=========================================================================
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
SEPTEMBER 30, 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
September 30, 2002: 145,764,921
=========================================================================
PART I.
ITEM 1. FINANCIAL STATEMENTS
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 September 30, 2002 and the related statements of operations, stockholders' equity, and cash flows for the three months ended September, 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, 2002 were audited by us and we expressed an unqualified opinion on them in our report dated September 12, 2002, 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 $9,152,310 at September 30, 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
November 12, 2002
F-1
-2-
FIRST AMERICAN SCIENTIFIC CORP.
CONSOLIDATED BALANCE SHEETS
|
|
|
|
September 30,
2002
|
|
|
June 30,
2002
|
|
ASSETS
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
|
|
|
|
Restated
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
|
Cash
|
$
|
17,082
|
|
$
|
126,144
|
|
|
Accounts receivable
|
|
172,433
|
|
|
130,932
|
|
|
Refundable research and development tax credit
|
|
87,189
|
|
|
83,085
|
|
|
Sales tax refunds
|
|
-
|
|
|
27,957
|
|
|
Prepaid expenses and other assets
|
|
20,166
|
|
|
10,000
|
|
|
Inventory
|
|
490,442
|
|
|
490,442
|
|
|
|
|
TOTAL CURRENT ASSETS
|
|
787,312
|
|
|
868,560
|
|
PROPERTY AND EQUIPMENT
|
|
|
|
|
|
|
|
Property and equipment
|
|
307,377
|
|
|
311,631
|
|
|
Less: Accumulated depreciation
|
|
(104,200)
|
|
|
(90,295)
|
|
|
|
|
TOTAL PROPERTY AND EQUIPMENT
|
|
203,177
|
|
|
221,336
|
|
OTHER ASSETS
|
|
|
|
|
|
|
|
Technology rights, net of amortization
|
|
1,247,992
|
|
|
1,279,743
|
|
|
Patents and manufacturing rights, net of amortization
|
|
168,160
|
|
|
172,327
|
|
|
Deposits
|
|
1,432
|
|
|
1,432
|
|
|
|
|
TOTAL OTHER ASSETS
|
|
1,417,584
|
|
|
1,453,502
|
|
NET ASSETS DISTRIBUTED TO SUBSIDIARY
|
|
-
|
|
|
268,835
|
|
TOTAL ASSETS
|
$
|
2,408,073
|
|
$
|
2,812,233
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
$
|
152,154
|
|
$
|
127,880
|
|
|
Accounts payable to related parties
|
|
60,788
|
|
|
152,192
|
|
|
|
|
TOTAL CURRENT LIABILITIES
|
|
212,942
|
|
|
280,072
|
|
LONG TERM LIABILITIES
|
|
|
|
|
|
|
|
Notes payable to related parties
|
|
38,107
|
|
|
-
|
|
|
Notes payable
|
|
31,415
|
|
|
-
|
|
|
|
|
TOTAL LONG-TERM LIABILITIES
|
|
69,522
|
|
|
-
|
|
COMMITMENTS AND CONTINGENCIES
|
|
6,127
|
|
|
6,127
|
|
MINORITY INTEREST IN SUBSIDIARY
|
|
192,350
|
|
|
243,590
|
|
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
Common stock - $.001 par value,
|
|
|
|
|
|
|
|
|
200,000,000 shares authorized; and 145,764,921
|
|
|
|
|
|
|
|
|
142,213,018 shares issued and outstanding, respectively
|
|
145,765
|
|
|
142,213
|
|
|
Additional paid-in capital
|
|
10,815,717
|
|
|
11,105,694
|
|
|
Stock options
|
|
195,780
|
|
|
195,780
|
|
|
Accumulated deficit
|
|
(9,152,310)
|
|
|
(9,151,400)
|
|
|
Accumulated other comprehensive income (loss)
|
|
(2,171)
|
|
|
(9,843)
|
|
|
|
|
TOTAL STOCKHOLDERS' EQUITY
|
|
2,002,781
|
|
|
2,282,444
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
|
$
|
2,408,073
|
|
$
|
2,812,233
|
See accountant's review report.
F-2
FIRST AMERICAN SCIENTIFIC CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
|
|
2002
(unaudited)
|
|
|
2001
(unaudited)
Restated
|
|
REVENUES
|
|
$
|
5,962
|
|
$
|
-
|
|
COST OF SALES
|
|
|
-
|
|
|
-
|
|
GROSS PROFIT
|
|
|
5,962
|
|
|
-
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
Advertising
|
|
|
-
|
|
|
7,284
|
|
|
Amortization and depreciation
|
|
|
51,498
|
|
|
34,032
|
|
|
Professional services
|
|
|
86,450
|
|
|
-
|
|
|
Wages
|
|
|
133,197
|
|
|
-
|
|
|
Research and development
|
|
|
10,109
|
|
|
-
|
|
|
General and administration
|
|
|
24,126
|
|
|
178,615
|
|
|
Rent
|
|
|
8,176
|
|
|
-
|
|
|
|
Total Operating Expenses
|
|
|
313,556
|
|
|
219,931
|
|
|
|
|
|
|
|
|
|
LOSS FROM CONTINUING OPERATIONS
|
|
|
(307,594)
|
|
|
(219,931)
|
|
LOSS FROM DISTRIBUTED SUBSIDIARY
|
|
|
(76,882)
|
|
|
(67,661)
|
|
LOSS BEFORE INCOME TAXES
|
|
|
(384,476)
|
|
|
(287,592)
|
|
INCOME TAXES
|
|
|
-
|
|
|
-
|
|
NET LOSS BEFORE ALLOCATION TO MINORITY INTEREST
|
|
|
(384,476)
|
|
|
(287,592)
|
|
ALLOCATION OF LOSS TO MINORITY INTEREST
|
|
|
51,240
|
|
|
-
|
|
NET LOSS
|
|
|
(333,236)
|
|
|
(287,592)
|
|
OTHER COMPREHENSIVE INCOME (LOSS)
|
|
|
|
|
|
|
|
|
Foreign currency translation gain (loss)
|
|
|
7,672
|
|
|
(1,399)
|
|
COMPREHENSIVE NET LOSS
|
|
$
|
(325,564)
|
|
$
|
(288,991)
|
|
|
NET LOSS PER COMMON SHARE,
|
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED
|
|
$
|
Nil
|
|
$
|
Nil
|
|
|
WEIGHTED AVERAGE NUMBER OF
|
|
|
|
|
|
|
|
|
|
COMMON SHARES OUTSTANDING,
|
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED
|
|
|
144,429,101
|
|
|
131,416,351
|
See accountant's review report.
F
-3
-4-
FIRST AMERICAN SCIENTIFIC CORP.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
Common Stock
|
|
Additional
Paid-in
|
|
Stock
|
|
Accumulated
|
|
Other
Comprehensive
|
|
Total
Stockholders'
|
|
|
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Options
|
|
Deficit
|
|
Income (loss)
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 for cash of $189,850 and services of $82,850 at $0.09 per share
|
|
2,885,000
|
|
|
2,885
|
|
|
269,815
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
272,700
|
|
Common stock issued for compensation at $0.09 per share
|
|
3,600,000
|
|
|
3,600
|
|
|
316,880
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
320,480
|
|
Common stock issued for legal services at $0.10 per share
|
|
250,000
|
|
|
250
|
|
|
24,750
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
25,000
|
|
Common stock issued for KDS machine at $0.09 per share
|
|
500,000
|
|
|
500
|
|
|
44,500
|
|
|
|
|
|
|
|
|
|
|
|
45,000
|
|
Common stock issued for equipment at $0.13 per share
|
|
100,000
|
|
|
100
|
|
|
12,740
|
|
|
|
|
|
|
|
|
|
|
|
12,840
|
|
Common stock issued for accounts payable at $0.095 per share
|
|
100,000
|
|
|
100
|
|
|
9,400
|
|
|
|
|
|
|
|
|
|
|
|
9,500
|
|
Common stock issued from options for services at $0.09 per share
|
3,925,000
|
|
|
3,925
|
|
|
453,695
|
|
|
(100,210)
|
|
|
|
|
|
|
|
|
357,410
|
|
Common stock issued for rent expenses at $0.125 per share
|
|
120,000
|
|
|
120
|
|
|
14,880
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
15,000
|
|
Options issued for services
|
|
|
|
|
|
|
|
|
|
|
77,780
|
|
|
|
|
|
|
|
|
77,780
|
|
Foreign currency translation loss
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(7,286)
|
|
|
(7,286)
|
|
Net loss for the year ended June 30, 2002
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(2,137,651)
|
|
|
-
|
|
|
(2,137,651)
|
|
Balance, June 30, 2002
|
|
142,213,018
|
|
|
142,213
|
|
|
11,105,694
|
|
|
195,780
|
|
|
(9,151,400)
|
|
|
(9,843)
|
|
|
2,282,444
|
|
Net assets distributed to shareholders of VideoMovieHouse
|
|
-
|
|
|
-
|
|
|
(523,827)
|
|
|
-
|
|
|
332,326
|
|
|
-
|
|
|
(191,501)
|
|
Common stock issued for consulting services at $0.07 per share
|
|
1,201,903
|
|
|
1,202
|
|
|
78,450
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
79,652
|
|
Common stock issued as compensation at $0.07 per share
|
|
2,000,000
|
|
|
2,000
|
|
|
138,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
140,000
|
|
Common stock issued for legal fees at $0.05 per share
|
|
250,000
|
|
|
250
|
|
|
12,500
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
12,750
|
|
Common stock issued for professional services at $0.05 per share
|
|
100,000
|
|
|
100
|
|
|
4,900
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
5,000
|
|
Foreign currency translation loss
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
7,672
|
|
|
7,672
|
|
Net loss for the three months ended September 30, 2002
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(333,236)
|
|
|
-
|
|
|
(333,236)
|
|
Balance, September 30, 2002, unaudited
|
|
145,764,921
|
|
$
|
145,765
|
|
$
|
10,815,717
|
|
$
|
195,780
|
|
$
|
(9,152,310)
|
|
$
|
(2,171)
|
|
$
|
2,002,781
|
See accountant's review report.
F-4
-5-
FIRST AMERICAN SCIENTIFIC CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
Three Months Ended
September 30,
|
|
|
|
2002
(unaudited)
|
|
|
2001
(unaudited)
|
|
|
|
|
|
|
Restated
|
|
CASH FLOWS PROVIDED (USED) IN OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
Net loss
|
$
|
(384,476)
|
|
$
|
(287,592)
|
|
|
Discontinued operations
|
|
77,334
|
|
|
67,661
|
|
|
Loss allocated to minority interest
|
|
51,240
|
|
|
-
|
|
|
Depreciation and amortization
|
|
51,498
|
|
|
34,032
|
|
|
Stock and options issued for services and compensation
|
|
237,402
|
|
|
-
|
|
|
Adjustments to reconcile net loss to net cash
|
|
|
|
|
|
|
|
|
used by operations:
|
|
|
|
|
|
|
|
|
Amounts used from trust for accounts payable
|
|
-
|
|
|
42,793
|
|
|
|
Compensation and other expenses paid with stock
|
|
-
|
|
|
34,000
|
|
|
|
Decrease (increase) in accounts receivable
|
|
(41,501)
|
|
|
(22,606)
|
|
|
|
Decrease (increase) in taxes and tax credits
|
|
23,856
|
|
|
-
|
|
|
|
Decrease (increase) in inventory
|
|
-
|
|
|
(128,136)
|
|
|
|
Decrease (increase) in deposits and prepaid expenses
|
|
(10,166)
|
|
|
32,607
|
|
|
|
(Decrease) increase in accounts payable
|
|
(24,273)
|
|
|
20,393
|
|
|
|
(Decrease) increase in accounts payable, related party
|
|
-
|
|
|
-
|
|
Net cash (used) in operating activities
|
|
(19,086)
|
|
|
(206,848)
|
|
CASH FLOWS PROVIDED (USED) IN
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Cash provided by minority interest
|
|
113,505
|
|
|
-
|
|
|
|
Investment in technology
|
|
-
|
|
|
(8,884)
|
|
|
|
Cash from discontinued operation
|
|
(12,842)
|
|
|
-
|
|
|
|
Investment in discontinued operations
|
|
(186,969)
|
|
|
-
|
|
Net cash used in investing activities
|
|
(86,306)
|
|
|
(8,884)
|
|
CASH FLOWS PROVIDED (USED) IN FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Proceeds from borrowing
|
|
69,522
|
|
|
32,916
|
|
|
|
Repayment of borrowing
|
|
(91,404)
|
|
|
-
|
|
|
|
Proceeds from sales of stock
|
|
-
|
|
|
12,500
|
|
Net cash provided by financing activities
|
|
(21,882)
|
|
|
45,416
|
|
NET INCREASE (DECREASE) IN CASH
|
|
(127,274)
|
|
|
(170,316)
|
|
Other comprehensive loss
|
|
-
|
|
|
(1,399)
|
|
CASH - Beginning of year
|
|
144,356
|
|
|
175,146
|
|
CASH - End of period
|
$
|
17,082
|
|
$
|
3,431
|
|
SUPPLEMENTAL CASHFLOW DISCLOSURES:
|
|
|
|
|
|
|
|
Interest Expense
|
$
|
-
|
|
$
|
-
|
|
|
Income Taxes
|
$
|
-
|
|
$
|
-
|
|
NON-CASH TRANSACTIONS:
|
|
|
|
|
|
|
|
Common stock issued for services and compensations
|
$
|
237,402
|
|
$
|
34,000
|
See accountant's review report.
F-5
-6-
FIRST AMERICAN SCIENTIFIC CORP.
Notes to the Consolidated Financial Statements
September 30, 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 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. See Note 12.
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
.
Impairment of Long-Lived Assets
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 No. 144 replaces SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This 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 believes the adoption of SFAS No. 144 will not have a material impact on the financial statements of the Company at June 30, 2002.
F-6
-7-
FIRST AMERICAN SCIENTIFIC CORP.
Notes to the Consolidated Financial Statements
September 30, 2002
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Impairment of Long-Lived Assets (continued)
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.
Interim Financial Statements
The interim financial statements for the period ended September 30, 2002, included herein have not been audited, at the request of the Company. They reflect all adjustments, which are, in the opinion of management, necessary to present fairly the results of operations for the period. All such adjustments are normal recurring adjustments. The results of operations for the period presented is not necessarily indicative of the results to be expected for the full fiscal year.
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.
As shown in the accompanying financial statements, the Company has incurred an accumulated deficit of $9,152,310 through September 30, 2002 and has minimal revenues. Although the Company recorded $1,108,087 in sales during the year ended June 30, 2002, it also generated a loss from operations of $879,067. These factors raise substantial doubt about the Company's ability to continue as a going concern.
Management plans to undertake a comprehensive review of its ongoing business to substantially increase sales through current channels and develop new sales opportunities.
Management has established plans designed to increase the sales of the Company's products by continued research and development and combining technology through AGES.
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 intends to seek new capital from new equity securities offerings that will, if successful, provide funds needed to increase liquidity, fund internal growth and fully implement its business plan. However, there is no assurance that the Company will raise the required capital. If the Company is unable to raise the required capital, then it will assess its future business viability.
F-7
-8-
FIRST AMERICAN SCIENTIFIC CORP.
Notes to the Consolidated Financial Statements
September 30, 2002
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Accounting Method
The Company uses the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America.
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.
Historically, the Company has not entered into derivatives contracts to hedge existing risks or for speculative purposes.
At September 30, 2002 the Company has not engaged in any transactions that would be considered derivative instruments or hedging activities.
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.
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.
Minority Interest
At June 30, 2002 minority shareholders held an approximately 56.52% interest in Alternative Green Energy Systems, Inc. The value for this minority interest is shown on the accompanying balance sheet.
F-8
-9-
FIRST AMERICAN SCIENTIFIC CORP.
Notes to the Consolidated Financial Statements
September 30, 2002
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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.
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