NOTE F — INVESTMENT IN JOINT VENTURES

In March 2011, Milestone entered into an agreement with a People’s Republic of China (“PRC”) entity Beijing 3H Scientific Technology Co., Ltd (Beijing 3H), to establish a Medical Joint Venture entity in the PRC to develop intra-articular and epidural drug delivery instruments utilizing Milestone’s patented CompuFlo technology (the “Medical Joint Venture”). Beijing 3H, agreed to contribute up to $1.5 million to this Medical Joint Venture entity, based on progress reports from Milestone and subject to refund if the instruments are not developed because of technological problems within 30 months of the inception date. Milestone evaluates the technological feasibility of the products to be developed using the CompuFlo technology periodically and at every reporting date to establish if circumstances indicate that the technology continues to be feasible. Based on the available evidence Milestone concluded that the contingency associated with the return of capital to Beijing 3H no longer existed as of December 31, 2013, since the instruments have advanced beyond the development state and accordingly no amounts have been accrued in the accompanying financial statements relating to this contingency. Milestone, with the consent of Beijing 3H, organized a domestic research and development corporation to which Beijing 3H made a capital contribution of $1,500,000. The Medical Joint Venture entity was initially owned fifty percent by the Beijing 3H and fifty percent by Milestone. Milestone contributed an exclusive worldwide royalty-free license to use CompuFlo technology to the Medical Joint Venture which has been valued at approximately $245,000 and has accounted for its investment in the Medical Joint Venture using the equity method of accounting. Further, Milestone was authorized by the Medical Joint Venture to manage and oversee the development of the two products for the Medical Joint Venture. In connection with this authorization, Milestone also entered into an agreement with a significant vendor to develop the two instruments included in the Medical Joint Venture.

Milestone will have distribution responsibility in the U.S. and Canada. Beijing 3H will distribute products exclusively in the PRC, Macao, Hong Kong and other regions of Asia. The rest of the world responsibilities will be shared by Milestone and Beijing 3H.

Milestone recorded a Loss on Medical Joint Venture of $924,363, of which $509,803 is from 2013 operations and $414,561 is from suspended losses in 2012 and prior years. The losses described represent fifty percent of the applicable losses record by medical joint venture during the periods. Milestone utilizes the equity method of accounting to recognize its financial results of the joint venture.

Milestone expended approximately $225,979 on behalf of the joint venture in the year ended December 31, 2013 for legal fees related to the FDA (510k) certifications. As part of the joint venture agreement, Milestone is to pay all fees related to the USA FDA certification process.

The Medical Joint Venture’s cumulative expenses since inception are approximately $2.4 million. Milestone has an investment in the Joint Venture of $924,115 at December 31, 2013 and there are no remaining suspended losses.

Milestone provides management, financial, engineering and accounting services to Milestone Medical, Inc the value of these services prior to July 31, 2013, of which approximately $336,000 was not reimbursed by Milestone Medical, Inc.

As of July 1, 2013, Milestone Scientific Inc. and Milestone Medical Inc., signed an agreement for the reimbursement of specific expenses incurred by Milestone Scientific Inc. specifically for the benefit of Milestone Medical Inc. Reimbursable expenses related to this agreement were approximately $260,000 for the year ending December 31, 2013. The expenses related to the agreement that have not been paid is $24,086 as of December 31, 2013 and are included in account receivable, net.

In July 2013, Milestone entered a strategic partnership with the largest provider of specialty sales and distribution solutions for healthcare. During the three year strategic partnership, the distributor will hold the exclusive rights to market, resell, label and distribute Milestone’s CompuFlo injection technology for use in epidural applications for childbirth and other pain management needs in hospitals in the U.S.

In the fourth quarter of 2013, Milestone Medical Inc, joint venture, sold 2 million shares of its common stock in a Private Placement offering at $1.50 per share ($3.0 million) in Poland. As a result of this sale, the joint venture received net proceeds of $2,363,000. The effect of this sale of new shares was to reduce Milestone’s ownership percentage from 50% to 45.5% (post transaction). Consistent with the equity method of accounting, the dilution in ownership percentage is treated as if the decreased percentage of ownership was the result of the sale of these shares. As a result, Milestone recorded in the fourth quarter of 2013, a $1,363,650 gain on dilution effect on Medical Joint Venture.

The following condensed financial information of Milestone Medical Inc, Medical Joint Venture, 45.5% ownership at December 31, 2013 and 2012, respectively is as follows:


	December 31,
		2013			2012

Current Assets	$	2,258,809		$	216,177
Non Current Assets		1,561,129			1,576,529
Total Assets		3,819,939			1,792,706

Current Liability		125,962			2,157
Equity		3,693,977			1,790,549
Total Liability and Equity	$	3,819,939		$	1,792,706
	December 31,
		2013			2012
Revenue		-			-
Operation expenses		1,019,606			1,172,154
Net Loss	$	(1,019,606	)	$	(1,172,154	)

Milestone Medical Inc. is a Development Stage Company and does not have revenues at this time. Milestone has recorded its share of the losses $509,803 and $586,077 for December 31, 2013 and 2012, respectively.

In the first quarter of 2013, the CEO of Milestone loaned Milestone $50,000 for use in capitalizing a fifty percent equity portion in the joint venture with Milestone Education LLC. This balance is included in the accrued expenses on the condensed balance sheets. There is no interest to this agreement. The loan will be paid in 2014.

Milestone established a joint venture, Milestone Education, LLC, in the first quarter of 2013. Milestone contributed $50,000 as did the other joint venture partner. Each of the partners owns fifty (50) percent of the joint venture. The joint venture is expected to provide training and education to dentists throughout the world. Milestone accounted for its investment in the Education Joint Venture using the equity method of accounting. Milestone Education LLC began operation in 2013. The investment in the joint venture is accounted for under the equity method of account. As of December 31, 2013, the joint venture has incurred a loss of $15,836 and fifty percent of these losses are recorded in the Statement of Operations for Milestone.