ANNUAL REPORT FOR FIRST AMERICAN SCIENTIFIC CORP FOR 2006

10KSB 1 fasc10k2006.htm 2006 ANNUAL REPORT FOR FIRST AMERICAN SCIENTIFIC CORP. ANNUAL REPORT FOR FIRST AMERICAN SCIENTIFIC CORP FOR 2006

=======================================================================================================

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

FORM 10-KSB

[X]

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 2006

OR

[ ]

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from

Commission file number 000-27094

FIRST AMERICAN SCIENTIFIC CORP.
(Name of small business issuer in its charter)

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

811 - 100 Park Royal South
West Vancouver, British Columbia
Canada V7T 1A2
(Address of principal executive offices, including postal code.)

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

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 [ ]

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 fiscal year June 30, 2006: $ 976,406

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 June 30, 2006: $ 9,302,353 USD

==========================================================================================================

State the number of shares outstanding of each of the issuer's classes of common equity, as of September 10, 2006: 189,843,955

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.

- 2 -

PART I
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 the patented kinetic disintegration system called the KDS Micronex System and two additional process patents using the equipment. One other process patent application is pending. The System consists of an electrically powered disintegration/drying chamber and feeding system that utilizes kinetic energy and standing sound waves to pulverize various waste materials such as biomass (wood waste), pulp sludge, animal waste, food waste, rubber, glass, and other feed stocks into valuable, fine, dry, talcum-like powders that can be used as a combustible fuel or a high nutrient fertilizer. The goal of the Company is to identify and develop commercially viable " waste to resources" industrial applications for the KDS System, then market, manufacture, sell, lease and/or license it to end users in the forest and pulp and paper industries, in agriculture, in recycling, and others.

Applications
1. Converting biomass to combustible fuel or fertilizer

The Company's research and testing to date indicates that the highest potential use for the equipment is found in pulverizing and drying (micronizing) biomass (wood waste) into 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 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 at a significantly lower cost than through other conventional methods.

2. Drying and grinding of pulp sludge

The Company has also processed wet (80% moisture) pulp sludge, and has shown that potential exists in converting waste pulp sludge to a dry, fibre-like powder and releasing the kaolin clay concurrently, then burning to create BTUs which are recycled back into the paper making process as heat and/or electrical power. This could reduce energy costs, disposal costs, and environmental problems in the pulp and paper industry.

3. Drying and grinding animal waste/munincipal sewage/food waste

When micronizing 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 create a nutrient rich "clean" end product suitable for recycling as fertilizer.

- 3 -

When micronizing a mixture of food waste, wood waste and chicken manure, a fine, dry, pathogen-free dry powder is produced which is suitable as a high nutrient fertilizer base, as a filler, or, depending on the content, as cattle feed.

4. Pulverizing of mineral rock to release precious metals

When micronizing mineral rock, the process reduces the rock to a consistent fine dry powder as small as -400 mesh which has proven sufficient to separate and release precious and heavy metals mechanically without the use of chemicals. Development work continues to increase the durability of the equipment to withstand the heavy wear imposed when processing hard rock. Although the process has proven to be 97% efficient, commercially viable processing volumes have not yet been achieved. This process has now been patented.

5. Micronizing scrap rubber

When micronizing rubber, a cryogenic cooling process can facilitate the recycling 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. This process has now been patented and the company is seeking a joint venture partner who will participate in the development of this application to commercial viability. No further work has been done this year, and the application is dormant.

6. Micronizing of recycled Glass

When micronizing glass, the process reduces it to a consistent fine dry powder as small as 20 microns which has proven valuable as a strengthener in asphalt, concrete and ceramics.

The KDS Equipment

The KDS uses a patented high speed rotary action to create sufficient kinetic energy to pulverize and dry (micronize) raw materials that are introduced into the chamber without cutting.

The KDS machine weighs approximately five tons and measures sixteen feet high, by ten feet long by eight feet wide. 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 machine 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.

There are currently three models and variations thereof available designed for various feedstocks and applications.

- 4 -

Patents issued and pending
Device and Method for Comminution - US Patent #6,024,307 and Canadian patent # 2,218,429

A patent was issued for the KDS as for a "device for comminution" on November 24, 1998, and its U.S. patent number is 6,024,307 with additional patent applications filed in Australia, Canada, Europe (EEC), Finland, France, Germany, Ireland, Italy, Mexico, New Zealand, Spain, Sweden, Switzerland, and the United Kingdom.

Cryogenic Comminution of Rubber - US Patent # 6,655,167 B2

On April 20, 2001, the Company filed a patent application in the United States to protect its research into developing a process for cryogenically freezing non-tire scrap rubber and processing in into a micro-fine powder using the KDS equipment. This patent has now been issued.

Method of Recovery of Precious Metal and Heavy Minerals - US Patent # 6,682,005 B2

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

Method and apparatus for Recovery of Fuel and Clay from Biomass - (pending)

In November 2002, the Company filed a provisional patent application in the United States to protect its research for the processing wet biomass through the KDS equipment. This application is still pending.

Acquisition of / Ownership of Patents

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.

On July 2, 1997, the Company purchased from Spectrasonic Corp all rights to the technology and its patents, whether issued or pending, including all data pertaining to the patent process with respect to the KDS Disintegration System. Upon the final payment to Spectrasonic of 1,000,000 common shares of the Company's stock valued at $0.25 per share which was made on December 1, 1999 , unencumbered right and title to all patents was irrevocably transferred to the Company.

- 5 -

Research and Testing

The Company continues research with various 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. In this regard, testing is being carried out in Canada by FASC and AGES, in Kuala Lumpur, Malaysia by FASCM, in London, England by WRAP, in Japan by JP Steelplantech, and in Korea by JNK Heaters Ltd. Significant progress has been made converting biomass to a fine dry fuel which can be combusted in the dust burning system. All research on rubber processing has been discontinued until a suitable research partner can be identified.

Government/Environment Regulation

The Company is subject to various federal, provincial and local environmental laws and regulations. Management believes that the Company' s operations currently comply in all material respects with applicable laws and regulations. Management believes the trend in environmental litigation and regulation is toward stricter standards, and that these stricter standards may result in higher costs for the Company and its competitors. Such changes in the laws and regulations may require the Company to make additional capital expenditures which, while not presently estimable with certainty, are not presently expected to be material. Costs for environmental compliance and waste disposal have not been material in the past. In the future, stricter regulations may increase the demand for our products which offer solutions to some environmental problems.

Manufacturing

Canadian manufacturing of the KDS machine is sub-contracted to Mainland Machinery Limited (MML) in Abbotsford, British Columbia at a fixed price on a case by case basis. Engineering and design assistance are also provided by MML. Our licenses in Malaysia, Brazil, Japan, and Korea provide for local manufacturing in those countries subject to certain conditions.

Technology Licenses granted as of June 30, 2005

Canada - Alternative Green Energy Systems Inc

In October 2001, the Company signed an agreement with Thermix Combustion Systems Inc, to form a jointly owned corporation named the Alternative Green Energy Systems Inc. ("AGES"). AGES goal was to 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. FASC and Thermix contributed their respective technologies to design a complete micronizing and dust burning system to be marketed to the Thermix's contacts in the pulp industry.

In February 2002, the Company granted a conditional license to AGES to manufacture and sell the KDS equipment for all applications using biomass in Canada, the USA, and the European Union. In February 2002, AGES signed an agreement with Hydro Quebec Capitech Inc. wherein Hydro Quebec Capitech agreed to invest CDN$1,000,000 equity in AGES's for research and development. On February 21, 2004, that license expired when conditions were not met.

- 6 -

On February 23, 2004, the Company granted AGES a modified exclusive license to design, manufacture and sell a large scale version of the KDS machine to be used in the pulp and paper industry in Canada, the USA, and the European Union.

AGES has not sold the required one machine per year, but has paid $25,000 annually in lieu of a sale to maintain its exclusive rights granted under the agreement

By mutual agreement, in July 2006, the license was modified to reduce the territory licensed to Canada and the USA.

Under the all license agreements with AGES, the Company retains ownership of all patents for the KDS technology, and owns rights to all the research conducted by AGES.

As of June 30, 2006 , FASC owns 12 % of the outstanding shares of AGES, but does not participate in the management of AGES.

Malaysia - FASC ( Malaysia ) SDN. BHD.

On July 8, 2004, the Company granted an exclusive license for 21 years to First American Scientific Corp (Malaysia) Bhd. Sdn., to market the KDS system in Malaysia, Thailand, Singapore and Indonesia. The agreement required FASCM to purchase one KDS machine and set up a fully operational demonstration plant in Malaysia. This requirement was met in September 2004.

As of June 30, 2006 , FASC owns 50 % of the outstanding shares of FASCM.

Japan - JP Steelplantech Co. Ltd

On September 26, 2005, the Company granted an exclusive license for manufacturing and marketing the KDS System in Japan to JP Steelplantech Company of Yokohama, Japan. As part of the licensing agreement, JP Steel paid an up front licensing fee and purchased and installed a fully operational KDS at its facility in Yokohama to be used for sales demonstrations and research purposes. JP Steel will also pay a royalty for each machine manufactured and sold in Japan. Marketing efforts are now underway.

JP Steel Plantech Co. is a well established engineering and equipment manufacturing company owned by four Japanese steel industry companies ; Kawasaki Heavy Industries (KHI), Hitachi Zosen (HITZ), JFE Engineering (JFE) and Sumitomo Heavy Industries (SHI).

Korea - JNK Heaters Co. Ltd dba FASC - Korea

On December 14, 2005, the Company signed an exclusive license agreement for the marketing of the KDS System in Korea with JNK Heaters Co. Ltd. of Seoul, Korea. As part of the agreement JNK has paid an up front deposit for a licensing fee and machine purchase, and has purchased and and installed a fully operational KDS at its facility in Seoul. JNK may also earn the right to manufacture machines in Korea after meeting certain contractual conditions and will also pay a royalty for each machine manufactured and sold in Korea. FASC Korea has sold one machine to a customer in the limestone industry and has purchased a second machine to be installed at a local sewage plant on a trial basis. The license requires a minimum sales quota be met each year commencing in year 2 to maintain exclusivity.

- 7 -

Brazil - South American Bio-Energy Corp

On April 18, 2006 the company announced the anticipated signing of an Agreement in Principle to form a joint venture to be named First American Scientific Brazil Ltda. with South American Bio-Energy Corp Ltda of Uruguay and Bruno Industrial Ltda of Brazil for the manufacture, marketing, and operation of KDS equipment in Brazil, Uruguay and Argentina. Finalization of the documentation is expected to be completed in the next quarter.

On finalization, FASC will own 50 % of the outstanding shares of SABECo.

Summary of Agreements

Other material contracts or agreements:

The Waste and Resources Action Programme - UK (WRAP)

In September 2004, we signed an agreement wherein WRAP has agreed to provide funding to develop "value enhanced end-products" from the output of the KDS machine. WRAP has agreed to provide $1,000,000 USD for the purchase and installation of one complete KDS system to be located at a local pulp & paper mill in England. The fund will also pay for market research, scientific research, re-design and adaptation costs for the equipment and supplementary systems for industry-specific applications. The goals of the project are to demonstrate the KDS technology in a working environment, optimize ancillary equipment to improve its efficiency, and identify markets for recycled end products. In December 2004, a KDS Model S-4 was shipped to Aylesford Newsprint in London, England for trial runs and evaluation. The testing is now complete and a final report is expected in the next quarter.

City of Prince George, Canada

FASC has signed a Memorandum of Understanding the City of Prince George, BC, Canada to assist in solving its environmental cleanup problems with sewage sludge using the KDS Micronex system. This will be the first operation of its kind in the world where the strictly regulated Class B municipal sludge can now be cleaned, bagged and profitably sold to the public as a soil amendment" The initial runs will be monitored for two months, and if satisfactory, the city will establish a permanent facility and purchase up to 4 KDS Micronex machines. To date all trial runs have been satisfactory and many adjustments have been made to accommodate the efficient processing of the City' s sewage sludge. Expected date for completion of the evaluation has been extended to November 2006.

Minnesota Valley Alfalfa Producers Association

On April 28, 2006, the company received a purchase order for the sale of two machines to Minnesota Valley Alfalfa Producers. The machines were delivered in June 2006. Adaptations to the equipment to accommodate local conditions are now underway with positive results.

- 8 -

AGES agreement with Sustainable Development Technology Canada (SDTC)

In October 2004, Sustainable Development Technology Canada (SDTC) awarded a research grant to AGES to construct and install a complete waste to energy KDS 3000 system at a pulp mill in Eastern Canada. Subsequent to the award, AGES signed a Contribution Agreement for $600,000 Cdn with SDTC to construct a "Wet Wood Waste to Energy" project to be hosted by Flakeboard Company Limited (FCL), at their St. Stephen, New Brunswick pulp mill. SDTC is mandated to act as the primary catalyst in building a sustainable development technology infrastructure in Canada and help meet the Kyoto accords. All funding has since been received and expended by AGES.

AGES agreement with Flakeboard Company Limited

Flakeboard Company Limited has installed all infrastructure equipment to handle wood waste to the project and to convey and store the fuel dust after it has been processed. The FCL total investment includes a reclaimer, silo, various conveyors, a major area electric upgrade, DCS modifications and a civil engineering project to site and enclose all the equipment. Further adaptations to the equipment are being made to meet the customer's requirements.

United Zeolite Products Ltd agreement with Halliburton Group Canada

In February 2004, FASC became a 1/3rd partner, along with C2C Zeolite Corp and Zeotech Enviro Corp, in United Zeolite Products Ltd, a BC company formed to build and operate a specialty zeolite processing plant in Princeton, B.C. UZP has a $5,000,000 Cdn contract to supply of micronized zeolite to Halliburton Group Canada. In August 2004, Thelon Ventures Ltd., a Canadian company committed $450,000 Cdn in cash to UZP as a condition to become a fourth equal partner in UZP, thereby by reducing each of the existing partners' equity position to 25 % each of UZP's outstanding shares, but providing the balance of funds needed to complete the construction of the Princeton facility. The building construction was completed and KDS equipment was delivered, commissioned and fully operational. Delays at the Zeotech mine in Princeton resulted in no raw material being delivered for processing and no micronized product was ever delivered to Halliburton Group Canada from UZP' s Princeton processing facility.

US Dept of Agriculture Grant - University of Tennessee

In July 2004, we were selected to participate with the University of Tennessee in a Biomass Research Initiative project funded by the US Dept of Agriculture. First American Scientific Co. was identified as a key industry partner for its history of developing novel size reduction and separation processes. The research is ongoing. Results will be announced as they become available.

Market

The KDS machine has proven viable for softer industrial rock, such as gypsum and zeolite, wood chips or chicken manure (embedded in sawdust), and any biomass at moisture levels below 60%. The Company continues to research and seek potential markets where operation of the equipment is economically viable. Improvements to the equipment continue and we are constantly experimenting to find solutions that increase throughput on various types of products. Each situation presents unique hurdles to be overcome. In the case of rubber, feedstock becomes elastic with rise in temperature and

- 9 -

must be pre-frozen before processing to maintain efficient shattering. In the case of biomass and pulp sludge, the product must not exceed 60% 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. Some of these adaptations require additional research and until implemented, there is no certainty that the equipment will be accepted in all the proposed markets.

Competition

The Company has competition from other producers of microfine powders, most of who must use a series of equipment to achieve similar results. Some have much greater financial resources than the Company, but the Company believes its system is more cost effective than these competitors and that we can reasonably expect to attract a share of the marketplace.

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 office is located at #26 - 7621 Vantage Way, Delta, British Columbia, Canada V4K 4E2. The phone numbers are (604) 913-9035 and (604) 940-6220, respectively. Fax numbers are (604) 925-1118 and (604) 940-6221.

Subsidiaries and other equity positions
Canada - First American Scientific ( Canada ) Ltd.. - 100 % owned by FASC

The Company owns 100% of the outstanding shares of common stock of First American Scientific ( Canada) Ltd, a BC company which was formed for the purpose of providing research, development, and other services to FASC and its Canadian customers and licensees. The Company changed its name from First American Power Corp to First American Scientific (Canada) Ltd. on May 26, 2005.

Malaysia - FASC (Malaysia) Bhd. Sdn. - 50 % owned by FASC

The Company owns 50% of the outstanding shares of common stock of First American Scientific ( Malaysia ) Bhd. Sdn. (FASCM) , a Malaysian company incorporated for the purpose of manufacturing and marketing the KDS system in Malaysia, Thailand, Singapore, and Indonesia primarily to the palm oil industry.

Brazil - South American Bio-Energy Corp - proposed 50 % ownership by FASC

The Company will own 50% of the outstanding shares of common stock of South American Bio-Energy Corp, a Brazilian company ( when finalized) to be incorportated for the purpose of manufacturing, operating and marketing the KDS system in Brazil, Argentina and Uraguay , primarily to the sugar cane industry.

- 10 -

Canada - Alternative Green Energy Systems Inc (AGES) - 12 % owned by FASC

The Company owns 12% of the outstanding shares of common stock of Alternative Green Energy Systems Inc., a Canadian federally incorporated corporation ("AGES") which is licensed to design, manufacture, operate, and market a large scale the KDS system for the pulp & paper industry in Canada and the USA.

Canada - United Zeolite Products Ltd - 0 % ownership ( withdrew )

In Feb 2006 , due to irreconcilable differences between the joint venture partners, the Company withdrew from this joint venture. The Company has subsequently relinquished all its shares of UZP and removed all of its equipment from the UZP site. The Company has no further interest in UZP and has received a full and final release and indemnification from all claims and liability resulting therefrom from all parties involved.

Employees

FAS ( Canada) Ltd currently has four full-time employees in Canada. Messrs, Nichols and Kantonen are officers of, and members of the boards of directors of both FASC and FAS ( Canada ) Ltd. The company also retains outside consultants when necessary.

Other

During the fiscal period ending June 30, 2006, the Company settled various accounts owing by issuance of common stock.

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 machines and KDS processes and to successfully develop, and generate revenues from its processes. To date the Company has been unable to achieve the foregoing.

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.

- 11 -

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, 2006, there were 189,843,955 shares of common stock or 95 % of the 200,000,000 authorized shares of common stock of the Company outstanding and 10,156,045 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.

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.

- 12 -

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.

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 not engaged in any transactions with its officers, directors and principal shareholders except for accepting non-interest bearing loans from two of its officers. 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 and Brian Nichols.

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.

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 Smythe Ratcliffe, Chartered Accountants, on an month to month basis. The rent is US$1,100 per month which includes full reception and office services.

In July 2005, the Company leased a new sales office at # 26 - 7621 Vantage Way in Delta, British Columbia, Canada containing 800 square feet of office space for a monthly rental of US$600. A new temporary demo facility has been set up in Abbotsford, BC, Canada adjacent to our fabricator.

As of June 30, 2006, the Company owns two KDS machines. One machine is installed in Prince George on a trial basis, and one is used for demonstration and testing at the Company's test facility in Abbotsford, BC, Canada.

The Company has tools, test equipment, office furniture and office equipment costing at total of $218,534 located in Delta, British Columbia, Canada Abbotsford, British Columbia, Canada and West Vancouver, British Columbia, Canada.

The Company's registered office is # 700 - 101 Convention Center Drive, Las Vegas, Nevada 89109.

- 13 -

ITEM 3. LEGAL PROCEEDINGS

The Company is not a party to any pending litigation and none is contemplated or threatened other than as described below:

Ford Motor Credit Company vs. First American Scientific Corp., Kern County Municipal Court, Bakersfield Judicial District, Case No. 148129, filed on October 10, 1998. This complaint seeks $3,549, 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, but 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. As of the date hereof, the case has not been settled.

The Company has a number of commercial creditors in the state of California who had the ability to bring actions to recover money due them resulting from the close of operation of the Bakersfield plant in 1997. Some of these claims will entitle the creditor to attorneys' fees spent in recovering these funds. The Company offered settlements on approximately $24,000 for these trade payables which have been outstanding for more than six years. The company disputes the amounts owing. None of these creditors have initiated lawsuits or further claims. There are currently no further discussions or actions contemplated concerning these disputed payables and the company has cancelled these debts on its books.

ITEM 4. SUBMISSION OR MATTERS TO A VOTE OF SECURITY HOLDERS.

No matters were submitted to a vote of shareholders in the year ending June 30, 2006.

PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS.

The Company's securities are traded over-the-counter on the Bulletin Board operated by the National Association of Securities Dealers, Inc. under the symbol "FASC." The table shows the high and low bid of the Company's Common Stock for the past two years:

Quarter ended		High	Low
2003	March 31	0.075	0.051
	June 30	0.07	0.034
	September 30	0.06	0.04
	December 31	0.07	0.04

2004	March 31	0.06	0.04
	June 30	0.11	0.05
	September 30	0.05	0.043
	December 31	0.043	0.031

- 14 -

2005	March 31	0.041	0.032
	June 30	0.040	0.021
	Sept 30	0.034	0.03
	Dec 30	0.031	0.03
2006	Mar 31	0.032	0.031
	June 30	0.052	0.049

Of the 189,843,955 shares of common stock outstanding as of June 30, 2006, all are free trading with the exception of approximately 11,000,000 shares which may only be resold in compliance with Rule 144 of the Securities Act of 1933.

At September 10, 2006, the Company had approximately 5,000 shareholders of record of its common stock.

Dividends

The Company has not declared any cash dividends, nor does it intend to do so. The Company is not subject to any legal restrictions respecting the payment of dividends, except that dividends may not be paid to render the Company insolvent. Dividend policy will be based on the Company's cash resources and needs and it is anticipated that all available cash will be needed for the Company's operations in the foreseeable future.

Section 15(g) of the Securities Exchange Act of 1934

The Company's shares are covered by Section 15(g) of the Securities Exchange Act of 1934, as amended that imposes additional sales practice requirements on broker/dealers who sell such securities to persons other than established customers and accredited investors (generally institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouses). For transactions covered by the Rule, the broker/dealer must make a special suitability determination for the purchase and have received the purchaser's written agreement to the transaction prior to the sale. Consequently, the Rule may affect the ability of broker/dealers to sell our securities and also may affect your ability to sell your shares in the secondary market.

Section 15(g) also imposes additional sales practice requirements on broker/dealers who sell penny securities. These rules require a one page summary of certain essential items. The items include the risk of investing in penny stocks in both public offerings and secondary marketing; terms important to in understanding of the function of the penny stock market, such as "bid" and "offer" quotes, a dealers "spread" and broker/dealer compensation; the broker/dealer compensation, the broker/dealers duties to its customers, including the disclosures required by any other penny stock disclosure rules; the customers rights and remedies in causes of fraud in penny stock transactions; and, the NASD's toll free telephone number and the central number of the North American Administrators Association, for information on the disciplinary history of broker/dealers and their associated persons.

- 15 -

Securities authorized for issuance under equity compensation plans

The Company currently has one equity compensation plan. Prior to 2000, the Company had three additional stock option plans. All shares which were authorized under those plans have been exhausted.

The 2001 Incentive Stock Option Plan provides for the issuance of stock options for services rendered to the Company. The board of directors is vested with the power to determine the terms and conditions of the options. The Plan included 30,000,000 shares. To date options to purchase 30,000,000 shares have been granted and all options have been exercised, leaving no shares available for issuance under the Plan.

The 2001A Incentive Stock Option Plan provides for the issuance of stock options for services rendered to the Company. The board of directors is vested with the power to determine the terms and conditions of the options. The Plan includes 20,000,000 shares. To date options to purchase 20,000,000 shares have been granted and all options have been exercised, leaving no shares available for issuance under the Plan.

The 2003 Incentive Stock Option Plan provides for the issuance of stock options for services rendered to us. The board of directors is vested with the power to determine the terms and conditions of the options. The Plan includes 10,000,000 shares. To date options to purchase 10,000,000 shares have been granted and all options have been exercised, leaving no shares available for issuance under the Plan.

The 2004 Incentive Stock Option Plan provides for the issuance of stock options for services rendered to us. The board of directors is vested with the power to determine the terms and conditions of the options. The Plan includes 10,000,000 shares. To date options to purchase 10,000,000 shares have been granted, leaving no shares available for issuance under the Plan.

The 2005 Incentive Stock Option Plan provides for the issuance of stock options for services rendered to us. The board of directors is vested with the power to determine the terms and conditions of the options. The Plan includes 10,000,000 shares. At June 30, 2006, options to purchase 10,000,000 shares have been granted and exercised, leaving no shares available for issuance under the 2005 Plan.

Number of securities

Number of securities to

Weighted-average

remaining available for future

be issued upon exercise

exercise price of

issuance under equity

of outstanding options,

outstanding options,

compensation plans

warrants and rights

warrants and rights

(excluding securities

Plan category

(a)

(b)

in column (a)) (c)

Equity compensation plans

approved by security holders

None

None

None

Equity compensation plans

2005

6,225,000

$0.04

Nil

not approved by

securities holders

Total

6,225,000

$0.04

Nil

- 16 -

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
Liquidity and Capital Resources

We were incorporated April 12, 1995 as a development stage company. We are the owner of the KDS disintegration technology which is patented in the USA, Canada, UK, Europe, Mexico, Australia, and New Zealand. In addition to the core patent, new patents for two new applications, one for the cryogenic freezing and shattering scrap rubber and one for separation of precious metals from mineral rock using our equipment have been granted. One other patent application for drying and recovery of fuel and clay from biomass has been submitted and is pending status. Further new registrations have been submitted in Japan, Malaysia and Korea. We have now reached commercial viability for several of our applications and have entered our marketing phase. To date, we have sold systems in Canada, the United States, Poland, Malaysia, South Korea, Japan and the UK.

On June 30, 2006 we had current assets of $ 505,249 and current liabilities of $ 286,152 compared to the previous year on June 30, 2005 when we had $ 333,320 in current assets and $ 176,804 in current liabilities. Our working capital ratio on June 30, 2006 was 2.03 : 1, compared to the working capital ratio of 1.88 : 1 on June 30, 2005. The company continues to maintain a positive working capital position and has no long term debt other than amounts due to two of its directors.

Waste Resources Action Program (WRAP) Research Funding in UK

University of Tennessee - USDA Funding

In July 2004, we were selected to participate with the University of Tennessee in a Biomass

Research Initiative project funded by the US Dept of Agriculture. First American Scientific Co. was identified as a key industry partner for its history of developing novel size reduction and separation processes. The project is ongoing. No funds were paid or due to FASC in regard to this project.

AGES - Sustainable Development Technology Canada (SDTC) Funding

In October 2004, Sustainable Development Technology Canada (SDTC) awarded a $600,000 Cdn research grant to AGES to construct and install a complete waste to energy KDS 3000 System at a pulp mill in eastern Canada. All money has been received and expended by AGES. FASC did not receive ant funds from SDTC.

- 17 -

Accounting issues

Management believes that the carrying value of its technology licenses, patents and manufacturing rights are fairly stated at cost less amortization using the straight line method over 15 years based upon the estimated present value of cash flows and the Company's projections to sell at least two machines each year through 2006. The Company exceeded this target in fiscal year 2006, and already has contracts in place for delivery of equipment in fiscal 2007. Sales are booked when the equipment is delivered.

Our auditors have issued a going concern statement because we do not have sufficient cash flow for us to maintain our operation for the next year. Consequently, our management will have to seek additional capital from new equity securities offerings, loans, or other fund raising activities to maintain our operation should new sales and receipt of receivables not materialize. Some relief has come from deferment of payment of salaries and loans due to our senior management which aggregate approximately $ 480,315 as of June 30, 2006.

As of June 30, 2006 there were 189,843,955 shares issued and outstanding.

Results of Operations - Quarter ending June 30, 2006

Revenue for the year ended June 30, 2006 was $ 976,406 compared to $851,817 for last year.

Net losses for the year ended June 30, 2006 were $ 623,918 compared to a loss of $ 429,815 for last year or less than $0.01 per share in each period.

The company anticipates future revenue to come from equipment sales, as well as its share in future profits from joint ventures, and by earning royalties and license fees under the following agreements:

Japan - JP Steelplantech Co. License Agreement

On September 26, 2005, the Company signed an exclusive license agreement for manufacturing and marketing the KDS System in Japan with JP Steelplantech Company of Yokohama, Japan. As part of the agreement JP Steel has paid an up front licensing fee and purchased and installed a fully operational KDS at its facility in Yokohama to be used for sales demonstrations and research purposes. Under the agreement, FASC will receive a royalty for each manufactured and machine sold in Japan. Marketing efforts are now underway, but there have been no sales to date.

Korea - JNK Heaters Co. Ltd License Agreement

- 18 -

facility in Seoul. JNK may also earn the right to manufacture machines in Korea after meeting certain contractual conditions. Under the agreement, FASC will receive a royalty for each machine sold in Korea. There have been two sales in Korea to date.

Malaysia - FASCM Joint Venture & License Agreement

On July 8, 2004, the Company granted an exclusive license for 21 years to First American Scinetific Corp (Malaysia) Bhd. Sdn., to market the KDS system in Malaysia, Thailand, Singapore and Indonesia. FASCM purchased one KDS machine and set up a fully operational demonstration plant in Malaysia. Under the agreement, FASC will receive a royalty for each machine manufactured and sold in the territory and will share 50 % in any excess profits from the operation. There was one sale in Malaysia to date, but the equipment was recovered when payment was not forthcoming.

Brazil - Proposed Joint Venture & License Agreement

On April 18, 2006 the company announced the signing of an Agreement in Principle to form a joint venture to be named First American Scientific Brazil Ltda. with South American Bio-Energy Corp Ltda of Uruguay and Bruno Industrial Ltda of Brazil for the manufacture, marketing, and operation of KDS equipment in Brazil, Uruguay and Argentina generally in, but not limited to the sugar industry. Finalization of the documentation is expected to be completed in October 2006. Under the proposed agreement, FASC will receive a royalty for each machine manufactured and sold in the territory and will share 50 % in any excess profits from the operation.

Canada - Alternative Green Energy Systems Inc - Joint Venture

In February 2004, AGES was granted an exclusive license to design, manufacture and sell a large scale KDS 3000 machine for exclusive use in the pulp & paper industry in Canada, the USA and Europe. The smaller test machine Model 250 was delivered to Atlantic Packaging Ltd.'s paper recycling facility in Whitby, Ontario for evaluation and testing.

A large scale KDS Model 3000 was fabricated and delivered to the Flakeboard pulp mill site in Nova Scotia, Canada on a trial basis and testing is being conducted. Flakeboard installed all feeding equipment required to deliver wood waste to the KDS equipment and to convey and store the fuel dust after it has been processed. The Flakeboard system includes installation of a reclaimer, silo, various conveyors, a major area electric upgrade, DCS modifications and a civil engineering project to site and enclose all the equipment. Further adaptations to the KDS equipment are being made to determine if it is suitable to meet the Flakeboard's requirements.

In October 2005, AGES received $ 700,000 Cdn in new funding from its shareholders to be used to complete the Flakeboard project. FASC did not participate in the September cash call by AGES thereby reducing its percentage ownership in AGES to 12 %. FASC continues to support AGES in its efforts to make this project a success.

Under the agreement, FASC will receive a royalty for each machine manufactured and sold in the territory and will share 12 % in any excess profits from the operation. AGES must pay FASC at least $ 25,000 USD per annum to maintain the agreement in good standing.

- 19 -

By mutual agreement, in July 2006, the license was modified to reduce the territory licensed to Canada and he USA.

United Zeolite Products Ltd.

The Company withdrew from this joint venture in February 2006 when it became apparent that raw materials needed for processing would not arrive in a cost effective manner.

Other material contracts:

Canada - City of Prince George, BC

FASC has signed a Memorandum of Understanding the City of Prince George, BC, Canada to assist in solving its environmental cleanup problems with sewage sludge using the KDS Micronex system. This will be the first operation of its kind in the world where the strictly regulated Class B municipal sludge can now be cleaned, bagged and profitably sold to the public as a soil amendment" The initial runs will be monitored for two months, and if satisfactory, the city will establish a permanent facility and purchase up to 4 KDS Micronex machines. To date all trial runs have been satisfactory and many adjustments have been made to accommodate the efficient processing of the City' s sewage sludge. To date, all preliminary results have been positive. Expected date for completion of the final evaluation has been extended to November 2006.

USA - Minnesota Valley Alfalfa Producers Coop

Waste Resources Action Program - UK

In September 2004, we signed an agreement wherein WRAP has agreed to provide funding to develop " value enhanced end-products" from the output of the KDS machine. WRAP has agreed to provide $1,000,000 USD for the purchase and installation of one complete KDS system to be located at a local pulp & paper mill in England. The fund will also pay for market research, scientific research, re-design and adaptation costs for the equipment and supplementary systems for industry-specific applications over an 18 month period. The goals of the project are to demonstrate the KDS technology in a working environment, optimize ancillary equipment to improve its efficiency, and identify markets for recycled end products. In Dec 2004, a KDS Model S-4 was shipped to Aylesford Newsprint in London, England for trial runs and evaluation. The testing is now complete and a final report is expected in the next quarter.

Ongoing Research and Development

We continue to focus on improving the KDS equipment' s processing capacity and improve efficiencies for several different applications. We have determined that processing of softer materials such as biomass and pulp sludge currently represent the highest and best use for our technology and the most probable to generate sales. With the funding provided by SDTC, WRAP, the USDA,

- 20 -

FASCM, JP Steelplantech Co., the City of Prince George, JNK Heaters Co. Ltd , in Korea, an soon in Brazil, our research and testing will continue in developing commercially viable applications for our technology in the various localities.

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

We rent office space in West Vancouver, British Columbia, Canada which serves as an administrative office and rent a sales office in Delta, British Columbia. We moved our demonstration facility to Abbotsford, British Columbia in August 2005. AGES shares office space in Montreal, Quebec with Thermix Combustions Systems.

Trends

Sales efforts are beginning to bring results with five systems sold in the last six quarters and two new license agreements signed this fiscal year. Based upon the sale of a minimum of one machine per quarter, plus royalties and license fees, we have projected sales of at least $ 1,000,000 to $ 2,000,000 next fiscal year .

Accounting Pronouncements

In March 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 156, " Accounting for Servicing of Financial Assets -- an amendment of FASB Statement No. 140." This statement requires an entity to recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract in any of the following situations: a transfer of the servicer' s financial assets that meets the requirements for sale accounting; a transfer of the servicer' s financial assets to a qualifying special-purpose entity in a guaranteed mortgage securitization in which the transferor retains all of the resulting securities and classifies them as either available-for-sale securities or trading securities; or an acquisition or assumption of an obligation to service a financial asset that does not relate to financial assets of the servicer or its consolidated affiliates. The statement also requires all separately recognized servicing assets and servicing liabilities to be initially measured at fair value, if practicable, and permits an entity to choose either the amortization or fair value method for subsequent measurement of each class of servicing assets and liabilities. The statement further permits, at its initial adoption, a one-time reclassification of available for sale securities to trading securities by entities with recognized servicing rights, without calling into question the treatment of other available for sale securities under Statement 115, provided that the available for sale securities are identified in some manner as offsetting the entity' s exposure to changes in fair value of servicing assets or servicing liabilities that a servicer elects to subsequently measure at fair value and requires separate presentation of servicing assets and servicing liabilities subsequently measured at fair value in the statement of financial position and additional disclosures for all separately recognized servicing assets and servicing liabilities. This statement is effective for fiscal years beginning after September 15, 2006, with early adoption permitted as of the beginning of an entity' s fiscal year. Management believes the adoption of this statement will have no immediate impact on the Company' s financial condition or results of operations.

- 21 -

In February 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 155, "Accounting for Certain Hybrid Financial Instruments, an Amendment of FASB Standards No. 133 and 140" (hereinafter "SFAS No. 155"). This statement established the accounting for certain derivatives embedded in other instruments. It simplifies accounting for certain hybrid financial instruments by permitting fair value remeasurement for any hybrid instrument that contains an embedded derivative that otherwise would require bifurcation under SFAS No. 133 as well as eliminating a restriction on the passive derivative instruments that a qualifying special-purpose entity ("SPE") may hold under SFAS No. 140. This statement allows a public entity to irrevocably elect to initially and subsequently measure a hybrid instrument that would be required to be separated into a host contract and derivative in its entirety at fair value (with changes in fair value recognized in earnings) so long as that instrument is not designated as a hedging instrument pursuant to the statement. SFAS No. 140 previously prohibited a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. This statement is effective for fiscal years beginning after September 15, 2006, with early adoption permitted as of the beginning of an entity's fiscal year. Management believes the adoption of this statement will have no immediate impact on the Company's financial condition or results of operations.

In May 2005, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 154, "Accounting Changes and Error Corrections," (hereinafter "SFAS No. 154") which replaces Accounting Principles Board Opinion No. 20, "Accounting Changes", and SFAS No. 3, "Reporting Accounting Changes in Interim Financial Statements - An Amendment of APB Opinion No. 28". SFAS No. 154 requires that changes in accounting principle be applied retrospectively to prior period financial statements and is effective for fiscal years beginning after December 15, 2005. Management does not expect SFAS No. 154 to have an immediate material impact on the Company's financial position, results of operations, or cash flows.

ITEM 7. FINANCIAL STATEMENTS
Table of Contents

Independent Auditor's Report	F-1
Financial Statements
Consolidated Balance Sheets	F-2
Consolidated Statements of Operations and Comprehensive Income (Loss)	F-3
Consolidated Statement of Stockholders' Equity	F-4
Consolidated Statements of Cash Flows	F-5
Notes to Consolidated Financial Statements	F-6

- 22 -

Certified Public Accountants & Business Consultants

First American Scientific Corp.
Vancouver, BC
Canada

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have audited the accompanying consolidated balance sheets of First American Scientific Corp. as of June 30, 2006 and 2005, and the related consolidated statements of operations and comprehensive income (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 the standards of the Public Company Accounting Oversight Board (United States). 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 estimates 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, 2006 and 2005 and the results of its operations, stockholders' equity 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 and has limited cash resources. These factors raise substantial doubt about the Company' s ability to continue as a going concern. Realization of a major portion of the assets is dependent upon the Company' s ability to meet its future financing requirements and the success of future operations. Management' s plans regarding those matters are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

WILLIAMS & WEBSTER, P.S.
Williams & Webster, P.S.
Certified Public Accountants
Spokane, Washington
September 15, 2006

Member of Private Companies Practice Section, SEC Practice Section, AICPA and WSCPA
Bank of America Center - 601 West Riverside Avenue, Suite 1940 - Spokane, WA 99201
Phone (509) 838-5111 - Fax (509) 838-5114 - www.williams-webster.com

F-1

- 23 -

FIRST AMERICAN SCIENTIFIC CORP.
CONSOLIDATED BALANCE SHEETS

					June 30,		June 30,
					2006		2005

ASSETS

CURRENT ASSETS
	Cash			$	4,435	$	1,020
	Accounts receivable, net of allowance				402,411		129,860
	Sales tax refunds				7,708		10,090
	Prepaid expenses				365		184
	Inventory				90,330		192,166
			TOTAL CURRENT ASSETS		505,249		333,320

PROPERTY AND EQUIPMENT
	Property and equipment				218,534		88,856
	Less: accumulated depreciation				(67,162)		(48,020)
			TOTAL PROPERTY AND EQUIPMENT		151,372		40,836

OTHER ASSETS
	Technology rights, net of amortization				771,742		898,742
	Patents and manufacturing rights, net of amortization				124,059		142,240
	Investments in joint ventures				263,158		333,420
			TOTAL OTHER ASSETS		1,158,959		1,374,402

TOTAL ASSETS				$	1,815,580	$	1,748,558

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
	Accounts payable and accrued expenses			$	286,152	$	176,804
			TOTAL CURRENT LIABILITIES		286,152		176,804

LONG-TERM LIABILITIES
	Notes and wages payable to related parties				480,315		239,530
			TOTAL LONG-TERM LIABILITIES		480,315		239,530

COMMITMENTS AND CONTINGENCIES					-		-

STOCKHOLDERS' EQUITY
	Common stock - $0.001 par value,
		200,000,000 shares authorized; 189,843,955 and
		181,443,955 shares issued and outstanding, respectively			189,844		181,444
	Stock options				287,291		254,291
	Additional paid-in capital				12,726,405		12,412,161
	Accumulated deficit				(12,130,747)		(11,506,829)
	Accumulated other comprehensive (gain) loss				(23,680)		(8,843)
			TOTAL STOCKHOLDERS' EQUITY		1,049,113		1,332,224

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY				$	1,815,580	$	1,748,558

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

F-2

- 24 -

FIRST AMERICAN SCIENTIFIC CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME (LOSS)

Year Ended

June 30,

2006

2005

REVENUES

Revenues from equipment and machine sales

$

724,706

$

549,494

Royalty & Licensing fees

234,901

302,323

Leasing fees

16,799

-

Total Revenue

976,406

851,817

COST OF SALES

360,925

252,018

GROSS PROFIT

615,481

599,799

OPERATING EXPENSES

Stock option expense

33,000

-

Advertising

5,035

11,230

Amortization and depreciation

167,199

173,533

Consulting

-

102,272

Marketing

15,372

-

Professional services

77,191

109,632

Wages

472,424

518,991

Commissions

33,564

-

Research and development

54,106

23,229

General and administration

297,035

188,800

Bad debt expense

123,239

2,313

Rent

27,852

22,300

TOTAL OPERATING EXPENSES

1,306,017

1,152,300

LOSS FROM OPERATIONS

(690,536)

(552,501)

OTHER INCOME

Expenses recovered

59,122

115,486

Government grant

7,496

7,200

TOTAL OTHER INCOME

66,618

122,686

LOSS BEFORE INCOME TAXES

(623,918)

(429,815)

INCOME TAXES

-

-

NET LOSS

(623,918)

(429,815)

OTHER COMPREHENSIVE INCOME (LOSS)

Foreign exchange comprehensive income (loss)

(14,837)

2,079

COMPREHENSIVE NET LOSS

$

(638,755)

$

(427,736)

NET LOSS PER COMMON SHARE, BASIC AND DILUTED

$

nil

$

nil

WEIGHTED AVERAGE NUMBER OF COMMON SHARES

OUTSTANDING, BASIC AND DILUTED

188,159,372

176,503,903

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

F-3

- 25 -

FIRST AMERICAN SCIENTIFIC CORP.

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

Accumulated

Additional

Other

Total

Common Stock

Paid-in

Accumulated

Comprehensive

Stockholders'

Shares

Amount

Capital

Deficit

Income (Loss)

Equity

Balance, June 30, 2004

169,564,976

$

169,565

$

12,227,267

$

(11,077,014)

$

(10,922)

$

1,308,896

Common stock issued for cash at $0.072 per share

138,889

139

9,861

-

-

10,000

Common stock issued in settlement of debt

300,000

300

28,255

-

-

28,555

Common stock issued for services at $0.04 per share

2,870,000

2,870

95,995

-

-

98,865

Common stock issued for rent at $0.04 per share

110,090

110

4,294

-

-

4,404

Common stock issued for compensation at $0.04 per share

8,250,000

8,250

291,750

-

-

300,000

Common stock issued for commissions at $0.044 per share

210,000

210

9,030

-

-

9,240

Foreign currency translation gain

-

-

-

-

2,079

2,079

Net loss for the year ended June 30, 2005

-

-

-

(429,815)

-

(429,815)

Balance, June 30, 2005

181,443,955

181,444

12,666,452

(11,506,829)

(8,843)

1,332,224

Common stock issued for professional fees at $0.034 per share

700,000

700

22,334

-

-

23,034

Common stock issued for expenses expenses at $0.024 per share

275,000

275

6,325

-

-

6,600

Common stock issued for expenses at $0.034 per share

465,000

465

15,345

-

-

15,810

Common stock issued and options exercised as compensation

at $0.04 per share

1,875,000

1,875

73,125

-

-

75,000

Common stock issued for repayment of loan at $0.034 per share

650,000

650

21,450

-

-

22,100

Common stock issued and options exercised as compensation

at $0.04 per share

3,750,000

3,750

146,250

-

-

150,000

Common stock issued for rent expense & prepaid rent at $0.04

550,000

550

21,450

-

-

22,000

Options granted for accrued compensation

33,000

-

-

33,000

Common stock issued for professional fees at $0.06 per share

135,000

135

7,965

-

-

8,100

Foreign currency translation loss

-

-

-

-

(14,837)

(14,837)

Net Loss for the period ended June 30, 2006

-

-

-

(623,918)

-

(623,918)

Balance, June 30, 2006

189,843,955

$

189,844

$

13,013,696

$

(12,130,747)

$

(23,680)

$

1,049,113

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

F-4

- 26 -

FIRST AMERICAN SCIENTIFIC CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended

June 30,

2006

2005

CASH FLOWS FROM OPERATING ACTIVITIES

Net loss

$

(623,918)

$

(429,815)

Depreciation and amortization

167,199

173,533

Bad debt expense

123,239

2,313

Stock and options issued for services and compensation

225,000

427,420

Stock issued for rent

22,000

4,404

Stock issued for services

31,134

-

Stock issued for expenses

22,410

-

Stock options issued for compensation

33,000

-

Stock issued for commissions

-

9,240

Income for licensing fees on Malaysia joint venture

paid with stock in joint venture company

-

(263,158)

Adjustments to reconcile net loss to net cash

used by operations:

Decrease (increase) in accounts receivable

(395,790)

(51,234)

Decrease (increase) in inventory

-

(56,057)

Decrease (increase) in prepaid expenses

(181)

16,754

Decrease (increase) in refunds

2,382

(10,090)

Increase (decrease) in accounts payable & accrued expenses

109,348

99,186

Increase (decrease) in payable to related parties

178,275

90,000

Net cash provided (used) by operating activities

(105,902)

12,496

CASH FLOWS FROM INVESTING ACTIVITIES

-

-

CASH FLOWS FROM FINANCING ACTIVITIES

Net proceeds from borrowing, related parties

138,653

-

Payments on borrowing, related parties

(31,500)

(81,054)

Proceeds from sales of stock

-

10,000

Net cash used by financing activities

107,153

(71,054)

NET INCREASE (DECREASE) IN CASH

1,251

(58,558)

Other comprehensive gain (loss) - foreign currency translation

2,164

(244)

CASH - Beginning of period

1,020

59,822

CASH - End of period

$

4,435

$

1,020

SUPPLEMENTAL CASH FLOW DISCLOSURES:

Interest expense

$

-

$

-

Income taxes

$

-

$

-

NON-CASH FINANCING AND INVESTING TRANSACTIONS:

Stock issued for repayment of loan

$

22,100

$

-

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

F-5

- 27 -

FIRST AMERICAN SCIENTIFIC CORP.

Notes to Consolidated Financial Statements

June 30, 2006 and 2005

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 Abbotsford, British Columbia, Canada. The Company's year-end is June 30^th.

First American Scientific (Canada) Ltd.
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 FASC and, when feasible, to operate a profitable production facility in Canada. On May 26, 2005, the subsidiary's name was changed to "First American Scientific (Canada) Ltd."

United Zeolite Products Ltd - (joint venture)
During the year ended June 30, 2005, the Company renegotiated its agreement with Zeo-Tech Enviro Corp, ("ZEO") and CZC Zeolite Corporation Ltd. ("CZC") to admit a fourth shareholder, Thelon Ventures Ltd., ("THV") to United Zeolite Products Ltd. ("United"). With the new agreement, FASC, CZC ZEO, THV each own one-fourth of United.

In February 2006, the Company withdrew from this joint venture, relinquished all its shares of UZP and removed all of its equipment from the UZP site. The Company has no further interest in UZP. (See Note 9)

Alternative Green Energy Systems, Inc. - ( joint venture )
The Company formed Alternative Green Energy Systems, Inc. (hereinafter "AGES") 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. In 2002 and 2003, the Company reported financial information from AGES on a consolidated basis due to its control of AGES.

In September 2005, AGES issued a cash call to all its shareholders. In October 2005, AGES received $ 700,000 Cdn in new funding from its other shareholders. FASC did not participate in the September cash call by AGES and its shareholdings in AGES were diluted to 12 %.

First American Scientific Corp ( Malaysia ) Bhd. Sdn, - (joint venture)
On July 8, 2004, the Company entered into a joint venture agreement with two Malaysian companies to

F-6

- 28 -

FIRST AMERICAN SCIENTIFIC CORP.

Notes to Consolidated Financial Statements

June 30, 2006 and 2005

sell and market the KDS Micronex Machine. Under the terms of the agreement, the joint venture ordered one KDS Micronex Machine from FASC and set up a demonstration plant in Malaysia for the KDS System utilizing the KDS Micronex Machine acquired from the Company. In September of 2005, the Company sold a license agreement to FASC Bhd. Sd. for 50 % of the outstanding shares of common stock of the joint venture.

The Company accounts for this investment at cost, accordance with APB 18. FASC does not participate in or influence operating or financial decisions of the joint venture. The investment is valued at the agreed upon purchase price of the 21 year license for the KDS technology.

JP Steelplantech Company (Japan) - Licensee
On September 26, 2005, the Company signed an exclusive license agreement for manufacturing and marketing the KDS System in Japan with JP Steelplantech Company of Yokohama, Japan. As part of the agreement, JP Steel has paid an up front licensing fee and purchased and installed a fully operational KDS machine at its facility in Yokohama, to be used for sales demonstrations and research purposes. JP Steel will also pay a royalty for each machine manufactured and sold in Japan.

JNK Heaters Co. Ltd ( Korea ) - Licensee
On December 14, 2005, the Company signed an exclusive license agreement for the marketing of the KDS System in Korea with JNK Heaters Co. Ltd of Seoul, Korea. As part of the agreement JNK has paid an up front deposit for a licensing fee and machine purchase, and has agreed to finalize the purchase and install a fully operational KDS at its facility in Seoul within one year, to be used for sales demonstrations and research purposes. JNK may also earn the right to manufacture machines in Korea after meeting certain contractual conditions and will pay a royalty for each machine manufactured and sold in Korea.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies of FASC 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.

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

Accounts Receivable
The Company carries its accounts receivable at cost less an allowance for doubtful accounts. At June 30, 2006 and 2005, accounts receivable were $402,411 and $129,860, respectively, with no allowance for doubtful accounts required.

F-7

- 29 -

FIRST AMERICAN SCIENTIFIC CORP.

Notes to Consolidated Financial Statements

June 30, 2006 and 2005

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. During the fiscal year ended June 30, 2006 the Company wrote $123,239 of accounts receivable off as a bad debt because it was past due over 180 days. Any amounts collected at a later date that are relative to this receivable will be included in income.

Advertising Expenses
Advertising expenses consist primarily of costs incurred in the design, development, and printing of Company literature and marketing materials. The Company expenses all advertising expenditures as incurred. The Company's advertising expenses were $5,035 and $11,230 for the years ended June 30, 2006 and 2005, respectively.

Cash and Cash Equivalents
For purposes of its 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.

Compensated Absences
Employees of the Company are entitled, by Canadian law, for paid time off equal to four percent of their wages. At both June 30, 2006 and 2005, the accrued amount for compensated absences is approximately $20,000.

Comprehensive Income
In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (hereinafter "SFAS No. 130"). SFAS 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.

Concentration of Risk
The Company maintains its Canadian cash accounts in primarily one commercial bank in Vancouver, British Columbia, Canada. Its U.S. dollars are also maintained in a bank account in Vancouver, British Columbia, Canada.

Derivative Instruments
The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB No. 133", and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities" and SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities". These statements establish accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. They require that an entity recognize all derivatives as either assets or liabilities in the consolidated balance sheet and measure those instruments at fair value.

F-8

- 30 -

FIRST AMERICAN SCIENTIFIC CORP.

Notes to Consolidated Financial Statements

June 30, 2006 and 2005

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, 2006 and 2005, the Company has not engaged in any transactions that would be considered derivative instruments or hedging activities.

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

Foreign Currency Translation
Assets 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.

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

As shown in the accompanying financial statements, the Company has incurred an accumulated deficit of $12,130,747 through June 30, 2006 and has limited cash resources of $4,435. The Company recorded increased sales during the year ended June 30, 2006, but generated a net loss of $623,918. These factors raise substantial doubt about the Company's ability to continue as a going concern.

Management plans to substantially increase sales through current channels as well as 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 with its licensees in Canada, Japan, and Korea, and through its joint ventures in Malaysia and Brazil.

Management intends to seek additional 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, it will reassess its future business viability.

F-9

- 31 -

FIRST AMERICAN SCIENTIFIC CORP.

Notes to Consolidated Financial Statements

June 30, 2006 and 2005

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.

Impairment of Long-Lived Assets
In October 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" (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, including 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.

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 present value of future cash flows estimated to be generated by its assets to their respective carrying amounts. As of June 30, 2006, no impairment was deemed necessary.

Inventory
In November 2004, the Financial Accounting Standards Board (FASB)issued Statement of Financial Accounting Standards No. 151, "Inventory Costs - an amendment of ARB No.43, Chapter4". This statement amends the guidance in ARB No.43, Chapter4, "Inventory Pricing," to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). Paragraph5 of ARB 43, Chapter4, previously stated that ". . . under some circumstances, items such as idle facility expense, excessive spoilage, double freight, and rehandling costs may be so abnormal as to require treatment as current period charges. . . ." This statement requires that those items be recognized as current-period charges regardless of whether they meet the criterion of "so abnormal." In addition, this statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. This statement is effective for inventory costs incurred during fiscal years beginning after June15, 2005. Management does not believe the adoption of this statement will have any immediate material impact on the Company.

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

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

F-10

- 32 -

FIRST AMERICAN SCIENTIFIC CORP.

Notes to Consolidated Financial Statements

June 30, 2006 and 2005

Net loss per share was zero for the years ended June 30, 2006 and 2005.

Prepaid Expenses
At June 30, 2006 and June 30, 2005, prepaid expenses consist of a refundable utility deposit that is immaterial in amount.

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

FASC consolidates its financial statements with First American Scientific ( Canada) Ltd as it is wholly owned and controlled by FASC.

Historically, FASC has owned 40% of the outstanding shares of AGES, as well ownership of all AGES technology. AGES's license to use the technology was conditional upon it meeting certain conditions. Because, as of June 30, 2003, these conditions had not been met, FASC was deemed to be in a position of control and AGES was treated as a majority owned subsidiary of FASC with its financial statements consolidated with FASC.

During the year ended June 30, 2005, the agreement between FASC and AGES was renegotiated. Under the new agreement, FASC owns 12 % of AGES. As a consequence, FASC has no control over AGES and will in this and future financial statements report its investment in AGES using the equity method. Its investment in AGES has been offset against net losses generated by AGES. See Note 9.

The Company accounts its investment in the joint venture with FASC Malaysia at cost, in accordance with APB 18. FASC does not participate in or influence operating or financial decisions of the joint venture. The investment is valued at the agreed upon purchase price of the 21 year license for the KDS technology.

Provision for Taxes
Income taxes are provided based upon the liability method of accounting pursuant to Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (hereinafter "SFAS No. 109"). 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, 2006 and 2005, the Company had deferred tax assets of approximately $2,800,000 and $2,500,000, respectively, principally arising from net operating loss carryforwards, calculated at an expected rate of 34%. As management of the Company cannot determine that it is more likely than not

F-11

- 33 -

FIRST AMERICAN SCIENTIFIC CORP.

Notes to Consolidated Financial Statements

June 30, 2006 and 2005

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, 2006 and 2005. The change in the deferred tax asset valuation allowance from June 30, 2005 to June 30, 2006 was $300,000.

The significant components of the deferred tax asset at June 30, 2006 and June 30, 2005 were as follows:

June 30, 2006

June 30, 2005

Net operating loss carryforward

$

7,500,000

$

7,300,000

Stock options issued under a non-qualified plan:

Deferred tax asset

$

2,800,000

$

2,500,000

Deferred tax asset valuation allowance

(2,800,000)

(2,500,000)

Net deferred tax assets

$

0

$

0

At June 30, 2006, the Company has net operating loss carryforwards of approximately $7,500,000, which expire in the years 2016 through 2026.

Recent Accounting Pronouncements
In March 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 156, "Accounting for Servicing of Financial Assets - an amendment of FASB Statement No. 140." This statement requires an entity to recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract in any of the following situations: a transfer of the servicer's financial assets that meets the requirements for sale accounting; a transfer of the servicer's financial assets to a qualifying special-purpose entity in a guaranteed mortgage securitization in which the transferor retains all of the resulting securities and classifies them as either available-for-sale securities or trading securities; or an acquisition or assumption of an obligation to service a financial asset that does not relate to financial assets of the servicer or its consolidated affiliates. The statement also requires all separately recognized servicing assets and servicing liabilities to be initially measured at fair value, if practicable, and permits an entity to choose either the amortization or fair value method for subsequent measurement of each class of servicing assets and liabilities. The statement further permits, at its initial adoption, a one-time reclassification of available for sale securities to trading securities by entities with recognized servicing rights, without calling into question the treatment of other available for sale securities under Statement 115, provided that the available for sale securities are identified in some manner as offsetting the entity's exposure to changes in fair value of servicing assets or servicing liabilities that a servicer elects to subsequently measure at fair value and requires separate presentation of servicing assets and servicing liabilities subsequently measured at fair value in the statement of financial position and additional disclosures for all separately recognized servicing assets and servicing liabilities. This statement is effective for fiscal years beginning after September 15, 2006, with early adoption

F-12

- 34 -

FIRST AMERICAN SCIENTIFIC CORP.

Notes to Consolidated Financial Statements

June 30, 2006 and 2005

permitted as of the beginning of an entity' s fiscal year. Management believes the adoption of this statement will have no immediate impact on the Company' s financial condition or results of operations.

In February 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 155, " Accounting for Certain Hybrid Financial Instruments, an Amendment of FASB Standards No. 133 and 140" (hereinafter "SFAS No. 155"). This statement established the accounting for certain derivatives embedded in other instruments. It simplifies accounting for certain hybrid financial instruments by permitting fair value remeasurement for any hybrid instrument that contains an embedded derivative that otherwise would require bifurcation under SFAS No. 133 as well as eliminating a restriction on the passive derivative instruments that a qualifying special-purpose entity ("SPE") may hold under SFAS No. 140. This statement allows a public entity to irrevocably elect to initially and subsequently measure a hybrid instrument that would be required to be separated into a host contract and derivative in its entirety at fair value (with changes in fair value recognized in earnings) so long as that instrument is not designated as a hedging instrument pursuant to the statement. SFAS No. 140 previously prohibited a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. This statement is effective for fiscal years beginning after September 15, 2006, with early adoption permitted as of the beginning of an entity's fiscal year. Management believes the adoption of this statement will have no immediate impact on the Company's financial condition or results of operations.

Reclassification
Certain amounts from prior periods have been reclassified to conform to the current period presentation. This reclassification has resulted in no changes to the Company's accumulated deficit or net losses presented.

Revenue and Cost Recognition
Revenues 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.

F-13

- 35 -

FIRST AMERICAN SCIENTIFIC CORP.

Notes to Consolidated Financial Statements

June 30, 2006 and 2005

Sales Tax Refunds-Goods and Services tax (GST)
The Canadian Government requires Canadian resident companies to collect sales taxes from customers when goods and services are sold in Canada. These taxes collected can be offset by taxes paid (tax credits) for goods and services purchased in Canada. Any sale outside of Canada is not taxed for this purpose. At the end of each quarter, all taxes paid on goods and services purchased are netted against the taxes due on sales of goods and services sold. Because the Company has more tax credits than taxes collected, as of June 30, 2006 and June 30, 2005 the Company is due a refund of $7,708 and $10,090.

Use of Estimates
The 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.

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 is five years.

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

June 30,
2006

June 30,
2005

Plant assets and equipment

$

186,102

$

56,424

Office equipment

32,432

32,432

Total assets

218,534

88,,856

Less accumulated depreciation

(67,162)

(48,020)

$

151,372

$

40,836

Depreciation expense for the years ended June 30, 2006 and 2005 was $22,017 and $28,379 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 present value of future cashflows 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.

F-14

- 36 -

FIRST AMERICAN SCIENTIFIC CORP.

Notes to Consolidated Financial Statements

June 30, 2006 and 2005

NOTE 4 - TECHNOLOGY RIGHTS AND PATENTS

Intangible Assets
In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141, "Business Combinations" (hereinafter "SFAS No. 141") and Statement of Financial Accounting StandardsNo.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. SFASNo.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. SFASNo.142 is effective for fiscal years beginning after December 15, 2001. On June 30, 2001, the Company adopted SFASNo.142. Application of the nonamortization provision of SFASNo.142 resulted in no change to reported earnings in the years ended June 30, 2006 and June 30, 2005, as the Company does not have recorded assets with indeterminate lives.

Technology 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 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.

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 paying $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.

F-15

- 37 -

FIRST AMERICAN SCIENTIFIC CORP.

Notes to Consolidated Financial Statements

June 30, 2006 and 2005

Consideration to Spectrasonic was 1,000,000 common shares of the Company's stock at a deemed value of $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 is fifteen years.

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

		June 30, 2006		June 30, 2005
Technology licenses and rights	$	1,905,000	$	1,905,000
Patents and manufacturing rights		272,727		272,699
		2,177,727		2,177,699
Less accumulated amortization		(1,281,926)		(1,136,717)
	$	895,801	$	1,040,982

Amortization expense for the years ended June 30, 2006 and 2005 was $145,182 and $145,154, respectively.

The Company has determined that the carrying value of its technology rights and patents is fairly stated, based upon the estimated present value of cash flows and the Company's estimated ability to sell two machines each year through the year ended June 30, 2006. The following is a summary of the costs of patents approved for the years ended June 30, 2006 and 2005:

		Cost		Accumulated Amortization		Net Amount

Balance, June 30, 2004	$	272,727	$	(112,523)	$	160,204
2005 Activity		-		(17,964)		(17,964)
Balance, June 30, 2005		272,727		(130,487)		142,240
2006 Activity		-		(18,181)		(18,181)
Balance, June 30, 2006	$	272,727	$	(148,668)	$	124,059

NOTE 5 - COMMON STOCK

The Company is authorized to issue 200,000,000 shares of $0.001 par value common stock. All shares have equal voting rights, are non-assessable and have one vote per share. Voting rights are not cumulative and, therefore, the holders of more than 50% of the common stock could, if they choose to do so, elect all of the directors of the Company.

F-16

- 38 -

FIRST AMERICAN SCIENTIFIC CORP.

Notes to Consolidated Financial Statements

June 30, 2006 and 2005

During the year ended June 30, 2005, the Company issued stock as follows: 3,170,000 shares of common stock as payment for services with a fair market value of $127,420; 8,250,000 shares of common stock for compensation with a fair market value of $300,000; 110,090 shares of common stock in payment of rent with a fair market value of $4,404; 210,000 shares of common stock in payment of commissions of $9,240. In addition, 138,889 shares of common stock were issued for cash of $10,000.

During the year ended June 30, 2006, the Company issued stock as follows: 835,000 shares of common stock as payment for services with a fair market value of $ 31,134; 550,000 shares of common stock in payment of rent with a fair market value of $22,000; 740,000 shares of common stock as payment for expenses with a fair market value of $22,410; 650,000 shares of common stock as payment of a loan with a fair market value of $22,400; 5,625,000 shares of common stock for compensation with a fair market value of $225,000.

NOTE 6 - STOCK OPTIONS

The Company's board of directors approved the First American Scientific Corp. 2005 Non-qualified Stock Option Plan. This plan allows the Company to distribute up to 10,000,000 shares of common stock options at a maximum share price of $0.04 to persons employed or associated with the Company. This plan was not approved by the Company's security holders.

During the year ended June 30, 2005, the Company granted 11,740,000 options, all of which were immediately exercised.

During the year ended June 30, 2006, the Company granted 8,316,000 options of which 6,225,000 have not been exercised.

The Company has an obligation to file a new 2006 Plan to accommodate options granted to the Company's Officers for payment of outstanding salaries due and three of its employees who have been promised options as an employment incentive.

The fair value of each option granted during the years ended June 30, 2006 and 2005 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 5%, volatility of 71%, expected life of 1 to 5 years, and no expected dividends. The additional value assigned to these options granted during the year ended June 30, 2006 is $33,000. There was no additional value assigned to these options granted during the year ended June 30, 2005 because all options granted were immediately exercised.

The Company's board of directors approved the First American Scientific Corp. 2004 and 2004A Non-qualified Stock Option Plan. This plan allows the Company to distribute up to 20,000,000 shares of

F-17

- 39 -

FIRST AMERICAN SCIENTIFIC CORP.

Notes to Consolidated Financial Statements

June 30, 2006 and 2005

common stock options at a maximum share price of $0.05 to persons employed or associated with the Company. This plan was not approved by the Company's security holders.

The Company's board of directors approved the First American Scientific Corp. 2003 Non-qualified Stock Option Plan. This plan allows the Company to distribute up to 10,000,000 shares of common stock options at a maximum share price of $0.075 to persons employed or associated with the Company. This plan was not approved by the Company' s security holders.

There is no express termination date for the options, authorized by the Company's plans, although the Company's board may vote to terminate any existing plan. The exercise price of the options will be determined at the date of grant.

The following is a summary of the Company's open stock option plans:

Equity compensation plans not approved by security holders

Number of securities to be issued upon exercise of outstanding options

Weighted-average exercise price of outstanding options

Number of securities remaining available for future issuance under equity compensation plans

2005 Stock Option Plan

6,225,000

$0.04

-

Total

6,225,000

-

The following is a summary of stock option activity:

Number of Shares

Weighted Average Exercise Price

Options outstanding at July 1, 2004

6,309,000

$

0.05

Granted

11,740,000

0.04

Exercised

(11,740,000)

0.04

Options outstanding and exercisable at
June 30, 2005

6,309,000

$

0.05

F-18

- 40 -

FIRST AMERICAN SCIENTIFIC CORP.

Notes to Consolidated Financial Statements

June 30, 2006 and 2005

Options outstanding at July 1, 2005

6,309,000

$

0.04

Granted

8,316,000

0.04

Exercised

(8,400,000)

0.04

Options outstanding and exercisable at
June 30, 2006

6,225,000

$

0.04

Weighted average fair value of options granted during 2006

$

0.04

NOTE 7 - RELATED PARTIES

At June 30, 2005, the Company owed two of its shareholders $150,000 for accrued wages and approximately $89,500 for loans made to the Company.

At June 30, 2006, the Company owed two of its shareholders $225,000 for accrued wages and approximately $255,315 for loans made to the Company

Periodically, at the Company's discretion, loans and accrued wages are repaid through the issuance of its common stock options.

NOTE 8 - COMMITMENTS AND CONTINGENCIES

Lease Commitments
The Company has no long term lease commitments. The Company rents its premises on a month to month tenancy of the facility.

The Company is not a party to any pending litigation and none is contemplated or threatened other than as described below:

The Company has a number of other commercial creditors in the state of California who have the ability to bring actions to recover money due them resulting from the close of operation of the Bakersfield plant. Some of these claims will entitle the creditor to attorneys' fees spent in recovering these funds. The Company offered settlements on approximately $24,000 for these trade payables which have been outstanding for more than six years. The Company disputes the amounts owing. None of these creditors have initiated lawsuits or further claims. There are currently no further discussions or actions contemplated concerning these disputed payables and the Company has cancelled these debts on its books.

F-20

- 41 -

FIRST AMERICAN SCIENTIFIC CORP.

Notes to Consolidated Financial Statements

June 30, 2006 and 2005

NOTE 9 - JOINT VENTURES

United Zeolite Products Ltd -.(UZP)
During the year ended June 30, 2004, the Company entered into an agreement with Zeo-Tech Enviro Corp, ("ZEO") United Zeolite Products Ltd. ("United") and CZC Zeolite Corporation Ltd. ("CZC") to restructure United Zeolite Products Ltd. so that FASC, CZC and ZEO each own one-third of United. In August 2004, Thelon Ventures Ltd, a Canadian corporation committed $450,000 CAD in cash to United as a condition to become the fourth partner and thereby diluting each of the existing partners' equity position to 25%. Under this agreement, FASC was to deliver two KDS machines to United to be used to micronize zeolite. In September 2004 the Company contributed one machine to United United was to pay FASC a royalty based on production. No royalties were ever paid to FASC.

This investment was accounted for using the cost method, in accordance with APB 18. The Company does not have significant control of United and does not actively manage United. In Feb 2006, the Company withdrew from this joint venture, relinquished all its shares of UZP and removed all of its equipment from the UZP site. The equipment was returned to inventory and the Company has no further interest in UZP.

Alternative Green Energy Systems Inc - (AGES)
In January 2002, FASC entered into a joint venture agreement with Thermix Combustion Systems Inc. to combine FASC's KDS System and Thermix's suspension dust burning technology and engineering expertise specifically for the processing of biomass pulp sludge. A new company called AGES was incorporated to manage the agreement. Under the original joint venture agreement, FASC retained ownership of all existing KDS technology and all new AGES developed intellectual property which was to be licensed to AGES for use in its designated territories. The license agreement was conditional upon AGES achieving pre-defined sales results, the purchase of one test machine, and the payment of royalties before the end of AGES's second year of business. In March 2002, Hydro Quebec Capitech Inc. was admitted as a shareholder in AGES after agreeing to invest $1,000,000 CDN in the joint venture. By March 1, 2003, Hydro Quebec Capitech Inc.'s full investment had been received.

In February 2003, FASC deferred the payment terms of the joint venture agreement with AGES for one additional year, until February 21, 2004, then again in 2005. On June 30, 2006, the amount still remains unpaid.

In February 2004, the Company finalized its agreement with AGES by granting AGES exclusive rights to the KDS technology for 20 years for applications in the pulp and paper industry in North America and the European Economic Community at which point FASC is scheduled to relinquish management control over AGES. AGES agreed to purchase the existing test machine in its possession for $100,000 to be paid in four equal installments payable upon closing of the first four sales made by AGES. In addition, AGES agreed to pay a minimum of $500,000 in royalties at $25,000 per machine sold, a minimum of one per

F-21

- 42 -

FIRST AMERICAN SCIENTIFIC CORP.

Notes to Consolidated Financial Statements

June 30, 2006 and 2005

year, to maintain the exclusive rights in the territory. During the year ended June 30, 2004, FASC changed its accounting for AGES to the equity method. The balance of its investment in AGES has been netted with its share of accumulated losses from AGES resulting in a zero balance at the financial statement reporting dates.

First American Scientific Corp ( Malaysia ) Bhd. Sd, ( Joint venture )
On July 8, 2004, the Company entered into a joint venture agreement with two Malaysian companies to sell and market the KDS Micronex Machine. Under the terms of the agreement, the joint venture ordered one KDS Micronex Machine from FASC at a cost of $140,000 and set up a demonstration plant in Malaysia for the KDS System utilizing the KDS Micronex Machine acquired from the Company. At September 9, 2004, this KDS machine had been sold, shipped and paid for.

In June 2005, FASC designed, manufactured and sold one large scale KDS machine to a biomass power plant in Malaysia. FASC earned a royalty of approximately $ 14,000 USD on the sale.

The joint venture with FASC Bhd. is also accounted for using the cost method. According to APB 18, the cost method is generally followed for investments in non-controlled corporations. FASC received stock in FASC Bhd. for the use of FASC's technology license. While FASC holds 50% of the outstanding shares and two other companies own the other 50%, FASC does not influence the operating or financial decisions of FASC Bhd., since it does not exercise its voting rights. FASC Bhd. issued its stock to FASC because it did not have the cash to pay FASC for the use of the technology license. FASC does not exercise significant control over FASC Bhd. and does not actively manage FASC Bhd. because of the presence, involvement and longstanding participation of the other two owners of the joint venture.

NOTE 10 - SUBSEQUENT EVENTS

On April 18, 2006 the Company announced the anticipated signing of an agreement in principle to form a joint venture to be named First American Scientific Brazil Ltda. with South American Bio-Energy Corp Ltda of Uruguay and Bruno Industrial Ltda of Brazil for the manufacture, marketing, and operation of KDS equipment in Brazil, Uruguay and Argentina. Finalization of the documentation is expected to be completed in the first quarter of fiscal year 2007. On finalization, FASC will own 50 % of the outstanding shares of SABECo.

By mutual agreement, in July 2006, the technology license between FASC and AGES was modified to limit the territory licensed to the pulp & paper industry in Canada and the USA only.

F-22

- 43 -

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 8A. CONTROLS AND PROCEDURES

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's Securities Exchange Act of 1934 reports are recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the Company's management, including the chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. Within 90 days prior to the date of this report, the Company's management carried out an evaluation, under the supervision and with the participation of management, including the Company's chief executive officer and chief financial officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon the foregoing, the Company's chief executive officer and chief financial officer concluded that the disclosure controls and procedures are effective in connection with the filing of this Annual Report on Form 10-KSB for the year ended June 30, 2006.

There were no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of its evaluation, including any significant deficiencies or material weaknesses of internal controls that would require corrective action.

PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Officers and Directors

The directors and officers of the Company are:

Name

Age

Position

John Brian Nichols

69

President, Chief Executive Officer and member of the Board of Directors

Cal Kantonen

55

Treasurer, Chief Financial Officer and Chairman of the Board of Directors

David Gibson

64

Secretary and member of the Board of Directors

- 44 -

John Brian Nichols - President, Chief Executive Officer and a member of the Board of Directors.

Since April 2001, Mr. Nichols has been the President, Chief Executive Officer and a member of the Board of Directors. For the past 32 years, Mr. Nichols has been a self-employed producer and marketer of a live entertainment show and circus which plays in over in 260 cities annually in Canada and the United States.

Calvin L. Kantonen,CGA - Chairman of the Board of Directors, Treasurer and Chief Financial Officer.

Since February 2000, Mr. Kantonen has been the chairman of the Board of Directors, Treasurer and Chief Financial Officer of the Company. From September 1999 to August 2002, Mr. Kantonen was the President, Secretary/Treasurer and sole member of the Board of Directors of VMH VideoMovieHouse.com Inc., a subsidiary of the Company. Prior to joining the Company in 1999, Mr. Kantonen spent five years as a commercial lender with one of Canada' s largest financial institutions. Mr. Kantonen, CGA has been a member in good standing of the Certified General Accountants of British Columbia since 1984, during which time he practiced in the field of public accounting for ten years providing taxation and business advice to small business.

David L. Gibson, BA, LLB - Secretary and member of the Board of Directors

Since April 2001, Mr. Gibson has been the Secretary and a member of the Board of Directors. Mr. Gibson received a BA in Economics and Political Science in 1968 and obtained his law degree from the University of British Columbia in 1971. Mr. Gibson is retired from the practice of law in Canada after 30 years specializing in the areas of corporate law, commercial practices and estate planning.

Indemnification of Officers and Directors

The Nevada Revised Statues and certain provisions of the Company's Bylaws under certain circumstances provide for indemnification of the Company's Officers, Directors and controlling persons against liabilities which they may incur in such capacities. A summary of the circumstances in which such indemnification is provided for is contained herein, but this description is qualified in its entirety by reference to the Company's Bylaws and to the statutory provisions.

In general, any Officer, Director, employee or agent may be indemnified against expenses, fines, settlements or judgments arising in connection with a legal proceeding to which such person is a party, if that person's actions were in good faith, were believed to be in the Company's best interest, and were not unlawful. Unless such person is successful upon the merits in such an action, indemnification may be awarded only after a determination by independent decision of the Board of Directors, by legal counsel, or by a vote of the shareholders, that the applicable standard of conduct was met by the person to be indemnified.

The circumstances under which indemnification is granted in connection with an action brought on behalf of the Company is generally the same as those set forth above; however, with respect to such actions, indemnification is granted only with respect to expenses actually incurred in connection with the defense or settlement of the action. In such actions, the person to be indemnified

- 45 -

must have acted in good faith and in a manner believed to have been in the Company's best interest, and have not been adjudged liable for negligence or misconduct.

Indemnification may also be granted pursuant to the terms of agreements which may be entered in the future pursuant to a vote of shareholders or directors. The statutory provision cited above also grants the power to the Company to purchase and maintain insurance which protects its officers and directors against any liabilities incurred in connection with their service in such a position, and such a policy may be obtained by the Company.

The Company's President and Chief Executive Officer, Mr. Nichols, and Chief Financial Officer and Treasurer, Mr. Kantonen are employed full time. Mr. Nichols oversees marketing, research and development and plant operations. Mr. Kantonen oversees all financial reporting and legal and regulatory matters.

Audit Committee and Charter

We have an audit committee and audit committee charter. Our audit committee is comprised of all of our officers and directors. None of directors are deemed independent. All directors also hold positions as our officers. A copy of our audit committee charter is filed as an exhibit to this report. Our audit committee is responsible for: (1) selection and oversight of our independent accountant; (2) establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls and auditing matters; (3) establishing procedures for the confidential, anonymous submission by our employees of concerns regarding accounting and auditing matters; (4) engaging outside advisors; and, (5) funding for the outside auditory and any outside advisors engagement by the audit committee.

Code of Ethics

We have adopted a corporate code of ethics. We believe our code of ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code.

Disclosure Committee and Charter

We have a disclosure committee and disclosure committee charter. Our disclosure committee is comprise of all of our officers and directors. The purpose of the committee is to provide assistance to the Chief Executive Officer and the Chief Financial Officer in fulfulling their responsibilities regarding the identification and disclosure of material information about us and the accuracy, completeness and timeliness of our financial reports.

Compliance with Section 16 (a) of the Exchange Act

Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to us pursuant to Rule 16a-3(e) under the Securities Exchange Act of 1934 during our most recent fiscal year and Forms 5 and amendments thereto furnished to us with respect to our most recent fiscal year, our officers, directors and owners of 10% or more of our outstanding shares have not filed all Forms 3, 4 and 5 required by Section 16(a) of the Securities Exchange Act of 1934.

- 46 -

ITEM 10. EXECUTIVE COMPENSATION

The following table sets forth the compensation paid by the Company for each officer and director of the Company during the past three years. This information includes the dollar value of base salaries, bonus awards and number of stock options granted, and certain other compensation, if any.

Summary Compensation Table

Long Term Compensation

Annual Compensation

Awards

Payouts

(a)

(b)

(c)

(d)

(e)

(f)

(g)

(h)

(i)

Securities

Other

Restricted

Underlying

All

Name and

Annual

Stock

Options/

LTIP

Other

Principal

Salary

Bonus

Compensation

Award(s)

SARs

Payouts

Compensation

Position [1]
Year
($)
($)
($)
($)
(#)
($)
($)

Brian Nichols

2006

150,000

0

0

0

0

0

0

President,CEO

2005

150,000

50,000

0

0

0

0

0

2004

120,000

0

0

0

0

0

0

Cal Kantonen

2006

150,000

0

0

0

0

0

0

CFO, Treasurer

2005

150,000

50,000

0

0

0

0

0

2004

120,000

0

0

0

0

0

0

David Gibson

2005

0

0

0

0

0

0

0

Secretary

2004

0

0

0

0

0

0

0

2003

0

0

0

0

0

0

0

[1] All compensation received by the officers and directors has been disclosed.

Future Compensation of Our Officers

The Company plans to pay the following salaries in 2007, subject to the Company beginning profitable operations and generating sufficient revenues to pay the same:

Cal Kantonen	Treasurer and CFO	2007	$		150,000
Brian Nichols	President and CEO	2007	$		150,000

Option/SAR Grants

There are no stock option, retirement, pension, or profit sharing plans for the benefit of the Company's officers and directors, other than three incentive stock option plans. Under each Plan, the board of directors is vested with discretionary authority to grant options to persons furnishing services to the Company.

The 2001 Plan registered 30,000,000 shares. All shares have been issued as a result of the exercise of options. No shares remain in the Plan.

- 47 -

The 2001A Plan registered 20,000,000 shares. All shares have been issued as a result of the exercise of options. No shares remain in the Plan.

The 2003 Plan registered 10,000,000 shares. All shares have been issued as a result of the exercise of options. No shares remain in the Plan.

The 2004 Plan registered 10,000,000 shares, all 10,000,000 options have been granted and no shares remain in the Plan.

The 2005 Plan registered 10,000,000 shares, 10,000,000 options have been granted and -0- shares remain in the Plan.

The Company has an obligation to file a new 2006 Plan to accommodate options granted to the Company' s Officers for payment of outstanding salaries due and three of its employees who have been promised options as an employment incentive.

Information concerning individual grants of stock options, whether or not in tandem with stock appreciation rights ("SARs"), and freestanding SARs made during fiscal 2005 to each of the named executive officers is reflected in the table below.

Option/SAR Grants in Fiscal 2006

Individual Grants

Number of Securities

Percent of Total

Underlying

Options/SARs

Exercise

Options/SARs Granted

Granted to Employees in

or Base

Expiration

Name
(#)
Fiscal Yr
Price
Date

Brian Nichols [1]

3,750,000

50%

$0.04

Sept. 30, 2009

Cal Kantonen [1]

3,750,000

50%

$0.04

Sept. 30, 2009

Aggregated Option/SAR Exercises and Fiscal 2006 Year-End Option/SAR Value Table.

The following table sets forth certain information with respect to each exercise of stock options and SARs during fiscal 2005 by each of the named executive officers, and the fiscal 2005 year-end value of unexercised options and SARs. The dollar values are calculated by determining the difference between the exercise or base price of the options and the fair market value of the underlying stock at the time of exercise and at fiscal year-end if unexercised, respectively. The unexercised options, some of which may be exercisable, have not been exercised and it is possible they might never be exercised. Actual gains realized, if any, on stock option exercises and common stock holdings are dependent on the future performance and value of the common stock and overall stock market conditions. There can be no assurance that the projected gains and values shown in this Table will be realized.

- 48 -

Aggregated Option/SAR Exercises in Fiscal 2006
and Option/SAR Values at June 30, 2006

Number of Securities

Value of Unexercised

Shares

Underlying Unexercised

In-the-Money

Acquired on

Value

Options/SARs

Options/SARs

Name

Exercise (#)

Realized

at FY-End (#)

at FY-End ($)

Exercisable

Unexercisable

Exercisable

Unexercisable

Brian Nichols

2,812,500

Nil

2,812,500

nil

112,500

nil

Cal Kantonen

2,812,500

Nil

2,812,500

nil

112,500

nil

Long-Term Incentive Plan Awards.

The Company does not have any formalized long-term incentive plans, excluding restricted stock, stock option and SAR plans, which provide compensation intended to serve as incentive for performance to occur over a period longer than one fiscal year, whether such performance is measured by reference to financial performance of the Company or an affiliate, the Company's stock price, or any other measure.

Compensation of Directors

The Company does not have any plans to pay its directors any money. The directors did not receive any other compensation for serving as members of the board of directors. There are no contractual arrangements with any member of the board of directors.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following schedule sets forth the common stock ownership of each person known by the Company to be the beneficial owner of five percent or more of the Company's common stock, each director individually, and all officers and directors of the Company as a group. Each person has sole voting and investment power with respect to the shares of common stock shown, and all ownership is of record and beneficial.

Number of

Percent of

Name of owner

Shares

Position

Class

Brian Nichols

6,936,500,

President, Principal Executive
Officer and a Director

3.6 %

Cal Kantonen

7,905,600

Chairman of Board of Directors,

4.1 %

Treasurer and Principal Financial

Officer

David Gibson

450,000

Secretary and a Director

0.2%

- 49 -

All officers and directors as a group (3)

15,292,100

7.9 %

Changes in Control

To the knowledge of management, there are no present arrangements or pledges of securities of our company which may result in a change in control of our company.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

During the year ended June 30, 2006, $ 37,500 of related party wages were paid with stock Mr. Kantonen and Mr. Nichols each.

At June 30, 2006, the Company owed its officers a total of $255,315 for loans and $225,000 for unpaid salaries.

During the year ended June 30, 2006, the Company issued stock options from the company's stock option plan to acquire up to 7,500,000 shares of common stock to its officers and employees at exercise prices ranging from $0.04 to $ 0.05 which were equal to the fair market value of the stock on the date of grant.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
Reports on Form 8-K.

One Form 8-Ks was filed during the fiscal year of 2005.

Exhibits

The following Exhibits are incorporated herein by reference from the Registrant's Form 10SB Registration Statement filed with the Securities and Exchange Commission, SEC file #000-27094, Such exhibits are incorporated herein by reference pursuant to Rule 12b-32:

Exhibit No.	Description
3.1	Articles of Incorporation of First American Scientific Corporation.
3.2	Bylaws of First American Scientific Corporation.
4.1	Specimen Stock Certificate
28.1	Consultant and Employee Stock Compensation Plan.

The following Exhibits are incorporated herein by reference from the Registrant's Form S-8 Registration Statement filed with the Securities and Exchange Commission, SEC file #333-06851 on June 26, 1996. Such exhibits are incorporated herein by reference pursuant to Rule 12b-32:

Exhibit No.	Description
10.1	The 1996 Nonqualified Stock Option Plan.

- 50 -

The following documents are incorporated by reference from the Company's Form 10-KSB for the period ending June 30, 1997:

Exhibit No.	Description
3.3	Articles of Incorporation of First American Power Corp ( formerly 521345 B.C. Ltd.)

The following documents are incorporated by reference from the Company's Form 10-KSB for the period ending June 30, 1998:

Exhibit No.	Description
3.4	Amended Articles of Incorporation.

The following Exhibits are incorporated herein by reference from the Registrant's Form S-8 Registration Statement filed with the Securities and Exchange Commission, SEC file #333-63041 on September 8, 1998. Such exhibits are incorporated herein by reference pursuant to Rule 12b-32:

Exhibit No.	Description
10.1	1998 Nonqualified Stock Option Plan.

The following Exhibits are incorporated herein by reference from the Registrant's Form S-8 Registration Statement filed with the Securities and Exchange Commission, SEC file #333-86995 on September 13, 1999. Such exhibits are incorporated herein by reference pursuant to Rule 12b-32:

Exhibit No.	Description
10.11	1999 Nonqualified Stock Option Plan.

The following Exhibits are incorporated herein by reference from the Registrant's Form S-8 Registration Statement filed with the Securities and Exchange Commission, SEC file #333-40234 on June 27, 2000. Such exhibits are incorporated herein by reference pursuant to Rule 12b-32:

Exhibit No.	Description
3.5	Amendment Articles of Incorporation as at June 12, 2000.
10.14	2001 Nonqualified Stock Option Plan.

The following documents are incorporated herein by reference from the Company's Form 10-KSB for the period ended June 30, 2000:

Exhibit No.	Description
10.15	Conditional Agreement with Henry Stritek

The following Exhibits are incorporated herein by reference from the Registrant's Form S-8 Registration Statement filed with the Securities and Exchange Commission, SEC file #333-59926 on May 1, 2001. Such exhibits are incorporated herein by reference pursuant to Rule 12b-32:

Exhibit No.	Description
10.16	2001A Nonqualified Stock Option Plan.

- 51 -

The following documents are incorporated herein by reference from the Company's Form 10-KSB for the period ended June 30, 2002:

Exhibit No.	Description
10.17	Alliance between Honeywell Ltd. and the Company
10.18	Agreement between Beau Pre Explorations Ltd. and the Company
10.19	Agreement between The Rubber Black Corporation and the Company

The following Exhibits are incorporated herein by reference from the Registrant's Form S-8 Registration Statement filed with the Securities and Exchange Commission, SEC file #333-102560 on January 17, 2003. Such exhibits are incorporated herein by reference pursuant to Rule 12b-32:

Exhibit No.	Description
10.1	2003 Nonqualified Stock Option Plan.

The following documents are incorporated herein by reference from the Company's Form 10-KSB and amendments thereto for the period ended June 30, 2003:

Exhibit No.	Description
14.1	Code of Ethics
99.1	Representative Agreement Between Environmental Management Systems Institute Inc. and the Company
99.2	Audit Committee Charter
99.3	Disclosure Committee Charter

The following exhibits are filed with this report:

Exhibit No.	Description
10.1	Technology License Agreement - Malaysia
10.2	Technology License Agreement - Japan
10.3	Technology License Agreement - Korea
10.4	Technology License Agreement - Alternative Green Energy Systems, Inc.
31.1	Certification of Principal Executive Officer pursuant to Rule 13a-15 and Rule 15d-15(a), promulgated under the Securities and Exchange Act of 1934, as amended.
31.2	Certification of Principal Financial Officer pursuant to Rule 13a-15 and Rule 15d-15(a), promulgated under the Securities and Exchange Act of 1934, as amended.
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer).
32.2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer).

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Williams and Webster, P.S., Certified Public Accountants, are the Company's independent auditors to examine the financial statements of the Company for the fiscal year ending June 30, 2006. Williams & Webster, P.S. has performed the following services and has been paid the following fees for these fiscal years.

- 52 -

Audit Fees

Williams & Webster, P.S. was paid aggregate fees of approximately $29,000 for the fiscal year ended June 30, 2006 and approximately $29,000 for the fiscal year ended June 30, 2005 for professional services rendered for the audit of the Company's annual financial statements and for the reviews of the financial statements included in the Company's quarterly reports on Form 10-QSB during these fiscal years.

Audit-Related Fees

Williams & Webster P.S. was not paid any additional fees for the fiscal year ended June 30, 2006 and June 30, 2005 for assurance and related services reasonably related to the performance of the audit or review of the Company's financial statements.

Tax Fees

Williams & Webster, P.S. was not paid approximately any fees for the fiscal year 2006 or 2005.

All Other Fees

Williams & Webster, P.S. was paid no other fees for professional services during the fiscal years ended June 30, 2006 and June 30, 2005.

- 53 -

SIGNATURES

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 28^th day of September, 2006.

FIRST AMERICAN SCIENTIFIC CORP.

BY:

JOHN BRIAN NICHOLS

John Brian Nichols, President, Principal Executive Officer and member of the Board of Directors

BY:

CALVIN KANTONEN

Calvin L. Kantonen, Treasurer, Principal Financial Officer and Chairman of the Board of Directors

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

Signatures

Title

Date

JOHN BRIAN NICHOLS

President, Principal Executive Officer and

September 28, 2005

John Brian Nichols

member of the Board of Directors

CALVIN KANTONEN

Treasurer, Principal Financial Officer and

September 28, 2005

Calvin L. Kantonen

Chairman of the Board of Directors

__________________________

Secretary and member of the Board of Directors

September __, 2005

David Gibson

- 54 -

[X]	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 2006

OR

[ ]	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from

				Number of securities
	Number of securities to		Weighted-average	remaining available for future
	be issued upon exercise		exercise price of	issuance under equity
	of outstanding options,		outstanding options,	compensation plans
	warrants and rights		warrants and rights	(excluding securities
Plan category	(a)		(b)	in column (a)) (c)
Equity compensation plans
approved by security holders	None		None	None

Equity compensation plans	2005	6,225,000	$0.04	Nil
not approved by
securities holders

Total	6,225,000		$0.04	Nil

FIRST AMERICAN SCIENTIFIC CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
				Year Ended
				June 30,
				2006		2005
REVENUES
	Revenues from equipment and machine sales		$	724,706	$	549,494
	Royalty & Licensing fees			234,901		302,323
	Leasing fees			16,799		-
		Total Revenue		976,406		851,817

COST OF SALES				360,925		252,018
GROSS PROFIT				615,481		599,799

OPERATING EXPENSES
	Stock option expense			33,000		-
	Advertising			5,035		11,230
	Amortization and depreciation			167,199		173,533
	Consulting			-		102,272
	Marketing			15,372		-
	Professional services			77,191		109,632
	Wages			472,424		518,991
	Commissions			33,564		-
	Research and development			54,106		23,229
	General and administration			297,035		188,800
	Bad debt expense			123,239		2,313
	Rent			27,852		22,300
		TOTAL OPERATING EXPENSES		1,306,017		1,152,300
LOSS FROM OPERATIONS				(690,536)		(552,501)

OTHER INCOME
	Expenses recovered			59,122		115,486
	Government grant			7,496		7,200
		TOTAL OTHER INCOME		66,618		122,686

LOSS BEFORE INCOME TAXES				(623,918)		(429,815)
INCOME TAXES				-		-
NET LOSS				(623,918)		(429,815)

OTHER COMPREHENSIVE INCOME (LOSS)
	Foreign exchange comprehensive income (loss)			(14,837)		2,079

COMPREHENSIVE NET LOSS			$	(638,755)	$	(427,736)

	NET LOSS PER COMMON SHARE, BASIC AND DILUTED		$	nil	$	nil

	WEIGHTED AVERAGE NUMBER OF COMMON SHARES
		OUTSTANDING, BASIC AND DILUTED		188,159,372		176,503,903

FIRST AMERICAN SCIENTIFIC CORP.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

									Accumulated
				Additional					Other	Total
	Common Stock			Paid-in			Accumulated		Comprehensive	Stockholders'
	Shares	Amount		Capital			Deficit		Income (Loss)	Equity

Balance, June 30, 2004	169,564,976	$	169,565	$	12,227,267	$	(11,077,014)	$	(10,922)	$	1,308,896

Common stock issued for cash at $0.072 per share	138,889		139		9,861		-		-		10,000

Common stock issued in settlement of debt	300,000		300		28,255		-		-		28,555

Common stock issued for services at $0.04 per share	2,870,000		2,870		95,995		-		-		98,865

Common stock issued for rent at $0.04 per share	110,090		110		4,294		-		-		4,404

Common stock issued for compensation at $0.04 per share	8,250,000		8,250		291,750		-		-		300,000

Common stock issued for commissions at $0.044 per share	210,000		210		9,030		-		-		9,240

Foreign currency translation gain	-		-		-		-		2,079		2,079

Net loss for the year ended June 30, 2005	-		-		-		(429,815)		-		(429,815)

Balance, June 30, 2005	181,443,955		181,444		12,666,452		(11,506,829)		(8,843)		1,332,224

Common stock issued for professional fees at $0.034 per share	700,000		700		22,334		-		-		23,034

Common stock issued for expenses expenses at $0.024 per share	275,000		275		6,325		-		-		6,600

Common stock issued for expenses at $0.034 per share	465,000		465		15,345		-		-		15,810

Common stock issued and options exercised as compensation
at $0.04 per share	1,875,000		1,875		73,125		-		-		75,000

Common stock issued for repayment of loan at $0.034 per share	650,000		650		21,450		-		-		22,100

Common stock issued and options exercised as compensation
at $0.04 per share	3,750,000		3,750		146,250		-		-		150,000

Common stock issued for rent expense & prepaid rent at $0.04	550,000		550		21,450		-		-		22,000

Options granted for accrued compensation					33,000		-		-		33,000

Common stock issued for professional fees at $0.06 per share	135,000		135		7,965		-		-		8,100

Foreign currency translation loss	-		-		-		-		(14,837)		(14,837)

Net Loss for the period ended June 30, 2006	-		-		-		(623,918)		-		(623,918)

Balance, June 30, 2006	189,843,955	$	189,844	$	13,013,696	$	(12,130,747)	$	(23,680)	$	1,049,113

FIRST AMERICAN SCIENTIFIC CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
				Year Ended
				June 30,
				2006		2005
CASH FLOWS FROM OPERATING ACTIVITIES
	Net loss		$	(623,918)	$	(429,815)
	Depreciation and amortization			167,199		173,533
	Bad debt expense			123,239		2,313
	Stock and options issued for services and compensation			225,000		427,420
	Stock issued for rent			22,000		4,404
	Stock issued for services			31,134		-
	Stock issued for expenses			22,410		-
	Stock options issued for compensation			33,000		-
	Stock issued for commissions			-		9,240
	Income for licensing fees on Malaysia joint venture
		paid with stock in joint venture company		-		(263,158)
	Adjustments to reconcile net loss to net cash
		used by operations:
		Decrease (increase) in accounts receivable		(395,790)		(51,234)
		Decrease (increase) in inventory		-		(56,057)
		Decrease (increase) in prepaid expenses		(181)		16,754
		Decrease (increase) in refunds		2,382		(10,090)
		Increase (decrease) in accounts payable & accrued expenses		109,348		99,186
		Increase (decrease) in payable to related parties		178,275		90,000
Net cash provided (used) by operating activities				(105,902)		12,496

CASH FLOWS FROM INVESTING ACTIVITIES				-		-

CASH FLOWS FROM FINANCING ACTIVITIES
		Net proceeds from borrowing, related parties		138,653		-
		Payments on borrowing, related parties		(31,500)		(81,054)
		Proceeds from sales of stock		-		10,000
Net cash used by financing activities				107,153		(71,054)

NET INCREASE (DECREASE) IN CASH				1,251		(58,558)
Other comprehensive gain (loss) - foreign currency translation				2,164		(244)

CASH - Beginning of period				1,020		59,822
CASH - End of period			$	4,435	$	1,020

SUPPLEMENTAL CASH FLOW DISCLOSURES:
	Interest expense		$	-	$	-
	Income taxes		$	-	$	-

NON-CASH FINANCING AND INVESTING TRANSACTIONS:
	Stock issued for repayment of loan		$	22,100	$	-

		June 30, 2006		June 30, 2005
Net operating loss carryforward	$	7,500,000	$	7,300,000
Stock options issued under a non-qualified plan:

Deferred tax asset	$	2,800,000	$	2,500,000
Deferred tax asset valuation allowance		(2,800,000)		(2,500,000)
Net deferred tax assets	$	0	$	0

		June 30, 2006		June 30, 2005
Plant assets and equipment	$	186,102	$	56,424
Office equipment		32,432		32,432
Total assets		218,534		88,,856
Less accumulated depreciation		(67,162)		(48,020)
	$	151,372	$	40,836

Equity compensation plans not approved by security holders	Number of securities to be issued upon exercise of outstanding options	Weighted-average exercise price of outstanding options	Number of securities remaining available for future issuance under equity compensation plans

2005 Stock Option Plan	6,225,000	$0.04	-

Total	6,225,000		-

	Number of Shares		Weighted Average Exercise Price

Options outstanding at July 1, 2004	6,309,000	$	0.05
Granted	11,740,000		0.04
Exercised	(11,740,000)		0.04
Options outstanding and exercisable at June 30, 2005	6,309,000	$	0.05

Options outstanding at July 1, 2005	6,309,000	$	0.04
Granted	8,316,000		0.04
Exercised	(8,400,000)		0.04
Options outstanding and exercisable at June 30, 2006	6,225,000	$	0.04
Weighted average fair value of options granted during 2006		$	0.04

Name	Age	Position

John Brian Nichols	69	President, Chief Executive Officer and member of the Board of Directors

Cal Kantonen	55	Treasurer, Chief Financial Officer and Chairman of the Board of Directors

David Gibson	64	Secretary and member of the Board of Directors

					Long Term Compensation
		Annual Compensation			Awards		Payouts
(a)	(b)	(c)	(d)	(e)	(f)	(g)	(h)	(i)
						Securities
				Other	Restricted	Underlying		All
Name and				Annual	Stock	Options/	LTIP	Other
Principal		Salary	Bonus	Compensation	Award(s)	SARs	Payouts	Compensation
Position [1]	Year	($)	($)	($)	($)	(#)	($)	($)
Brian Nichols	2006	150,000	0	0	0	0	0	0
President,CEO	2005	150,000	50,000	0	0	0	0	0
	2004	120,000	0	0	0	0	0	0

Cal Kantonen	2006	150,000	0	0	0	0	0	0
CFO, Treasurer	2005	150,000	50,000	0	0	0	0	0
	2004	120,000	0	0	0	0	0	0

David Gibson	2005	0	0	0	0	0	0	0
Secretary	2004	0	0	0	0	0	0	0
	2003	0	0	0	0	0	0	0

Individual Grants
	Number of Securities	Percent of Total
	Underlying	Options/SARs	Exercise
	Options/SARs Granted	Granted to Employees in	or Base	Expiration
Name	(#)	Fiscal Yr	Price	Date
Brian Nichols [1]	3,750,000	50%	$0.04	Sept. 30, 2009
Cal Kantonen [1]	3,750,000	50%	$0.04	Sept. 30, 2009

			Number of Securities		Value of Unexercised
	Shares		Underlying Unexercised		In-the-Money
	Acquired on	Value	Options/SARs		Options/SARs
Name	Exercise (#)	Realized	at FY-End (#)		at FY-End ($)
			Exercisable	Unexercisable	Exercisable	Unexercisable
Brian Nichols	2,812,500	Nil	2,812,500	nil	112,500	nil
Cal Kantonen	2,812,500	Nil	2,812,500	nil	112,500	nil

	Number of		Percent of
Name of owner	Shares	Position	Class
Brian Nichols	6,936,500,	President, Principal Executive Officer and a Director	3.6 %

Cal Kantonen	7,905,600	Chairman of Board of Directors,	4.1 %
		Treasurer and Principal Financial
		Officer

David Gibson	450,000	Secretary and a Director	0.2%

	FIRST AMERICAN SCIENTIFIC CORP.

	BY:	JOHN BRIAN NICHOLS
		John Brian Nichols, President, Principal Executive Officer and member of the Board of Directors

	BY:	CALVIN KANTONEN
		Calvin L. Kantonen, Treasurer, Principal Financial Officer and Chairman of the Board of Directors

Signatures	Title	Date

JOHN BRIAN NICHOLS	President, Principal Executive Officer and	September 28, 2005
John Brian Nichols	member of the Board of Directors

CALVIN KANTONEN	Treasurer, Principal Financial Officer and	September 28, 2005
Calvin L. Kantonen	Chairman of the Board of Directors

__________________________	Secretary and member of the Board of Directors	September __, 2005
David Gibson