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.

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

The Company carries its accounts receivable at cost less an allowance for doubtful accounts. At March 31, 2012 and June 30, 2011 accounts receivable were $1,376 and $0. Management determined that no allowance for doubtful accounts was required at either date based upon their assessment of individual account balances.

A receivable is considered past due if payments have not been received by the Company for 90 days. Any amounts collected at a later date will be included in income.

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.

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.

Employees of the Company are entitled, by Canadian law, for paid time off equal to four percent of their wages. At March 31, 2012, no amounts were accrued as the amounts were deemed to be immaterial.

The Company maintains its Canadian cash accounts in primarily one commercial bank in Vancouver, British Columbia, Canada. Its U.S. dollars are maintained in a U.S. dollar bank account in Vancouver, British Columbia, Canada and in a U.S. bank in Washington State, USA.

All accounts receivables and sales are booked in U.S. dollars All manufacturing costs and operating costs are primarily incurred in Canadian dollars.

The Company uses the U.S. dollar as its primary currency and records all international contracts in U.S. dollars, except for sales to Canadian customers which are generally recorded in Canadian dollars.

The majority of our operational expenses, are incurred in Canadian dollars. Recent fluctuations of the U.S. dollar vs. the Canadian has given us foreign exchange losses on our Canadian dollar liabilities and a gain in the value our Canadian assets. The reverse would be true if the US dollar was to strengthen against the Canadian dollar as was the case in recent history. These changes are reported as exchange gains and losses and included in Net Income. Relative to our total financial position, these fluctuations are not considered material at this time.

The Company attempts to, whenever practical, meet our Canadian obligations with our Canadian dollars, and meet our US obligations with our US dollars which we hold in separate accounts. This minimizes our exposure to currency fluctuations as much as possible.

The Company contracts primarily with one Canadian manufacturer for the production of the KDS machine for customers in the North American and European markets. To the extent that we rely on them to supply our equipment and provide us with engineering and design assistance locally, we could face delays or cost increases if our relationship with them ceased. In this event, we could utilize the manufacturing facilities of our joint venture partners in Malaysia or Korea as backup while seeking alternate arrangements in North America.

Historically, the Company has not entered into derivatives contracts to hedge existing risks or for speculative purposes. At March 31, 2012, the Company has not engaged in any transactions that would be considered derivative instruments or hedging activities.

Our financial statements include the following financial instruments: cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses. We believe the carrying amounts of these assets and liabilities in the financial statements approximate the fair values of these financial instruments at March 31, 2012 and June 30, 2011. Fair value is defined as the exchange price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date.

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 gains and losses arising on translation are included as a separate component of net income. Any material fluctuations in foreign currency exchange rates could have an impact on our balance sheet as expressed in U.S. dollars.

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.

$ 16,300.190 through March 31, 2012 and has limited cash resources. The Company recorded increased revenues during the year ended June 30, 2011, but generated a net loss of $105,917. As a result, there is substantial doubt about the Company’s ability to continue as a going concern as working capital remains negative.

Management plans to increase sales through current channels and develop new sales opportunities. Management has also established plans to increase the sales of the Company’s products by continued research and development and combining technology with its licensees in Canada and Japan, and through its joint ventures in Malaysia and Korea. If the Company is unable to increase revenue, then it will need to re-assess its future business viability.

The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence.

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 March 31, 2012, no impairments were deemed necessary.

The Company utilizes a third party contract manufacturer for the production of the KDS machine. The Company has negotiated fixed production costs. Inventory includes finished goods and work in progress and is based on an estimated percentage of completion for each machine. The value of the inventory is stated at cost and based upon the specific identification of each unit.

Basic 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.

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.

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

Equity investments in which the Company exercises significant influence but does not control and is not the primary beneficiary, include the Company's share of its equity method investees earnings or losses in other income in the accompanying Consolidated Statements of Operations. The Company eliminates its pro rata share of gross profit on sales to its equity method investees for inventory on hand at the investee at the end of the year. Investments in which the Company is not able to exercise significant influence over the investee are accounted for under the cost method.

The Company follows the asset and liability method of accounting for income 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. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.