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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 MARCH 31, 2002

 

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 811
Vancouver, British Columbia
Canada V7T 1A2
(Address of principal executive offices)

(604) 931-9035
(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 March 31, 2002: 139,763,018.

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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 March 31, 2002 and 2001 and the related consolidated statements of operations, stockholders' equity and cash flows for the three and nine months ended March 31, 2002 and 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 $7,891,417 at March 31, 2002 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
May 14, 2002

F-1

-2-

FIRST AMERICAN SCIENTIFIC CORP.
CONSOLIDATED BALANCE SHEETS

 

March 31, 2002

ASSETS

 

(Unaudited)

   

June 30, 2001

CURRENT ASSETS

   

   

Cash

$

420,456

 

$

182,829

 

Accounts receivable

 

307,676

   

6,628

 

Trust account

 

-

   

42,793

 

Prepaid expenses and other assets

 

22,428

   

32,607

 

Inventory

 

732,040

   

173,939

 

 

 

TOTAL CURRENT ASSETS

 

1,482,600

 

 

438,796

 

 

 

 

 

 

 

 

 

PROPERTY AND EQUIPMENT

         
 

Property and equipment

 

565,115

   

1,455,787

 

Less: Accumulated depreciation

 

(165,925)

   

(378,886)

 

 

 

TOTAL PROPERTY AND EQUIPMENT

 

399,190

 

 

1,076,901

 

 

 

 

 

 

 

 

 

OTHER ASSETS

         
 

Technology rights, net of amortization

 

1,279,743

   

1,375,775

 

Investment in technology and website, net of amortization

 

282,113

   

376,021

 

Patents and manufacturing rights, net of amortization

 

172,327

   

184,930

 

Investment in joint venture

 

74,549

   

-

 

Deposits

 

11,433

   

11,433

 

 

 

TOTAL OTHER ASSETS

 

1,820,165

 

 

1,948,159

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

$

3,701,955

 

$

3,463,856

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

         

CURRENT LIABILITIES

         
 

Accounts payable and accrued expenses

$

197,696

 

$

122,748

 

Accounts payable to related parties

 

145,034

   

31,937

 

Deposit on sale

 

-

   

17,500

 

 

 

TOTAL CURRENT LIABILITIES

 

342,730

 

 

172,185

 

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES

 

-

   

-

MINORITY INTEREST IN SUBSIDIARY

 

354,896

   

-

 

 

 

 

 

 

STOCKHOLDERS' EQUITY

         
 

Common stock - $.001 par value, 200,000,000 shares authorized; 139,763,018 and 130,733,018 shares issued and outstanding, respectively

 



139,763

 



130,733

 

Additional paid-in capital

 

10,572,353

   

9,959,034

 

Stock options

 

187,586

   

218,210

 

Accumulated deficit

 

(7,891,417)

   

(7,013,749)

 

Accumulated other comprehensive income (loss)

 

(3,956)

   

(2,557)

 

 

 

TOTAL STOCKHOLDERS' EQUITY

 

3,004,329

 

 

3,291,671

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

3,701,955

 

$

3,463,856

See accompanying notes and accountant's review report.

F-2

-3-

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

 

Three Months Ended March 31, 2002 (unaudited)

 


Three Months Ended March 31, 2001 (unaudited)

 

Nine Months Ended March 31, 2002 (unaudited)

 


Nine Months Ended March 31, 2001 (unaudited)

REVENUES

$

678,688

 

$

-

 

$

1,108,087

 

$

-

COST OF SALES

 

378,629

   

-

   

615,774

   

-

GROSS PROFIT

 

300,059

   

-

   

492,313

   

-

                       

OPERATING EXPENSES

                     
 

General and administration

 

366,194

   

112,869

   

794,846

   

293,817

 

Amortization and depreciation

 

109,863

   

107,119

   

395,875

   

321,356

 

Consulting

 

43,250

   

208,638

   

78,250

   

852,212

LOSS FROM OPERATIONS

 

519,307

 

 

428,626

 

 

1,268,971

 

 

1,467,385

                         

OTHER INCOME (EXPENSE)

                     
 

Loss on impairment of assets

 

(122,541)

   

-

   

(122,541)

     

 

 

 

 

 

 

 

 

 

 

 

 

 

LOSS BEFORE INCOME TAXES

 

(341,789)

   

(428,626)

   

(899,199)

   

(1,467,385)

                         

INCOME TAXES

 

-

   

-

   

-

   

-

 

 

 

 

 

 

 

 

 

 

 

 

 

NET LOSS BEFORE ALLOCATION TO MINORITY INTEREST

 


(341,789)

   


(428,626)

   


(899,199)

   


(1,467,385)

                     

ALLOCATION OF LOSS TO MINORITY INTEREST

 


21,531

   


-

   


21,531

   


-

 

 

 

 

 

 

 

 

 

 

 

 

 

NET LOSS

 

(320,258)

   

(428,626)

   

(877,668)

   

(1,467,385)

                         

OTHER COMPREHENSIVE INCOME (LOSS)

                     
 

Foreign currency translation gain (loss)

 

-

   

-

   

(1,399)

   

(2,344)

                         

COMPREHENSIVE NET LOSS

$

(320,258)

 

$

(428,626)

 

$

(879,067)

 

$

(1,469,729)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET LOSS PER COMMON SHARE, BASIC AND DILUTED


$


Nil

 


$


Nil

 


$


(0.01)

 


$


(0.01)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC AND DILUTED

 




138,621,352

   




117,594,685

   




138,032,460

   




114,941,530

See accompanying notes and accountant's review report.

F-3

-4-

FIRST AMERICAN SCIENTIFIC CORP.

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY



Common Stock

 



Additional
Paid-in

 




Stock

 




Accumulated

Accumulated Other Comprehensive Income



Total Stockholders'

Shares

 

Amount

 

Capital

 

Options

 

Deficit

(loss)

Equity

Balance, June 30, 2000

 

100,821,018

 

$

100,821

 

$

7,495,605

 

$

-

 

$

(4,533,197)

 

$

(213)

 

$

3,063,016

Issuance of options for compensation and consulting services

 


-

   


-

   


-

   


411,891

   


-

   


-

   


411,891

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

 

2,950,000

   


2,950

   


41,100

   


-

   


-

   


-

   


44,050

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

 


2,000,000

   


2,000

   


103,000

   


-

   


-

   


-

   


105,000

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

 


900,000

   


900

   


110,965

   


-

   


-

   


-

   


111,865

Common stock issued from options 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 from options 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 from options as compensation at $0.06 per share

 


3,800,000

   


3,800

   


240,824

   


(30,624)

   


-

   


-

   


214,000

Common stock issued for cash at $0.06 per share

 


3,085,000

   


3,085

   


177,765

   


-

   


-

   


-

   


180,850

Common stock issued from options for services at $0.09 per share

 


2,025,000

   


2,025

   


179,850

   


-

   


-

   


-

   


181,875

Common stock issued for rent expenses at $0.125 per share

 


120,000

   


120

   


14,880

   


-

   


-

   


-

   


15,000

Foreign currency translation gain (loss)

 

-

   

-

   

-

   

-

   

-

   

(1,399)

   

(1,399)

Net loss for the nine months ended March 31, 2002 (unaudited)

 


-

   


-

   


-

   


-

   


(877,668)

   


-

   


(877,668)

Balance, March 31, 2002, (unaudited)

 

139,763,018

 

$

139,763

 

$

10,572,353

 

$

187,586

 

$

(7,891,417)

 

$

(3,956)

 

$

3,004,329

See accompanying notes and accountant's review report.

F-4

-5-

FIRST AMERICAN SCIENTIFIC CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS

 

Nine Months
Ended
March 31, 2002
(unaudited)

 

Nine Months Ended
March 31, 2001 (unaudited)

CASH FLOWS PROVIDED (USED) IN OPERATING ACTIVITIES

 

 

 

 

 

 

Net loss

$

(877,668)

   

(1,467,385)

 

Loss allocated to minority interest

 

(21,531)

   

-

 

Depreciation and amortization

 

325,379

   

321,356

 

Impairment on assets

 

122,542

   

-

 

Stock and options issued for services and compensation

 

395,875

   

912,363

 

Stock issued for rent expense

 

15,000

     
 

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

         
   

Amounts used from trust for accounts payable

 

42,793

   

-

   

Decrease (increase) in accounts receivable

 

(301,048)

   

-

   

Decrease (increase) in inventory

 

(116,884)

   

-

   

Decrease (increase) in deposits and prepaid expenses

 

10,179

   

(6,000)

   

Decrease (increase) in investments

 

(74,549)

   

-

   

(Decrease) increase on deposits for sales

 

(17,500)

   

-

   

(Decrease) increase in accounts payable

 

154,948

   

-

   

(Decrease) increase in accounts payable, related party

 

33,097

   

11,250

Net cash (used) in operating activities

 

(309,367)

 

 

(228,416)

 

 

 

 

 

 

 

 

CASH FLOWS PROVIDED (USED) IN INVESTING ACTIVITIES

         
   

Cash provided by minority interest

 

376,427

   

-

   

Purchase of equipment

 

-

   

(3,955)

   

Investment in technology

 

(8,884)

   

-

Net cash used in investing activities

 

367,543

 

 

(3,955)

 

 

 

 

 

 

 

 

CASH FLOWS PROVIDED (USED) IN FINANCING ACTIVITIES

         
   

Deposits

 

-

   

-

   

Proceeds from sales of stock

 

180,850

   

303,774

Net cash provided by financing activities

 

180,850

 

 

303,774

 

 

 

 

 

 

NET INCREASE (DECREASE) IN CASH

 

239,026

   

71,403

Other comprehensive loss

 

(1,399)

   

(2,344)

           

CASH - Beginning of year

 

182,829

   

42,420

CASH - End of period

$

420,456

 

$

111,479

 

 

 

 

 

 

SUPPLEMENTAL CASHFLOW DISCLOSURES:

         
 

Interest Expense

$

-

 

$

-

 

Income Taxes

$

-

 

$

-

             

NON-CASH TRANSACTIONS:

         
 

Common stock issued for website development

$

-

 

$

60,995

 

Common stock issued for inventory

$

-

 

$

138,000

 

Common stock issued for services and compensations

$

395,875

   

912,363

 

Common stock issued for expenses

$

15,000

   

-

See accompanying notes and accountant's review report.

F-5

-6-

FIRST AMERICAN SCIENTIFIC CORP.
Notes to the Consolidated Financial Statements
March 31, 2002

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

First American Scientific Corp. (hereinafter "the Company" or "FASC") 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 First American Power Corp, formerly 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 formed Alternative Green Energy Systems, Inc. (hereinafter "AGES") in 2002 for the purpose of using FASC's licensed technology and patents to manufacturer, sell, operate and use the KDS machines in combination with available expertise in wood dust burning technology. See Note 10. The Company owns 43.48% and has management control of AGES. William E. Barber owns 43.48% and Hydro-Quebec Capitech Inc. owns 13.04% of AGES.

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. This basis of accounting contemplates the recovery of the Company's assets and the satisfaction of its liabilities in the normal course of operations.

F-6

-7-

FIRST AMERICAN SCIENTIFIC CORP.
Notes to the Consolidated Financial Statements
March 31, 2002

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 $7,891,417 through March 31, 2002 and has minimal revenues. Although the Company recorded $1,108,087 in sales during the nine months ended March 31, 2002, it also generated a loss from operations by $879,067. These factors raise substantial doubt about the Company's ability to continue as a going conce