UNITED STATES
SECURITIES AND EXCHANGE COMMISSION 
Washington, D.C. 20549

Form 10-KSB/A-2



|[ x ] | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|----- | ------------------------------------------------------------------------------------
|      | For the fiscal year ended June 30, 2002.                                            
|[   ] | TRANSITION REPORT UNDER 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.(Name of small business issuer in its charter)



|Nevada State or other jurisdiction of incorporation
or organization | 88-0338315(I.R.S. Employer Identification No.)
|------------------------------------------------------------------- | ----------------------------------------------

811 - 100 Park Royal South 
West Vancouver, British Columbia   V6T 1A2(Address of principal executive offices, including postal code.)

(604) 913-9035(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



| | Title of each class 
None | Name of each exchange on which registered
None
| | ------------------------- | ----------------------------------------------

Securities registered pursuant to Section 12(g) of the Act:



| | Title of each class | Common Stock
| | ------------------- | ------------

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

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Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by referenced in Part III of this Form 10-KSB or any amendment to this Form 10-KSB [   ]

State issuer's revenues for its most recent fiscal year:$1,634,799

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of September 24, 2002: $8,745,895

State the number of shares outstanding of each of the issuer's classes of common equity, as of September 24, 2002: 145,764,921

We make forward-looking statements in this document. Our forward-looking statements are subject to risks and uncertainties. You should note that many factors, some of which are described in this section or discussed elsewhere in this document, could affect our company in the future and could cause our results to differ materially from those expressed in our forward-looking statements. Forward-looking statements include those regarding our goals, beliefs, plans or current expectations and other statements regarding matters that are not historical facts. For example, when we use the words "believe," "expect," "anticipate" or similar expressions, we are making forward-looking statements. We are not required to release publicly the results of any revisions to these forward-looking statements we may make to reflect future events or circumstances.













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Item 1.   DESCRIPTION OF BUSINESS

General

FIRST AMERICAN SCIENTIFIC CORP. (the "Company") was incorporated under the laws of Nevada on April 12, 1995. The Company owns a patented kinetic disintegration system (KDS). The KDS is a machine that utilizes kinetic energy and standing sound waves to disintegrate various materials such as wood waste, animal waste, mineral rock, rubber, glass, and other industrial minerals into a dry, fine, talcum-like powder. The goal of the Company is to develop commercially viable industrial applications for the KDS, then market, manufacture, and sell, lease and/or license the KDS. The Company's research and testing to date indicates that the best use for the equipment is found in converting biomass (wood waste) to a fine, dry combustible fuel that can be incinerated in specialized burners to create BTUs (heat energy), which, in turn can be converted to electrical power through conventional means. For the biomass, the critical value of the process is its ability to act as an industrial dryer which can extract water from wood at below boiling temperature, and at a significantly lower cost than through conventional methods. The Company is also experimenting with pulp sludge, and believes that significant potential exists in converting waste pulp sludge to dry powder, then to energy which could be recycled back to significantly reduce energy costs, disposal costs, and environmental problems. The Company has also had success in processing animal waste, such as chicken manure and horse manure. These forms of waste are usually mixed with sawdust (bedding) and can be processed into a combustible fuel or could be used as a high nutrient fertilizer. Other potential markets researched are rubber re-cycling, human and other animal sewage/waste processing, food waste processing, industrial mineral comminution, including minerals such as zeolite, gypsum, limestone, phosphates, sulfates, nitrates, sea shells, wallboard, and the recovery of precious metals from hard rock without the use of chemicals.

The KDS Equipment

The KDS uses a patented high speed rotary action to create sufficient kinetic energy to disintegrate and pulverize raw materials that are introduced into the chamber without cutting. The KDS machine weighs approximately five (5) tons and measures sixteen (16) feet (H), by ten (10) feet (L) by eight (8) feet (W). It is powered by a 150 or 250 hp main drive electric motor and uses 5 smaller ancillary motors to move product though the chamber and out through the taurus. The feed material is typically one inch in diameter and carried by a pneumatic lift or conveyor and material grading system, passing through the KDS system at various rates, dependent up product size, moisture content and hardness. The life span of the KDS machines is greater than ten (10) years and requires ongoing service and replacement of consumables on a daily basis. Maintenance is minimal and requires less than thirty minutes per day and twenty-four hour servicing twice a year.





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Licenses

On June 22, 1995, the Company entered into a license agreement with Spectrasonic Corp. (hereinafter "Spectrasonic"), a related party, for the worldwide license to its unpatented 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 KDS machine was $550,000, with license rights valued at $250,000. Since then, modifications were made to the first KDS machine, bringing its total cost to $440,740. This machine was transferred to the Company's subsidiary, First American Power Corp., at its book value of $55,669.

On February 22, 1996, the Company entered into an additional license agreement with Spectrasonic for the worldwide license to its unpatented Ultrasound Equipment for exclusive use in gypsum disintegration, disposal, recycling, remanufacturing or manufacturing of used or new raw materials. The purchase price of this license and one KDS machine for gypsum-related use was $775,000, with the parties agreeing that the technology license was valued at $425,000 and the gypsum KDS machine was valued at $350,000. During the year ended June 30, 2002, this machine was impaired and moved to inventory and sold for $150,000.

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 $1,047,000, which the Company paid by issuing to Spectrasonic 5,500,000 shares of First American common stock (with an aggregate deemed value of $802,000) and paid $168,000 in varying installment amounts between September 30, 1996 and January 2, 1997. The Company recognized $77,000 in forgiveness of debt, which has been recorded as additional paid-in capital.

On July 2, 1997, the Company finalized negotiations with Spectrasonic for all patents to be issued or pending, including all data pertaining to the patent process with respect to the KDS 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.

Applications

When micronizing bio-mass, hog fuel and waste wood, the system produces a fine dry combustible powder that will burn extremely efficiently in a specially designed dust burner. The process also acts as a dryer of moist waste wood such as hog-fuel or pulp sludge creating an alternative green energy fuel.

When micronizing pulp sludge, the KDS is capable of reducing moisture content from 80% moisture down to 13% moisture in two passes through the KDS. In some instances, a re-circulation of material has proven successful. Research is ongoing, however commercial viability has not been achieved.





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When micronizing human and animal manures, the system has proven its ability to kill 99% of all pathogens and coliforms during processing earning it an EPA rating as a pesticide device with registered establishment number 73753 CAN - 001 granted to the Company in January 2001. This "cleansing" of these types of waste products could bring large animal and poultry producers into compliance with EPA regulations as well as creating nutrient rich "clean" end products suitable for recycling as fertilizer.

When micronizing mineral rock, the process reduces mineral rock to a fine dry powder as small as -600 mesh which is sufficient to separate and release precious metals without the use of chemicals. Research continues to increase the durability the working mechanism of the equipment to withstand the heavy wear imposed when processing hard rock. Although the process is 97% efficient, commercially viable processing rates have not yet been achieved. The process has a separate patent pending.

When micronizing a mixture of food waste, wood waste and chicken manure, a fine dry powder is produced which is suitable as a fertilizer base, a filler, or, depending on the content, as cattle feed. Experimentation with various mixtures and moisture contents is ongoing.

When micronizing rubber, a cryogenic cooling process can facilitate the re-cycling of scrap rubber by pre-freezing it in a cooling chamber and injecting it through a pneumatic feed system into a pulverizing chamber. The method has proven that the KDS system can pulverize (shatter) rubber into a fine mesh suitable for re-cycling as a base material for other rubber based products. Commercially viable quantities are not yet proven. The process has a separate patent pending, but, at present, no further work is being done of this application

Patents - Device

A patent was issued the KDS as for a "device for comminution" on November 24, 1998, and its U.S. patent number is 5,839,671. Patent registration in other jurisdictions in the EEC, Australia, New Zealand, Mexico, the UK are pending.

Patents Pending - Processes

Rubber

On April 20, 2001, the Company filed a patent application to protect its research into developing a process for cryogenically freezing non-tire scrap rubber and processing in into a microfine powder using the KDS equipment

Precious Metal Extraction

On May 4, 2001, the Company filed a patent application to protect its research into developing a process for disintegrating and separating precious metal from hard rock without the use of chemicals.





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Research and Testing

The Company continues research with other materials to improve operating efficiencies; increase volume throughput to economically viable levels; and identify markets where profitable operation of the equipment can be achieved. Of particular interest is adapting the equipment to dry out heavily moisture laden materials such as biomass from the forest industry, and pulp sludge. Testing is being carried out in Vancouver, British Columbia, and in Montreal by Alternative Green Energy Systems, Inc., a Canadian federal corporation ("AGES") of which 43.48% of the outstanding shares are owned by the Company. Significant progress has been made converting biomass to a fine dry fuel which can be combusted in the dust burning system. Limited progress has been made with pulp sludge. Other testing includes strengthening bars and rotor to withstand the impact when processing hard rock, dewatering of food waste, and grinding of other materials. All research on rubber processing has been discontinued. While some results have been very promising, there is no assurance that any operations will ever be initiated as a result of these tests. Further, the Company has no contracts with anyone to buy or sell any KDSs or buy, sell or dispose of any waste products or powders of any kind.

Manufacturing

Manufacturing of the KDS is contracted out to Vancouver Blower and Sheet Metal Fabrication Limited (VBS) in Vancouver, British Columbia. When the Company wants to acquire a machine, a turn key contract is executed and the machine is built. Two other backup manufacturers have been identified should demand increase beyond the capacity of VBS or VBS is unwilling or unable to manufacture the KDSs.

Summary of Agreements

In 1998, the Company entered into a research agreement with Green Leaf Fibre Company Ltd. of Northern Ireland and continued its research into sludge and animal waste processing at GLF's research site. The project was funded by Green Leaf and the Irish government under the Radian program. Some progress was made with animal waste, but not sufficient to meet economical viability. Further experimentation with various forms of waste/garbage is ongoing. Should economic viability be achieved, then arrangements would be made with GLF to form a joint venture operation in Ireland and the UK. As of the date of this report, this project has proven unsuccessful and the KDS is now being stored in a warehouse in Castleblaney, Ireland.

In August 2000, the Company entered into an agreement with Beau Pre Explorations Ltd, a Canadian mining company, to process ore from their mine through a KDS. Preliminary work to increase durability of chain system to handle hard rock was required. The Company hired Robert Salter Ph.D. to develop a new impact system, to protect the process with a new patent, and if successful, implement the program on Beau Pre's mineral claims on Valentine Mountain. The re-design and patent process was completed with patent pending status obtained in May 2001. Test work continued throughout the summer of 2001. The equipment has been moved to a staging site near the Valentine Mountain mine site to begin final testing of ore. To date, the Company cannot conclusively state that the equipment is capable of functioning continuously at commercially viable levels of production. Testing is continuing, but there is no assurance that the KDS will ever process any ore.





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In March 2001, the Company signed a letter of interest with Honeywell to determine how the KDS could fit into Honeywell's overall business plans for creation of energy from alternative green fuel sources. To date some work has been done with product provided by Honeywell's clients and initial tests have proven the systems ability to produce a useable end product, but until the Company can establish economical viability, the program has been suspended. Economic viability depends on the KDS processing a sufficient volume of product to create a positive return on investment. Discussions with Honeywell's engineers have been suspended until the Company is able to provide satisfactory proof of the equipments commercial viability. There is no assurance the Company will ever be able to establish a commerical viability for Honeywell's products.

In October 2001, the Company signed an agreement with Thermix Combustion Systems Inc, a designer and manufacturer of computer controlled dust burning furnaces and systems. Under the agreement, the Company and Thermix Combustion combined their respective technologies for micronizing and burning wood waste/powder and jointly formed a corporation named the Alternative Green Energy Systems Inc. ("AGES"). AGES goal is adapt the KDS system to create a continuous flow of suitable micronized hog fuel/ wood dust that will be used as a fuel for Thermix's specialized dust burners.

In February 2002, AGES signed an agreement with Hydro-Quebec Capitech Inc. wherein Hydro Quebec Capitech agreed to invest CD$1,000,000 in AGES's research. Thermix and the Company will each transfer up to 10% of their shares of AGES to Hydro Quebec in return for the investment. The initial payment of CD$600,000 was received in March 2002, and the second payment of $400,000 will be paid the later of September 1, 2002 or upon the sale by AGES of a KDS to anyone, but in any case, not later than March 1, 2003. Should the second payment never be received, Hydro Quebec Capitech interest will revert to 12% of ownership in AGES. In January 2002, a KDS machine was shipped to Montreal where it has been re-designed and enhanced to adapt to processing biomas and pulp sludge. AGES is marketing the combined system to Hydro Quebec's existing clients in the forestry and pulp and paper industry. Further, AGES technical data will be made available to Honeywell International. Responsibility for continuing technical discussions and testing for the Honeywell proposal are being handled by AGES.

On September 1, 2002, the Company spun off its wholly owned subsidiary VMH VideoMovieHouse.com Inc.("VMH") a British Columbia corporation, to holders of the Company's common stock, on June 30, 2002. Each Company shareholder received one share of VMH's common stock for each ten shares of the Company's common stock held on June 30, 2002. The Company shareholders did not receive cash in lieu of fractional shares, but fractional shares were be rounded up to the next whole share.

Market

The KDS has proven economically viable for softer industrial rock, such as gypsum and zeolite, and dry wood chips or chicken manure (embedded in dry sawdust), biomass at moisture levels below 50%. The Company continues to research and seek potential markets where operation of the equipment is economically viable. Research work continues looking for solutions to increase throughput on various types of products. Each situation presents unique hurdles to be overcome. In the case of rubber, feedstock becomes elastics with rise in temperature and must be pre-frozen before processing to maintain efficient





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shattering. In the case of biomass and pulp sludge, the product must not exceed 50% moisture content to avoid clogging of the equipment. In the case of minerals rock, chains must be replaced with hardened steel bars to avoid rapid wear and breakage. In the case of human and animal waste, a de-watering is required prior to processing. Until these adaptations are successfully researched and implemented, there is no certainty that the equipment will be accepted by the market place for economically processing these materials.

Competition

The Company has competition from other producers of microfine powders, most of who have greater financial resources than the Company. The Company believes its system is more cost effective than its competitors.

Company Facilities

The Company's corporate offices are located at 811 - 100 Park Royal, West Vancouver British Columbia, Canada, V7T 1A2 and the Company's sales and demonstration site is located at 5333 176th Street, Surrey, British Columbia V3S 0L5. The phone numbers are (604) 913-9035 and (604) 575-3006, respectively. Fax numbers are (604) 913-9036 and (604) 575-3166.

Subsidiaries

Alternative Green Energy Systems Inc (AGES)

The Company owns 5,000 shares of common stock of Alternative Green Energy Systems Inc., a Canadian federally incorporated corporation ("AGES" ) which constitutes 43.48% of the total outstanding shares (11,500) of AGES

First American Power Corp.

The Company owns 100% of the outstanding shares of common stock of First American Power Corp. ("FAPC"). FAPC was formed for the purpose of providing research and development services exclusively to the Company that are eligible for Canadian research and development credits.





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Pending Contracts

In Vancouver, the Company entered into two sales contracts during the year. The first was to B&B Poultry Waste Management, a company who planned to process of chicken waste to produce an organic fertilizer and/or BTUs to heat local greenhouses in the Fraser Valley. A deposit of US$37,500 has been received and the equipment was delivered. Subsequently, B&B Poultry Waste ran into difficulty obtaining adequate power to its site and experienced a delay in receiving funding. For a short period of time, the Company assisted B&B Poultry Waste by loaning them the use of the Company's mobile generator, but B&B Poultry Waste has now advised that they have quit their existing location and now are seeking a new location to set-up its operation. Consequently, no additional money has been received from B&B Poultry Waste, and the Company is warehousing the equipment at Cloverdale until B&B Poultry Waste can find a new site and re-establish its operation. The Company has booked a reserve against this account should it prove to be uncollectable.

Further, the Company sold one of its used machines located in Ireland to Organic Waste Returns Ltd. A deposit of CDN$50,000 was received and the machine was delivered. The used machine was to be completely refurbished in Ireland and put into production processing a combination of food waste and chicken manure. It soon became apparent that the refurbishing would be better accomplished in Vancouver, so a decision was made to refurbish one of the Company's used machines in Vancouver first, then substitute it for the one in Ireland. This is underway. Subsequent to the date of these statements, Organic Waste Returns advised that it was experiencing difficulty raising funds to complete the transaction, and the Company is currently reviewing other possible options with Organic Waste Returns. No reserve has been taken, as management expects this transaction to complete.

Employees

The Company currently has seven full-time employees, and retains outside consultants when necessary.

Other

During the fiscal period ending June 30, 2002, the Company settled various accounts owing by issuance of common stock. See Item 12 - Recent Sales of Unregistered Securities.

Risk Factors

1. Going Concern Opinion.  At this time, the Company cannot be sure that it will be successful in its operations. Therefore the Company's independent certified public accountants have issued an opinion that there is substantial doubt about the Company's ability to continue in business as a going concern.

2.   Development and Market Acceptance of New Products.  The Company's success and growth will depend upon its ability to improve and market its KDS and KDS processes and to successfully develop, and generate revenues from its processes. To date the Company has been unable to achieve the foregoing.





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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.

4.Dependence on Suppliers.  The Company relies on a number of suppliers to provide certain raw materials for its products. The interruption of certain sources of supply or the failure to adapt materials to the Company's changing technological requirements could disrupt the Company's ability to manufacture 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 KDS and its processes 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. If the market for the KDS or its process are established, the Company expects that additional competition will emerge and that existing competitors may commit more resources to those markets.

7.   Issuance of Additional Shares.  At June 30, 2002, there were 142,213,018 shares of common stock or 71.6% of the 200,000,000 authorized shares of Common Stock of the Company outstanding and 57,786,982 shares remain unissued. 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.

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.

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" The Company's Board of Directors has approved a resolution to prepare its subsidiary, VMH VideoMovieHouse for spin-off as a separate company. If proceeded with, each shareholder will receive a pro-rata interest in the new company by way of stock dividend.

11.   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"

12.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.

13.   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.

14.   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.

15.   Reliance Upon Current Management.  The Company's current operations and future success are greatly dependent upon the participation of its officers, Cal Kantonen, Brian Nichols and David L. Gibson.

16.Lack of Key Man Insurance.  The Company has not obtained key man life insurance on the life of its officers and directors. The death or unavailability of any one of them could have a material adverse impact on the operation of the Company.





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ITEM 2.   DESCRIPTION OF PROPERTIES

The Company owns no real property. It leases a 300 square feet of office space at 811 - 100 Park Royal, West Vancouver, West Vancouver, British Columbia V6T 1A2. The office is leased from Smyth Ratcliffe, Chartered Accountants, on a month-to-month basis. The rent is $1,100 per month. The lease is oral and there is no written agreement covering the same.

In July 2001, the Company leased an additional sales office at 5933 176th Street, Surrey, British Columbia, Canada containing 600 square feet. The sales office is leased from Supper Soil, Inc. on a month-to-month basis. The monthly rental is $600. The lease is oral and there is no written agreement covering the same.

The Company owns eight KDS machines. The first two KDS systems were acquired as part of the licensing agreement with Spectrasonic and are recorded at a lower of cost or fair market value of $300,000 . These machines are currently held in Hungtington Beach, California.  One machine is being held in Northern Ireland pending finalization of negotiations with Organic Waste Returns Ltd. Three machines are located in Vancouver and are being used as test and demonstration machines. One machine is complete and was delivered to Sooke BC as part of the Beau Pre mining joint venture. ,, one machine is held as inventory, and a ninth machine has been sold but not yet delivered.

The Company had other fixed assets located in California. The net book value of these assets at June 30, 2002 was US$112,176 and consisted of bagging equipment, hoppers, electrical paneling, site preparation, paving, construction of building, and general storage bins. These have been written off. The Company has office furniture and equipment costing $47,874 located in Cloverdale, Canada and West Vancouver, Canada.

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:

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. Not settled.





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The Company was the plaintiff in a lawsuit against Paul Marino and the Opal Christian Family Trust (Landlord at 4100 Burr Street, Bakersfield, California), wherein the Company was denied access to its equipment located at that address. The Company settled all claims for $23,500. The equipment is now in the Company's possession at a warehouse in Hungtington Beach, California.

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. The Company offered settlements on approximately $24,000 of trade payables which were outstanding for more than five years.  None of these creditors have initiated lawsuits or further claims.  There are currently no further discussions or actions contemplated concerning these disputed trade payables.

PART II

ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

Liquidity and Capital Resources

As of June 30, 2002, the Company had current assets of $868,560 and current liabilities of $280,072 providing for a positive working capital ratio of 3.10 to 1. This compares to current assets of $384,838 and current liabilities of $171,548 as of June 30, 2001 or a working capital ratio of 2.23 to 1. As of June 30, 2002, the company had $126,144 cash on hand, however, approximately $125,000 is held by AGES and is designated for research. This compares to $175,147 on June 30, 2001. Consequently, there is not sufficient cash for the Company to maintain its operation for the next year, and management will have to seek additional capital from new equity securities offerings, loans, or other fund raising activities to maintain its operation should sales and receipt of receivables not materialize. In the short term, some funding has come from loans from Company officers and by deferring the payment of salaries to Company officers. This is unlikely to continue. Another outstanding source of funds for the Company will materialize if AGES is successful in selling at least one KDS system before March 1, 2003, then Hydro Quebec is expected to make an additional investment of CDN$400,000 in AGES, and in turn, US$100,000 will be due from AGES to the Company as payment of amounts due for equipment already supplied.

The Company is the owner of a US patent on its KDS technology. The patent is also registered in the UK, EEC, Mexico, Australia, and New Zealand. Applications for two new process patents, one for the cryogenic freezing and shattering scrap rubber, and the other for extraction of precious metals using the KDS equipment are patent pending status. The Company is also making preparation to file for a further process patent for "converting bio-mass and pulp sludge to a combustible fuel."

Results of Operations - Year Ended June 30, 2002

Revenue for the year was $453,655 compared to $-0- last year. This consisted of equipment sales by the Company of $453,655.

Net operating losses for the year ending June 30, 2002 were $2,137,651 or US$0.02 per share compared to last year when operating losses were $2,481,764, also US$0.02 per share. Management expects this trend to reverse in the next year as equipment sales begin to come on line and investments in research decrease.





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In June 2002, the Company's subsidiary AGES, received a request to prepare a detailed proposal to install a turnkey power generating system for Hollywood Park Racetrack of Inglewood California which would be fueled by horse manure processed through the Company's KDS system. The preliminary report was successfully presented in August 2002, and the final quotation will be ready for presentation shortly. The Company's engineering staff is confident that they have designed an economically viable solution for handling racetrack waste and management is optimistic that it will be able to close this sale in the near future. As of the date of this report, there is no assurance that any contract will be entered into with Hollywood Park Racetrack.

In Vancouver, the Company entered into two sales contracts during the year. The first was to B&B Poultry Waste Management, a company who planned to process of chicken waste to produce an organic fertilizer and/or BTUs to heat local greenhouses in the Fraser Valley. A deposit of US$37,500 has been received and the equipment was delivered. Subsequently, B&B Poultry Waste ran into difficulty obtaining adequate power to its site and experienced a delay in receiving funding. For a short period of time, the Company assisted B&B Poultry Waste by loaning them the use of the Company's mobile generator, but B&B Poultry Waste has now advised that they have quit their existing location and now are seeking a new location to set-up its operation. Consequently, no additional money has been received from B&B Poultry Waste, and the Company is warehousing the equipment at Cloverdale until B&B Poultry Waste can find a new site and re-establish its operation. The Company has booked a reserve against this account should it prove to be uncollectible.

Further, the Company sold one of its used machines located in Ireland to Organic Waste Returns Ltd. A deposit of CDN$50,000 was received and the machine was delivered. The used machine was to be completely refurbished in Ireland and put into production processing a combination of food waste and chicken manure. It soon became apparent that the refurbishing would be better accomplished in Vancouver, so a decision was made to refurbish one of the Company's used machines in Vancouver first, then substitute it for the one in Ireland. This is underway. Subsequent to the date of these statements, Organic Waste Returns advised that it was experiencing difficulty raising funds to complete the transaction, and the Company is currently reviewing other possible options with Organic Waste Returns. No reserve has been taken as management expects this transaction to complete.

The Company is now focusing on increasing the KDS equipment's capacity to reach commercially economic processing volumes. With the injection of capital provided by Hydro Quebec Capitech, this research is being conducted in Montreal by the Company's engineers at the AGES facility. Management believes the processing of biomass and, possibly pulp sludge, currently represent the highest and best use for the Company's technology. Research is also being done in Vancouver with animal waste, food waste and sewage. The Company has achieved economically viable production levels with chicken and horse manures, and are currently seeking suitable candidates interested in purchasing its equipment.





-14-

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Management strongly believes that the Company's technology is unique and has the potential to transform the waste management industry. To this end, the Company has applied for and received EPA designation as a "pesticide device" indicating that the Company's process is capable of killing most pathogens and coliforms contained in animal wastes. However, the expected environmental push has not yet generated the anticipated sales and the Company continues to re-evaluate its marketing strategies. The Company has determined that the equipment is generally not going to be used as a stand-alone system. Therefore, the Company has begun to develop relationships with suppliers of ancillary equipment, such as pelletizers, heat log manufacturers, product handling equipment suppliers, boiler and generator manufacturers, etc, with the view to offering the Company's equipment as part of an integrated turnkey system designed to fulfill a specific need. The Company believes this will expand its exposure to a wider market and generate sales.

Construction of the new Cloverdale demonstration and sales center was completed in April 2002 and is now in full operation. The sales offices, located adjacent to the demonstration center on the same property, was completed and occupied by the Company in July 2001.

During the year ended June 30, 2002, the Company determined that the value of three of its KDS machines was impaired.  These machines were written down to the estimated market value of $150,000 each and reclassified as inventory.  The Company also impaired all of its assets at its former facility in California.  The Company recoginized an impairment of $371,870 for both of these events.

As of June 30, 2002, there were 142,213,018 shares issued and outstanding.

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.

Foreign Operations

The Company rents office space in West Vancouver and Cloverdale, British Colombia, Canada which serve as administrative, sales offices and a demonstration facility.

ITEM 7.   FINANCIAL STATEMENTS



|INDEPENDENT ACCOUNTANT'S REVIEW REPORT     | F-1                                                         
|------------------------------------------ | ------------------------------------------------------------
|FINANCIAL STATEMENTS                       |                                                             
|                                           | Consolidated Balance Sheets                                 
|                                           | Consolidated Statements of Operations and Comprehensive Loss
|                                           | Consolidated Statement of Stockholders' Equity              
|                                           | Consolidated Statement of Cash Flows                        
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | F-6 - F-22                                                  





-15-

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To the Board of Directors and Stockholders
First American Scientific Corp.
Vancouver, British Columbia
CANADA



INDEPENDENT AUDITOR'S REPORT



We have audited the accompanying balance sheets of First American Scientific Corp., a Nevada corporation, as of June 30, 2002 and 2001 and the related statements of operations and comprehensive loss, stockholders' equity and cash flows for the years 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 audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America.  Those standards require that we plan and perform the audits 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 audits provide 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, 2002 and 2001 and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 2, the Company has sustained losses since inception.  This factor raises 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
Spokane, WashingtonSeptember 12, 2002, except for Note 10, which is dated February 21, 2003.





F-1

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|FIRST AMERICAN SCIENTIFIC CORP.
CONSOLIDATED BALANCE SHEETS
|-----------------------------------------------------------
|                                                           
|ASSETS                                                     
|CURRENT ASSETS                                             
|                                                           
|                                                           
|                                                           
|                                                           
|                                                           
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|PROPERTY AND EQUIPMENT                                     
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|OTHER ASSETS                                               
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|NET ASSETS DISTRIBUTED TO SUBSIDIARY                       
|                                                           
|TOTAL ASSETS                                               
|LIABILITIES AND STOCKHOLDERS' EQUITY                       
|CURRENT LIABILITIES                                        
|                                                           
|                                                           
|                                                           
|                                                           
|COMMITMENTS AND CONTINGENCIES                              
|MINORITY INTEREST IN SUBSIDIARY                            
|STOCKHOLDERS' EQUITY                                       
|                                                           
|                                                           
|                                                           
|                                                           
|                                                           
|                                                           
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                 





The accompanying notes are an integral part of these financial statements.
F-2

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|FIRST AMERICAN SCIENTIFIC CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS 
AND COMPREHENSIVE INCOME (LOSS)
|------------------------------------------------------------------------------------------------------
|                                                                                                      
|REVENUES                                                                                              
|COST OF SALES                                                                                         
|GROSS PROFIT                                                                                          
|OPERATING EXPENSES                                                                                    
|                                                                                                      
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|                                                                                                      
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|LOSS FROM CONTINUING OPERATIONS                                                                       
|OTHER INCOME (EXPENSE)                                                                                
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES                                                   
|INCOME TAXES                                                                                          
|NET LOSS  FROM CONTINUING OPERATIONS BEFORE                                                           
|                                                                                                      
|ALLOCATION OF LOSS TO MINORITY INTEREST                                                               
|LOSS FROM DISTRIBUTED SUBSIDIARY                                                                      
|NET LOSS                                                                                              
|OTHER COMPREHENSIVE INCOME (LOSS)                                                                     
|                                                                                                      
|COMPREHENSIVE NET LOSS                                                                                
|                                                                                                      
|                                                                                                      
|                                                                                                      





The accompanying notes are an integral part of these financial statements.
F-3

-18-

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|FIRST AMERICAN SCIENTIFIC CORP.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY                                       
|---------------------------------------------------------------------------------------------------------------------
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|Balance, June 30, 2000                                                                                               
|Issuance of options for compensation and consulting services                                                         
|Common stock issued from options for cash, compensation, services and other expenses at an average of $0.09 per share
|Common stock issued from options for cash at an average of  $0.01 per share                                          
|Common stock issued from options for cash at an average of  $0.05 per share                                          
|Common stock issued from options for cash and equipment inventory at $0.12 per share                                 
|Common stock issued from options for website development and video inventory at an average of $0.07 per share        
|Common stock issued from options for cash at $0.03 per share and services of $91,960 and inventory of $12,000        
|Common stock issued from options for services at $0.08 per share                                                     
|Common stock issued from options for cash at $0.08 per share                                                         
|Common stock issued from options for legal settlement at $0.14 per share                                             
|Common stock issued from options for commissions at $0.11 per share                                                  
|Foreign currency translation loss                                                                                    
|Net loss for the year ended June 30, 2001                                                                            
|Balance, June 30, 2001                                                                                               
|Common stock issued for cash of $189,850 and services of $82,850 at $0.09 per share                                  
|Common stock issued for compensation at $0.09 per share                                                              
|Common stock issued for legal services at $0.10 per share                                                            
|Common stock issued for KDS machine at $0.09 per share                                                               
|Common stock issued for equipment at $0.13 per share                                                                 
|Common stock issued for accounts payable at $0.095 per share                                                         
|Common stock issued from options for services at $0.09 per share                                                     
|Common stock issued for rent expenses at $0.125 per share                                                            
|Options issued for services                                                                                          
|Foreign currency translation loss                                                                                    
|Net loss for the year ended June 30, 2002                                                                            
|Balance, June 30, 2002                                                                                               





The accompanying notes are an integral part of
these financial statements.
F-4

-19-

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|FIRST AMERICAN SCIENTIFIC CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|---------------------------------------------------------------------
|                                                                     
|CASH FLOWS PROVIDED (USED) IN OPERATING ACTIVITIES                   
|                                                                     
|                                                                     
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|                                                                     
|                                                                     
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|                                                                     
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|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Net cash used in operating activities                                
|CASH FLOWS FROM INVESTING ACTIVITIES                                 
|                                                                     
|                                                                     
|                                                                     
|Net cash used in investing activities                                
|CASH FLOWS FROM IN FINANCING ACTIVITIES                              
|                                                                     
|                                                                     
|Net cash provided by financing activities                            
|NET INCREASE (DECREASE) IN CASH                                      
|Foreign exchange loss                                                
|CASH - Beginning of year                                             
|CASH - End of period                                                 
|SUPPLEMENTAL CASHFLOW DISCLOSURES:                                   
|                                                                     
|                                                                     
|NON-CASH INVESTING AND FINANCING TRANSACTIONS:                       
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                     



The accompanying notes are an integral part of these financial statements.
F-5

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FIRST AMERICAN SCIENTIFIC CORP.
Notes to Consolidated Financial Statements
June 30, 2002

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

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

In September 1999, the Company entered into an agreement with VMH VideoMovieHouse.com Inc., ("VMH"), a British Columbia company, whereby the Company acquired 100% of the common shares and the technology of VMH in return for a cash consideration of $250,000. (See Note 7).  VMH possesses domain names, a web page, and technology for the sale of videos, DVD's, and CD's through the internet.  In 2001, the Company elected to spin off VMH into its own separate entity which became a fully reporting OTC publicly traded company in August 2002.  See Note 10.

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

The Company formed Alternative Green Energy Systems, Inc. (hereinafter "AGES"), a Canadian Corporation, in 2002 for the purpose of using FASC's licensed technology and patents to manufacture, sell, operate and use KDS machines in combination with available expertise in wood dust burning technology.  The Company owns 43.48% of AGES and has management control of AGES.  William E. Barber owns 43.48% and Hydro-Quebec Capitech Inc. owns 13.04% of AGES.  The Company reports financial information from AGES on a consolidated basis due to the control feature in the agreement.  AGES maintains a facility in Montreal, Canada.  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 accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.





F-6

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FIRST AMERICAN SCIENTIFIC CORP.
Notes to Consolidated Financial Statements
June 30, 2002

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Impairment of Long-Lived AssetsIn March 1995, the Financial Accounting Standards Board issued statement SFAS No. 121 titled "Accounting for Impairment of Long-lived Assets." In complying with this standard, the Company reviews its long-lived assets quarterly to determine if any events or changes in circumstances have transpired which indicate that the carrying value of its assets may not be recoverable. The Company determines impairment by comparing the undiscounted future cash flows estimated to be generated by its assets to their respective carrying amounts.

The Company impaired the carrying value of its assets from its former facility in California during the year ended June 30, 2002.  See Note 3.

In August 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" (hereinafter "SFAS No. 144").  SFAS No. 144 replaces SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."  This standard establishes a single accounting model for long-lived assets to be disposed of by sale, discontinued operations.  SFAS No. 144 requires that these long-lived assets be measured at the lower of carrying amount or fair value less cost to sell, whether reported in continuing operations or discontinued operations.  This statement is effective beginning for fiscal years after December 15, 2001, with earlier application encouraged.  The Company believes the adoption of SFAS No. 144 will not have a further material impact on the financial statements of the Company at June 30, 2002.

Going ConcernThe accompanying financial statements have been prepared assuming that the Company will continue as a going concern. This basis of accounting contemplates the recovery of the Company's assets and the satisfaction of its liabilities in the normal course of operations.

As shown in the accompanying financial statements, the Company has incurred an accumulated deficit of $9,151,400 through June 30, 2002.  Although the Company recorded $453,655 in sales during the year ended June 30, 2002, it also generated a net loss of $2,137,651.  These factors raise substantial doubt about the Company's ability to continue as a going concern.

Management plans to undertake a comprehensive review of its ongoing business to substantially increase sales through current channels and develop new sales opportunities.  Management has also established plans designed to increase the sales of the Company's products by continued research and development and combining technology through AGES.





F-7

-22-

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FIRST AMERICAN SCIENTIFIC CORP.
Notes to Consolidated Financial Statements
June 30, 2002

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Going Concern (continued)Management intends to seek new capital from new equity securities offerings that will, if successful, provide funds needed to increase liquidity, fund internal growth and fully implement its business plan.  However, there is no assurance that the Company will raise the required capital.  If the Company is unable to raise the required capital, then it will assess its future business viability.

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.

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

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

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

Historically, the Company has not entered into derivatives contracts to hedge existing risks or for speculative purposes.

At June 30, 2002, the Company has not engaged in any transactions that would be considered derivative instruments or hedging activities.





F-8

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FIRST AMERICAN SCIENTIFIC CORP.
Notes to Consolidated Financial Statements
June 30, 2002

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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

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

Minority InterestAt June 30, 2002, minority shareholders held an approximately 56.52% interest in Alternative Green Energy Systems, Inc. (AGES). The related minority interest is shown on the accompanying balance sheet.  FASC has financial and management control of AGES.  See Note 9.

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

Prepaid ExpensesPrepaid expenses consist of rent paid in advance that will be amortized as used.

Fair Value of Financial InstrumentsThe carrying amounts for cash, accounts receivable, accounts payable, and accrued liabilities approximate their fair value.

Concentration of RiskThe Company maintains its cash accounts in primarily one commercial bank in Vancouver, British Columbia, Canada.  The Company's cash accounts are business checking accounts in Canadian and United States dollars.  The United States dollar account in the amount of $9,619 is not insured.

Restatement and ReclassificationCertain prior year amounts in the accompanying financial statements have been reclassified to conform to the fiscal 2002 presentation.  The reclassification principally consists of revised reporting of operating results of VideoMovieHouse.com Inc. which was spun off in August 2002, and not included in discontinued operations in the prior fiscal periods.  However, in the current fiscal period, the operating results of VideoMovieHouse.com Inc. have been reclassified as discontinued operations for all periods presented.  See Note 10.





F-9

-24-

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FIRST AMERICAN SCIENTIFIC CORP.
Notes to Consolidated Financial Statements
June 30, 2002

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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

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

At June 30, 2002, the Company had net deferred tax assets of approximately $1,380,000 principally arising from net operating loss carryforwards for income tax purposes.  As management of the Company cannot determine that it is more likely than not that the Company will realize the benefit of the net deferred tax asset, a valuation allowance equal to the net deferred tax asset has been established at June 30, 2002 and 2001.  The significant components of the deferred tax asset at June 30, 2002 and 2001 were as follows:



|                                                                                                |  | June 30,
2002 |  | June 30,
2001
|----------------------------------------------------------------------------------------------- |  | ------------- |  | -------------
|Net operating loss carryforward including
  Effective refundable R and D tax credits of $83,085 |  | $ 6,500,000   |  | $ 4,300,000  
|Stock options issued under a non-qualified plan:                                                |  |               |  |              
|For the years ended June 30, 2002 and 2001                                                      |  | 945,860       |  | 2,480,000    
|                                                                                                |  |               |  |              
|Deferred tax asset                                                                              |  | 1,380,000     |  | 430,000      
|Deferred tax asset valuation allowance                                                          |  | $(1,380,000)  |  | $(430,000)   

At June 30, 2002, the Company has net operating loss carryforwards of approximately $5,600,000, which expire in the years 2015 through 2021.  The Company recognized approximately $940,000 of losses from issuance of restricted common stock and stock options for services in fiscal 2002, which are not deductible for tax purposes and are not included in the above calculation of deferred tax assets.





F-10

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FIRST AMERICAN SCIENTIFIC CORP.
Notes to Consolidated Financial Statements
June 30, 2002

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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

Compensated AbsencesEmployees 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.

Revenue and Cost RecognitionRevenues from the sale of KDS machines are recognized when there is a sales contract, all terms of the contract have been completed, collectibility is reasonably assured and the products are delivered.

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

Accounts ReceivableThe Company carries its accounts receivable at cost less an allowance for doubtful accounts.

The Company's policy is to accrue interest on trade receivables 30 days after invoice date.  A receivable is considered past due if payments have not been received by the Company for 90 days.  Every effort is made to collect on the accounts or to take possession of the equipment.  During the year ended June 30, 2002, the Company sold a KDS machine for $285,000.  At June 30, 2002 the balance due on this machine of $249,372 was fully reserved.  All deposits received on this sale are non-refundable.

Refundable Research and Development Tax CreditsThe Canadian Government offers tax incentives to taxpayers carrying out scientific research and experimental development.  They encourage Canadian companies to investigate better ways of doing things: provide better products and processes using advanced technologies.  A 35% tax credit is available for Canadian owned companies with less than $200,000 taxable income in the previous year.  AGES has prepared the forms and   submitted to Revenue Canada for its refundable tax credits of $83,085 for the year ended June 30, 2002.  This tax credit is included in net loss for the Company's U.S. income tax calculation.





F-11

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FIRST AMERICAN SCIENTIFIC CORP.
Notes to Consolidated Financial Statements
June 30, 2002

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Sales Tax RefundsThe Canadian Government taxes goods and services when purchased.  These taxes when paid, can be off-set against taxes due from the sales of goods and services by the Company.  Any sale outside of Canada is not taxed for this purpose.  At the end of each quarter all goods and services taxes paid are netted against the goods and service taxes due on sales.  If the Company has paid more tax than it owes then the Company is due a refund.

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

The components of inventory are as follows:



|                              | June 30,
2002 |  | June 30,
2001
|----------------------------- | ------------- |  | -------------
|                              |               |  |              
|Work in progress - 4 machines |               |  | $132,761     
|Finished goods -3 machines    | $345,000      |  | 132,761      
|Work in progress - 2 machines | 145,442       |  | -            
|                              | $490,442      |  | $265,522     

Accounting PronouncementsIn June 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 146, "Accounting for Costs Associated with Exit or Disposal Activities" (hereinafter "SFAS No. 146").  SFAS No. 146 addresses significant issues regarding the recognition, measurement, and reporting of costs associated with exit and disposal activities, including restructuring activities.  SFAS No. 146 also addresses recognition of certain costs related to terminating a contract that is not a capital lease, costs to consolidate facilities or relocate employees, and termination benefits provided to employees that are involuntarily terminated under the terms of a one-time benefit arrangement that is not an ongoing benefit arrangement or an individual deferred-compensation contract.

SFAS No. 146 was issued in June 2002 and is effective for activities after September 30, 2002.  The Company has not determined the impact on its financial position or results of operations from adopting SFAS No. 146.

In April 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 145, "Rescission of SFAS Statements No. 44, 4 and 64, Amendment of SFAS Statement No. 13, and Technical Corrections" (hereinafter "SFAS No. 145"), which updates, clarifies and simplifies existing accounting pronouncements.  SFAS No. 4, which required all gains and losses from the extinguishment of debt to be aggregated and, if material, classified as an extraordinary item, net of





F-12

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FIRST AMERICAN SCIENTIFIC CORP.
Notes to Consolidated Financial Statements
June 30, 2002

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Accounting Pronouncements (continued)related tax effect was rescinded.  As a result, SFAS No. 64, which amended SFAS No. 4, was rescinded, as it was no longer necessary.  SFAS No. 44, Accounting for intangible Assets of Motor Carriers, established the accounting requirements for the effects of transition to the provisions of the Motor Carrier Act of 1980.  Since the transition has been completed, SFAS No. 44 is no longer necessary and has been rescinded.  SFAS No. 145 amended SFAS No. 13 to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions.  The Company adopted SFAS No. 145 and does not believe that the adoption will have a material effect on the financial statements of the Company at June 30, 2002.

In August 2001, the FASB issued Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment of Long-Lived Assets" (hereinafter "SFAS 144"), which requires a single accounting model to be used for long-lived assets to be sold and broadens the presentation of discontinued operations to include a "component of an entity" (rather than a segment of a business).  A component of an entity comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity.  A component of an entity that is classified as held for sale, or has been disposed of, is presented as a discontinued operation if the operations and cash flows of the component will be (or have been) eliminated from the ongoing operations of the entity and the entity will not have any significant continuing involvement in the operations of the component.

The Company adopted SFAS No. 144 effective August 1, 2001.  Consequently, the operating results of VideoMovieHouse.com Inc. which was to be spun off at June 30, 2002 are included in discontinued operations.  Assets and liabilities of VideoMovieHouse.com Inc. are included in net assets distributed to subsidiary at June 30, 2002.

In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 143, "Accounting for Asset Retirement Obligations" (hereinafter "SFAS No. 143").  SFAS No. 143 establishes guidelines related to the retirement of tangible long-lived assets of the Company and the associated retirement costs.  This statement requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made.  The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived assets.  This statement is effective for financial statements issued for the fiscal years beginning after June 15, 2002 and with earlier application encouraged.  The Company adopted SFAS No. 143 and the adoption did not have a material impact on the financial statements of the Company at June 30, 2002.





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FIRST AMERICAN SCIENTIFIC CORP.
Notes to Consolidated Financial Statements
June 30, 2002

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Accounting Pronouncements (continued)In June 2001, the FASB issued Statement of Financial Accounting Standards No. 141, "Business Combinations" (hereinafter "SFAS No. 141") and Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" (hereinafter "SFAS No. 142"). SFAS No. 141 provides for the elimination of the pooling-of-interests method of accounting for business combinations with an acquisition date of July 1, 2001 or later. SFAS No. 142 prohibits the amortization of goodwill and other intangible assets with indefinite lives and requires periodic reassessment of the underlying value of such assets for impairment. SFAS No. 142 is effective for fiscal years beginning after December 15, 2001. An early adoption provision exists for companies with fiscal years beginning after March 15, 2001. On June 30, 2001, the Company adopted SFAS No. 142. Application of the nonamortization provision of SFAS No. 142 resulted in no change to reported earnings in fiscal 2002 as the Company does not have assets with indeterminate lives.

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

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

At June 30, 2002 because of the spin off of VMH VideoMovieHouse.com Inc., the Company no longer has more than one operating segment.

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.





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FIRST AMERICAN SCIENTIFIC CORP.
Notes to Consolidated Financial Statements
June 30, 2002

NOTE 3 - PROPERTY AND EQUIPMENT (Continued)

The following is a summary of property, equipment, and accumulated depreciation:



|                                       | June 30,
2002 |  | June 30,
2001
|-------------------------------------- | ------------- |  | -------------
|Kinetic disintegration equipment (KDS) | $236,557      |  | $1,355,596   
|Plant assets and equipment             | 19,389        |  | 52,176       
|Office equipment                       | 47,874        |  | 41,862       
|Leasehold improvements                 | 7,811         |  | 5,476        
|Total assets                           | $311,631      |  | $1,455,110   
|Less accumulated depreciation          | (90,295)      |  | (378,886)    
|                                       | $221,336      |  | $1,076,224   

Depreciation expense for the years ended June 30, 2002 and 2001 $58,475 and $220,720, respectively.  The Company evaluates the recoverability of property and equipment when events and circumstances indicate that such assets might be impaired.  The Company determines impairment by comparing the undiscounted future cash flows estimated to be generated by these assets to their respective carrying amounts.  Maintenance and repairs are expensed as incurred.  Replacements and betterments are capitalized.  The cost and related reserves of assets sold or retired are removed from the accounts, and any resulting gain or loss is reflected in results of operations.

During the year ended June 30, 2002, the Company determined that the value of three of its KDS machines was impaired.  These machines were written down to the estimated market value of $150,000 each and reclassified as inventory.  During the year ending June 30, 2002, one of these three machines was sold for $150,000.  The Company also impaired all assets at its former facility in California.  The Company recognized an impairment of $371,870 for both of these events.

NOTE 4 - TECHNOLOGY RIGHTS AND PATENTS

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





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FIRST AMERICAN SCIENTIFIC CORP.
Notes to Consolidated Financial Statements
June 30, 2002

NOTE 4 - TECHNOLOGY RIGHTS AND PATENTS (Continued)

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

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

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

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

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



|                                 | June 30,
2002 |  | June 30,
2001
|-------------------------------- | ------------- |  | -------------
|                                 |               |  |              
|Technology license and rights    | $1,905,000    |  | $1,905,000   
|Patents and manufacturing rights | 250,000       |  | 250,000      
|                                 | 2,155,000     |  | 2,155,000    
|Less accumulated amortization    | 702,930       |  | 594,295      
|                                 | $1,452,070    |  | $1,560,705   

Amortization expense for the years ended June 30, 2002 and 2001 was $108,635 and $144,578, respectively.





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FIRST AMERICAN SCIENTIFIC CORP.
Notes to Consolidated Financial Statements
June 30, 2002

NOTE 5 - COMMON STOCK

During the year ended June 30, 2002, the Company issued from options 2,885,000 shares of common stock for cash of $189,850 and services valued at $82,850; 3,600,000 shares of common stock for compensation valued at $320,480; 250,000 shares of common stock for legal services valued at $25,000; 500,000 shares of common stock for a KDS machine valued at $45,000; 100,000 shares of common stock for equipment valued at $12,840; 100,000 shares of common stock in payment of an account payable of $9,500 and 120,000 shares of common stock as prepaid rent of its offices valued at $15,000.  In addition, 3,925,000 common stock options were exercised for services valued at $457,620.

During the year ended June 30, 2001, the Company issued from options 11,717,000 share of common stock for cash of $1,845; compensation valued at $235,850 and services valued at $822,720; 900,000 shares of common stock for cash of $21,865 and equipment valued at $90,000; 840,000 shares of common stock for website development valued at $13,345; 3,775,000 shares of common stock for cash of $137,574, services valued at $91,960 and inventory valued at $12,000; 4,730,000 shares of common stock for services valued at $356,451 and 204,545 shares of common stock for commissions valued at $22,500.

In addition, the Company issued 5,931,818 shares of common stock for cash in the amount of $231,050 and issued 1,813,637 shares of common stock as legal settlements valued at $262,500.

In June 2000, an amendment to the Company's articles of incorporation was approved, which increased the Company's authorized capital to 200,000,000 shares of common stock at a par value of $0.001 per share.

NOTE 6 - STOCK OPTIONS

During the year ended June 30, 2002, the Company granted 10,505,000 options for compensation, services, expenses and cash at an average exercise price of $0.09.  All options were exercised immediately.  The options were granted at the fair market value of the stock on each grant date.

During the year ended June 30, 2001, the Company granted 33,537,000 options of which 25,865,182 were granted for services, compensation and video inventory, 840,000 were granted for website development, 900,000 for equipment inventory and cash.  In addition 5,931,818 options were granted for cash.

In April 2001, the Company's board of directors approved the First American Scientific Corp. 2001 nonqualified stock option plan. This plan allows the Company to distribute up to 20,000,000 shares of common stock options of a maximum share price of $0.275 to persons employed or associated with the Company. This plan was not approved by the Company's security holders.





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FIRST AMERICAN SCIENTIFIC CORP.
Notes to Consolidated Financial Statements
June 30, 2002

NOTE 6 - STOCK OPTIONS (Continued)

The fair value of each option granted during fiscal 2001 and 2002 was estimated on the grant date using the Black-Scholes Option Price Calculation.  The following assumptions were made in estimating fair value: risk-free interest of 4%, volatility of 111%, expected life of 1 year, and no expected dividends.  The value of these options granted during the years ended June 30, 2002 and 2001 in the amount of $77,780 and $411,891, respectively, was included in operating expense in the financial statements.

The following is a summary of stock option activity:



|                                     |  | Number of
Shares |  | Weighted
Average
Exercise
Price
|------------------------------------ |  | ---------------- |  | -------------------------------
|Options outstanding at July 1, 2000  |  | -                |  | $ 0.03                         
|Granted                              |  | 33,537,000       |  | 0.07                           
|Exercised                            |  | (29,912,000)     |  | 0.04                           
|Options outstanding at June 30, 2001 |  | 3,625,000        |  | $   0.08                       
|                                     |  |                  |  |                                
|Options exercisable at June 30, 2001 |  | 3,625,000        |  | $   0.08                       



|Options outstanding at July 1, 2001                                                |  | 3,625,000    |  | $   0.08
|---------------------------------------------------------------------------------- |  | ------------ |  | --------
|Granted                                                                            |  | 10,505,000   |  | 0.07    
|Exercised                                                                          |  | (11,480,000) |  | 0.08    
|Options outstanding at June 30, 2002                                               |  | 2,650,000    |  | $   0.07
|                                                                                   |  |              |  |         
|Weighted average fair value of options granted during the year ended June 30, 2002 |  | $  0.03      |  |         

NOTE 7 - RELATED PARTIES

At June 30, 2002, the Company owed its officers $140,000 for accrued salary and $12,192 for reimbursed expenses.  These amounts are recorded in the accompanying financial statements under the caption of accounts payable, related parties.  Subsequently, $140,000 of related party accrued salaries was exchanged for stock.

During the year ended June 30 2002, the Company issued 6,650,000 common stock options to Company officers and employees at exercise prices ranging from $0.06 to $0.18 which were equal to the fair market value of the stock on the date of grant.





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FIRST AMERICAN SCIENTIFIC CORP.
Notes to Consolidated Financial Statements
June 30, 2002

NOTE 7 - RELATED PARTIES (Continued)

During the year ended June 30, 2000, the Company's officers, directors and board members 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.  During the year ended June 30, 2001 the Company's president was granted 7,342,000 common stock options, of which 3,842,000 were exercised and recorded as compensation expense.

The president of the Company was the former sole shareholder of VMH VideoMovieHouse.com Inc. (VMH), a firm which was purchased for $250,000 in 2000 and became a wholly owned subsidiary of First American Scientific Corp.  In August 2002, the Company completed a spin-off of VMH which then became  a separate reporting entity.  See Note 10.

NOTE 8 - COMMITMENTS AND CONTINGENCIES

Lease CommitmentsThe Company owns no real property.  On August 1, 1998, the Company negotiated a three-year commercial lease for 740 square feet in Vancouver, British Columbia, at a monthly rental of $1,000.

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 expired on April 14, 1998.  Negotiations with a proposed joint venture partner to operate this facility have ended in dispute between the parties and operations of the plant have ceased.  During the year ended June 30, 2002, this issue was resolved and the Company took possession of its plant assets.

NOTE 9 - JOINT VENTURES

Beau Pre Explorations Ltd.The Company has entered into a joint venture agreement with Beau Pre Explorations Ltd.  The Company's investment consists of one KDS machine contributed to the joint venture to process mineral and extract precious metal at the Valentine Mountain mine site.

AGESIn connection with its formation in January 2002, AGES issued 5,000 shares of no-par Class A common stock for $0.06 per share to both the Company and to Mr. William E. Barber.  In addition, 1,500 Class B common stock shares were issued to Hydro-Quebec Capitech, Inc. for $376,427 in cash.  The Company and Mr. Barber each own 43.48% of A





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FIRST AMERICAN SCIENTIFIC CORP.
Notes to Consolidated Financial Statements
June 30, 2002

NOTE 9 - JOINT VENTURES (Continued)

AGES has signed an agreement with Thermix Combustion Systems Inc. to acquire its engineering expertise in wood burning technologies and in designing Pro-Logic computerized control systems and programs.  AGES also has a license agreement with the Company to use its patents for the manufacture, sale, operation and use of KDS machines and equipment in connection with any application when used in combination with the acquired expertise in wood dust burning technology.

FASC owns all patents for the KDS technology and machines, and to all the research conducted by AGES.  To perfect the license agreement AGES must sell two machines, one machine in each industry, biomass and pulp sludge, and pay $100,000 for the license.  Until a unit is sold for each purpose contemplated in the agreement and until Hydro Quebec contributes an additional $400,000 CDN to raise its share of the ownership, the license agreement is not perfected.

Until these conditions are met, FASC remains in control of the venture because of the contractual agreement.  When these conditions are met, FASC becomes a minority shareholder, and no longer controls AGES.

In February 2003, FASC extended the payment terms of the agreement with AGES for one additional year, until February 21, 2004.

NOTE 10 - SPIN OFF OF VMH VIDEOMOVIEHOUSE.COM, INC.

On June 11, 2001, the Company's board of directors recommended and approved a motion that the Company would spin off its subsidiary, VMH VideoMovieHouse.com Inc., into its own separate fully reporting OTC publicly traded company.  At that time, management under the direction of the board of directors began the necessary actions to accomplish the spin-off in a timely manner.

In August 2002, VMH finalized its registration with the Securities and Exchange Commission to become a separate reporting entity.  In September 2002, the Company issued 14,221,750 shares of common stock in accordance with the spin-off agreement.







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FIRST AMERICAN SCIENTIFIC CORP.
Notes to Consolidated Financial Statements
June 30, 2002

NOTE 10 - SPIN OFF OF VMH VIDEOMOVIEHOUSE.COM, INC. (Continued)

The assets and liabilities distributed to VMH VideoMovieHouse.com Inc. were as follows as of August 31, 2002:



|Cash in bank                                | $                 | 12,842 
|------------------------------------------- | ----------------- | -------
|Accounts receivable                         |                   | 60,457 
|Inventory                                   |                   | 70,832 
|Property, plant and equipment               |                   | 33,081 
|Technology and website, net of amortization |                   | 229,989
|Deposits                                    |                   | 10,000 
|                                            |                   |        
|                                            | Total Assets      | $      
|                                            |                   |        
|Accounts payable and accrued expenses       | $                 | 107,183
|Accounts payable, related parties           |                   | 118,517
|                                            |                   |        
|                                            | Total Liabilities | $      
|                                            |                   |        
|Assets in excess of liabilities             | $                 | 191,501

Costs associated with the spin off VMH were accounted for in discontinued operations.

In accordance with generally accepted accounting principles, the financial results for VMH are reported as discontinued operations "distributions to subsidiary" and the Company's financial results of prior periods were restated.  Condensed results of the discontinued operations "loss from distributed subsidiary" were as follows:



|                         |  |   | June 30,
2002 |  |   | June 30,
2001
|------------------------ |  | - | ------------- |  | - | -------------
|Net Sales                |  | $ | 286,869       |  | $ | 4,222        
|Loss before Income Taxes |  | $ | (193,377)     |  | $ | (23,151)     
|Income Tax Expense       |  | $ | -             |  |   | -            
|Net Loss                 |  | $ | (193,377)     |  | $ | (23,151)     

The loss on distribution of subsidiary reflects expenses related to the distribution of the assets, common stock and certain expenses associated with establishing a capital structure of VMH.





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FIRST AMERICAN SCIENTIFIC CORP.
Notes to Consolidated Financial Statements
June 30, 2002

NOTE 11 - FORGIVENESS OF DEBT

During the year ended June 30, 2001, the Company negotiated debt settlement agreements with various suppliers and vendors.  These transactions resulted in a gain from debt forgiveness of $146,500 for the year ending June 30, 2001.





















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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 5th day of June, 2003.



| | FIRST AMERICAN SCIENTIFIC CORP.
| | -------------------------------



| | BY: | /s/ Calvin L. Kantonen
Calvin L. Kantonen 
Principal Financial Officer and Chairman of the Board of Directors
| | --- | -------------------------------------------------------------------------------------------------------------



Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities.



|SIGNATURES                                | TITLE                                                              | DATE        
|----------------------------------------- | ------------------------------------------------------------------ | ------------
|/s/ Calvin L. Kantonen
Calvin L. Kantonen | Principal Financial Officer and Chairman
of the Board of Directors | June 5, 2003
|/s/ John Brian Nichols
John Brian Nichols | Principal Executive Officer and Chairman
of the Board of Directors | June 5, 2003
|David Gibson                              | Secretary and a member
of the Board of Directors                   | June 5, 2003









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CERTIFICATION

I, John Brian Nichols, certify that:

1.   I have reviewed this annual report on Form 10-KSB of First American Scientific Corp.:

2.   Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.   Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report.

Date: June 5, 2003

| | /s/ John Brian Nichols
John Brian Nichols
President and Principal Executive Officer
| | -----------------------------------------------------------------------------------

I, Calvin L. Kantonen, certify that:

1.   I have reviewed the Form 10-KSB of First American Scientific Corp.;

2.   Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.   Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report.

Date: June 5, 2003



| | /s/ Calvin Kantonen
Calvin Kantonen  
Principal Financial Officer
| | -----------------------------------------------------------------





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CERTIFICATION PURSUANT TO
18 U.S.C. Section 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of First American Scientific Corp. (the "Company") on Form 10-KSB for the period ended June 30, 2002, as filed with the Securities and Exchange Commission on the date here of (the "report"), I, John Brian Nichols, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)   The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)   The information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated this 5th day of June, 2003.



| | /s/ John Brian Nichols
John Brian Nichols 
Chief Executive Officer
| | ------------------------------------------------------------------

CERTIFICATION PURSUANT TO
18 U.S.C. Section 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of First American Scientific Corp. (the "Company") on Form 10-KSB for the period ended June 30, 2002, as filed with the Securities and Exchange Commission on the date here of (the "report"), I, Calvin Kantonen, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)   The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)   The information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated this 5th day of June, 2003.



| | /s/ Calvin Kantonen
Calvin Kantonen 
Chief Financial Officer
| | ------------------------------------------------------------





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