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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10QSB

[X]

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2001

OR

[ ]

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

COMMISSION FILE NUMBER 0-27094

FIRST AMERICAN SCIENTIFIC CORP.
(Exact name of registrant as specified in its charter)

NEVADA
(State of other jurisdiction of incorporation or organization)

88-0338315
(IRS Employer Identification Number)

100 Park Royal South
Suite 200
West Vancouver, British Columbia V7T 1A2
(Address of principal executive offices)

(604) 575-3006
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [ x ] No [ ]

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of December 31, 2001: 135,533,018.

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Board of Directors
First American Scientific Corp.
Vancouver, BC

ACCOUNTANT'S REVIEW REPORT

We have reviewed the accompanying consolidated balance sheet of First American Scientific Corp. as of December 31, 2001 and the related consolidated statements of operations, stockholders' equity and cash flows for the six months ended December 31, 2001. These financial statements are the responsibility of the Company's management.

We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with accounting principles generally accepted in the United States of America.

The financial statements for the year ended June 30, 2001 were audited by us and we expressed an unqualified opinion on them in our report dated September 14, 2001 but we have not performed any auditing procedures since that date.

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates continuation of the Company as a going concern. As discussed in Note 2, the Company has an accumulated deficit of $7,569,760 at December 31, 2001 and has limited sales volume. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans regarding those matters also are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Williams & Webster, P.S.
Williams & Webster, P.S.
Certified Public Accountants
Spokane, Washington
February 13, 2002

1

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PART I.

ITEM 1. - FINANCIAL STATEMENTS

FIRST AMERICAN SCIENTIFIC CORP.
CONSOLIDATED BALANCE SHEETS

December 31, 2001
(Unaudited)



June 30, 2001

ASSETS

CURRENT ASSETS

Cash

$

32,241

$

182,829

Accounts receivable

50,045

6,628

Trust account

-

42,793

Prepaid expenses

-

32,607

Inventory

374,918

173,939

TOTAL CURRENT ASSETS

457,204

438,796

PROPERTY AND EQUIPMENT

Property and equipment

1,480,955

1,455,787

Less: Accumulated depreciation

(462,182)

(378,886)

TOTAL PROPERTY AND EQUIPMENT

1,018,773

1,076,901

OTHER ASSETS

Technology rights, net of amortization

1,311,754

1,375,775

Investment in technology and website, net of amortization

319,795

376,021

Patents and manufacturing rights, net of amortization

176,528

184,930

Deposits

13,669

11,433

TOTAL OTHER ASSETS

1,821,746

1,948,159

TOTAL ASSETS

$

3,297,723
============

$

3,463,856
============

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Accounts payable and accrued expenses

$

138,530

$

122,748

Accounts payable to related party

157,432

31,937

Deposit on sale

17,500

17,500

TOTAL CURRENT LIABILITIES

313,462

172,185

COMMITMENTS AND CONTINGENCIES

-

-

STOCKHOLDERS' EQUITY

Common stock - $.001 par value, 200,000,000 shares authorized; 135,533,018 and 130,733,018 shares issued and outstanding, respectively



135,533



130,733

Additional paid-in capital

10,227,734

9,959,034

Stock options

194,710

218,210

Accumulated deficit

(7,569,760)

(7,013,749)

Accumulated other comprehensive income (loss)

(3,956)

(2,557)

TOTAL STOCKHOLDERS' EQUITY

2,984,261

3,291,671

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

3,297,723
============

$

3,463,856
============

See accompanying notes and accountant's review report.

2

- 3 -

FIRST AMERICAN SCIENTIFIC CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)

Three
Months
Ended
December 31, 2001
(unaudited)

Three
Months
Ended
December 31,
2000
(unaudited)

Six
Months
Ended
December 31, 2001
(unaudited)


Six Months
Ended
December 31,
2000
(unaudited)

REVENUES

$

347,501

$

-

$

429,399

$

-

COST OF SALES

201,741

-

237,145

-

GROSS PROFIT

145,760

-

192,254

-

OPERATING EXPENSES

Advertising

-

-

7,284

-

Sales expenses

71,479

-

71,479

-

Amortization

128,034

-

164,246

-

Depreciation

24,990

-

54,144

-

General and administrative

135,719

255,348

451,112

1,014,009

TOTAL OPERATING EXPENSES

288,743

255,348

676,786

1,014,009

LOSS BEFORE INCOME TAXES

(214,462)

(255,348)

(556,011)

(1,014,009)

INCOME TAXES

-

-

-

-

NET LOSS

(214,462)

(255,348)

(556,011)

(1,014,009)

OTHER COMPREHENSIVE INCOME (LOSS)

Foreign currency translation gain (loss)

(1,399)

(1,393)

(1,399)

(2,344)

COMPREHENSIVE NET LOSS

$

(215,861)
==========

$

(256,741)
==========

$

(557,410)
==========

$

(1,016,353)
==========

NET LOSS PER COMMON SHARE, BASIC AND DILUTED


$


(0.002)
==========


$


nil
==========


$


(0.004)
==========


$


(0.01)
==========

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC AND DILUTED




134,266,355
==========




114,249,308
==========




133,374,685
==========




110,233,233
==========

See accompanying notes and accountant's review report.

3

- 4 -

FIRST AMERICAN SCIENTIFIC CORP.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

 

Common Stock


Additional
Paid-in
Capital




Options



Accumulated
Deficit

Accumulated
Other
Comprehensive
Income (loss)


Total
Stockholders'
Equity

Shares

Amount

Balance, June 30, 2000

100,821,018

$

100,821

$

7,495,605

$

-

$

(4,533,197)

$

(213)

$

3,063,016

Issuance of options for compensa-tion and consulting services


-


-


-


411,891


-


-


411,891

Common stock issued for cash, compensation, services and other expenses at an average of $0.09 per share



11,717,000



11,717



1,156,507



(107,809)



-



-



1,060,415

Common stock issued for cash at an average of $0.01 per share


2,950,000


2,950


41,100


-


-


-


44,050

Common stock issued for cash at an average of $0.05 per share


2,000,000


2,000


103,000


-


-


-


105,000

Common stock issued for cash and equipment inventory at $0.12 per share


900,000


900


110,965


-


-


-


111,865

Common stock issued for website development and video inventory at an average of $0.07 per share



840,000



840



60,155



(47,650)



-



-



13,345

Common stock issued from options for cash at $0.03 per share and services of $91,960 and inventory of $12,000



3,775,000



3,775



240,759



(3,000)



-



-



241,534

Common stock issued from options for services at $0.08 per share


4,730,000


4,730


386,943


(35,222)


-


-


356,451

Common stock issued from options for cash at $0.08 per share


981,818


981


81,019


-


-


-


82,000

Common stock issued from options for legal settlement at $0.14 per share


1,813,637


1,814


260,686


-


-


-


262,500

Common stock issued for commissions at $0.11 per share


204,545


205


22,295


-


-


-


22,500

Foreign currency translation gain (loss)

-

-

-

-

-

(2,344)

(2,344)

Net loss for the year ended June 30, 2001


-


-


-


-


(2,480,552)


-


(2,480,552)

 

Balance, June 30, 2001

130,733,018

130,733

9,959,034

218,210

(7,013,749)

(2,557)

3,291,671

Common stock issued as compensation at $0.50 per share


2,300,000


2,300


135,200


(23,500)


-


-


114,000

Common stock issued for cash at $0.05 per share


2,000,000


2,000


103,000


-


-


-


105,000

Common stock issued for services at $0.06 per share


500,000


500


30,500


-


-


-


31,000

Foreign currency translation gain (loss)

-

-

-

-

-

(1,399)

(1,399)

Net loss for the six months ended December 31, 2001 (unaudited)


-


-


-


-


(556,011)


-


(556,011)

Balance, December 31, 2001, (unaudited)


135,533,018
=============


$


135,533
=========


$


10,227,734
============


$


194,710
===========


$


(7,569,760)
===========


$


(3,956)
===========


$


2,984,261
==========

See accompanying notes and accountant's review report.

4

- 5 -

FIRST AMERICAN SCIENTIFIC CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS

Six
Months
Ended
December 31, 2001
(unaudited)

Six
Months
Ended
December 31,
2000
(unaudited)

CASH FLOWS PROVIDED (USED) IN OPERATING ACTIVITIES

Net loss

$

(556,011)

$

(1,014,009)

Depreciation and amortization

218,390

170,927

Options issued for services and compensation

-

327,657

Adjustments to reconcile net loss to net cash used by operations:

Services paid by issuance of stock

-

324,547

Compensation and other expenses paid with stock

145,000

-

Amounts used from trust for accounts payable

42,793

-

Decrease (increase) in accounts receivable

(43,417)

-

Decrease (increase) in inventory

(200,979)

-

Decrease (increase) in deposits and prepaid expenses

32,607

(21,000)

(Decrease) increase in accounts payable

75,782

30,140

(Decrease) increase in accounts payable, related party

65,495

-

Net cash (used) in operating activities

(220,340)

(181,738)

CASH FLOWS PROVIDED (USED) IN INVESTING ACTIVITIES

Purchase of equipment

(22,729)

(3,300)

Investment in technology

(8,884)

(1,622)

Net cash used in investing activities

(31,613)

(4,922)

CASH FLOWS PROVIDED (USED) IN FINANCING ACTIVITIES

Deposits

(2,236)

-

Proceeds from sales of stock

105,000

150,700

Net cash provided by financing activities

102,764

150,700

NET INCREASE (DECREASE) IN CASH

(149,189)

(35,960)

Other comprehensive loss

(1,399)

(2,344)

CASH - Beginning of year

182,829

42,420

CASH - End of period

$

32,241
===========

$

4,116
===========

SUPPLEMENTAL CASHFLOW DISCLOSURES:

Interest Expense

$

-
===========

$

-
===========

Income Taxes

$

-
===========

$

-
===========

NON-CASH TRANSACTIONS:

Common stock issued for compensation and services rendered

$

145,000
===========

$

-
===========

See accompanying notes and accountant 's review report.

5

- 6 -

FIRST AMERICAN SCIENTIFIC CORP.
Notes to the Consolidated Financial Statements
December 31, 2001

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

First American Scientific Corp. (hereinafter "the Company") was incorporated in April 1995 under the laws of the State of Nevada primarily for the purpose of manufacturing and operating equipment referred to as the KDS Micronex System. This patented process has the capability of reducing industrial material such as limestone, gypsum, zeolite, wood chips, bio-waste, rubber and ore containing precious metals to a fine talcum-like powder. The process can significantly increase the end value of the host material. The Company maintains an office in Vancouver, British Columbia, Canada.

The Company, through its wholly owned subsidiary, VMH, has developed an internet sales site known as VMH Videomoviehouse.com Inc. The site is designed to sell videos, CDs and books and, as technology advancements permit, is expected to become a virtual video rental store.

In September 1999, the Company entered into an agreement with VMH Videomoviehouse.com Inc., ("VMH") a British Columbia company whereby the Company acquired 100% of the common shares and the technology of VMH in return for a cash consideration of $250,000. (See Note 7). VMH possesses domain names, a web page, and technology for the sale of videos, DVD's, and CD's through the internet.

The Company formed 521345 BC Ltd., a wholly owned subsidiary, in 1998 in order to provide research and development services exclusively to First American Scientific Corp. that are eligible for Canadian research and development credits and, when feasible, operate a profitable production facility in Canada.

The Company's year-end is June 30 th .

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies of First American Scientific Corp. is presented to assist in understanding the Company's financial statements. The financial statements and notes are representations of the Company's management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.

Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

6

- 7 -

FIRST AMERICAN SCIENTIFIC CORP.
Notes to the Consolidated Financial Statements
December 31, 2001

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Going Concern (continued )

As shown in the accompanying financial statements, the Company has incurred an accumulated deficit of $7,569,760 through December 31, 2001 and has very limited sales volume. The Company is currently putting technology in place which will, if successful, mitigate these factors which raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence.

Management has established plans designed to increase the sales of the Company's products. Management intends to seek additional capital from new equity securities offerings that will provide funds needed to increase liquidity, fund internal growth and fully implement its business plan.

Accounting Method
The Company uses the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America.

Loss Per Share
In June 1999, the Company adopted Statement of Financial Accounting Standards Statement (SFAS) No. 128, Earnings Per Share. Basic earnings (loss) per share is computed using the weighted average number of common shares outstanding. Diluted net loss per share is the same as basic net loss per share, as the inclusion of common stock equivalents would be antidilutive.

Derivative Instruments
The Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB No. 133", and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities", which is effective for the Company as of January 1, 2001. This standard establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the consolidated balance sheet and measure those instruments at fair value.

If certain conditions are met, a derivative may be specifically designated as a hedge, the objective of which is to match the timing of gain or loss recognition on the hedging derivative with the recognition of (i) the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk or (ii) the earnings effect of the hedged forecasted transaction. For a derivative not designated as a hedging instrument, the gain or loss is recognized in income in the period of change.

7

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FIRST AMERICAN SCIENTIFIC CORP.
Notes to the Consolidated Financial Statements
December 31, 2001

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Derivative Instruments (continued)
Historically, the Company has not entered into derivatives contracts to hedge existing risks or for speculative purposes.

At December 31, 2001 the Company has not engaged in any transactions that would be considered derivative instruments or hedging activities.

Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant inter-company transactions and balances have been eliminated in consolidation.

Cash and Cash Equivalents
For purposes of the Statement of Cash Flows, the Company considers all short-term debt securities purchased with a maturity of three months or less to be cash equivalents.

Prepaid expenses
Prepaid expenses consist of commissions and salaries paid in advance that will be amortized as earned.

Fair Value of Financial Instruments
The carrying amounts for cash, accounts receivable, the trust account, accounts payable, and accrued liabilities approximate their fair value.

Concentration of Risk
The Company maintains its cash accounts in primarily one commercial bank in Vancouver, British Columbia, Canada. The Company's cash account, which is not insured, is a business checking account in United States dollars.

Reclassification
Certain amounts from prior periods have been reclassified to conform with the current period presentation. This reclassification has resulted in no changes to the Company's accumulated deficit or net losses presented.

Foreign Currency Translation
Assets and liabilities of the Company's foreign operations are translated into U.S. dollars at the period-end exchange rates, and revenue and expenses are translated at the average exchange rates during the period. Exchange differences arising on translation are disclosed as a separate component of shareholders' equity. Realized gains and losses from foreign currency transactions are reflected in the results of operations.

8

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FIRST AMERICAN SCIENTIFIC CORP.
Notes to the Consolidated Financial Statements
December 31, 2001

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Provision for Taxes
Income taxes are provided based upon the liability method of accounting pursuant to SFAS No. 109 "Accounting for Income Taxes." Under this approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end. A valuation allowance is recorded against deferred tax assets if management does not believe the Company has met the "more likely than not" standard imposed by SFAS No. 109 to allow recognition of such an asset.

At December 31, 2001, the Company had net deferred tax assets of approximately $848,000 principally arising from net operating loss carryforwards for income tax purposes, and stock and options issued for services. As management of the Company cannot determine that it is more likely than not that the Company will realize the benefit of the net deferred tax asset, a valuation allowance equal to the net deferred tax asset has been established at December 31, 2001.

At December 31, 2001, the Company has net operating loss carryforwards of approximately $5,500,000, which expire in the years 2015 through 2020. The Company recognized approximately $145,000 of losses for the issuance of restricted common stock and stock options for services in fiscal 2002, which were not deductible for tax purposes and are not included in the above calculation of deferred tax assets.

Use of Estimates
The process of preparing financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues, and expenses. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from estimated amounts.

Impairment of Long-lived Assets
The Company evaluates the recoverability of long-lived assets when events and circumstances indicate that such assets might be impaired. The Company determines impairment by comparing the undiscounted future cash flows estimated to be generated by these assets to their respective carrying amounts.

Compensated Absences
Employees of the Company are entitled to paid vacation, paid sick days and personal days off, depending on job classification, length of service, and other factors. The Company's policy is to recognize the costs of compensated absences when actually paid to employees.

9

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FIRST AMERICAN SCIENTIFIC CORP.
Notes to the Consolidated Financial Statements
December 31, 2001

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Segment Information
The Company adopted SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," during the second quarter of 1999. SFAS No. 131 established standards for reporting information about operating segments in annual financial statements and requires selected information about operating segments in interim financial reports issued to stockholders. It also established standards for related disclosures about products and services and geographic areas. Operating segments are defined as components of an enterprise about which separate financial information is available, evaluated regularly by the chief operating decision makers, or a decision making group, in deciding how to allocate resources and in assessing performance.

Revenue and Cost Recognition
Revenues are recognized at the time that products are delivered.

Product costs include all direct material, labor costs and related indirect costs. Changes in job performance, job conditions, and estimated profitability may result in revisions to product costs, which are recognized in the period in which the revisions are determined.

Inventory
Inventories are stated at the lower of average cost or market. The cost of finished goods includes the cost of raw material, direct and indirect labor, and other indirect manufacturing costs.

The components of inventory are as follows:

December 31, 2001

Finished goods - videos

$

57,720

Finished goods - machines

317,198

$

374,918
================

Accounting Pronouncements
In October 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" (SFAS No. 144). SFAS 144 replaces SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This new standard establishes a single accounting model for long-lived assets to be disposed of by sale, including discontinued operations. Statement 144 requires that these long-lived assets be measured at the lower of carrying amount or fair value less cost to sell, whether reported in continuing operations or discontinued operations. This statement is effective beginning for fiscal years after December 15, 2001, with earlier application encouraged. The Company adopted SFAS 144 and does not believe that the adoption will have a material impact on the financial statements of the Company at December 31, 2001.

10

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FIRST AMERICAN SCIENTIFIC CORP.
Notes to the Consolidated Financial Statements
December 31, 2001

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Accounting pronouncements (continued)
In October 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 143, "Accounting for Asset Retirement Obligations" (SFAS No. 143). SFAS No. 143 establishes guidelines related to the retirement of tangible long-lived assets of the Company and the associated retirement costs. This statement requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long -lived assets. This statement is effective for financial statements issued for the fiscal years beginning after June 15, 2002 and with earlier application encouraged. The Company adopted SFAS No. 143 and does not believe that the adoption will have a material impact on the financial statements of the Company at December 31, 2001.

In September 2000, the FASB issued SFAS No. 140 "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities." This statement provides accounting and reporting standards for transfers and servicing of financial assets and extinguishment of liabilities and also provides consistent standards for distinguishing transfers of financial assets that are sales from transfers that are secured borrowings. SFAS No. 140 is effective for recognition and reclassification of collateral and for disclosures relating to securitization transactions and collateral for fiscal years ending after December 15, 2000, and is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001. The Company believes that the adoption of this standard will not have a material effect on the Company's results of operations or financial position.

Comprehensive Income
In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS No. 130"). SFAS 130 establishes standards for reporting and displaying comprehensive income, its components and accumulated balances. SFAS 130 is effective for periods beginning after December 15, 1997. The Company adopted this accounting standard and its adoption is reflected in the accompanying financial statements.

NOTE 3 - PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the assets. The useful lives of property, plant and equipment for purposes of computing depreciation are five to forty years. The following is a summary of property, equipment, and accumulated depreciation:

11

- 12 -

FIRST AMERICAN SCIENTIFIC CORP.
Notes to the Consolidated Financial Statements
December 31, 2001

NOTE 3 - PROPERTY AND EQUIPMENT (continued)

December 31,
2001

Kinetic disintegration equipment

$

1,364,480

Plant assets and equipment

112,176

Office equipment

58,823

Leasehold improvements

5,476

Total assets

$

1,540,956

Less accumulated depreciation

462,182

$

1,018,773
===============

Depreciation and amortization expense for the six months ended December 31, 2001 was $218,390. The Company evaluates the recoverability of property and equipment when events and circumstances indicate that such assets might be impaired. The Company determines impairment by comparing the undiscounted future cash flows estimated to be generated by these assets to their respective carrying amounts. Maintenance and repairs are expensed as incurred. Replacements and betterments are capitalized. The cost and related reserves of assets sold or retired are removed from the accounts, and any resulting gain or loss is reflected in results of operations.

NOTE 4 - TECHNOLOGY RIGHTS AND PATENTS

Technology Licenses
On June 22, 1995, the Company entered into a license agreement with Spectrasonic Corp. (hereinafter "Spectrasonic"), a related party, for the worldwide license to its unpatented Kinetic Disintegration Equipment (KDS) for use in rubber and glass recycling and disposal, for a period of ninety-nine years. The purchase price of this license and one SDM machine was $550,000, with license rights valued at $250,000. Since then, modifications were made to the first KDS machine, bringing its total cost to $440,740. This machine was transferred to the Company's subsidiary, 521345 BC Ltd., at its book value of $55,669.

On February 22, 1996, the Company entered into an additional license agreement with Spectrasonic for the worldwide license to its unpatented Ultrasound Equipment for exclusive use in gypsum disintegration, disposal, recycling, remanufacturing or manufacturing of used or new raw materials. The purchase price of this license and one KDS machine for gypsum-related use was $775,000, with the parties agreeing that the technology license was valued at $425,000 and the gypsum KDS machine was valued at $350,000.

12

- 13 -

FIRST AMERICAN SCIENTIFIC CORP.
Notes to the Consolidated Financial Statements
December 31, 2001

NOTE 4 - TECHNOLOGY RIGHTS AND PATENTS (continued)

On May 17, 1996, the Company executed another agreement with Spectrasonic for the worldwide licenses to equipment (as yet unpatented) developed by Spectrasonic for use in disintegration, disposal, recycling, remanufacturing or manufacturing "any and all kinds of materials" for a period of ninety-nine years. The purchase price of this license was $1,047,000, which the Company paid by issuing to Spectrasonic 5,500,000 shares of First American common stock (with an aggregate deemed value of $802,000) and paid $168,000 in varying installment amounts between September 30, 1996 and January 2, 1997. The Company recognized $77,000 in forgiveness of debt, which has been recorded as additional paid-in capital.

On July 2, 1997, the Company finalized negotiations with Spectrasonic for all patents to be issued or pending, including all data pertaining to the patent process with respect to the Kinetic Disintegration Machine (KDS Machine) whose worldwide rights had been previously acquired by the Company. In the negotiations, the Company acquired all manufacturing rights applicable to the KDS machine technology. The Company has sole right and responsibility for manufacturing the machinery. Consideration to Spectrasonic was 1,000,000 common shares of the Company's stock at $0.25 per share issued on December 1, 1999.

Technology licenses, patents and manufacturing rights are stated at cost. Amortization is provided using the straight-line method over the estimated useful lives of the assets, which are five and fifteen years.

The following is a summary of technology licenses, patents and manufacturing rights and accumulated amortization:

December 31,
2001

VMH Videomoviehouse.com Inc. Website

$

126,155

VMH Videomoviehouse.com Inc technology assets

250,000

Technology license and rights

1,905,000

Patents and manufacturing rights

250,000

$

2,531,115

Less accumulated amortization

723,078

$