<PAGE> 1
- -----------------------------------------------------------------
- -----------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
----------------------------------
FORM 10-Q
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1999.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from:
------------------------------
Commission file number 0-27094
------------------------------
FIRST AMERICAN SCIENTIFIC CORP.
(Exact name of Registrant as specified in its charter.)
NEVADA 88-0338315
(State of other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
409 Granville Street, Suite 1003
Vancouver, British Columbia V6C 1T2
(Address of principal executive offices, including zip code.)
(604) 681-8656
Registrant's telephone number, including area code.
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Act of
1934 during the preceding 12 months (or for such shorter period that
the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES [ ]
NO [ x ]
The number of shares outstanding of the Registrant's Common Stock, no
par value per share, at September 30, 1999 was 66,146,018 shares.
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<PAGE> 2
PART I
ITEM 1. FINANCIAL STATEMENTS.
FIRST AMERICAN SCIENTIFIC CORP.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
Dec 31, 1999 June 30, 1999
<S> <C> <C>
CURRENT ASSETS
Cash $ 75,155 $ 25,690
Accounts receivable 9,007 9,007
Prepaid expenses 53,500 -
----------- -----------
TOTAL CURRENT ASSETS 137,662 34,697
----------- -----------
INVESTMENTS
Securities 1,010 -
Other 250,219 -
----------- -----------
251,229 -
----------- -----------
PROPERTY AND EQUIPMENT
Ultrasound equipment 972,246 872,246
Plant assets and equipment 687,881 687,881
Office equipment 23,916 23,916
Leasehold improvements 5,476 5,476
----------- -----------
1,689,519 1,589,519
Less: Accumulated depreciation (327,567) (327,567)
----------- -----------
1,361,952 1,261,952
----------- -----------
OTHER ASSETS
Technology licenses-net
of amortization 1,630,275 1,629,775
Patents and manufacturing rights-net
of amortization 218,265 218,265
Deposits 11,431 11,431
----------- -----------
1,859,971 1,859,471
----------- -----------
TOTAL ASSETS $ 3,610,814 $ 3,156,120
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank overdraft $ - $ -
Accounts payable and accrued expenses 265,004 268,061
Short term loans payable 24,820 -
License agreement payable-Spectrasonic
Corp. - 302,000
----------- -----------
TOTAL CURRENT LIABILITIES 289,824 570,061
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial
statements.
1-a
<PAGE> 3
FIRST AMERICAN SCIENTIFIC CORP.
BALANCE SHEETS - CONTINUED
<TABLE>
<CAPTION>
Dec 31, 1999 June 30, 1999
<S> <C> <C>
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY
Common stock - $.001 par value
100,000,000 shares authorized,
97,746,018 and 66,146,018 shares
issued, respectively 97,746 66,146
Additional paid-in capital 7,218,450 6,399,031
Stock options receivable - -
Accumulated deficit (3,998,160) (3,882,072)
Accumulated other comprehensive income 2,954 2,954
----------- -----------
3,320,990 2,586,059
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 3,610,814 $ 3,156,120
=========== ===========
</TABLE>
The accompanying notes am an integral pan of these financial
statements.
1-b
<PAGE> 4
FIRST AMERICAN SCIENTIFIC CORP.
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
Period Ended Year Ended
Dec 31, 1999 June 30, 1999
<S> <C> <C>
Revenues $ - $ 285,399
Cost of sales - 106,595
---------- ------------
Gross - 178,804
Operating expenses 113,670 594,993
---------- ------------
(113,670) (416,189)
Net loss from operations (113,670) (416,189)
Other income (expense)
Miscellaneous - 445
Loss on impairment of assets - (629,118)
---------- ------------
(113,670) (1,044,862)
Extraordinary income
Gain on debt forgiveness - 33,767
---------- ------------
Net loss (113,670) (1,011,095)
Other comprehensive
Foreign currency translation gain (2,419) 2,954
Comprehensive income $ (116,089) $ (1,008,141)
========== ============
Basic and diluted net loss
per common share $ 0.003 $ 0.02
========== ============
Weighted average number of
common stock shares outstanding 76,760,393 55,876,015
========== ============
</TABLE>
The accompanying notes are an integral part of these financial
statements.
2
<PAGE> 5
FIRST AMERICAN SCIENTIFIC CORP.
STATEMENT OF STOCKHOLDERS' EQUITY
December 31, 1999
<TABLE>
<CAPTION>
Additional Total
Common Stock Paid-in Deficit Stockholders'
Shares Amount Capital Accumulated Equity
<S> <C> <C> <C> <C> <C>
BALANCE Inception
April 12, 1995 - $ - $ - $ - $ -
Issuance of stock
at $0.1667 per
share for cash 6,000,000 6,000 94,000 - 100,000
Issuance of stock
at $0.70 per share
for payment on
licence agreement 250,000 250 174,750 - 175,000
Net loss for
the period - - - (52) (52)
--------- ------- ----------- ---------- ---------
BALANCE
June 30, 1995 6,250,000 6,250 268,750 (52) 274,941
Issuance of stock
at $0.45 per share
for cash 600,000 600 269,400 - 270,000
Issuance of stock
at $0.50 per share
in lieu of payment
on management
contract 200,000 200 99,800 - 100,000
Issuance of stock
at $0.50 per share
for purchase of one
Gypsum SDM and the
related technology,
per agreement 1,000,000 1,000 499,000 - 500,000
Private placement
sale of stock at
$1.25 per share
for cash 74,400 74 92,926 - 93,000
Issuance of stock at
$0.45 per share in
settlement of debt
conversion 380,717 381 170,942 - 171,323
Net loss for the
year - - - (473,369) (473,369)
--------- ------- ----------- ---------- ---------
BALANCE
June 30, 1996 8,505,117 $ 8,505 $ 1,400,913 $ (473,421) $ 935,902
--------- ------- ----------- ---------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 6
FIRST AMERICAN SCIENTIFIC CORP.
STATEMENT OF STOCKHOLDERS' EQUITY
December 31, 1999
<TABLE>
<CAPTION>
Additional Total
Common Stock Paid-in Deficit Stockholders'
Shares Amount Capital Accumulated Equity
<S> <C> <C> <C> <C> <C>
BALANCE
June 30, 1996 8,505,117 $ 8,505 $ 1,400,913 $ (473,421) $ 935,902
Issuance of stock
at $0.50 per
share for payment
technology license
agreement 1,000,000 1,000 499,000 - 500,000
Issuance of stock
at $0.40-$0.225
per share
for cash 1,057,000 1,057 691,343 - 692,400
Issuance of stock
at $0.0875 per share
for financing
fees 107,440 107 9,293 - 9,400
Issuance of stock
at $.4453 per
share for loan
payment 2,124,701 2,125 845,457 - 847,582
Issuance of stock
at $0.40 per
share for
services 229,808 230 91,693 - 91,923
Issuance of stock
at $0.33 per
share for loan
extensions 598,382 599 193,967 - 194,466
Net loss for
the year - - - (1,324,634) (1,324,643)
---------- ------- ----------- ------------ -----------
Balance, June
30, 1997 13,622,448 $13,623 $ 3,731,471 $ (1,798,055) $ 1,947,039
---------- ------- ----------- ------------ -----------
</TABLE>
The accompanying notes are an integral part of these financial
statements.
5<PAGE> 7
FIRST AMERICAN SCIENTIFIC CORP.
STATEMENT OF STOCKHOLDERS' EQUITY
December 31, 1999
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in
Shares Amount Capital
<S> <C> <C> <C>
Balance, June 30, 1997 13,622,448 $ 13,623 $ 3,731,471
Issuance of stock at $.05
- $.158 per share for
settlement of debt 27,919,250 27,919 1,606,268
Issuance of stock at $.02
- $.20 per share for cash 3,000,000 3,000 237,000
Issuance of stock at $.25
for purchase of patent and
manufacturing rights 1,000,000 1,000 249,000
Issuance of stock at $.10 -
$.227 per share for purchase
of Bakersfield assets 223,000 223 31,377
Issuance of stock at $.117 -
$.05 per share for settlement
of royalty agreement 3,011,320 3,011 167,304
Exercise of stock, options
at $.01 per share 550,000 550 4,950
Net loss for year - - -
----------- -------- -----------
Balance, June 30, 1998 49,326,018 49,326 6,027,370
Issuance of stock for services
at $.001 - $.025 per share 8,010,000 8,010 25,230
Issuance of stock for repayment
of debt at $.01 - $.025
per share 3,160,000 3,160 96,506
Issuance of stock for license
agreement at $.05 per share 1,000,000 1,000 49,000
Issuance of stock for cash at
$.04 per share 4,650,000 4,650 200,925
Stock subscriptions receivable - - -
Net loss for year - - -
Foreign currency translation
gain - - -
----------- -------- -----------
Balance June 30, 1999 66,146,018 66,146 6,399,031
----------- -------- -----------
</TABLE>
The accompanying notes are an integral part of these financial
statements.
6-a
<PAGE> 8
FIRST AMERICAN SCIENTIFIC CORP.
STATEMENT OF STOCKHOLDER'S EQUITY
December 31, 1999
<TABLE>
<CAPTION>
Accumulated
Subscriptions Other Total
& Options Accumulated Comprehensive Stockholders'
Receivable Deficit Income Equity
<S> <C> <C> <C> <C>
Balance, June 30,1997 $ - $ (1,798,055) $ - $ 1,947,039
Issuance of stock at
$.05 - $.158 per share
for settlement of debt - - - 1,634,187
Issuance of stock at
$.02 - $.20 per
share for cash (40,000) - - 200,000
Issuance of stock at
$.25 for purchase
of patent and
manufacturing rights - - - 250,000
Issuance of stock at
$.10 - $.227 per share
for purchase of
Bakersfield assets - - - 31,600
Issuance of stock at $.117
- $.05 per share for
settlement of royalty
agreement - - - 170,315
Exercise of stock options at
$.01 per share (5,500) - - -
Net loss for year - (1,072,922) - (1,072,922)
--------- ------------ -------- -----------
Balance, June 30, 1998 (45,500) (2,870,977) - 3,160,219
Issuance of stock for
services at $.001 -
$.025 per share - - - 33,240
Issuance of stock for
repayment of debt at
$.01 - $.025 per share - - - 99,666
Issuance of stock for
license agreement
at $.05 per share - - - 50,000
Issuance of stock for
cash at $.04 per share - - - 205,575
Stock subscriptions
receivable 45,500 - - 45,500
Net loss - (1,011,095) - (968,932)
Foreign currency
translation gain - - 2,954 2,954
--------- ------------ -------- -----------
Balance,
September 30, 1999 $ - $ (3,882,072) $ 2,954 $ 2,628,222
--------- ------------ -------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
6-b
<PAGE> 9
FIRST AMERICAN SCIENTIFIC CORP.
STATEMENT OF STOCKHOLDERS' EQUITY
December 31, 1999
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in
Shares Amount Capital
<S> <C> <C> <C>
Balance June 30, 1999 66,146,018 66,146 6,399,031
Issuance of stock for
debt settlement at
$0.025 per share 5,600,000 5,600 134,809
Issuance of stock
for settlement of
technology debt
at $0.05 6,000,000 6,000 294,000
Issuance of stock for
purchase of KDS machines
at $0.05 per share 2,000,000 2,000 98,000
Issuance of stock for
cash at $0.015 per share 3,000,000 3,000 42,000
Issuance of stock for
cash at $0.01 per share 1,000,000 1,000 9,000
Issuance of stock for
cash at $0.025 per share 5,500,000 5,500 132,000
Issuance of stock for
cash at $0.05 per share 1,000,000 1,000 49,000
Issuance of stock for
settlement of licence
rights 2,500,000 2,500 -
Issuance of stock for
services $0.01 - $0.034 5,000,000 5,000 60,610
Net loss for period ending
December 31, 1999
----------- -------- -----------
Balance
December 31, 1999 97,746,018 $ 97,746 $ 7,218,450
=========== ======== ===========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
7-a
<PAGE> 10
FIRST AMERICAN SCIENTIFIC CORP.
STATEMENT OF STOCKHOLDER'S EQUITY
December 31, 1999
<TABLE>
<CAPTION>
Accumulated
Subscriptions Other Total
& Options Accumulated Comprehensive Stockholders'
Receivable Deficit Income Equity
<S> <C> <C> <C> <C>
Balance
June 30, 1999 $ - $ (3,882,072) $ 2,954 $ 2,586,058
Issuance of stock for
debt settlement at
$0.025 per share - - - 140,409
Issuance of stock
for settlement of
technology debt
at $0.05 - - - 300,000
Issuance of stock for
purchase of KDS machines
at $0.05 per share - - - 100,000
Issuance of stock for
cash at $0.015 per share - - - 45,000
Issuance of stock for
cash at $0.01 per share - - - 10,000
Issuance of stock for
cash at $0.025 per share - - - 137,500
Issuance of stock for
cash at $0.05 per share - - - 50,000
Issuance of stock for
settlement of licence
rights - - - 2,500
Issuance of stock for
services $0.01 - $0.034 - - - 65,610
Net Loss for period ending
December 31, 1999 - (116,089) - (116,089)
-------- ------------- -------- -----------
Balance
December 31, 1999 - $ (3,998,161) $ 2,954 $ 3,320,989
======== ============= ======= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
7-b
<PAGE> 11
FIRST AMERICAN SCIENTIFIC CORP.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period Ended Year Ended
Dec 31, 1999 June 30, 1999
<S> <C> <C>
CASH FLOWS PROVIDED (USED) IN
OPERATING ACTIVITIES
Net income (loss) $ (113,670) $ (1,011,095)
Depreciation and amortization - 313,255
Impairment of assets - 629,118
Adjustments to reconcile net loss
to net cash used by operations:
Services paid by issuance of stock 11,360 33,240
Decrease (Increase) in
accounts receivable -
23,908
Decrease (Increase) in inventory - 5,500
Decrease (Increase) in prepaid expenses - -
Deposits - 2,304
(Decrease) Increase in accounts payable (3,057) (60,355)
(Decrease) Increase in
litigation reserve - -
Payment for shares for investment (251,229) -
Payment on license agreements payable - (185,020)
---------- ------------
Net cash (used) in operating activities (356,596) (249,125)
---------- ------------
CASH FLOWS PROVIDED (USED) IN
INVESTING ACTIVITIES
Net cash provided (used) in
investing activities - -
---------- ------------
CASH FLOWS PROVIDED (USED)
IN FINANCING ACTIVITIES
Borrowings 24,820 80,467
Payments on borrowings - (12,360)
Proceeds from sales of stock 381,241 205,575
---------- ------------
Net cash provided by
financing activities 406,061 273,682
---------- ------------
NET INCREASE (DECREASE) IN CASH $ 49,465 $ 24,557
---------- ------------
</TABLE>
The accompanying notes are an integral part of these financial
statements.
8
<PAGE> 12
FIRST AMERICAN SCIENTIFIC CORP.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period Ended Year Ended
Dec 31, 1999 June 30, 1999
<S> <C> <C>
NET INCREASE (DECREASE) IN CASH
(Balance forward) $ 49,465 $ 24,557
CASH - Beginning of year 25,690 1,133
--------- -----------
CASH - End of period $ 75,155 $ 25,690
========= ===========
SUPPLEMENTAL CASHFLOW DISCLOSURES
Interest $ - $ 8,787
Income Taxes $ - $ -
NON-CASH INVESTING ACTIVITIES
Common stock issued for purchase of
fixed assets $ 100,000 $ 31,600
Common stock issued for payment on
royalty agreements $ - $ 170,315
Common stock issued for payment on
license agreement payable $ 302,000
NON-CASH FINANCING ACTIVITIES
Common stock issued for payment on
patents and manufacturing rights $ 500 $ 250,000
Common stock issued for
services rendered $ 11,360 $ -
Common stock issued for exchange
of debt $ 140,409 $ 1,634,187
Common stock issued for payment
on worldwide technology license $ 500 $ -
Common stock issued for commissions $ - $ 13,500
Common stock issued for
prepaid expenses $ 53,500 $ -
</TABLE>
The accompanying notes are an integral part of these financial
statements.
9
<PAGE> 13
FIRST AMERICAN SCIENTIFIC CORP.
NOTES TO THE FINANCIAL STATEMENTS
September 30, 1999
(Unaudited)
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 of rubber powder for
industrial fillers, and has acquired the rights to process and sell
industrial products such as gypsum, limestone, and sulfur. The Company
maintains an office in Vancouver, British Columbia Canada.
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 who are 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 $3,998,160 through Dec. 31, 1999,
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.
10
<PAGE> 14
FIRST AMERICAN SCIENTIFIC CORP.
NOTES TO THE FINANCIAL STATEMENTS
September 30, 1999
(Unaudited)
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.
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.
Provision for Taxes
At December 31, 1999, the Company had net operating accumulated losses
of $3,998,160. 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.
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. It is impracticable to estimate the amount
of compensation for future absences, and, accordingly, no liability has
been recorded in the accompanying financial statements. The Company's
policy is to recognize the costs of compensated absences when actually
paid to employees. The Company has no employees and utilizes
consultants only at this time.
11
<PAGE> 15
FIRST AMERICAN SCIENTIFIC CORP.
NOTES TO THE FINANCIAL STATEMENTS
September 30, 1999
(Unaudited)
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.
At this time, because of the complexities involved in the issue,
management cannot provide absolute assurances that the Year 2000 issue
will not have an impact on the Company's operations.
The Company has reviewed its technology, including software and
hardware, and has determined that there will be 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,
1999. 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 operation or financial position.
The Company's Bakersfield plant was not in operation during 1999,
therefore there is no segment information required.
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.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is provided
using the straight-line method over the estimated useful lives of the
assets. The useful lives of property, plant and equipment for purposes
of computing depreciation are five to forty years. The following is a
summary of property, equipment and accumulated depreciation.
12
<PAGE> 16
FIRST AMERICAN SCIENTIFIC CORP.
NOTES TO THE FINANCIAL STATEMENTS
September 30, 1999
(Unaudited)
NOTE 3 - PROPERTY AND EQUIPMENT - continued
<TABLE>
<CAPTION>
Dec 31, 1999 June 30, 1999
<S> <C> <C>
Ultrasound equipment $ 972,246 $ 872,246
Plant assets and equipment 687,881 687,881
Office equipment 23,916 23,916
Leasehold improvements 5,476 5,476
Total assets 1,689,519 1,589,519
Less accumulated depreciation (327,567) (327,567)
$ 1,361,952 $ 1,261,952
</TABLE>
Depreciation and amortization expense for the year ended June 30, 1999
was $313,255. No depreciation has been taken in the current year. 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. During 1999, the Company suspended
operations at its Bakersfield location and determined that plant assets
were impaired by $629,118.
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. 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.
<TABLE>
<CAPTION>
Dec 31, 1999 June 30, 1999
<S> <C> <C>
Technology license $ 1,905,500 $ 1,905,000
Patents and manufacturing rights 250,000 250,000
2,155,500 2,155,000
Less accumulated amortization (306,960) (306,960)
$ 1,848,540 $ 1,848,040
</TABLE>
13
<PAGE> 17
FIRST AMERICAN SCIENTIFIC CORP.
NOTES TO THE FINANCIAL STATEMENTS
September 30, 1999
(Unaudited)
NOTE 4 - COMMON STOCK AND WARRANTS
On June 4, 1998, the Board of Directors authorized and increased common
stock from 50,000,000 to 100,000,000 authorized shares.
During the quarter ending Dec 31, 1999, the Company issued 5,000,000
shares of common stock for consulting, advertising and other services.
The Company valued these services at $65,610. The Company issued
6,000,000 shares of common stock for settlement of technology debt,
valued at $300,000, 2,000,000 shares of common stock for fixed asset
additions, 2,500,000 shares of common stock for settlement of license
rights, and 16,100,000 shares of common stock for cash.
NOTE 5-STOCK OPTIONS
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.
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 4,750,000 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.
NOTE 6 - RELATED PARTIES
Certain consultants who received common stock under the Company's
non-qualified stock option plan are Company directors and stockholders.
During the quarter ending December 31, 1999, 4,725,000 shares were
issued under the stock option plan to members of the board of directors
who provided services to the Company.
14
<PAGE> 18
FIRST AMERICAN SCIENTIFIC CORP.
NOTES TO THE FINANCIAL STATEMENTS
September 30, 1999
(Unaudited)
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 - 409
Granville Street, Vancouver BC
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 take over 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.
Technology License
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 Sonic Disintegration Equipment
(SDM) 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 SDM
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 SDM machine
for gypsum-related use was $775,000, with the parties agreeing that the
technology license is valued at $425,000 and the gypsum SDM 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 consisted of the Company
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. The Company issued 1,000,000 common stock shares to
Spectrasonic in July 1996.
15
<PAGE> 19
FIRST AMERICAN SCIENTIFIC CORP.
NOTES TO THE FINANCIAL STATEMENTS
September 30, 1999
(Unaudited)
NOTE 7 - COMMITMENTS AND CONTINGENCIES - continued
At June 30, 1999, the balance owing on this agreement was $302,000 and
subsequent to the year end, a cash payment and issuance of common stock
retired the balance outstanding.
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 Micronizing
Machine (SDM Machine) whose worldwide rights had been previously
acquired by the Company. In the negotiations, Company acquired all
manufacturing rights applicable to the SDM machine technology. The
Company has sole right and responsibility for manufacturing the
machinery. Consideration to Spectrasonic will be the issuance of
1,000,000 common shares of the Company's stock at $0.25 per share plus
the payment of $500,000. This amount has now been settled by issuance
of common stock and the Company has the sole right and ownership of the
patents, and the manufacturing rights worldwide.
NOTE 8 - NOTES PAYABLE
On November 15, 1996, the Company entered into a loan agreement with
Huntingdon Limited in the amount of $100,000. This loan, including
accrued interest of $10,000, was settled for 2,200,000 shares of common
stock on March 20, 1998.
On April 30, 1996, the Company entered into a loan agreement with
Knowlton Capital, Inc. wherein the lender agreed to provide a revolving
line of credit, which matures upon the Company's completion of a
preferred share offering. The loan agreement gave Knowlton Capital,
Inc. the option of converting its loan into First American common stock
at a deemed value of $0.075 per share on or before December 31, 1996.
During the year ended June 30, 1997, the Company obtained an extension
on this loan by the issuance of 398,836 shares of common stock, valued
at $131,617. This loan, with an interest rate of 10% and an
outstanding principal balance of $790,229 at June 30, 1997, was secured
by a collateral mortgage on the Company's Bakersfield plant and other
assets. During the year ended June 30, 1998, all debt to Knowlton
Capital, Inc. was converted to stock.
NOTE 9 - EXTRAORDINARY GAIN
Forgiveness of Debt
During 1999, 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 $33,767.
16
<PAGE> 20
FIRST AMERICAN SCIENTIFIC CORP.
NOTES TO THE FINANCIAL STATEMENTS
September 30, 1999
(Unaudited)
NOTE 10 - SUBSEQUENT EVENTS
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 for a cash
consideration of $250,000. The sum of $125,000 was paid to the VMH and
the balance paid November 30, 1999. VMH possesses domain names, a web
page, and technology for the sale of videos, DVD's, and CD's through
the Internet. VMH will become a wholly owned subsidiary of the
Company.
NOTE 11 - INVESTMENTS
In August 1999, the Company agreed to acquire 100% of the shares of
Video MovieHouse.com Inc. a company using video on demand technology
for videos, DVD's, CD's and related products. Terms included a payment
of $125,000 down payment and the balance, $125.000 due Nov 30, 1999.
All payments have been made.
17
<PAGE> 21
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Quarter - Ending December 31, 1999
LIQUIDITY AND CAPITAL RESOURCES
First American Scientific (the Company) was incorporated April 12,
1995 as a development stage company. From May 1997 to June 1998 it
operated a pilot project in Bakersfield, California 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 underway to
resolve the matter.
On December 1, 1999, the Company met all conditions of its
agreements with Ashford Holdings LTD to acquire all patent rights to
the technology, to acquire full ownership of the equipment located in
Bakersfield, California to cancel future royalty obligations of
US$450,000 and to retire the remaining debt of US$302,000 owed the
patent holders. With this complete, the Company has irrevocable clear
title to the KDS patents and technology.
On November 30, 1999 the Company completed the purchase 100% of
the shares of VMH VideoMovieHouse.com Inc. By making the final payment
of US$125,000 and VMH VideoMovieHouse.com Inc. is now a fully owned
subsidiary of the Company. Web site development is now ongoing.
The Company's only remaining liabilities (other than a US$24,820
loan from a director which has subsequently been repaid) are the
outstanding accounts payable of US$265,004 incurred from the
Bakersfield operation. Settlement negotiations and counterclaims are
currently underway.
The company currently has US$75,155 cash on hand and has
sufficient liquidity to maintain its operation. It will, however,
continue to have a need for capital to advance its projects and plans
to actively pursue fund rasing activities, either by way of loans, sale
of stock or a combination of both.
RESULTS OF OPERATIONS - QUARTER ENDED DECEMBER 31, 1999
The Company did not generate any revenue during this quarter, but
has been focusing its efforts on reducing liabilities, resolving
outstanding legal issues and developing a market strategy and business
plan. The Company is conscious of its operating expenses and is
carefully managing its resources.
Phase I of the research and development funded by the "Radian
Award Program" in Ireland was completed and it has been proven that the
technology works in processing sludge at low volumes. Phase II research
is now underway to attempt to refine the process to increase throughput
volumes to commercially viable levels.
<PAGE> 22
Plans to move the equipment in Tonasket, Washington to Vancouver,
British Columbia, Canada have been finalized for February 2000. The new
location will be used as a demonstration site and sales office. Plans
to relocate the equipment from Bakersfield to a mining site in Nevada
are nearing completion.
INFLATION
Inflation has not been a factor effecting currant operations, and
is not expected to have any material effect on operations in the near
future.
FOREIGN OPERATIONS
The Company rents office space in Vancouver, British Columbia,
Canada which serves as the corporate and administrative offices.
Administration site and sales office will be opened in the Vancouver
area sometime in the third quarter.
EXHIBIT INDEX
Exhibit No. Description
27 Financial Data Schedule
<PAGE> 23
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Dated this 14th day of February, 2000.
FIRST AMERICAN SCIENTIFIC CORP.
(the "Registrant")
BY: /s/ C.L. Kantonen
C.L. Kantonen, President,
Secretary/Treasurer, Chief Financial
Officer and a Member of the Board of
Directors
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Statement of Financial Condition at December 31, 1999 (Unaudited)
and the Consolidated Statement of Income for the six months ended December 31,
1999 (Unaudited) and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> DEC-31-1999
<CASH> 75,155
<SECURITIES> 0
<RECEIVABLES> 9,007
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 84,162
<PP&E> 53,500
<DEPRECIATION> 327,567
<TOTAL-ASSETS> 3,610,814
<CURRENT-LIABILITIES> 289,824
<BONDS> 0
0
0
<COMMON> 97,746
<OTHER-SE> 7,218,450
<TOTAL-LIABILITY-AND-EQUITY> 3,610,814
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
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<OTHER-EXPENSES> 113,670
<LOSS-PROVISION> 2,419
<INTEREST-EXPENSE> 0
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