CONTINGENCIES

12 Months Ended

Dec. 31, 2011

Notes to Financial Statements

Note 18. CONTINGENCIES

On June 29, 2011, WaterSavr Singapore Pte. Ltd., a former distributor of the Company’s WATERSAVR product, initiated an arbitration proceeding with the American Arbitration Association in New York, NY asserting multiple claims. The Company has denied the allegations of WaterSavr Singapore Pte. Ltd. and is defending itself vigorously. At this time the amount and outcome of the claims are indeterminable, and may be monetarily favorable to FSI. The company has included in deferred revenue $250,000 of cash received from WaterSavr Singapore Pte. Ltd. related to the arbitration proceedings.