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FORM 10-KSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[ x ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended - June 30, 2000
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 Company as specified in its charter)
Nevada 88-0338315
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
409 Granville Street
Suite 1003
Vancouver, British Columbia V6C 1V5
(Address of principal executive offices, including postal code.)
(604) 681-8656
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
Common Stock
Securities registered pursuant to Section 15(d) of the Act:
Title of each class
None
Indicate by check mark whether the Company (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 Company was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES [ X ] NO [ ]
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Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. [ ]
The number of shares outstanding each of the Registrant's classes
of Common Stock, as of June 30, 2000
was 100,821,018 .
Documents Incorporated by Reference
1. Form S-8 Registration Statement filed with the Securities and
Exchange Commission on June 26, 1996.
2. Form 10-K for the period ending June 30, 1996.
3. Form 10-K for the period ending June 30, 1997.
4. Form 10-K for the period ending June 30, 1998.
5. Form 10-K for the period ending June 30, 1999.
6. Form S-8 Registration Statement filed with the Securities and
Exchange Commission on September 13, 1999.
7. Form S-8 Registration Statement filed with the Securities and
Exchange Commission on June 8, 2000
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PART I
Item 1. BUSINESS
General
FIRST AMERICAN SCIENTIFIC CORP. (the "COMPANY") was incorporated
under the laws of Nevada on April 12, 1995. Soon after incorporation,
the Company acquired licensing rights to the KINETIC DISINTEGRATION
SYSTEM (KDS), which is a highly refined micronizing process utilizing
kinetic energy to disintegrate non-ferrous material such as rubber,
glass, and various industrial minerals. The initial purpose of the
Company was to develop, market, manufacture, distribute, and sell KDS
equipment. The areas of interest were rubber, sludge and industrial
minerals, including minerals such as gypsum, phosphates, sulfates, and
nitrates. Other areas of interest were wallboard recycling, and
recovery of precious metals from mineral deposits. While the initial
thrust of the Company was in the area of rubber recycling and bio-waste
processing, the Company has decided to focus on developing a profitable
business operation based on industrial mineral recovery and processing.
To this end, the Company is in the process of reconstituting three of
its four KDS systems to be put back into profitable operation.
Further, subsequent to the date of these statements, the Company has
contracted to build two additional machines which it intends to sell
and/or put into production as part of a planned joint venture
operation.The Company is actively seeking operational partners for its
California plant, and has conditional agreements to process product in
the Vancouver area, and on the Beau Pre Explorations Inc gold property
near Victoria, British Columbia.
Technology Rights and Patents
In June 1995, the Company executed three licensing agreements with
the original owners of the technology. This first agreement licensed
the processing rubber and glass. A second agreement signed in February
1996 licensed gypsum, and a third agreement in May 1996, licensed all
other applications.
In June 1997 the Company agreed to acquire the rights to all
patents (either issued and or pending) and all other data pertaining
to the technology and its patented process. The purchase was subject
only to settlement of payments terms as agreed. The Company was unable
to meet these payment conditions and the agreement fell into default.
On May 31, 1999 the Company entered into new Amended Memorandum of
Agreement with Ashford Holdings Ltd. wherein Ashford again agreed to
deliver all legal and beneficial ownership of the technology, free and
clear of all liens, charges and encumbrances. In return the Company
agrees to pay US$150,000 plus 500,000 common shares (restricted as Reg.
S stock with a one year hold period) plus 1,000,000 in stock options at
$0.025 per share and a $200,000 debenture. On October 7, 1999, the
parties agreed to a further amendment whereby the Company will issue
4,000,000 shares in cancellation of the debenture of $200,000. These
payment terms were met in full on December 1, 1999 and clear title
ownership of the rights and patents passed irrevocably to the Company.
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The KDS patent, issued on November 24, 1998, under U.S. patent
number is 5,839,671. The patents rights extend to the following
regions: Canada, United States of America, Mexico, New Zealand,
United Kingdom, European Economics Community and
Australia.
The KDS Process
The KDS system produces extremely fine powders, from any number
of raw materials or recycled product. The KDS system utilizes a highly
refined process using kinetic energy technology and standing sound
waves for the disintegration of materials. These fine powders referred
to as MICROFINE (TM ) normally have a higher market value and are used
as high performance fillers and additives in a variety of compounds and
emulsions. The product produced is a extremely fine, like a talcum
powder, and the process can add significant value to the host
material.
Testing at the Company's research center in Ireland has shown that
the system can process bio-waste and sludge into the fine powders, and
at the same time eliminate virtually all bacteria while preserving the
nutrients which can then be used as a basis for making fertilizer.
Further research is needed to increase throughput volumes to
economically viable levels for fertilizer production, but
notwithstanding the above, the process also has the potential of
significant environmanal value.
The KDS machine weighs approximately five (5) tons and measures
sixteen (16) feet (H), x ten (10) feet (L) eight (8) feet (W). The
feed material is typically one inch in diameter and carried by a
pneumatic lift and material grading system, passing through the KDS
system within seconds. The life span of the KDS is greater than ten
(10) years. Ongoing service is minimal and requires less than thirty
minutes per day and twenty-four hour servicing twice a year.
Manufacturing of the KDS will be contracted out.
Operations
The Company opened a plant in California in1996 to process
industrial gypsum but closed this operation in June 1998 because of
lack of supply of gypsum, a resultant lack of working capital, and a
dispute with its joint venture partner. The operation was not
profitable at the then current gypsum market price.
During the fiscal year ending June 30, 1999, sales were $285,000
from the sale of one KDS system. There were no sales during the year
ending June 30, 2000 as the company is still in the development stage.
The Company has now hired a full time Business Development Manager, and
expects that, in conjunction with the opening of the demonstration site
on June 29, 2000, it will be aggressively entering the marketing phase
of its operations.
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Development of the Internet site VideoMovieHouse.com is
continuing, with an expected launch date sometime before the end of the
year 2000. The site will initially offer catalogue merchandise for sale
over the Internet, and develop into a full-scale sales and rental
operation as advancement in technology permits. The project is expected
to produce modest positive cash flow in its first year of operation.
On March 25, 2000, the Company entered into a conditional
Agreement in Principle to form a joint venture to distribute and
manufacture the KDS System in the Czech Republic. Under the proposed
agreement, a joint venture, which will be known as First American
Scientific (Europe) Corp., will be 60 % owned and controlled by FASC.
All funding for the venture will come from our Czech investors. Legal
work with respect to registering the KDS patents in the Czech Republic
and finalizing the agreement is now under review. However, unless
FASC is assured of total patent protection, it will not permit its
technology to be placed in an unprotected jurisdiction
Research & Development
The Company entered into an agreement in September 1998 with The
Green Leaf Fibre Company Ltd. (hereinafter "GlF") of Northern Ireland
for GLF to conduct research and development testing within the United
Kingdom, on the commercial viability of the Company's KDS system. This
research continues primarily for sludge and, secondarily, for rubber
processing. All costs of research in Ireland are paid for by GLF and by
the Irish government under their Radian Award program .
Research carried out in Vancouver has been with special minerals,
gold tailings, wood chips, zeolite, and gyproc. All test results have
been positive and have confirmed the capabilities of the equipment
within the specified parameters. Improvements to the design are
ongoing.
Summary of Agreements with Spectrasonic Corp. and Ashford Holdings Ltd.
On June 22, 1995 the Company entered into an Exclusive License
Agreement with Spectrasonic. The contract is for a period of 99 years.
Under the terms of the June 22, 1995 agreement, Spectrasonic granted
the Company the exclusive license to develop, market, manufacture,
distribute, and sell equipment, technology products, and services
worldwide using the KDS system as it relates to rubber and glass
disposal. The contract price for this license was $550,000. The Company
issued 250,000 common shares to Spectrasonic at an aggregate value of
US$175,000 plus cash of $375,000. This contract has been fully paid.
On February 22, 1996 the Company executed a License Agreement with
Spectrasonic Corp for the exclusive rights to exploit, develop, use,
manufacture, market, distribute and sell KDS systems as it relates to
gypsum disintegration, disposal, recycling, remanufacturing or
manufacturing, using used or raw materials. The license is for a period
of 99 years. The contract price for this was US$775,000, consisting of
1,000,000 common shares at $0.50 per share, plus cash payments of
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US$275,000. This contract was exclusive except for a small operator in
the State of Washington who has certain rights to continue his
operation. This operation has not nor will not have any significant
impact on the operation of the Company.
On May 17, 1996, the Company executed a further License Agreement
with Spectrasonic Corp wherein it acquired the worldwide rights to all
and any kinds of materials not covered in previous agreements with
Spectrasonic. This agreement covers both used and new materials, and
covers disintegration, disposal, recycling, remanufacturing or
manufacturing or any kinds of materials using the KDS equipment or
technology. This agreement is for a period of 99 years. The
consideration is 1,000,000 shares of common stock at $0.50 per share
plus payment of $1,000,000 in Canadian funds (US$680,000) by January 2,
1997.This payout schedule was amended on October 24, 1996, and the
balance outstanding at June 30, 1999 was $302,000. Subsequent to this
agreement, Spectrasonic advised the Company that its interests had been
assigned to Ashford Holdings Ltd.
On July 2, 1997 the Company acquired all patents issued, to be
issued, or pending, as well as all manufacturing rights, drawings,
blueprints, CAD drawings, for a total consideration of 1,000,000 common
shares at $0.25 per share plus US$500,000 payable on the basis of
US$50,000 per KDS machine sold, until 10 machines are sold. A patent
was issued on November 24, 1998, and its U.S. patent number is
5,839,671.
On May 31, 1999 the Company entered into a Memorandum of Agreement
with Ashford Holdings Ltd. wherein Ashford agrees to deliver all legal
and beneficial ownership of certain technology, free and clear of all
liens, charges and encumbrances. In return the Company agrees to pay
US$150,000 plus 500,000 common shares (legended as Reg. S stock with a
one year hold period) plus 1,000,000 in stock options at $0.025 per
share. On October 7, 1999, the parties agreed to an amendment whereby
the Company will issue 4,000,000 shares in cancellation of the
debenture of $200,000. These payment terms were met in full on
December 1, 1999 when all the above licensing agreements were cancelled
and clear title ownership of the rights and patents passed irrevocably
to the Company.
Market
At June 30, 2000 the Company was not producing any KDS machines,
but subsequent to that date has begun construction of two new heavy
duty systems to be designed for processing mineral rock. The Company
believes that testing will continue to show the system's ability to
liberate precious metals from rock without the use of environmentally
harmful chemicals. If successful at economically viable levels, then
the Company expects a high demand for its equipment from the mining
sector.
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Testing has shown that the equipment can efficiently reduce
zeolite rock to a fine powder, and that such reduction significantly
increases the end value of the host rock. The Company is currently
discussing opportunities with several zeolite suppliers, with the view
to set up a full scale production and bagging operation at the
Company's Bakersfield plant.
Competition
The Company has competition from other producers of microfine
powders using various other methods of materials reduction, however,
the Company believes its KDS System is superior to other systems, more
efficient and less costly to operate.
Company Facilities
The Company's corporate offices are located at 1003-409 Granville
St, Vancouver BC Canada, V6C 1T2. The phone number of the Company is
(604) 681-8656 and the fax number is (604) 685-0698. The premises are
leased for a three-year period commencing August 1, 1998 at a monthly
rental of US$1,000.
The Company is in the process of negotiating a new lease at 4100
Burr Street, Bakersfield, CA. 93308. where two of its KDS systems are
located. The premises consist of 3 acres of land and a 5,000 square
foot building. The plant is expected to re-open in October or November
2000.
The Company is currently sub-leasing space within the confines of
its equipment manufacturer's fabrication facility located at 7399 River
Rd, Delta BC. The space contains a fully operational KDS system which
is being used for testing new improvements and for sales
demonstrations. The equipment will likely remain at that location
until the new facility planned for Cloverdale, BC is ready for
occupation.
Employees
The Company currently has four full time employees, including the
CEO, and several hired outside consultants who are providing legal,
accounting and professional advice, technical and engineering services
and investor relations services. To minimize drain on working capital,
some outside consultants and the CEO are paid through stock options.
Other
On September 1, 1999, the Company entered into a formal agreement
with VMH VideoMovieHouse.com Inc. whereby the Company will purchase all
of the shares of said company for US$250,000.The purchase was completed
in November 1999. Web-site development was delayed due lack of working
capital, but has since recommenced work on the site with the launching
of the Company's internet site expected before the end of year 2000.
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On September 1, 1999, the Company acquired 100,000 shares of
common stock of Lynx Express for US$1,000, but in January 2000,
returned those shares to the outgoing president in lieu of canceling
his shareholder advances of $ 37,500.
During the fiscal period ending June 30, 2000, the Company settled
various accounts owing by issuance of common stock.
Ashford Holdings Ltd. $302,000 4,500,000 common shares
Spectrasonic Corp $100,000 2,000,000 common shares
J. Lovelock $ 50,000 2,000,000 common shares
Jon Martin $ 50,000 1,000,000 common shares
C.L.Kantonen $ 68,000 2,000,000 common shares
Gary Burnie $120,000 3,000,000 common shares
Harold Bergman $ 3,750 75,000 common shares
Peter Matousek $ 50,000 1,000,000 common shares
Ian Scott-Moncrieff $ 8,500 850,000 common shares
Kanno Group Holdings Ltd $ 7,500 150,000 common shares
RISK FACTORS
1. Going Concern Opinion. During the fiscal year ended June 30,
2000 the Company had a net loss of US$651,125 compared to a net loss of
US$1,008,141 at June 30, 1999. This significant improvement in results
from operations at the plant in Bakersfield CA. was terminated. During
the past year the Company concentrated on research and machine sales,
both of which require far less overhead expenses. The loss in the
current year has reduced the shareholders equity to $3,063,015 Total
liabilities of the Company have been reduced to $196,196 compared to
$570,061 at June 30, 1999. During the year, agreements were reached
with Ashford Holdings Ltd. wherein their debt of $302,000 has been
settled, leaving only the trade payables outstanding. While significant
improvement has been achieved, the Company needs to raise new capital
to cover its ongoing expenses. The Company has $59,642 held as a
litigation reserve which is expected to be sufficient to settle
outstanding accounts payable.
2. Development and Market Acceptance of New Products. The
Company's success and growth will depend upon its ability to improve
and market its existing products and to successfully develop,
manufacture and market new products, and to find and prove new uses for
its equipment..
3. Liquidity; Need for Additional Financing. The Company
believes that it will need additional cash during the next twelve
months. If the Company is unable to generate a positive cash flow
before its cash is depleted, it will need to seek additional capital.
There is no assurance that the Company will be able to obtain
additional capital if required, or obtain the capital on terms and
conditions acceptable to it. The Company is currently suffering from a
lack of liquidity although its current obligations are not significant.
In spite of this, the Company continues its sales efforts while it
continuously seeks out additional capital. The Company's auditors have
also issued a going concern opinion. See "Financial Statements".
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4. Dependence on Suppliers. The Company relies on a number of
suppliers to provide certain raw materials it may be processing through
its equipment. The interruption of certain sources of supply or the
failure to adapt materials to the Company's changing technological
requirements could impair the Company's ability to process products or
cause the Company to incur costs associated with the development of
alternative sources, either of which could adversely affect the
Company's financial performance.
5. Technology Risk. All manufacturers, including the Company,
utilize different applications of known technology. Should a competitor
develop a technology breakthrough that cannot be adapted to the
Company's systems or develop a more effective application of existing
technology, the Company's products would be at risk of becoming
obsolete.
6. Competition. Most of the competition are Companies with
substantially greater financial, technical and marketing resources
than the Company. As the market for the Company's products expand, the
Company expects that additional competition will emerge and that
existing competitors may commit more resources to those markets. See
"Business Competition."
7. Issuance of Additional Shares. At June 30, 2000, there were
100,821,018 shares of common stock issued or 50.45% of the 200,000,000
authorized shares of Common Stock of the Company. The Board of
Directors has the power to issue such shares, subject to shareholder
approval, in some instances. Although the Company presently has no
commitments, contracts, or intentions to issue any additional shares to
other persons, other than in the exercise of options, the Company may
in the future attempt to issue shares to acquire products, equipment,
or properties, or for other corporate purposes. Any additional issuance
by the Company, from its authorized but unissued shares, would have the
effect of diluting the interest of existing shareholders. See
"Description of Securities".
8. Indemnification of Officers and Directors for Securities
Liabilities. The Articles of Incorporation of the Company provide that
any Director, Officer, agent and /or employee will be indemnified as to
those liabilities and on those terms and conditions as are specified in
the Company Act of the State of Nevada. Further, the Company may
purchase and maintain insurance on behalf of any such persons whether
or not the Corporation would have the power to indemnify such person
against the liability insured against. The foregoing could result in
substantial expenditures by the Company and prevent any recovery from
such Officers, Directors, agents and employees for losses incurred by
the Company as a result of their actions. Further, the Company has been
advised that in the opinion of the Securities and Exchange Commission,
indemnification is against public policy as expressed in the Securities
Act of 1933, as amended, and is, therefore, unenforceable.
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9. Cumulative Voting, Preemptive Rights and Control. There are
no preemptive rights in connection with the Company's Common Stock.
Shareholders may be further diluted in their percentage ownership of
the Company in the event additional shares are issued by the Company in
the future. Cumulative voting in the election of Directors is not
provided for. Accordingly, the holders of a majority of the shares of
Common Stock, present in person or by proxy, will be able to elect all
of the Company's Board of Directors. See "Description of the
Securities"
10. No Dividends Anticipated. At the present time the Company
does not anticipate paying dividends, cash or otherwise, on its Common
Stock in the foreseeable future. Future dividends will depend on
earnings, if any, of the Company, its financial requirements and other
factors. See "Dividend Policy"
11. Lack of Current Operations. The Company did not produce any
KDS machines during the year, but has a contract in place to
manufacture two new heavy-duty KDS machines which are expected to be
delivered in November 2000.
12. Lack of Market Research. The Company has neither conducted
nor has the Company engaged other entities to conduct market research
such that management has assurance market demand exists for the
transactions contemplated by the Company. See "Business"
13. No Cash Dividends and None Anticipated. The Company has not
paid any cash dividends, nor does it contemplate or anticipate paying
any cash dividends upon its securities in the foreseeable future. The
Company anticipates that it will use all earnings generated from
operations to finance the growth of the Company. See "Description of
Securities" and "Dividends"
14. Product Liability. The Company could incur liability for
product defects, which result in damage from the use of its equipment
and products. Any such claims, if successful, could result in
substantial losses to the Company.
15. No Insurance Coverage. The Company, like other companies in
its industry, is finding it increasingly difficult to obtain adequate
insurance coverage against possible liabilities that may be incurred in
conducting its business activities. At present, the Company has not
secured any liability insurance. The Company has potential liability
from its general business activities, and accordingly, it could be
rendered insolvent by serious error omission.
16. Non-arms Length Transactions and Conflicts of Interest. The
Company has engaged in transactions with its Officers, Directors and
principal shareholders. Such transactions may be considered as not
having occurred at arms length. The Company will be engaged in
transactions with management and others involving conflicts of
interest, including conflicts on salaries and other payments to such
parties. See "Business"
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17. Reliance Upon Current Management. The Company's current
operations and future success are greatly dependent upon the
participation of its sole officer and director, C Kantonen. The death
or absence of Mr. Kantonen in all likelihood would result in an
impairment of operations until a successor was appointed. The Company
has an employment agreement with Mr. Kantonen
18. Lack of Key Man Insurance. The Company has not obtained key
man life insurance on the life of its sole officer and director. The
death or unavailability of its sole officer and director could have a
material adverse impact on the operation of the Company. See
"Management"
ITEM 2. PROPERTIES
The Company owns no real property. It leases 1,000 square feet of
office space at 409 Granville Street, Suite 1003, Vancouver, British
Columbia V6C 1T2. The cost of this space is approximately $1,000 per
month. The lease is for three years and was effective August 1, 1998.
The Company is negotiating a lease at 4100 Burr Street,
Bakersfield, California 93303, for the operation of its plant. These
discussions have resulted in a conditional lease agreement that is
being reviewed by our solicitor. The land consists of 100,000 square
feet and the rent will be $2,000 per month.
The Company owns four KDS machines. The first two KDS systems
located in California, were acquired as part of the licensing agreement
with Spectrasonic. In the fiscal year ending June 30, 2000, $ 100,000
was expended to clear all claims against the two Bakersfield units. The
two other KDS systems, one in Ireland and one in Vancouver, are being
used for testing, demonstrations, and in research and development.
The Company has other fixed assets located in California including
bagging equipment, hoppers, electrical paneling, site preparation,
paving, construction of building, and general storage bins. These
assets are part of the leasehold improvements located in Bakersfield
which are currently the subject of lease negotiations. Total equipment
is recorded on the balance sheet at $ 1,168,969 net of depreciation The
Company also has office equipment costing $23,916 located in Vancouver.
The Company's Technology and Patents have a recorded net book
value of $ 1,952,750 USD.
ITEM 3. LEGAL PROCEEDINGS
No material legal proceedings are pending to which the Company is
a party or of which any of the Company's property is the subject matter
other than as described below. Further no legal proceedings are known
to be contemplated by governmental authorities and no officer or
director of the Company is a party to any litigation other than as
described below:
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PRIMECO V. FIRST AMERICAN SCIENTIFIC CORP., Kern County Municipal
Court, Bakersfield Judicial District Case No. 139650, filed on
approximately September 19, 1998. The claim is in the amount
$21,231.54. SETTLED for $16,231.54
DARCO EQUIPMENT VS. FIRST AMERICAN SCIENTIFIC CORP., Orange County
Superior Court, Case No. 786408, filed on approximately November 4,
1997. The claim was for the amount of $ 13,960.58. SETTLED for
$4,000.00
KERN ROCK V. FIRST AMERICAN SCIENTIFIC CORP., Kern County
Municipal Court, Bakersfield Judicial District, Case No. 137938, filed
on approximately July 24, 1997. The claim was for the amount of
$11,634.96. SETTLED for $5,060.15
TERRAIN TECHNOLOGY V. FIRST AMERICAN SCIENTIFIC CORP., Kern County
Municipal Court, Bakersfield Judicial District, Case No. 140950, filed
on approximately October 8, 1997. This claim was for $10,199. SETTLED
for $5,799.92
GAHVEJJAN ENTERPRISES, INC. V. FIRST AMERICAN SCIENTIFIC CORP.,
Fresno Municipal Court, Consolidated Fresno Judicial District, Case No.
C97908858-4, filed on approximately November 17, 1997. This t claims
is in the amount $9,980.41. SETTLED for $2,969.18
COMMERCIAL TRADE BUREAU V. FIRST AMERICAN SCIENTIFIC CORP., Kern
County Municipal Court, Bakersfield Judicial District, Case No. 146019,
filed on June 26, 1998. This claim was for $17,353.76. SETTLED for
$3,359.15
WOOD V. FIRST AMERICAN SCIENTIFIC CORP., Kern County Municipal
Court, Bakersfield Judicial District, Case No. 146901, filed on August
7, 1998. This claim was for $16,200. SETTLED for $4,860.00
FORD MOTOR CREDIT COMPANY V. FIRST AMERICAN SCIENTIFIC CORP.,
Kern County Municipal Court, Bakersfield Judicial District, Case No.
148129, filed on October 10, 1998. This complaint seeks $3,549.96, plus
attorneys' fees and costs for failure to pay on a lease executed by the
Company. No trial date has been set and discovery has been propounded
by plaintiff. Management would like to settle this matter prior to
trial. Plaintiff has made an offer to settle for $3,549.60 and this
offer was not accepted by the Company's management. It is likely that
plaintiff will prevail at trial and thus out of court settlement is
sought. SETTLEMMENT OFFER REJECTED.
HARTWICK & HAND V. FIRST AMERICAN SCIENTIFIC CORP., Kern County
Municipal Court, Bakersfield Judicial District, Case No. 146948, filed
on August 10, 1998. This claim was for $18,246.44. SETTLED for
$6,000.00
SMALL V. FIRST AMERICAN SCIENTIFIC CORP., Kern County Superior,
Case No. 235377 RA, filed on December 26, 1997. This claim was in the
amount of $29,235.48. SETTLED for $15,000.00
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H. LIMA CO. V. FIRST AMERICAN SCIENTIFIC CORP., Kern County
Superior Court, Case No. 235647 AEW, filed on February 6, 1998. This
claim was for $69,133.62. SETTLED for $18,000.00.
L.A. COMMERCIAL V. FIRST AMERICAN SCIENTIFIC CORP., Kern County
Municipal Court, Bakersfield Judicial District, Case No. 144246, filed
on March 26, 1998. This claim was in the amount of $6,885.00. SETTLED
for $2,000.00.
ITO PACKING CO. V. FIRST AMERICAN SCIENTIFIC CORP., Fresno County
Municipal Court, Case No. C98906111-0, filed on August 10,1998. This
claim was for $9,513.34. SETTLEMENT OFFER OF $7,000 UNDER
CONSIDERATION.
QUINN CO. V. FIRST AMERICAN SCIENTIFIC CORP., Fresno County
Municipal Court, Case No. 613896-0, filed on July 16, 1998. This claim
was for $35,523.90. SETTLED for $17,000.00.
The Company has a number of other commercial creditors who have
the ability to bring actions to recover money due them. Some of these
claims will entitle the creditor to attorneys' fees spent in recovering
these funds. Settlement discussions are ongoing. The company expects to
settle all remaining outstanding claims during the next fiscal year.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The company submitted the matter of increasing the authorized
capital from 100 million shares to 200 million shares. The proposal was
passed by 54 % of the outstanding shareholders.
ITEM 5. MARKET PRICE OF AND DIVIDENDS ON THE COMPANY'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS.
At June 30, 2000, the Company had 443 shareholders of record of
its Common Stock.
The Company has not paid any dividends since its inception and
does not anticipate paying any dividends on its Common Stock in the
foreseeable future.
The Company's securities are traded over-the-counter on the
Bulletin Board operated by the National Association of Securities
Dealers, Inc. under the symbol "FASC". The table shows the high and low
bid of the Company's Common Stock since February 29, 1996, when the
Company's securities began trading.
<PAGE> 14
Quarter ended
High Low
1996
March 31 2.13 1.63
June 30 1.90 0.88
September 30 0.71 0.71
December 31 0.20 0.18
1997
March 31 0.16 0.12
June 30 0.175 0.15
September 30 0.20 0.18
December 31 0.10 0.085
1998
March 31 0.065 0.055
June 30 0.07 0.06
September 30 0.0275 0.0225
December 31 0.02 0.018
1999
March 31 0.021 0.021
June 30 0.055 0.055
September 30 0.0525 0.0525
December 31 0.042 0.042
2000
March 31 0.540 0.540
June 30 0.150 0.150
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data presented below has been derived
from the financial statements of the Company. The following table
summarizes certain financial information and should be read in
conjunction with Management's Discussion and Analysis of Results of
Operations and Financial Condition " and the Financial Statements and
related notes included elsewhere in this Statement.
Year ended Year ended Year ended Year ended Year ended
06/30/00 06/30/99 06/30/98 06/30/97 06/30/96
Income $ 73,486 $ 319,166 $ 665,638 $ 347,721 $ -
Cost of Sales $ - $ 106,595 $ 290,086 $ 157,974 $ -
Gross Profit $ 73,486 $ 212,571 $ 375,552 $ 189,747 $ -
Operating Expenses 724,611 $ 594,993 $ 1,290,783 $ 1,514,381 $ 473,369
Other expenses $ - $ - $ 157,691 $ - $ -
Net Loss $ 654,292 $ 1,008,141 $ 1,072,922 $ 1,324,634 $ 473,369
Accumulated Deficit:
Beginning Period $3,882,072 $ 2,870,977 $ 1,798,055 $ 473,421 $ -
End of Period $4,533,197 $ 3,882,072 $ 2,870,977 $ 1,798,055 $ 473,421
Net loss per share (0.01) $ (0.001) $ (0.05) $ (0.12) $ (0.07)
Shares
outstanding 100,821,018 66,146,018 49,326,018 13,622,448 8,505,117
Balance Sheet Data:
Working Capital $ (60,134) $ (535,365) $ (863,909) $(2,320,026) $(1,987,273)
Total Assets $3,259,212 $ 4,098,493 $ 4,314,959 $ 4,422,427 $ 2,932,278
Long-term Debt $ - $ - $ - $ - $ -
Shareholders'
Equity $3,063,015 $ 2,586,057 $ 3,160,219 $ 1,947,038 $ 935,902
<PAGE> 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
The Company was incorporated April 12, 1995 as a development stage
company. From May 1997 until June 1998 it operated a pilot project in
Bakersfield, which confirmed that, the technology worked for industrial
minerals, primarily gypsum. A joint venture to operate the plant ended
in dispute between the parties and operation of the plant ceased. Steps
are now nearing conclusion to resolve the legal issues surrounding the
matter and to regain control of the property. There are two fully
operational KDS machines and complete material handling systems and
bagging equipment belonging to FASC on the site. which are is expected
to be put back into operation before the end of calendar year 2000.
The operation is expected to begin generating revenue in the early part
of 2001.
The Company irrevocably acquired all patent rights to the KDS
technology in December 1999, free and clear of all encumbrances or
royalty obligations. This break through has allowed the company to
move forward in developing its plans for future exploitation of the
technology.
In June 2000, the company reclaimed one of its KDS systems and
relocated to Vancouver, BC, where it is now being used for sales
demonstrations and for testing of improvements to the technology. As
soon as City permits are received, the equipment will be moved to a
permanent home where it will participate in a joint venture revenue
generating operation.
Research and development of the KDS system continues at the
company's research facility in Ireland. The center is 100% funded by
our Joint Venture partner in conjunction with the Irish government
under their Radian Award program. The primary focus of the research is
de-watering and processing of bio-waste and sludge. The process has
proven successful processing low volumes of material. Research
continues with a view to increasing through put up to commercially
viable levels. The cost of this research has no impact on the Companies
financial position, and if proven successful will create significant
financial opportunity for the company.
Development of the Internet site VideoMovieHouse.com is
continuing, with an expected launch date sometime before the end of the
year 2000. The site will initially offer catalogue merchandise for sale
over the Internet, and develop into a full-scale sales and rental
operation as advancement in technology permits. The project is expected
to produce modest positive cash flow in its first year of operation.
The Company continues to focus on strengthening its balance sheet
and has reduced total liabilities from $570,061 at June 30, 1999 to
$196,196, by the end of this fiscal period. This has increased the
Company's working capital ratio from .06:1 at the end of 1999 to .7:1
at June 30, 2000. The Company continues to strive to eliminate all old
trade liabilities before the end of the next fiscal year.
<PAGE> 16
The Company currently has sufficient funds on hand to maintain its
operation over the short term, however, it will continue to have a
need to raise capital to advance its projects and plans to actively
pursue fund raising activities, either by way of loans, sale of stock
or a combination of both.
On March 7, 2000, the Board of Directors passed a resolution to
increase its authorized capital from 100 million to 200 million common
shares which was subsequently ratified by a clear majority of all
shareholders. As of June 30, 2000 there were 100,821,018 shares issued.
RESULTS OF OPERATIONS - YEAR ENDED JUNE 30, 2000
The Company generated US$73,486 in revenue during the year, mainly
as a result of gains realized through settlement of old debt. (down
from $319,166 in 1999 when one machine was sold). Operating losses for
the years 2000 were $654,292, mainly incurred to re-establish its
operation on a sounder footing. Despite no sales in the year, this is
an improvement over 1999 losses which were $1,008,141. The Company
continues to focus on strengthening its balance sheet, resolving
outstanding legal issues, settling old debt, and developing its
marketing strategy and business plan as it moves into the next phase of
its operation. The Company is conscious of its operating expenses and
is carefully managing its resources.
Phase II of the research and development funded by the "Radian
Award Program" in Ireland is well underway with the development of a
computer simulation model which will, when completed, be used to
enhance system design and customize components for specific processes
and materials.
The KDS machine previously located in Tonasket, Washington was
moved to Vancouver and is currently undergoing a complete retrofit and
being made ready for use at the new Cloverdale demonstration site and
sales office.
On March 25, 2000, the Company entered into an Agreement in
Principle to form a joint venture to distribute and manufacture the KDS
System in the Czech Republic. Under the agreement the joint venture,
which will be known as First American Scientific (Europe) Corp., will
be 60% owned and controlled by FASC. All funding for the venture will
come from our Czech partners. The Company's solicitors are currently
reviewing the agreement and dealing with legal issues with respect to
registering the KDS patents in the Czech Republic.
INFLATION
Inflation has not been a factor effecting current operations, and
is not expected to have any material effect on operations in the near
future.
<PAGE> 17
FOREIGN OPERATIONS
The Company rents office space in Vancouver, British Columbia,
Canada which serve as the corporate and administrative offices. The
Vancouver demonstration site and sales office is expected to be open
during the fourth quarter.
ITEM 8. FINANCIAL STATEMENTS
FIRST AMERICAN SCIENTIFIC CORP.
Consolidated Financial Statements
TABLE OF CONTENTS
INDEPENDENT AUDITOR'S REPORT F-1
FINANCIAL STATEMENTS
Consolidated Balance Sheets F-2
Consolidated Statements of Operations
and Comprehensive Income (Loss) F-3
Consolidated Statement of Stockholders' Equity F-4
Consolidated Statements of Cash Flows F-5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-7
<PAGE> 18
First American Scientific Corp.
Vancouver, British Columbia
CANADA
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying balance sheet of First American
Scientific Corp., a Nevada corporation, as of June 30, 2000 and the
related statements of operations and comprehensive income (loss),
stockholders' equity and cash flows for the year then ended. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimated
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of First
American Scientific Corp. as of June 30, 2000 and the results of its
operations and its cash flows for the year then ended in conformity
with generally accepted accounting principles.
As discussed in Note 2, the Company has sustained losses since
inception and has negative working capital. These factors raise
substantial doubt about the Company's ability to continue as a going
concern. Realization of a major portion of the assets is dependent
upon the Company's ability to meet its future financing requirements,
and the success of future operations. Management's plans regarding
those matters 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
September 27, 2000
F-1
<PAGE> 19
FIRST AMERICAN SCIENTIFIC CORP.
CONSOLIDATED BALANCE SHEETS
ASSETS June 30, 2000 June 30, 1999
CURRENT ASSETS
Cash $ 42,420 $ 25,690
Accounts receivable - 9,007
Trust account 59,642 -
Prepaid expenses 34,000 -
------------ -----------
TOTAL CURRENT ASSETS 136,062 34,697
------------ -----------
PROPERTY AND EQUIPMENT
Property and equipment 1,693,261 1,589,519
Less: Accumulated depreciation (524,292) (327,567)
------------ -----------
TOTAL PROPERTY AND EQUIPMENT 1,168,969 1,261,952
------------ -----------
OTHER ASSETS
Technology rights - net of amortization 1,751,152 1,629,775
Patents and manufacturing rights -
net of amortization 201,598 218,265
Deposits 1,430 11,430
------------ -----------
TOTAL OTHER ASSETS 1,954,180 1,859,470
------------ -----------
TOTAL ASSETS $ 3,259,211 $ 3,156,119
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 196,196 $ 268,061
License agreement payable -
Spectrasonic Corp. - 302,000
------------ -----------
TOTAL CURRENT LIABILITIES 196,196 570,061
------------ -----------
COMMITMENTS AND CONTINGENCIES - -
------------ -----------
STOCKHOLDERS' EQUITY
Common stock - $.001 par value,200,000,000
shares authorized; 100,821,018 and
66,146,018 shares issued and outstanding,
respectively 100,821 66,146
Additional paid-in capital 7,495,604 6,399,030
Stock options and subscriptions
receivable - -
Accumulated deficit (4,533,197) (3,882,072)
Accumulated other comprehensive income (213) 2,954
------------ -----------
TOTAL STOCKHOLDERS' EQUITY 3,063,015 2,586,058
------------ -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 3,259,211 $ 3,156,119
============ ===========
The accompanying notes are an integral part of these financial
statements.
F-2
<PAGE> 20
FIRST AMERICAN SCIENTIFIC CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
Year Ended Year Ended
June 30, 2000 June 30, 1999
REVENUES $ - $ 285,399
COST OF SALES - 106,595
-------------- -------------
GROSS PROFIT - 178,804
Operating Expenses 724,611 594,993
-------------- -------------
Loss from Operations (724,611) (416,189)
Other Income (Expense)
Miscellaneous - 445
Loss on impairment of assets - (629,118)
-------------- ------------
Total Other Income (Expense) - (628,673)
-------------- ------------
Loss Before Extraordinary Items (724,611) (1,044,862)
Extraordinary Item
Gain on debt forgiveness 73,486 33,767
-------------- ------------
Loss before Income Taxes (651,125) (1,011,095)
Income Taxes - -
-------------- ------------
NET LOSS (651,125) (1,011,095)
Other Comprehensive Income (loss)
Foreign currency translation gain (loss) (3,167) 2,954
-------------- ------------
Comprehensive Net Loss $ (654,292) $ (1,008,141)
============== ============
Basic and diluted net loss per
common share $ (0.01) $ (0.01)
============== ============
Weighted average number of
basic and diluted common stock
shares outstanding 88,512,685 55,876,015
============== ============
The accompanying notes are an integral part of these financial
statements.
F-3
<PAGE> 21
FIRST AMERICAN SCIENTIFIC CORP.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Additional
Common Stock Paid-in Options
Shares Amount Capital
Balance, June 30, 1998 49,326,018 $ 49,326 $ 6,027,370 $
Issuance of stock for
services at $0.001 -
$0.025 per share 8,010,000 8,010 25,230
Issuance of stock for
repayment of debt at
$0.01 - $0.025 per share 3,160,000 3,160 96,506
Issuance of stock for partial
payment of license agreement
at $0.05 per share 1,000,000 1,000 49,000
Issuance of stock for cash
at $0.04 per share 4,650,000 4,650 200,924
Stock subscriptions collected - - -
Net loss for year ended
June 30, 1999 - - -
Foreign currency translation
gain - - -
----------- --------- ------------ -------
Balance, June 30, 1999 66,146,018 66,146 6,399,030
Issuance of options for
consulting services - - - 4,500
Exercise of stock options
for cash at an average of
$0.03 per share 10,600,000 10,600 319,400 (4,500)
Issuance of stock for cash
at an average of $0.03
per share 7,500,000 7,500 217,500 -
Common stock issued from
options for equipment at
$0.05 per share 2,000,000 2,000 98,000 -
Common stock issued from
options for services at
$0.02 per share 9,075,000 9,075 147,675 -
Common stock issued from
options for accounts
payable at $0.02 1,000,000 1,000 16,500 -
Common stock issued from
options for payment of long-term
debt at $0.05 per share 4,500,000 4,500 297,500 -
Net loss for year ended
June 30, 2000 - - - -
Foreign currency translation
gain (loss) - - - -
----------- --------- ------------ -------
Balance, June 30, 2000 100,821,018 $ 100,821 $ 7,495,604 $ -
=========== ========= ============ =======
The accompanying notes are an integral part of theses financial
statements.
F-4a
<PAGE> 22 FIRST AMERICAN SCIENTIFIC CORP.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Accumulated Total
Other Stock-
Subscriptions Accumulated Comprehensive holders'
Receivable Deficit Income (loss) Equity
Balance, June 30, 1998
Issuance of stock for services
at $0.001 - $0.025 per share $ (45,500) $(2,870,977) $ - $3,160,219
Issuance of stock for repayment
of debt at $0.01 - $0.025
per share - - - 33,240
Issuance of stock for repayment
of debt at $0.01 - $0.025 per
share - - - 99,666
Issuance of stock for partial
payment of license agreement
at $0.05 per share - - - 50,000
Issuance of stock for cash
at $0.04 per share - - - 205,574
Stock subscriptions
collected 45,500 - - 45,500
Net loss for year ended
June 30, 1999 - (1,011,095) - (1,011,095)
Foreign currency translation
gain - - 2,954 2,954
--------- -------------- ----------- ----------
Balance, June 30, 1999 - (3,882,072) 2,954 2,586,058
Issuance of options for
consulting services - - - 4,500
Exercise of stock options
for cash at an average of
$0.03 per share - - - 325,500
Issuance of stock for cash at
an average of $0.03 per
share - - - 225,000
Common stock issued from
options for equipment at
$0.05 per share - - - 100,000
Common stock issued from
options for services at
$0.02 per share - - - 156,750
Common stock issued from
options for accounts
payable at $0.02 - - - 17,500
Common stock issued from
options for payment of
long-term debt at $0.05
per share - - - 302,000
Net loss for year ended
June 30, 2000 - (651,125) - (651,125)
Foreign currency translation
gain (loss) - - (3,167) (3,167)
--------- ------------- ---------- -----------
Balance, June 30, 2000 $ - $ (4,533,197) $ (213) $3,063,015
========= ============= ========== ==========
The accompanying notes are an integral part of theses financial
statements.
F-4b
<PAGE> 23
FIRST AMERICAN SCIENTIFIC CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended Year Ended
June 30, 2000 June 30, 1999
CASH FLOWS PROVIDED (USED) IN
OPERATING ACTIVITIES
Net loss $ (651,125) $ (1,011,095)
Depreciation and amortization 340,393 313,255
Impairment of assets - 629,118
Adjustments to reconcile net loss to net cash
used by operations:
Forgiveness of debt (73,486) -
Services paid by issuance of stock 122,750 33,240
Non-cash expenses 9,007 -
Services paid by issuance of options 4,500 -
Amounts used from trust for accounts
payable 19,121 -
Decrease (increase) in accounts
receivable - 23,908
Decrease (increase) in inventory - 5,500
Decrease (increase) in deposits - 2,304
(Decrease) increase in accounts payable 0 (60,355)
(Decrease) increase in litigation
reserve (49,642) -
Payment on license agreements payable - (185,000)
------------ -------------
Net cash (used) in operating activities (278,482) (249,125)
------------ -------------
CASH FLOWS PROVIDED (USED) IN
INVESTING ACTIVITIES
Purchase of property, plant and
equipment (3,742) -
Investment in technology (248,379) -
------------ -------------
Net cash provided (used) in
investing activities (252,121) -
------------ -------------
CASH FLOWS PROVIDED (USED)
IN FINANCING ACTIVITIES
Borrowings - 80,467
Payments on borrowings - (12,360)
Proceeds from sales of stock 550,500 205,575
------------ -------------
Net cash provided by financing
activities 550,500 273,682
------------ -------------
NET INCREASE (DECREASE) IN CASH $ 19,897 $ 24,557
============ =============
The accompanying notes are an integral part of these financial
statements.
F-5
<PAGE> 24
FIRST AMERICAN SCIENTIFIC CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Year Ended Year Ended
June 30, 2000 June 30, 1999
NET INCREASE (DECREASE) IN CASH
(Balance forward) $ 19,897 $ 24,557
Other comprehensive income (3,167) -
------------ ------------
CASH - Beginning of year 25,690 1,133
------------ ------------
CASH - End of year $ 42,420 $ 25,690
============ ============
SUPPLEMENTAL CASHFLOW DISCLOSURES
Interest $ - $ -
============ ============
Income Taxes $ - $ -
============ ============
NON-CASH TRANSACTIONS
Common stock issued for services
rendered $ 122,750 $ 33,240
Common stock issued for exchange
of debt $ - $ 209,060
Common stock issued for payment on
worldwide technology license $ 302,000 $ 50,000
Common stock issued for commissions $ - $ 3,300
Common stock issued as prepaid
consulting fees $ 34,000 $ -
Common stock issued for equipment $ 100,000 $ -
Common stock issued for payment
of accounts payable $ 17,500 $ -
The accompanying notes are an integral part of these financial
statements.
F-6
<PAGE> 25
FIRST AMERICAN SCIENTIFIC CORP.
Notes to the Consolidated Financial Statements
June 30,2000
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, is developing an
internet sales site to be known as VideoMovieHouse.com. The site,
which is designed to sell videos, CDs and books, and as technology
advancements permit, become a virtual video rental store, is expected
to be ready for launch before the year end 2000. See Note 9.
The Company's year-end is June 30th.
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
generally accepted accounting principles 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.
As shown in the accompanying financial statements, the Company has
incurred an accumulated deficit of $4,533,197 through June 30, 2000,
and has a working capital deficit. 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 new capital from new
equity securities offerings that will provide funds needed to increase
liquidity, fund internal growth and fully implement its business plan.
F-7
<PAGE> 26
FIRST AMERICAN SCIENTIFIC CORP.
Notes to the Consolidated Financial Statements
June 30,2000
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Accounting Method
The Company's financial statements are prepared using the accrual
method of accounting.
Earnings (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
In June 1998 the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." 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.
At June 30, 2000 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.
Trust Account
The Company has $59,642 on deposit with an attorney in California.
This amount was set aside to pay negotiated settlements with vendors
and suppliers.
Fair Value of Financial Instruments
The carrying amounts for cash, the trust account, marketable
securities, accounts receivable, accounts payable, notes payable and
accrued liabilities approximate their fair value.
F-8
<PAGE> 27
FIRST AMERICAN SCIENTIFIC CORP.
Notes to the Consolidated Financial Statements
June 30,2000
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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
maintained in United States dollars.
Foreign Currency Translation
Assets and liabilities of the Company's foreign operations are
translated into U.S. dollars at the year-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.
Provision for Taxes
At June 30, 2000, the Company had net operating accumulated losses of
approximately $4,500,000. No provision for taxes or tax benefit has
been reported in the financial statements, as there is not a measurable
means of assessing future profits or losses.
Use of Estimates
The process of preparing financial statements in conformity with
generally accepted accounting principles 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, however,
the Company has no employees and utilizes consultants only at this
time.
F-9
<PAGE> 28
FIRST AMERICAN SCIENTIFIC CORP.
Notes to the Consolidated Financial Statements
June 30,2000
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Year 2000
The Company, like other firms, could be adversely affected if the
computer systems used by it, its suppliers or customers do not properly
process and calculate date-related information and data from the period
surrounding and including January 1, 2000. This is commonly known as
the "Year 2000" issue. Additionally, this issue could impact non-
computer systems and devices such as production equipment.
The Company has reviewed its technology, including software and
hardware, and has determined that there have been no adverse effects to
the Company's operations regarding Year 2000 issues. Management also
believes that Year 2000 issues should not adversely affect the ability
of its clients and customers to conduct business with the Company. Any
costs associated with Year 2000 compliance are expensed when incurred.
Segment Reporting
The Company adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," in the fiscal year ended June 30,
2000. SFAS No. 131 requires disclosures about products and services,
geographic areas and major customers. The adoption of SFAS No. 131 did
not affect the Company's results of operations or financial position.
The Company's Bakersfield plant was not engaged in any business
activity. VHM, the Company's subsidiary, (see Note 9) is non-
operational as of June 30, 2000. The Company has no segments engaged
in business activities, at June 30, 2000, and therefore no segment
reporting is required.
NOTE 3 - PROPERTY AND EQUIPMENT
Revenue and Cost Recognition
Revenues are recognized when products are delivered.
Costs include all direct material and labor costs and those indirect
costs related to the products. Changes in job performance, job
conditions, and estimated profitability may result in revisions to
costs and income and are recognized in the period in which the
revisions are determined.
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:
F-10
<PAGE> 29
FIRST AMERICAN SCIENTIFIC CORP.
Notes to the Consolidated Financial Statements
June 30,2000
NOTE 3 - PROPERTY AND EQUIPMENT (Continued)
June 30, June 30,
2000 1999
Kinetic disintegration
equipment $ 972,246 $ 872,246
Plant assets and equipment 687,881 687,881
Office equipment 27,658 23,916
Leasehold improvements 5,476 5,476
------------ -----------
Total assets 1,693,261 1,589,519
Less accumulated depreciation (524,292) (327,567)
------------ -----------
$ 1,168,969 $ 1,261,952
============ ===========
Depreciation and amortization expense for the year ended June 30, 2000
was $340,393. 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. In 1999, the Company
suspended operations at its Bakersfield location and recorded a loss of
$629,118 on impairment of plant assets.
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.
Technology licenses, patents and manufacturing rights are stated at
cost. See Note 7. Amortization is provided using the straight-line
method over the estimated useful lives of the assets, which is fifteen
years. The following is a summary of technology licenses, patents and
manufacturing rights and accumulated amortization:
June 30, June 30,
2000 1999
Technology license and rights $ 2,153,380 $ 1,905,000
Patents and manufacturing rights 250,000 250,000
------------ ------------
2,403,379 2,155,000
Less accumulated amortization (450,628) (306,960)
------------ ------------
$ 1,952,751 $ 1,848,040
============ ============
F-11
<PAGE> 30
FIRST AMERICAN SCIENTIFIC CORP.
Notes to the Consolidated Financial Statements
June 30,2000
NOTE 4 - COMMON STOCK AND WARRANTS
At June 30, 2000, the Company issued 1,000,000 common stock shares in
settlement of accounts payable of $17,500; 4,500,000 common stock
shares in a settlement agreement of the balance due on the technology
licenses for $225,000 (see Note 7); 2,000,000 common stock shares for
the purchase of two KDS machines valued at $100,000; and 9,075,000
common stock shares for services and expenses of $156,750, of which
$34,000 was considered prepaid.
During the period ended June 30, 2000, the Company issued 18,100,000
common stock shares for cash totaling $550,500.
On June 4, 1998, the Board of Directors authorized and increased common
stock from 50,000,000 to 100,000,000 authorized shares.
In June 2000, an amendment to the Articles of Incorporation was
approved, which increased the authorized capital to 200,000,000 shares
of common stock at a par value of $0.001 per share.
During 1999, the Company issued 8,010,000 shares of common stock for
consulting, advertising and other services. The Company valued these
services at $33,240. The Company issued 3,160,000 shares of common
stock for repayment of loans from related parties totaling $99,666 and
another 1,000,000 shares of common stock were issued, valued at
$50,000, for partial payment of license agreements. The Company issued
4,650,000 shares of common stock for cash at $0.04 per share, thereby
raising $205,575.
Stock subscriptions and options receivable of $45,500 at June 30, 1998
was paid during 1999.
NOTE 5 - STOCK OPTIONS
On June 8, 2000, the Company's board of directors approved the First
American Scientific Corp. 2000 non-qualifying Stock Option Plan. This
plan allows the Company to distribute up to 30,000,000 shares of common
stock at $0.10 per share to persons employed or associated with the
Company.
In September 1998, the Company adopted the First American Scientific
Corp. 1998 Directors and Officers Stock Option Plan, a non-qualified
plan. This plan allows the Company to distribute up to 15,000,000
shares of common stock to officers, directors, employees and
consultants through the authorization of the Company's Board of
Directors.
In the year ending June 30, 1999, the Company issued 3,300,000 common
stock shares for the services of consultants. The Company valued these
services at $3,300.
F-12
<PAGE> 31
FIRST AMERICAN SCIENTIFIC CORP.
Notes to the Consolidated Financial Statements
June 30,2000
NOTE 5 - STOCK OPTIONS (Continued)
The fair value of each option granted is estimated on the grant date
using the Black-Scholes Option Price Calculation. The following
assumptions were made in estimating fair value: risk-free interest rate
is 5% and expected life is 5 years. During the year ending June 30,
1999, the Company issued 9,750,000 common stock options which were
exercised before year-end at an average price of $.019 per share. The
strike price of these options exceeds the options' minimum value
calculated using the Black-Scholes model. Accordingly, no compensation
costs have been recognized pursuant to Financial Accounting Standard
No. 123.
The following is a summary of stock option activity:
Weighted
Average
Number of Exercise
Shares Price
Outstanding at July 1, 1998 - -
Granted 3,300,000 $ 0.001
7,650,000 0.06
Exercised (9,750,000) 0.019
----------- --------
Outstanding at June 30, 1999 1,200,000 $ 0.019
=========== ========
Options exercisable at
June 30, 1999 1,200,000 $ 0.019
=========== ========
Weighted average fair value of
options granted during year ending
June 30, 1999 $ 0.019
===========
Outstanding at July 1, 1999 1,200,000 $ 0.019
----------- --------
Granted 29,275,000 0.032
Exercised (27,175,000) 0.033
----------- --------
Outstanding at June 30, 2000 3,300,000 $ 0.032
=========== ========
Options exercisable at
June 30, 2000 3,300,000 $ 0.032
Weighted average fair value of
options granted during year ended
June 30, 2000 $ 0.032
===========
F-13
<PAGE> 32
FIRST AMERICAN SCIENTIFIC CORP.
Notes to the Consolidated Financial Statements
June 30,2000
NOTE 6 - RELATED PARTIES
In 2000, the Company's president and his spouse were issued 3,225,000
common stock options, of which 1,725,000 were issued for services
valued at $58,650 and 1,500,000 were issued for $37,500 in cash. All
options were exercised. See Note 5.
In 1999, certain consultants which received common stock under the
Company's non-qualified stock option plan are Company directors and
stockholders. Of the 3,300,000 shares issued to consultants, 2,000,000
shares were issued to members of the board of directors who provided
services to the Company.
The president of the Company was the former sole shareholder of Video
Movie House.com Inc., a firm which was purchased for $250,000 in 2000
and is now the wholly owned subsidiary of First American Scientific
Corp. See Note 9.
During the year ended June 30, 2000, the Company purchased 100,000
share of Lynx Express, Ltd. Common stock for $1,000. This investment
was given to satisfy a debt of the company with its former president
during 2000. The excess of the debt over the book value of the
investment, in the amount of $5,220 was recorded in the financial
statements as a portion of the forgiveness of debt. See Note 8.
At June 30, 2000, the Company's president was the sole director of the
Company's board of directors.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Company owns no real property. The Company negotiated a three-year
lease for 740 square feet with Morguard Investments that commenced
August 1, 1998 at a monthly rental of $1,000 at Suite 1003 at 409
Granville Street in Vancouver, British Columbia.
In May 1996, the Company signed a lease to rent facilities in
Bakersfield, California for the industrial processing of gypsum,
limestone and specialty products. The lease, which required payments
of $2,000 per month, expired on April 14, 1998. Negotiations with a
proposed joint venture partner to operate this facility are ongoing.
At the present time, the Company is not utilizing the facility, except
for storage of equipment. No rental payments have been made since the
expiration of this lease. Although the lease required the Company to
carry insurance on the facility, the Company has elected to self-insure
this location until the facility re-opens.
F-14
<PAGE> 33
FIRST AMERICAN SCIENTIFIC CORP.
Notes to the Consolidated Financial Statements
June 30,2000
NOTE 7 - COMMITMENTS AND CONTINGENCIES (Continued)
Technology Patent
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 this initial agreement, modifications have been made to the first
KDS machine, bringing its total cost to $440,740.
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 is valued at $425,000 and the gypsum KDS machine is
valued at $350,000.
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 $1,230,000, which the Company paid by issuing
to Spectrasonic 1,000,000 shares of First American common stock (with
an aggregate deemed value of $500,000) and agreeing to pay $730,000 in
varying installment amounts between June 30, 1996 and January 2, 1997.
Although the Company issued 1,000,000 common stock shares to
Spectrasonic in July 1996, the Company subsequently defaulted on this
agreement by its failure to make the remaining installments totaling
$537,000. Although the June 30, 1999 balance owing on this agreement
was $302,000, the parties subsequently agreed to the settlement of the
balance by the Company's issuance of 4,500,000 shares of its common
stock to Spectrasonic. 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 issued, 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.
F-15
<PAGE> 34
FIRST AMERICAN SCIENTIFIC CORP.
Notes to the Consolidated Financial Statements
June 30,2000
NOTE 8 - EXTRAORDINARY GAIN
Forgiveness of Debt
During the year ended June 30, 2000, the Company negotiated debt
settlement agreements with various suppliers and vendors whereby the
terms of the original agreements were amended. These transactions
resulted in an extraordinary gain of $73,486. See Note 7 for information
on forgiveness of debt, recorded as additional paid-in capital.
NOTE 9 - SUBSIDIARY
In September 1999, the Company entered into an agreement with Video Movie
House.com Inc., ("VMH") a British Columbia company whereby the Company
acquired 100% of the common shares of VMH in return for a cash
consideration of $250,000. The sum of $125,000 was paid to VMH and the
balance was paid in November 1999. VMH possesses domain names, a web
page, and technology for the sale of videos, DVD's, and CD's through the
internet. VMH is a wholly owned subsidiary of the Company.
NOTES 10 - SUBSEQUENT EVENTS
The Company has issued 3,300,000 shares of common stock for $87,500 in
cash subsequent to June 30, 2000.
F-16
<PAGE> 35
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not Applicable
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS
Officers and Directors
The director and officer of the Company is:
Name Age Position
Calvin L Kantonen 49 President, CEO, Secretary and member of
the Board of Directors
John Brian Nichols 62 Director and Secretary (appointed August
1, 2000)
Mr Kantonen has been CEO since December 10, 1999, and upon the
resignation of Gary Burnie on February 8, 2000, Mr. Kantonen became
President, Secretary, Director, and Chairman of the Board. On August 1,
2000, Mr Nichols was appointed as a director and assumed the
responsibility of Secretary.
Indemnification of Officers and Directors
The Nevada Revised Statues and certain provisions of the Company's
Bylaws under certain circumstances provide for indemnification of the
Company's Officers, Directors and controlling persons against liabilities
which they may incur in such capacities. A summary of the circumstances
in which such indemnification is provided for is contained herein, but
this description is qualified in its entirety by reference to the
Company's Bylaws and to the statutory provisions.
In general, any Officer, Director, employee or agent may be
indemnified against expenses, fines, settlements or judgments arising in
connection with a legal proceeding to which such person is a party, if
that person's actions were in good faith, were believed to be in the
Company's best interest, and were not unlawful. Unless such person is
successful upon the merits in such an action, indemnification may be
awarded only after a determination by independent decision of the Board
of Directors, by legal counsel, or by a vote of the shareholders, that
the applicable standard of conduct was met by the person to be
indemnified.
The circumstances under which indemnification is granted in
connection with an action brought on behalf of the Company is generally
the same as those set forth above; however, with respect to such actions,
indemnification is granted only with respect to expenses actually
incurred in connection with the defense or settlement of the action. In
<PAGE> 36
such actions, the person to be indemnified must have acted in good faith
and in a manner believed to have been in the Company's best interest, and
have not been adjudged liable for negligence or misconduct.
Indemnification may also be granted pursuant to the terms of
agreements which may be entered in the future pursuant to a vote of
Shareholders or Directors. The statutory provision cited above also
grants the power to the Company to purchase and maintain insurance which
protects its Officers and Directors against any liabilities incurred in
connection with their service in such a position, and such a policy may
be obtained by the Company.
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation.
The following table sets forth the compensation paid by the Company
from inception through December 31, 2000, for each officer and director
of the Company. This information includes the dollar value of base
salaries, bonus awards and number of stock options granted, and certain
other compensation, if any.
SUMMARY COMPENSATION TABLE
Long-Term Compensation
Annual Compensation Awards Payouts
Names Other Under Restricted Other
Executive Annual Options/ Shares or Annual
Officer and Compen- SARs[1] Restricted LTIP[2] Compen-
Principal Year Salary Bonus sation Granted Share Payouts sation
Position Ended (US$) (US$) (US$) (#) Units (US$) (US$)
Cal Kantonen 2000 68,000 0 0 1.725MM 0 0 0
President/CEO
Gary Burnie 1999 20,000 0 0 3MM 0 0 0
(Resigned) 1998 0 0 0 0 0 0 0
Jack Lovelock 1999 0 0 0 3MM 0 0 0
(Resigned) 1998 35,000 0 0 0 0 0 0
1997 35,000 0 0 0 0 0 0
Robert Dinning 1999 0 0 0 1MM 0 0 0
(Resigned) 1998 35,000 0 0 0 0 0 0
1997 25,000 0 0 0 0 0 0
Richard Camuso 1999 0 0 0 0 0 0 0
(Resigned) 1998 0 0 0 0 0 0 0
1997 0 0 0 0 0 0 0
David Camuso 1999 0 0 0 0 0 0 0
(Deceased) 1998 0 0 0 0 0 0 0
1997 0 0 0 0 0 0 0
The Company anticipates paying the following salaries in 2000,
subject to the Company generating sufficient cashflow to pay the same:
Mr. Kantonen has agreed to accepting stock options in lieu of cash.
<PAGE> 37
Cal Kantonen President/CEO $ 68,000
The Company has adopted three non-qualified incentive stock option
plans. There are no other stock option plans, retirement, pension, or
profit sharing plans for the benefit of the Company's officers and
directors other than as described herein.
Option/SAR Grants.
The following grants of stock options, whether or not in tandem
with stock appreciation rights ("SARs") and freestanding SARs have been
made to officers and/or directors:
Number of
Number of Securities
Securities Underlying
Underlying Options/SARs
Options Granted Exercise Number of Expir-
SARs During Last or Base Options ation
Name Granted 12 Months[1] Price ($/Sh) Exercised Date
Cal Kantonen 1,725,000 1,725,000 $0.034
Gary Burnie 1,000,000 1,000,000 $0.001 1,000,000 05/14/2004
Jack Lovelock 1,000,000 1,000,000 $0.001 1,000,000 05/14/2004
300,000 $0.001 300,000 05/14/2003
Robert Dinning 1,000,000 1,000,000 $0.001 1,000,000 05/14/2004
250,000 $0.001 250,000 05/14/2003
Long-Term Incentive Plan Awards.
The Company does not have any long-term incentive plans that provide
compensation intended to serve as incentive for performance.
Compensation of Directors.
During the year, the Directors did not receive any compensation for
serving as members of the Board of Directors. On July 25, the Board has
adopted a plan to award 250,000 options at $ 0.025 cents and 250,000 at
$ 0.10 cents to each Director and 250,000 at $0.025 plus 250,000 options
at$ 0.10 to the Chairman.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following schedule sets forth the Common Stock ownership of each
person known by the Company to be the beneficial owner of five percent or
more of the Company's Common Stock, each director individually, and all
officers and directors of the Company as a group. Each person has sole
voting and investment power with respect to the shares of Common Stock
shown, and all ownership is of record and beneficial.
<PAGE>
Name and address
of owner Shares Position Percent
Cal Kantonen 4,075,000 Chairman of Board of 4.0%
1492 Frederick Rd Directors, President,
N Vancouver, B.C. Secretary/Treasurer
Canada V7K 1J 7 and Chief Executive Officer
All officers and
directors as
a group (1) 4,075,000 4.0%
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On June 23, 1995, Jack Lovelock, Chairman of the Board of Directors
of First American, purchased 39,500 shares of the Company's stock for
$17,775.00, in an open market transaction in Manila, Republic of the
Philippines. The transaction was no more favorable than could be obtained
by a non-affiliated third party.
On June 23, 1995, Betty Lovelock, the wife of Jack Lovelock,
purchased 39,500 shares of the Company for $17,775.00 in an open market
transaction in Manila, Republic of the Philippines. The transaction was
no more favorable than could have been obtained by a non-affiliated third
party.
On July 27, 1995, Richard A. Camuso, the former President of the
Company, purchased 50,000 common shares of the Company's common stock for
$22,500 in an open market transaction in Manila, Republic of the
Philippines. The transaction was no more favorable than could have been
obtained by a non-affiliated third party.
On June 25, 1995, the Company entered into an Exclusive License
Agreement for rubber and glass, with Spectrasonic. The contract is for a
period of 99 years. Spectrasonic has developed and is the sole
proprietary owner of all of the proprietary rights to the SDM.
Spectrasonic has not made any patent applications as of the date hereof
and has further advised the Company that: "Applications for
protection of assets of (Spectrasonic) under laws for the protection of
intellectual property in Canada, and the United States of America, and
any other country in which Spectrasonic does business will be made at
such time as Spectrasonic shall determine is in its best interests." This
transaction was no more favorable than could have been obtained by a non-
affiliated third party.
On February 22, 1996, the Company entered into an Exclusive License
Agreement, with Spectrasonic. The contract is for a period of 99 years
and covers the right to exploit, develop, manufacture, market,
distribute, and sell the ultrasound equipment as it relates exclusively
to gypsum. Any patent or other protection required will be the
responsibility of the Company and to date, the Company has not made any
patent application. This transaction was no more favorable than could
have been obtained by a non-affiliated third party.
<PAGE> 39
On May 17, 1996, the Company entered into an Exclusive License
Agreement with Spectrasonic. The contract is for a period of 99 years and
covers the production and operation of its disintegration machines for
any and all materials not previously licensed. Spectrasonic reserve the
right to manufacture the equipment. Any patent or other protection is the
responsibility of the Company and to date, they have not made any patent
application. This transaction was no more favorable than could have been
obtained by a non-affiliated third party.
The original contract price for one KDS and the license was
$550,000. The Company issued 250,000 common shares to Spectrasonic at an
aggregate value of $175,000. The balance of the debt was settled by cash
payments at varying times up to March 31, 1996. There are no other
payments due under this exclusive license. Payments were made from the
proceeds of a financing.
The License Agreement for gypsum required cash payments of $275,000
to Spectrasonic plus the issuance by the Company of 1,000,000 shares of
its common stock at $0.50 per share, for an aggregate value of $500,000.
The total purchase price, for this fully paid license was $775,000 with
the parties mutually agreeing that the value of the Technology license
was $425,000 and the KDS was $350,000.
The License Agreement dated May 17, 1996 requires payment of
CDN$1,000,000 (US$750,000) between June 30, 1996 and January 2, 1997.
The payments due January 2, 1997 have been deferred by mutual consent of
the parties involved.
The payment due June 30, 1996 was made subsequent to the year end
and $175,000 of the $450,000 was paid. By letter of understanding on
October 24, 1996, Spectrasonic deferred cash payments owing until a
private placement financing is completed sometime in 1997.
On October 30, 1995 the Company entered into an agreement with
L.C.M. Equity, of Vancouver, British Columbia to provide a line of
credit up to a maximum of CDN$600,000 for a period of one year. This
agreement was subsequently terminated and replaced with a new agreement
with LCM dated March 1, 1996. This agreement provided a revolving line of
credit of a maximum of US$500,000 to be available until February 16,
1997. LCM converted all of its outstanding loans to common stock in the
Company. The conversion price was US$0.37 per share.
On April 1996, the Company entered into an agreement with Knowlton
Capital Corp, ("Knowlton") a private venture capital concern, located at
329 Brill Road, Foster, Quebec, JOE 1RO. Knowlton agreed to provide
financing up to US$800,000 until December 31, 1996. This agreement was
extended to December 31, 1997. Interest was payable at 10% per annum.
This loan could be repaid at any time or convertible into common stock of
the Company at US$0.75 per share. The lender has the right to take a
collateral mortgage on the assets owned by the borrower. At June 30,
1997, the loan outstanding was US$790,229.
<PAGE> 40
On or about May 14, 1999, the Company issued 1,000,000 shares of
common stock to Gary Burnie, President as compensation upon the exercise
of certain stock options issued pursuant to the Company's Form S-8
registration statement. The shares were issued pursuant to Section 5 of
the Securities Act of 1933.
Recent Sales of Unregistered Securities
On May 2, 1995, the Company sold 6,000,000 post-split shares
(10,000,000 pre-split shares) of its common stock in consideration of
$100,000 in cash to 12 individuals in the Republic of the Philippines
pursuant to Reg 504 promulgated under the Securities Act of 1933, as
amended. The sales of the foregoing shares in the Republic of the
Philippines was in accordance with Philippines laws and regulations.
On June 22, 1995, the Company sold 150,000 post-split shares
(250,000 pre-split) shares of its common stock to Spectrasonic as
partial consideration for the execution of the exclusive licensing
agreement. See "Item 1. - Summary of Exclusive Agreement with
Spectrasonic." The shares were valued at $175,000. The sale of the
foregoing securities was made pursuant to Reg 504 promulgated under the
Securities Act of 1933, as amended.
On August 14, 1995, the Company effected a 6 for 10 reverse stock-split.
On September 18, 1995, the Company issued 600,000 shares of common
stock to two individuals who were residents of the Republic of the
Philippines in consideration of $270,000 in cash. The foregoing
individuals were not affiliates of the Company, Spectrasonic, or
Westmoreland. The sale of the foregoing stock in the Republic of the
Philippines was in accordance with Philippine laws and regulations. On
the same date the Company issued an additional 100,000 shares of common
stock to Spectrasonic in consideration of $50,000. The foregoing shares
were sold pursuant to Reg. 504 promulgated under the Securities Act of
1933, as amended.
On October 20, 1995, the Company issued 200,000 "restricted" shares
of its common stock to Westmoreland Capital Corp, a British Columbia
corporation as partial consideration for the execution of its agreement
to supply management services, pursuant to Reg 701 promulgated under the
Securities Act of 1933, as amended. See "Item 1. Business - Employees."
The 200,000 shares were valued at $100,000.
On February 29, 1996, the Company issued 1,000,000 "restricted"
shares of its common stock to Spectrasonic as partial consideration of a
license agreement, Gypsum, dated February 22, 1996. The shares were
valued at $0.50 per share for a total consideration of $500,000.
On March 20, 1996, the Company issued 74,400 shares of its common
stock to Astaire & Partners, in London, England. The shares were valued
at $1.25 per share for a total consideration of $93,000. The shares were
issued pursuant to a private placement.
<PAGE> 41
On March 25, 1996, the Company issued 380,717 shares of its common
shares to LCM Equity Inc, in settlement of debt conversion, at $0.45 per
share for a total consideration of $171,323.
On July 3, 1996, the Company issued 452,376 shares of its common
stock to LCM Equity Inc, regarding conversion of loans outstanding. This
stock was valued at $0.45 per share for loans of US$124,069 and loans of
CDN$106,000 (US$77,300) at $0.60 per share.
On July 10, 1997, the Company issued 1,000,000 shares of its common
stock to Microsonic Disintegration regarding May 17, 1996 agreement for
the purchase of rights. This stock was valued at $0.50 per share.
On July 10, 1996, the Company issued 7,440 shares of its common
stock to Astaire & Partners as settlement of a commission of $9,300. The
stock was issued at $1.25 per share.
On September 12, 1996, the Company issued 654,000 shares of its
common stock to Gerlach & Co. for the sum of $457,800. The stock was sold
under Reg "S" at a price of $0.70 per share.
On September 25, 1996, the Company issued 303,000 shares of its
common stock to Gerlach & Co for the sum of $212,100. The stock was sold
under Reg "S" at a price of $0.70 per share.
On October 24, 1996, the Company issued 100,000 shares of its common
stock to Gerlach & Co for the sum of $22,500. The stock was sold under
Reg "S" at a price of $0.225 per share.
On November 30, 1996, the Company issued a total of 1,142,188 shares
of its common stock to:
Monarch Consulting 337,083 common shares
LCM Equity, Inc. 181,730 common shares
Somers & Co. 480,650 common shares
LCM Equity, Inc. 142,725 common shares
Total 1,142,188 common shares
All of the above stock was issued at $0.42 per share for a total of
$479,719.
On April 4, 1997, the Company issued a total of 759,945 shares of
its common stock to Magic Trading, Inc, in settlement of loans advanced
in the amount of $281,180. The loans were converted to common stock at
$0.37 per share.
On April 30, 1997, the Company issued a total of 598,382 shares of
its common stock to:
834968 Ontario, Inc. 100,000 common shares
Huntington, Inc. 45,455 common shares
Knowlton Capital, Inc. 398,836 common shares
Meraloma Club 16,818 common shares
Jacqueline Lovelock 37,273 common shares
<PAGE. 42
All of the above stock was issued at $0.33 per share for a total
cost of $194,466.
On or about the 8th day of May, 1997, the Company sold 650,000
shares of Common Stock in consideration of $80,600 pursuant to Regulation
S of the Securities Act of 1933, as amended (the "ACT"); the name of the
non-U.S. purchaser was Huntingdon Limited and its address is 12/13 Hill
Street, Douglas, Isle of Man, British Isles 1M9 IBW. The applicable
restricted period as to the shares under Regulation S was forty (40) days
since the Company is required to file reports with the Securities and
Exchange Commission.
On or about the 8th day of May, 1997, the Company sold 100,000
shares of Common Stock in consideration of $12,400 pursuant to Regulation
S of the Act; the name of the non-U.S. purchaser was F.J Rigney Resources
Ltd; and its address is 2200-609 Granville Street, Vancouver, British
Columbia, Canada V7Y 1T2. The applicable restricted period as to the
shares under Regulation S was forty (40) days since the Company is
required to file reports with the Securities and Exchange Commission.
On or about the 8th day of May, 1997, the Company sold 187,000
shares of Common Stock in consideration of $23,188 pursuant to Regulation
S of the Act; the name of the non-U.S. purchaser was Magic Trading
Limited and its address is P.O. Box 107, Oceanic House, Duke Street,
Grand Turk, Turks and Caicos Islands, British West Indies. The
applicable restricted period as to the shares under Regulation S was
forty (40) days since the Company is required to file reports with the
Securities and Exchange Commission
On or about the 26th day of June, 1997, the Company sold 516,250
shares of Common Stock in consideration of $66,378 pursuant to Regulation
S of the Act; the name of the non-U.S. purchaser was Huntingdon Limited
and its address is 12/13 Hill Street, Douglas, Isle of Man, British Isles
1M9 1BW. The applicable restricted period as to the shares under
Regulation S was forty (40) days since the Company is required to file
reports with the Securities and Exchange Commission.
On or about the 26th day of June, 1997, the Company sold 762,500
shares of Common Stock in consideration of $98,144 pursuant to Regulation
S of the Act; the name of the non-U.S. purchaser was Magic Trading
Limited and its address is P.O. Box 107, Oceanic House, Duke Street,
Grand Turk, Turks and Caicos Islands, British West Indies. The
applicable restricted period as to the shares under Regulation S was
forty (40) days since the Company is required to file reports with the
Securities and Exchange Commission.
On or about the 2nd day of July, 1997, the Company sold 225,000
shares of Common Stock in consideration of $38,025 pursuant to Regulation
S of the Act; the name of the non-U.S. purchaser was Cavendish
Investments International Ltd and its address is Abbey Business Center,
Digby Road, Sherborne Dorset, United Kingdom, DT9 3NL . The applicable
restricted period as to the shares under Regulation S was forty (40) days
since the Company is required to file reports with the Securities and
Exchange Commission.
<PAGE> 43
On or about the 2nd day of July, 1997, the Company sold 500,000
shares of Common Stock in consideration of $75,000 pursuant to Regulation
S of the Act; the name of the non-U.S. purchaser was Bentley Financial
Inc. and its address is P.O. Box 107, Oceanic House, Duke Street, Grand
Turk, Turks and Caicos Islands, British West Indies. The applicable
restricted period as to the shares under Regulation S was forty (40) days
since the Company is required to file reports with the Securities and
Exchange Commission.
On or about the 18th day of July, 1997, the Company sold 500,000
shares of Common Stock in consideration of $75,000 pursuant to Regulation
S of the Act; the name of the non-U.S. purchaser was Cavendish
Investments International Ltd and its address is Abbey Business Center,
Digby Road, Sherborne Dorset, United Kingdom, DT9 3NL. The applicable
restricted period as to the shares under Regulation S was forty (40) days
since the Company is required to file reports with the Securities and
Exchange Commission.
On August 18, 1997 the Company sold 1,100,000 shares of common stock
to Magic Trading Limited in consideration of US$ 220,092. The foregoing
shares were issued pursuant to Reg S of the Act.
On or about the 1st day of February 1998, the Company sold 295,000
shares of Common Stock in consideration of $34,498 pursuant to Regulation
S of the Act; the name of the non-U.S. purchaser was Knowlton Capital,
Inc. and its address is 329 Brill Road, Foster, Quebec. The applicable
restricted period as to the shares under Regulation S was forty (40) days
since the Company is required to file reports with the Securities and
Exchange Commission
During the fiscal year July 1, 1998 to June 30, 1999, the Company
issued 16,820,000 shares of common stock pursuant to Section 4(2) of the
Securities Act of 1933. The shares were issued for services, property
and cash.
During the fiscal year July 1, 1999 to June 30, 2000, the Company
issued 34,575,000 shares of common stock pursuant to Section 4(2) of the
Securities Act of 1933. The shares were issued for services, debt
settlement, property and cash.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Reports on Form 8-K.
None
(b) Exhibits
The following documents are incorporated herein by reference from
the Company's Form 10 as filed with the Securities and Exchange
Commission (SEC #0-27094).
<PAGE> 44
Exhibit
No. Description
3.1 Articles of Incorporation of First American Scientific
Corporation.
3.2 Bylaws of First American Scientific Corporation.
4.1 Specimen Stock Certificate
10.1 License Agreement with Spectrasonic Corp.
10.2 Westmoreland Capital Corp Agreement.
10.3 Gross Royalty Agreement between Strategic International Inc.
and the Company.
10.4 Lease between the Company and Spectrasonic.
10.5 Agreement between LCM Equity, Inc and the Company.
28.1 Consultant and Employee Stock Compensation Plan.
The following documents are incorporated herein by reference from
the Company's Form S-8 as filed with the Securities and Exchange
Commission (SEC #333-06851).
10.1 Nonqualifying Stock Option Plan.
The following documents are incorporated herein by reference from
the Company's Form 10-K for the period ending June 30, 1996.
10.1 Loan Agreement between Knowlton Capital, Inc and the Company
dated April 30, 1996 incorporated by reference from the
Company's Form 10-K for the period ending June 30, 1996.
10.2 License Agreement between the Company and Spectrasonic Corp
dated May 17, 1996 incorporated by reference from the Company's
Form 10-K for the period ending June 30, 1996.
The following documents are incorporated by reference from the
Company's Form 10-K for the period ending June 30, 1997:
3.3 Articles of Incorporation of 521345 B.C. Ltd.
The following documents are incorporated by reference from the
Company's Form 10-K for the period ending June 30, 1998:
3.4 Amended Articles of Incorporation.
10.9 Agreement with Green Leaf Fibre Company Ltd. (GLF)
The following documents are incorporated herein by reference from
the Company's Form S-8 as filed with the Securities and Exchange
Commission (SEC #333-86995).
10.10 Nonqualifying Stock Option Plan 1999.
The following documents are filed as part of this June 30, 1999 Form
10-K:
10.10 Agreement with Ashford Holdings, Ltd.
10.11 Agreement regarding acquisition of VMH Video MovieHouse.com,
Inc.
10.12 Letter of Intent with Fortune Resources Corporation
<PAGE> 45
The following documents are incorporated herein by reference from
the Company's Form S-8 as filed with the Securities and Exchange
Commission (SEC #333-40234).
3.5 Amendment to the Articles of Incorporation as at June 12, 2000.
10.14 2000 Nonqualifying Stock Option Plan.
The following documents are filed as part of this June 30, 2000 Form
10-K:
10.15 Conditional agreement with Henry Skritek, Czech Republic
27 Financial Data Schedule.
<PAGE> 46
SIGNATURE PAGE
Pursuant to the requirements of Section 13 or 15(d) of the
Securities and Exchange Act of 1934, the Company has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized on this 11th day of October, 2000.
FIRST AMERICAN SCIENTIFIC CORP.
BY: /s/ C. Kantonen
C. Kantonen
President, Chief Financial Officer,
and Chairman of the Board of
Directors
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Company and in the capacities and on this 11th day of October, 2000.
SIGNATURES TITLE DATE
/s/ C. Kantonen
C. Kantonen Chairman of the Board of October 11, 2000
Directors, President,
Secretary/Treasurer
and Chief Financial Officer.
