First American Scientific Corp. (fka FASC)

[TRCPA]

10Q, page 12

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. Two additional machines have now been sold, the first of which is scheduled for delivery next quarter.

This is a very solid, well financed operation in which we hold a 50 % interest. The Malaysians are currently raising money privately to build a $1.3 million plant to process fiber which will be sold to China.