0001013762-12-001138.txt : 20120515 0001013762-12-001138.hdr.sgml : 20120515 20120515171915 ACCESSION NUMBER: 0001013762-12-001138 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20120331 FILED AS OF DATE: 20120515 DATE AS OF CHANGE: 20120515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MANHATTAN SCIENTIFICS INC CENTRAL INDEX KEY: 0001099132 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT & SUPPLIES [3690] IRS NUMBER: 850460639 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-28411 FILM NUMBER: 12846074 BUSINESS ADDRESS: STREET 1: 405 LEXINGTON AVENUE STREET 2: 32ND FLOOR CITY: NEW YORK STATE: NY ZIP: 10174 BUSINESS PHONE: 2125510577 MAIL ADDRESS: STREET 1: 405 LEXINGTON AVENUE STREET 2: 32ND FLOOR CITY: NEW YORK STATE: NY ZIP: 10174 10-Q 1 form10q.htm MANHATTAN SCIENTIFICS, INC. FORM 10-Q form10q.htm
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
 
FORM 10-Q
 (Mark One)
 
x
 
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934
 
For the fiscal quarter ended March 31, 2012
     
o
 
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________________________ to
 
Commission file number 000-28411
 
MANHATTAN SCIENTIFICS, INC.
(Exact name of small business issuer as specified in its charter)
 
Delaware
   
000-28411
   
85-0460639
(State of Incorporation)
   
(Commission File Number)
   
(IRS Employer Identification No.)
 
405 Lexington Avenue, 32nd Floor, New York, New York, 10174
[Missing Graphic Reference]
(Address of principal executive offices) (Zip code)
Issuer’s telephone number: (212) 551-0577
 
[Missing Graphic Reference]
Securities registered under Section 12(g) of the Exchange Act:
 
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 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 o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
o
       
   
Accelerated filer
   
o
Non-accelerated filer
oo
       
   
Smaller reporting company
   
x
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
 
There were 412,769,926 shares outstanding of registrant’s common stock, par value $.001 per share, as of May 1, 2011.


 
 

 
 
TABLE OF CONTENTS
 
     
 
PART I
 
Item 1.
Financial Statements
 
 
Consolidated Balance Sheets as of March 31, 2012 (unaudited) and December 31, 2011
1
 
Unaudited Consolidated Statements of Operations and Other Comprehensive Income for the three months ended March 31, 2012 and March 31, 2011
2
 
Unaudited Consolidated Statements of Cash Flows for the three months ended March 31, 2012 and March 31, 2011
3
 
Condensed Notes to Unaudited Consolidated Financial Statements
4
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operation
10
Item 3
Quantitative and Qualitative Disclosures About Market Risk
18
Item 4
Controls and Procedures
18
 
PART II
 
Item 1.
Legal Proceedings
19
Item 2
Unregistered Sales of Equity Securities and Use of Proceeds
19
Item 3
Defaults Upon Senior Securities
20
Item 4.
(Removed and Reserved)
20
Item 5.
Other Information
20
Item 6.
Exhibits
20
SIGNATURES
 
21
 
 

 
 
 

 
 
PART I
ITEM 1. FINANCIAL STATEMENTS
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

   
March 31, 2012
   
December 31, 2011
 
   
(Unaudited)
   
(Audited)
 
ASSETS
           
Current assets:
           
Cash and cash equivalents
 
$
715,000
   
$
157,000
 
Account receivable
      -      
171,000
 
Investments-available for sale
   
43,000
     
32,000
 
Prepaid expenses and other assets
   
154,000
     
244,000
 
Total current assets
   
912,000
     
604,000
 
                 
Investments
   
2,000
     
2,000
 
Property and equipment, net
   
45,000
     
50,000
 
Intellectual property, net
   
1,406,000
     
1,447,000
 
Other asset
   
2,000
     
2,000
 
Total assets
 
$
2,367,000
   
$
2,105,000
 
                 
LIABILITIES
               
Current liabilities
               
Accounts payable and accrued expenses
 
$
287,000
   
$
252,000
 
Accrued interest and expenses — related parties
   
360,000
     
365,000
 
Deferred revenue
   
257,000
     
-
 
Note payable to former officers
   
450,000
     
450,000
 
Note payable — other
   
438,000
     
225,000
 
Total current liabilities
   
1,792,000
     
1,292,000
 
                 
Long-term liabilities
               
Note payable, related party
   
545,000
     
545,000
 
Accrued interest, related party
   
238,000
     
231,000
 
Total long-term liabilities
   
783,000
     
776,000
 
Total  liabilities
   
2,575,000
     
2,068,000
 
                 
Commitments and Contingencies:
   
-
     
-
 
                 
STOCKHOLDERS’ EQUITY (DEFICIT)
               
Capital stock $.001 par value
               
Preferred, authorized 1,000,000 shares
               
Series A convertible, redeemable, 10 percent cumulative, authorized
182,525, shares; issued and outstanding — none
   
-
     
-
 
Series B convertible, authorized 250,000 shares; 49,999 shares issued and outstanding
   
-
     
-
 
Series C convertible, redeemable, authorized 14,000 shares; issued and none outstanding
   
-
     
-
 
Common, authorized 500,000,000 shares, 412,769,926 and 411,769,926 shares issued, and outstanding, respectively
   
446,000
     
440,000
 
Additional paid-in-capital
   
55,316,000
     
54,984,000
 
                 
Other accumulated comprehensive income
   
43,000
     
32,000
 
Accumulative deficit
   
(56,013,000
)
   
(55,419,000
)  
                 
Total stockholders' equity (deficit)
   
(208,000
)
   
37,000
  
                 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
 
$
2,367,000
   
$
2,105,000
 
                 
 

 
See notes to unaudited consolidated financial statements.

 
 
1

 
 
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
 
 
   
THREE MONTHS ENDED
 
   
March 31, 2012
   
March 31, 2011
 
             
Revenue
 
$
171,000
   
$
171,000
 
Cost of revenue
   
--
     
28,000
 
Gross profit
   
171,000
     
143,000
 
                 
Operating costs:
               
General and administrative expenses
   
602,000
     
431,000
 
                 
Total operating costs and expenses
   
602,000
     
431,000
 
                 
Loss from operations before other income and expenses
   
(431,000
)
   
(288,000
)
                 
Other income and (expenses):
               
Interest and other expenses
   
(163,000
)
   
(12,000
)
Interest income
   
-
     
-
 
                 
NET LOSS
   
(594,000
)
   
(300,000
)
                 
Comprehensive income:
               
Unrealized gain on available for sale investments
   
11,000
     
-
 
                 
COMPREHENSIVE LOSS
 
$
(583,000
)
 
$
(300,000
)
                 
BASIC AND DILUTED LOSS PER COMMON SHARE:
               
Weighted average number of common shares outstanding
   
443,487,180
     
412,758,815
 
                 
Basic and diluted loss per common share
 
$
(0.00
)
 
$
(0.00
)
 
 
See notes to unaudited consolidated financial statements.


 
2

 
 

MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
 
   
THREE MONTHS ENDED
 
   
March 31, 2012
   
March 31, 2011
 
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net loss
 
$
(594,000
)
 
$
(300,000
)
Adjustments to reconcile net loss to net cash used in operating activities:
               
Common stock issued for services
   
-
     
60,000
 
Debt discount and original issue discount accretion
   
151,000
     
-
 
Amortization of technology license, patents and intellectual property
   
46,000
     
9,000
 
Changes in operating assets and liabilities:
               
Account receivable
   
171,000
     
-
 
Prepaid expenses and other assets
   
90,000
     
86,000
 
Accounts payable and accrued expenses
   
35,000
     
(1,000
)
Accrued interest and expenses—related parties
   
2,000
 
   
19,000
 
Deferred revenue
   
257,000
     
343,000
 
                 
Net cash provided by operating activities
   
158,000
     
216,000
 
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Net cash provided by investing activities
     -        -  
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Proceeds from notes payable
   
100,000
     
-
 
Proceeds from issuance of common stock
   
300,000
     
-
 
                 
Net cash provided by financing activities
   
400,000
     
-
 
                 
NET INCREASE IN CASH AND CASH EQUIVALENTS
   
558,000
     
216,000
  
Cash and cash equivalents, beginning of period
   
157,000
     
1,055,000
 
                 
CASH AND CASH EQUIVALENTS, END OF PERIOD
 
$
715,000
   
$
1,271,000
 
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
               
Interest paid
 
$
   
$
 
                 
Income taxes paid
 
$
   
$
 
Supplemental disclosure of non-cash investing and financing activities:
  Recognition of discount on warrants associated with debt discount
 
$
38,000
   
$
--
 
 
See notes to unaudited consolidated financial statements.

 
 
3

 
 
MANHATTAN SCIENTIFICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MARCH 31, 2012
 
NOTE 1 – BASIS OF PRESENTATION
 
The foregoing unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Regulation S-X as promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, these financial statements do not include all of the disclosures required by generally accepted accounting principles in the United States of America for complete financial statements. These unaudited interim financial statements should be read in conjunction with the audited financial statements and the notes thereto included on Form 10-K for the year ended December 31, 2011. In the opinion of management, the unaudited interim financial statements furnished herein include all adjustments, all of which are of a normal recurring nature, necessary for a fair statement of the results for the interim period presented.
 
The preparation of financial statements in accordance with generally accepted accounting principles in the United States of America requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and the reported amounts of revenues and expenses during the reporting period. Uncertainties with respect to such estimates and assumption are inherent in the preparation of the Company’s financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions that could have a material effect on the reported amounts of the Company’s financial position and results of operations.
 
Operating results for the three months period ended March 31, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012.
 
NOTE 2 – ORGANIZATION AND OPERATIONS
 
Manhattan Scientifics, Inc., a Delaware corporation (formerly Grand Enterprises, Inc) (“Grand”) was established on July 31, 1992 and has three wholly-owned subsidiaries: Metallicum, Inc., (“Metallicum”), Senior Scientific, LLC, Scientific Nanomedicine, Inc., Tamarack Storage Devices, Inc. (“Tamarack”) and Teneo Computing, Inc. (“Teneo”) (collectively “the Company”). Currently, Metallicum and Senior Scientific, LLC are the only operating subsidiaries; and Tamarack and Teneo are dormant. On June 12, 2008, the Company acquired Metallicum, Inc, for 15,000,000 shares of Company’s common stock. Manhattan Scientifics, Inc., operates as a technology incubator that seeks to acquire, develop and commercialize life-enhancing technologies in various fields, with emphasis in the areas of nanotechonogies and nanomedicine. In this capacity, the Company continues to identify emerging technologies through strategic alliances with scientific laboratories, educational institutions, and scientists and leaders in industry and government. The Company has a long standing relationship with Los Alamos Laboratories in New Mexico. During 2008, the Company refocused its efforts from the development of its fuel cell technologies to its current focus on the development of nanomaterials through the acquisition of Metallicum and early cancer detection through the acquisition of Senior Scientific, LLC.
 
Metallicum is a nanotechnology start-up company located in Santa Fe, New Mexico. Metallicum Inc. has focused on the development and manufacturing of nanostructured metals for medical implants and other applications. Metallicum intends to establish manufacturing partner relationships with major Fortune 500 metals companies and strategic partnering with significant customers in the medical device & prosthetics industries as well as in auto, truck, & aircraft manufacturing industries. Metallicum’s initial products include nanostructured bulk metals and alloys in the form of rod, bar, wire and foil. The Company conducts its operations primarily in the United States.
 
Manhattan Scientifics purchased Metallicum to acquire its licensed rights to patented technology. The technology is comprised of three US Patents (US Patent numbers 7152448, 6197129 and 6399215) for which Metallicum (subsequently, Manhattan) had been assigned exclusive license rights by Los Alamos National Security LLC (LANL). Under the license rights, Metallicum had all rights, title and interest throughout the world in and to any and all inventions, original works of authorship, developments, concepts, know-how, improvements on the patents or trade secrets whether or not patentable or registrable under copyright or similar laws.
 
In January 2009, the Company entered into a patent license agreement with Los Alamos National Security, LLC for the exclusive licensing use of certain technology relating to the manufacture and application of nanostructuring metals and alloys. Pursuant to such agreement the Company provided a non-refundable fee and 2,000,000 shares of common stock. Additionally, the Company is required to pay an annual license fee starting in February 2010 and royalties on future net sales.
 
In September 2009, the Company entered into a technology transfer agreement with Carpenter Technologies Corporation. Wherein Carpenter will fully develop, manufacture and market a new class of high strength metals under an exclusive technology transfer agreement from Manhattan Scientifics and the Los Alamos National Laboratory. The proprietary process will enable super-strength metals and alloys to make products that weigh far less than in the past and without significant cost premiums.
On May 31, 2011, we entered into an Agreement and Plan of Reorganization (“Nanomedicine Agreement”) by and among the Company, Scientific Nanomedicine, Inc. (“Nanomedicine”), Edward, R. Flynn (“Flynn”) and Edward R. Flynn and Maureen A. Flynn, as Co-Trustees of the Edward R. Flynn and Maureen A. Flynn Revocable Trust u/t/a dated 10/25/2006 (“Trust”); and entered into a Purchase Agreement (“Senior Scientific Agreement”) by and among the Company, Senior Scientific LLC, (“Senior Scientific”) and Flynn.  Under the Nanomedicine Agreement, the Company purchased  all of the common stock of Nanomedicine. The purchase price for the common stock of Nanomedicine was 21,667,000 restricted shares of the Company’s voting common stock (less 7,667,000 shares already issued pursuant to the Acquisition Option Agreement, dated February 8, 2010, among the Company, Nanomedicine, Flynn and Senior Scientific. Nanomedicine holds the commercial rights to technology and intellectual property with respect to the early detection of diseases using nanotechnologies. Under the Senior Scientific Agreement, the Company purchased all of the membership interests of Senior Scientific. The purchase price for the membership interests of Senior Scientific was 1,000 restricted shares of the Company’s voting common stock. Senior Scientific operates a research laboratory in New Mexico.
 
 
4

 
 
MANHATTAN SCIENTIFICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MARCH 31, 2012
 
NOTE 2 – ORGANIZATION AND OPERATIONS (Continued)
 
The Company’s success will depend in part on its ability to obtain patents and product license rights, maintain trade secrets, and operate without infringing on the proprietary rights of others, both in the United States and other countries. There can be no assurance that patents issued to or licensed by the Company will not be challenged, invalidated, or circumvented, or that the rights granted thereunder will provide proprietary protection or competitive advantages to the Company.
 
Prior to September 2009, the Company had been considered a development stage company. As a result of the September 2009 technology sale to Carpenter, the Company has fully commenced its planned operations and generation of significant revenues.

Accordingly, the Company has relied primarily upon private placements and subscription sales of stock to fund our continuing activities and acquisitions.
 
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUTING POLICIES AND RELATED MATTERS
 
PRINCIPLES OF CONSOLIDATION:
 
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All material intercompany accounts and transactions have been eliminated.
 
INTANGIBLE ASSETS:
 
License Agreements
 
In 2008, the Company obtained licenses to the rights of certain patents regarding nanostructured materials developed by another company as a result of the acquisition of Metallicum. The purchase price paid for these licenses was $305,000, which represented its fair value.  The Company obtained an exclusive license on two patents and a non-exclusive license on the third patent. The value attributable to license agreements is being amortized over the period of its estimated benefit period of 10 years. At March 31, 2012 and December 31, 2011, accumulated amortization was $112,000 and $104,000, respectively. Under the terms of the agreement, the Company may be required to pay royalties, as defined, to the licensors.  
 
In 2009, the Company entered into a patent license agreement with Los Alamos National Security LLC for the exclusive use of certain technology relating to the manufacture and application of nanostructuring metals and alloys.  The purchase price paid for this license agreement was $33,000 based on the fair market value of 2,000,000 shares of common stock issued.  The value attributable to license agreements is being amortized over the period of its estimated benefit period of 10 years. At March 31, 2012 and December 31, 2011, accumulated amortization was $11,000 and $10,000, respectively. Under the terms of the agreement the Company is required to pay an annual license fee of $10,000 starting in February 2010 and, may be required to pay royalties, as defined, to the licensors. 
 
USE OF ESTIMATES:
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amount of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. A significant estimate includes the carrying value of the Company’s patents, fair value of the Company’s common stock, assumptions used in calculating the value of stock options, depreciation and amortization.
 
 
 
5

 
 
MANHATTAN SCIENTIFICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MARCH 31, 2012

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUTING POLICIES AND RELATED MATTERS (Continued)
 
INVESTMENTS
 
Available-for-Sale Investments
 
Investments that the Company designates as available-for-sale are reported at fair value, with unrealized gains and losses, net of tax, recorded in accumulated other comprehensive income (loss). The Company determines the cost of the investment sold based on the specific identification method. The Company’s available-for-sale investments include:
 
• 
Marketable equity securities The Company acquires these equity investments for the promotion of business and strategic objectives. The Company records the realized gains or losses on the sale or exchange of marketable equity securities in gains (losses) on other equity investments, net.

Non-Marketable and Other Equity Investments
 
The Company accounts for non-marketable and other equity investments under either the cost or equity method and include them in other long-term assets. The non-marketable and other equity investments include:
 
• 
Non-marketable cost method investments when the equity method does not apply. The Company records the realized gains or losses on the sale of non-marketable cost method investments in gains (losses) on other equity investments, net.

STOCK-BASED COMPENSATION
 
The Company accounts for stock-based compensation based on the fair value of all option grants or stock issuances made to employees or directors on or after its implementation date (the beginning of fiscal 2006), as well as a portion of the fair value of each option and stock grant made to employees or directors prior to the implementation date that represents the unvested portion of these share-based awards as of such implementation date, to be recognized as an expense, as codified in ASC 718. The Company calculates stock option-based compensation by estimating the fair value of each option as of its date of grant using the Black-Scholes option pricing model.  These amounts are expensed over the respective vesting periods of each award using the straight-line attribution method. Compensation expense is recognized only for those awards that are expected to vest, and as such, amounts have been reduced by estimated forfeitures. The Company has historically issued stock options and vested and non-vested stock grants to employees and outside directors whose only condition for vesting has been continued employment or service during the related vesting or restriction period.  The estimated fair value of grants of stock options and warrants to nonemployees of the Company is charged to expense, if applicable, in the financial statements. The Company did not issue any options or warrants during the three months ended March 31, 2012 and 2011.
 
FAIR VALUE OF FINANCIAL INSTRUMENTS
 
Effective January 1, 2008, the Company adopted FASB ASC 820, Fair Value Measurements and Disclosures, Pre Codification SFAS No. 157, “Fair Value Measurements”, which provides a framework for measuring fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The standard also expands disclosures about instruments measured at fair value and establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
 
Level 1 — Quoted prices for identical assets and liabilities in active markets;
 
Level 2 — Quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and
 
Level 3 — Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. 
 
 
 
6

 

MANHATTAN SCIENTIFICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MARCH 31, 2012
 
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUTING POLICIES AND RELATED MATTERS (Continued)
 
The Company designates cash equivalents (consisting of money market funds) and investments in securities of publicly traded companies as Level 1. The total amount of the Company’s investment classified as Level 3 is de minimis.
 
The fair value of the Company’s debt as of March 31, 2012 and December 31, 2011 approximated their fair value at those times.
 
Fair value of financial instruments: The carrying amounts of financial instruments, including cash and cash equivalents, short-term investments, accounts payable, accrued expenses and notes payables approximated fair value as of March 31, 2012 and December 31, 2011 because of the relative short term nature of these instruments. At March 31, 2012 and December 31, 2011, the fair value of the Company’s debt approximates carrying value. The fair value of the Company’s available for sale securities was $43,000 at March 31, 2012 and these securities are classified as Level 1.
 
BASIC AND DILUTED LOSS PER SHARE
 
In accordance with FASB ASC 260, “Earnings Per Share,” the basic loss per share is computed by dividing the loss attributable to common stockholders by the weighted average number of common shares outstanding during the period. Basic net loss per share excludes the dilutive effect of stock options or warrants and convertible notes.  Diluted net earnings (loss) per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents, consisting of shares that might be issued upon exercise of common stock options and warrants. In periods where losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive.
 
REVENUE RECOGNITION
 
To date the only revenue generated is from the sale of field technology developed by Metallicum related to the Company’s nanotechnology, services provided and sample materials (See Note 8).
 
Revenue is recognized when the four basic criteria of revenue recognition are met: (i) a contractual agreement exists; (ii) transfer of technology (intellectual property) has been completed or services have been rendered; (iii) the fee is fixed or determinable, and (iv) collectability is reasonably assured. Service revenue is recognized when specific milestones are reached or as service is provided if there are no discernable milestones.
 
RECENTLY ISSUED ACCOUNTING STANDARDS
 
In April 2010, the FASB reached a consensus on the Milestone Method of Revenue Recognition which provides guidance on the criteria that should be met for determining whether the milestone method of revenue recognition is appropriate. A vendor can recognize consideration that is contingent upon the achievement of a milestone in its entirety as revenue in the period in which the milestone is achieved only if the milestone meets all criteria to be considered substantive. The updated guidance is effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years beginning on or after June 15, 2010, with early adoption permitted. We adopted the provisions of the guidance as of January 1, 2011 on a prospective basis. The prospective application had no impact on our consolidated financial statements for the three months ended March 31, 2012.
 
NOTE 4 – CAPITAL TRANSACTIONS
 
Capital transactions during the three months ended March 31, 2012 and 2011:
 
For the three months ended March 31, 2012, the Company issued 6,000,000 shares of common stocks and warrants for 3,000,000 shares for a total consideration of $300,000 to three individuals.
 
For the three months ended March 31, 2011, the Company issued 1,000,000 shares of common stock to a consultant as a signing bonus for serving as a Director of Strategic Industry Relations.  The shares were valued at $60,000 or $0.06 per share based on the current fair value of such shares on the date of the consulting agreement.
 
 
7

 
 
MANHATTAN SCIENTIFICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MARCH 31, 2012

 
NOTE 5 – INVESTMENTS
 
The Company made an investment in Novint Technologies Inc. (“Novint”) in 2001. The Company initially recorded its investment using the equity method of accounting and wrote down the investment to $-0- in 2004 as it recorded its proportionate share of Novint's net loss.  
 
In prior years, the Company had significant control of Novint because of Mr. Maslow's position as a shareholder and board member of both the Company and Novint. Mr. Maslow resigned from the board of the Company in October 2007 and therefore the Company no longer has significant control of Novint. As of March 31, 2012 and December 31, 2011, the Company owned 1,075,648 shares of Novint common stock or approximately 3% and modified its accounting for the ownership position in accordance with FASB ASC 820. The fair value of the Novint shares was $43,000 and $32,000 as of March 31, 2012 and December 31, 2011, respectively.
 
The Company has an additional investment in Aprilis, Inc. which is accounted for at a cost of $2,000 as of March 31, 2012 and December 31, 2011.

NOTE 6 – RELATED PARTY AND FORMER OFFICERS NOTES PAYABLE
 
In December 2007, the former Chief Operating Officer and former Chief Executive Officer collectively forgave $1,416,500 of their outstanding accrued salaries ($1,387,500) and note payable ($29,000) balances. The amount forgiven has been accounted for as contributed capital. Additionally, the Company repaid $5,000 of the former Chief Executive Officer’s note payable balance. The remaining unpaid notes payable balances totaling $995,000 at March 31, 2012 and December 31, 2011 comprised of loans payable due on demand of $450,000 and $545,000 to its former Chief Operating Officer and Chief Executive Officer, respectively.
 
The loans bore interest at 5.5% per annum and were initially due December 31, 2002 and have been mutually extended and settled. Under the terms of the note extensions dated December 12, 2007, the loans bear interest at 5% per annum and are now due on demand. The Company has recorded interest expense for notes payable to these former officers of approximately $12,000 and $12,000 for the three months ended March 31, 2012 and 2011, respectively. Accrued interest related to these notes payable approximated $444,000 and $432,000 as of March 31, 2012 and December 31, 2011, respectively and is included in accrued liabilities, related parties.
 
NOTE 7 – NOTES PAYABLE – OTHER
 
During the years ended December 31, 2005 and December 31, 2004, the Company issued convertible notes in the amount of $33,000. The notes had a one year maturity date, are noninterest bearing and upon maturity convertible at the current per share price. These notes have not been paid and are currently in default.
 
On October 21, 2011, the Company issued a convertible note for up to $300,000 ("Convertible Note") of which $200,000 was received as of December 31, 2011 and $100,000 received during the three months ended March 31, 2012.  The note has a maturity date of April 21, 2012, noninterest bearing and convertible in the Company’s common stock at a conversion price of 67% of the fair value of the Company’s common stock upon the date of conversion notice.  Additionally, the note holders are entitled to warrants for 3,000,000 shares of the Company’s common stock with an exercise price of $0.05 and 2 year life ("Warrants").  The conversion feature to the note payable has been accounted for as an original issue discount approximating $148,000 which will be accreted over the maturity life of the note.  The warrant associated with the note has been accounted for as a debt discount with an approximate value of $152,000 which has been allocated to the note’s fully accrete value of $448,000 (original note amount plus original debt discount) on proportionate basis which amounted to $113,000.  The warrant value of $148,000 was determined using the Black-Scholes option pricing model based on the following assumptions: 2 year term; volatility rate of 135%; and discount rate of 2.5%.  For the three months ended March 31, 2012, the Company has recorded an expense associated with original debt discount and expense associated with the debt discount (warrants) of $151,000.  Accordingly, the carrying net value of this note at March 31, 2012 totals $404,000, comprising of $300,000 (original face value) plus accreted original debt discount of $123,000 less amortized debt discount of $19,000.
 

 
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MANHATTAN SCIENTIFICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MARCH 31, 2012
NOTE 8 – TECHNOLOGY SALE AND SUB-LICENSE AGREEMENT
 
To date the only revenue generated is from the exclusive sale of field technology developed by Metallicum, services provided and sample materials.
 
Revenue is recognized when the four basic criteria of revenue recognition are met: (i) a contractual agreement exists; (ii) transfer of technology (intellectual property) has been completed or services have been rendered; (iii) the fee is fixed or determinable, and (iv) collectability is reasonably assured. Service revenue is recognized when specific milestones are reached or as service is provided if there are no discernable milestones.
 
On September 12, 2009, the Company entered into a contract with Carpenter Technology Corp. to sell certain nanostructured metal technologies acquired from Metallicum, Inc, its wholly owned subsidiary, to Carpenter and to provide sub-license rights to Carpenter covering license agreements that the Company has from Los Alamos Laboratories.  The agreement has two distinct elements: a sale and services agreement and a sub-license agreement.  The first element irrevocably transfers the field technology to Carpenter Technology Corporation and Carpenter may develop or use the technology for its own benefit.  Carpenter agrees to pay a sales price of $600,000 and pay royalties for products developed using this technology.  In addition, the Company can receive additional service income for assisting Carpenter in the production process.  These additional services are elective and do not affect the sale of the technology.  The second element of the agreement is a sub-license to Carpenter for patents (the LANS patents) that are licensed by the Company from  Los Alamos Laboratories.  The sub-license agreement obligates Carpenter to pay MSI a running royalty on the sales of products that require license to the LANS patents but does not have any upfront fee or annual minimum royalties.
 
The Company recognized the sales revenue upon transfer of the technology and the service income over the term of the agreement.  The royalty income will be recognized as products are developed using the field technology or sub-license.
 
As of March 31, 2012 and 2011, the Company earned $171,000 and $171,000 and recorded such amount as revenue for the three months ended March 31, 2012 and 2011.  The amount received by the Company relates to services provided under the first element of the contract regarding additional services.  The Company earned service income for time that a consultant to the Company, Dr. Lowe, made himself available to Carpenter in accordance with the Technology Transfer Agreement.   The fees earned pursuant to the agreement with Carpenter are being proportionately recognized as revenue based upon the total fees to be collected over a 42 month period.  The 42 month period is based on the time periods described in the Agreement (6 months after effective date), (12 months after effective date), and (each of the first 3 anniversaries of Annuity date where the “Annuity date” is the date of the latter of 18 months after the effective date or the date Manhattan Scientific fully satisfies its duties under of the Agreement). The cost of revenue totaling $-0- and $28,000 for the three months ended March 31, 2012 and 2011 represents consulting fees paid to Dr. Lowe during the period..
 
NOTE 9 – SUBSEQUENT EVENT

On April 26, 2012, the Company issued an additional $300,000 of Convertible Notes (See Note 7 - Notes Payable-Other). In connection with this funding, the Company exchanged the existing warrants for a warrant for 6,000,000 shares of the Company’s common stock with an exercise price of $0.05 exercisable on or before October 15, 2015.
 
 
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
 
Forward Looking Statements
 
This Form 10-Q contains “forward-looking” statements including statements regarding our expectations of our future operations. For this purpose, any statements contained in this Form 10-Q that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “estimate,” or “continue” or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, and actual results may differ materially depending on a variety of factors, many of which are not within our control. These factors include, but are not limited to, economic conditions generally and in the industries in which we may participate. In addition, these forward-looking statements are subject, among other things, to our successful completion of the research and development of our technologies; successful commercialization of our technologies; successful protection of our patents; and effective significant industry competition from various entities whose research and development, financial, sales and marketing and other capabilities far exceeds ours. In light of these risks and uncertainties, you are cautioned not to place undue reliance on these forward-looking statements. Except as required by law, we undertake no obligation to announce publicly revisions we make to these forward-looking statements to reflect the effect of events or circumstances that may arise after the date of this report.
 
OVERVIEW

COMPANY HISTORY

Manhattan Scientifics, Inc., a Delaware corporation, was established on July 31, 1992 and has three operating wholly-owned subsidiaries: Metallicum, Inc., (“Metallicum”), Senior Scientific LLC (“Senior Scientific”), and Scientific Nanomedicine, Inc. (“Scientific Nanomedicine” or “SNMI”). The Company’s goal is to nurture visionary technologies into life changing success stories and Metallicum, Senior Scientific and Scientific Nanomedicine are pursuing that goal.

Manhattan Scientifics, Inc., operates as a technology incubator that seeks to acquire, develop and commercialize life-enhancing technologies in various fields, with emphasis in the areas of nanotechnology. Nanotechnology is the use and manipulation of matter on an atomic and molecular scale. To achieve this goal, the Company continues to identify emerging technologies through strategic alliances with scientific laboratories, educational institutions, scientists and leaders in industry and government. The Company and its executives have a long standing relationship with Los Alamos Laboratories in New Mexico.

ACQUISITIONS

In June 2008, we acquired Metallicum, Inc. (“Metallicum”) and its licensed patented technology. We entered into a stock purchase agreement with Metallicum, Inc. to acquire all of the outstanding capital in exchange for 15,000,000 restricted shares of our common stock. An additional 15,000,000 shares of our common stock will be payable to Metallicum in the event of meeting certain milestones. At December 31, 2011, one milestone was met. Metallicum was granted an exclusive license by The Los Alamos National Laboratory on patents related to nanostructured metals. In September 2009, we entered into a technology transfer agreement and sale with Carpenter Technology Corporation, (“Carpenter”) wherein Carpenter will fully develop, manufacture and market a new class of high strength metals. We earn annual revenues from these agreements and we expect to earn licensing royalties when Carpenter begins selling our licensed technology.

On May 31, 2011, we entered into an Agreement and Plan of Reorganization to acquire Senior Scientific and Scientific Nanomedicine. The total purchase price was 21,668,000 restricted shares of our common stock (less 7,667,000 shares previously issued pursuant to an option agreement). As a result of this acquisition, we own patented technologies that can use biosafe nanoparticles and sensitive magnetic sensors to detect and measure cancer cells in biopsies or in the human body with the potential to transform how cancer is detected and treated.

ADVANCED METALS

Our licensed proprietary process will enable our commercial partners the ability to build super-strength metals and alloys to make products that weigh far less than in the past and without significant cost premiums. In September 2009, the Company entered into a technology transfer agreement and sale with Carpenter. Pursuant to these revenue generating agreements, Carpenter will fully develop, manufacture and market a new class of high strength metals. We intend to establish other manufacturing partner relationships witj significant customers in the medical device and prosthetics industries.

 
 
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NANOMEDICINE

Our acquisition of Senior Scientific and Scientific Nanomedicine gives us the commercial rights to technology and intellectual property with respect to the detection and monitoring of diseases using nanotechnologies. The technology is intended for the early detection of cancers, quantitative in vivo assessments of tumors, and similar applications with other diseases identifiable by cell surface markers. The technology does not require surgery, biopsy, radioactivity, or exotically expensive instruments. Nanoparticles are introduced to the body, for example, by intravenous injection. A sensitive magnetic instrument is used to magnetize and measure the nanoparticles that have bound to the specific targets (e.g., cells of a specific type of cancer). Other tissues, bone, scars, etc. are all transparent to the magnetic fields used, so the technology can be used to image and measure tumors in places inaccessible to other tests, and tumors while they are still small enough to be treatable. The nanoparticles are nontoxic, and the magnetic instrument is not harmful or expensive, so the tests can be repeated as needed. The following bullet points summarize management's current beliefs with respect to the benefits and commercialization of our nanomedicine technology:

Our technology can detect cancer at a mass of 100,000 cells, and is currently being programmed to detect down to 12,000 cells;
After development for commercial use – our technology may detect cancer before stage one -- down to "a few thousand cells";
Our technology uses a patented device now known as SQUID (superconducting quantum interference device) which we hope to develop for commercialization along with the nanoparticles that will be used to detect cancer;
MD Anderson Cancer Center signed on for a preclinical trial of our magnetic nanoparticle technology in August 2011;
There is revenue potential from lab/animal research and from human medical applications;
FDA approval may not be needed for lab/animal uses; and
Since biosafe nanoparticles are already in use-there may be a shortened FDA approval process for human medical applications.

Similar to our agreement with Carpenter, we plan to license our technology to a pharmaceutical or medical device company who will use the technology for non-invasive cancer biopsies and screenings.

OTHER TECHNOLOGIES

In the recent past, we have worked to develop and commercialize three technologies:
 
·
Haptics "Touch and Feel" computer applications, which is a technology that allows computer users to be able to touch and feel any objects they see on their computer screen with the aid of special "mouse." Detailed texture, object-weight, stickiness, viscosity and object density can be "felt" or sensed. Management believes this haptics technology may positively impact the way computers are used everywhere by introducing the ability to "touch." (Please see Haptics "Touch and Feel" Internet Applications and Investment in Novint Technologies, Inc.”
   
·
Fuel Cell Technology - Micro fuel cell technology, which is designed to become an ultra efficient miniature electricity generator that converts hydrogen into electricity by chemical means, for portable electronic devices, including cellular telephones, as a substitute for lithium ion and other batteries in common use today. Mid-range fuel cell technology, which is an ultra efficient medium-size electricity generating device that converts hydrogen into electricity, with potential applications including personal transportation, cordless appliances, power tools, wheelchairs, bicycles, boats, emergency home generators, military field communications and laptop computers.

We are not presently using our resources to develop these technologies but will take advantage of opportunities to commercialize and monetize these technologies. We are also seeking to develop corporate opportunities to benefit our shareholders.

OUR DEVELOPMENT MODEL

Our goal has been to influence the future through the development of potentially life changing technologies. Our business model is to: (i) identify significant technologies, (ii) acquire them or the rights to them, (iii) secure the services of inventors, engineers or other staff who were instrumental in their creation, (iv) provide or contract for suitable work facilities, laboratories, and other aids where appropriate, (v) prototype the technologies to demonstrate "proof of principle" feasibility, (vi) secure patent and or other intellectual property protection, (vii) secure early customers for product trials where feasible and appropriate, and (viii) commercialize through licenses, sales or cooperative efforts with other manufacturing and distribution firms.

Since our technologies are still in their development phase, the need for operating and acquisition capital is a continuous concern requiring the ongoing efforts of our management. The Company’s success will depend in part on its ability to obtain patents and product license rights, maintain trade secrets, and operate without infringing on the proprietary rights of others, both in the United States and other countries. There can be no assurance that patents issued to or licensed by the Company will not be challenged, invalidated, or circumvented, or that the rights granted thereunder will provide proprietary protection or competitive advantages to the Company.
 
 
 
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We utilize the intellectual property sale/licensing model, and not a production model, though management is opportunistic and is open to explore all methods leading to commercializing our technologies. We intend to consider all appropriate avenues for the commercialization of our technologies.

DESCRIPTION OF TECHNOLOGIES

ADVANCED MATERIALS
 
Our business model is based on licensing metals technology to metals manufacturers. Although competing commercial products are provided by existing specialty metals companies, the only competing processes for creating nanostructured metals are either limited or cannot be economically scaled. Metallicum does not yet face direct competition, but expects competition will emerge as the metal is commercialized.

In January 2009, we entered into a patent license agreement with Los Alamos National Security, LLC for the exclusive licensing use of certain technology relating to the manufacture and application of nanostructuring metals and alloys. Pursuant to such agreement we provided a non-refundable fee and 2,000,000 shares of our common stock with a fair market value of $33.000. Additionally, we are required to pay an annual license fee of $10,000 starting in February 2010 and royalties on future net sales.

The technology is expected to trim thousands of pounds from airplanes and hundreds of pounds from cars without sacrificing structural strength or adding significant cost. The nanostructured metals also have wide implications for use in the medical device and prosthetics industries including dental implants, replacements for hips, shoulders, knees and cardio vascular stents. In December 2008, a manufacturing joint venture partner in Albuquerque, N.M. received U.S. Food and Drug Administration 510(k) clearance to market nanostructued titanium metal dental implants using our technology. This clearance positions us closer to our goal of commercializing our technology for nanostructured metals. We are in talks with many of the key manufacturers of dental implants and have signed material testing agreements with several manufacturers.

In September 2009, the Company entered into a contract with Carpenter to sell certain nanostructured metal technologies acquired from Metallicum, Inc, its wholly owned subsidiary, to Carpenter and to provide sub-license rights to Carpenter covering license agreements that the Company has from Los Alamos Laboratories. The agreement has two distinct elements: a sale and services agreement and a sub-license agreement. The first element irrevocably transfers the field technology to Carpenter and Carpenter may develop or use the technology for its own benefit. Carpenter agreed to pay a sales price of $600,000 and pay royalties for products developed using this technology. In addition, the Company will receive additional service income for assisting Carpenter in the production process. These additional services were elective and do not affect the sale of the technology. The second element of the agreement is a sub-license to Carpenter for patents (the LANS patents) that are licensed by the Company from Los Alamos National Laboratories. The sub-license agreement obligates Carpenter to pay MSI a running royalty on the sales of products that require license to the LANS patents.

For the three months ended March 31, 2012 and 2011 recorded $171,000 and $171,000, respectively, as revenue. The Company has received the following amounts from Carpenter:

·
During the year ended December 31, 2009, the Company received $0.6 million for the sale of certain technology;
·
During the years ended December 31, 2009, 2010 and 2011, the Company received from Carpenter $0.6 million of income for assisting with development of the technology and is recognizing the income over the term of the Agreement.
·
During the year ended December 31, 2009, the Company, received a $1,000,000 .one-time payment for satisfying a performance obligation under the Technology Transfer Agreement

The Company recognized the sales revenue upon transfer of the technology and satisfying the performance obligation by Manhattan to facilitate the purchase of a current generation ECAP-C production machine by Carpenter and will recognize the service income over the term of the agreement. The royalty income will be recognized as products are developed using the field technology or sub-license.

The fees earned pursuant to the agreement with Carpenter are being proportionately recognized as revenue based upon the total fees to be collected over a 42 month period. The 42 month period is based on the time periods described in the Agreement: 6 months after effective date, 12 months after effective date, and each of the first 3 anniversaries of Annuity date where the “Annuity date” is the date of the latter of 18 months after the effective date or the date Manhattan Scientific fully satisfies its duties under of the Agreement.


 
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NANOMEDICINE

Our subsidiary, Scientific Nanomedicine holds patented technologies that can use biosafe nanoparticles and sensitive magnetic sensors to detect and measure cancer cells in biopsies or in the human body. The technology is highly specific – it measures the exact type of cancer and does not generate false positive results from benign growths, calcifications, or other spurious signals that complicate current detection methods. It is also very sensitive – it can measure tumors that are 1000-times smaller than is possible with currently available techniques. This combination of features has the potential to transform how cancer is detected and treated.

Conventional cancer treatment starts when a cancer has already grown to hundreds of millions of cells – large enough to be detectable by X-rays, ultrasound, or to cause external symptoms. Even then, distinguishing between benign conditions and cancer is difficult, resulting in missed cancers, exploratory surgeries or unnecessary treatment, and needless patient anxiety. Treatments tend towards “overkill,” since there are no effective methods to measure small changes in the cancer to reliably know when all cancer cells have been eliminated, or to detect metastases or recurrences before they are again large enough to be deadly. Cancer is a cellular phenomena, but conventional technology does not measure cells. The mismatch causes huge costs – we need to find and treat cancer cells, but current technology forces us to find shapes and remove or kill all kinds of cells. Billions of dollars each year are wasted, and many lives shattered or lost, because cancer is essentially invisible until it is big enough to cause problems.

Our technology makes possible the detection of specific cancer cells. Physicians may then select a broad range for initial diagnosis, or a single type for monitoring therapy or detecting metastases. Small quantities of biosafe nanoparticles with attached targeting agents are introduced into the patient where they “stick” only to the targeted cancer cells. A weak magnetic field is applied to magnetize the particles, and sensitive magnetic detectors count the number of particles that have stuck to cancer cells. Due to the highly specialized nature of both the nanoparticles and our detection device, only those particles stuck to their targeted cells are detected, making the results highly specific, objective (the results depend only on the cells, not a human interpretation of an image), and sensitive (only a few thousand cells are required, instead of hundreds of millions for conventional techniques).

Our technology makes possible improvements across a wide range of cancer fighting areas: detection of cancers years earlier; noninvasive, specific diagnosis after conventional screening; earlier, faster discovery of drugs; precise, personalized monitoring of therapy; detection of metastases while still treatable; and accurate monitoring of new therapies. Our technology has been proven in animal models using human cancer cells, in human trials using bone marrow biopsy samples, and is the subject of over 20 patent applications and14 peer-reviewed publications. Our success will depend in part on its ability to obtain regulatory approvals required for human application of its technologies, both in the United States and other countries. There can be no assurance that such approvals will be obtained.

Our technology is a platform technology that has many possible applications. Our business model has been designed to fit these several applications, but, generally, the instrument will be placed at low cost, and recurring revenue realized on consumable targeted nanoparticles. Overall, we anticipate that our technology will be acquired or licensed by a large company once the first few applications are approved and in the market (if not before).
 
Regulatory approvals are required for applications of the technology in humans. Regulatory approval for in vivo applications may require demonstration that the targeted nanoparticles are safe for injection into humans, that the instrument is also safe, and that the resulting measurement provides information useful in assessing the state of a patient. We believe that the constituent parts of the targeted nanoparticles have already been approved for injection in humans in other applications. Initial toxicology studies in cell cultures suggest that the combination of the parts into targeted nanoparticles is not toxic. Significant effort is still required to document these results under the laboratory and manufacturing practices that the FDA is likely to require. The instrument comprises passive sensors and a magnetizing system, which applies a magnetic field much less powerful than that already approved in other instruments. The correlation of the instrument reading to the underlying biological phenomena has been demonstrated in preclinical studies for selected cancer/antibody combinations. Significant effort is still required to demonstrate the translation of the preclinical results to human pilot studies. We are currently working on defining the projects required to secure regulatory approval.

The total market for all applications of our technology is hard to estimate, given the breadth of the platform and our ability to develop the commercial application. Our expected development model anticipates market entries in the United States may include the following (estimated number of procedures and market opportunities calculated from both publicly available sources and discussions with industry experts):

Procedure
 
Annual Number of Procedures
 
Gross Estimated Annual Market Opportunity
Noninvasive biopsy for breast cancer follow-up
   
600,000
 
$300 million
Noninvasive biopsy for ovarian cancer diagnosis
   
200,000
 
$100 million
Prostate cancer metastases tracking
   
240,000
 
$200 million

Our first markets may be the use of our technology for in vitro laboratory measurements, preclinical research and ex vivo disease monitoring. We have received interest from clinicians in applying our technology to other cancers and other stages of cancer therapy. The selection of the initial market entries will be informed by size of market, and by time and risk of regulatory requirements. More than 100 million screening tests for cancer are performed each year in the US at a cost of over $14 billion. Ultimately, our technology, after development, has the potential to replace these screening tests or the more expensive, invasive tests that follow a positive screening result.
 
 
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To develop our technology, we are seeking $3-$5 million in additional financing to: possibly place and support instruments at the request of collaborators at two of the leading cancer research and treatment centers in the United States; perform studies demonstrating the application of our technology to specific clinical needs; perfect and protect the intellectual property surrounding our instrument, our nanoparticles, and our clinical applications; and initiate the process of regulatory approval.

INTELLECTUAL PROPERTY / RESEARCH AND DEVELOPMENT

In 2008, we purchased Metallicum to acquire its licensed rights to patented technology. The technology is comprised of three US Patents (US Patent numbers 7152448, 6197129 and 6399215) for which Metallicum (subsequently, Manhattan) had been assigned an exclusive license rights by Los Alamos National Security LLC (LANL). Under the license rights, Metallicum had all rights, title and interest throughout the world in and to any and all inventions, original works of authorship, developments, concepts, know-how, improvements on the patents or trade secrets whether or not patentable or registerable under copyright or similar laws. The purchase price paid for these licenses was $305,000, which represents its fair value. The Company obtained an exclusive license on two patents and a non-exclusive license on the third patent. The value attributable to license agreements is being amortized over the period of its estimated benefit period of 10 years.

On May 31, 2011, we entered into an Agreement and Plan of Reorganization to acquire Senior Scientific and Scientific Nanomedicine. With the acquisition, we now have

3 U.S. patents issued/allowed;
4 PCT applications for:

Cell detection using targeted nanoparticles and magnetic properties thereof,
Detection, measurement, and imaging of cells such as cancer and other biologic substances using targeted ,nanoparticles and magnetic properties thereof,
Nonsurgical determination of organ transplant condition, and
Methods and apparatuses for the localization and treatment of cancer;

5 U.S. utility applications;
19 U.S. provisional applications;

Confidential nanoparticle production, marker conjugation methods, and analysis techniques; and
Analysis and data acquisition software copyrights

Our ability to compete depends in part on the protection of and our ability to defend our proprietary technology and on the goodwill associated with our trade names, service marks and other proprietary rights. However, we do not know if current laws will provide us with sufficient enough protection that others will not develop technologies similar or superior to ours, or that third parties will not copy or otherwise obtain or use our technologies without our authorization.

The success of our business will depend, in part, to identify technology, obtain patents, protect and enforce patents once issued and operate without infringing on the proprietary rights of others. Our success will also depend on our ability to maintain exclusive rights to trade secrets and proprietary technology we own, are currently developing and will develop. We can give no assurance that any issued patents will provide us with competitive advantages or will not be challenged by others, or that the patents of others will not restrict our ability to conduct business.

In addition, we rely on certain technology licensed with a perpetual term from the Los Alamos National Laboratory and may be required to license additional technologies in the future. We do not know if these third-party licenses will be available or will continue to be available to us on acceptable commercial terms or at all. The inability to enter into and maintain any of these licenses could have a material adverse effect on our business, financial condition or results of our operations.
 
 
 
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Policing unauthorized use of our proprietary technology and other intellectual property rights could entail significant expense. In addition, we do not know if third parties will bring claims of copyright or trademark infringement against us or claim that our use of certain technologies violates a patent or other intellectual property. Any claims of infringement, with or without merit, could be time consuming and expensive to defend, result in costly litigation, divert management attention, require us to enter into costly royalty or licensing arrangements or prevent us from using important technologies or methods, any of which could have a material adverse effect on our business, financial condition or results of our operations.

SALES AND MARKETING

Although our technologies presently are in the development stage, we are engaged in an early commercialization program intended to facilitate the transition from development to licensing, manufacturing and/or sale. This program consists of preliminary dialogues with potential strategic partners, investors, manufacturers, potential licensees and/or purchasers.

COMPETITION

As a result of our licensed technology, we do not have any direct competitors in our advanced materials operations. We may, however, face competition from leading researchers and manufacturers worldwide that develop competing technology.

With respect to our nanomedicine technology, our cancer detection technology will face competition primarily from companies such as Abbott Laboratories Inc., Cepheid Inc., Philips, GE Healthcare, Siemens, Gen-Probe Incorporated, MDxHealth SA, EpiGenomics AG, Roche Diagnostics and Sequenom, Inc. We plan, however, to enter into partnerships with the aforementioned companies to develop our technology

Competitors may successfully challenge our licensed technology, produce similar products that do not infringe our licensed technology or produce products in countries where we have not applied for intellectual property protection. Many of these competitors may have longer operating histories and significantly greater financial, marketing and other resources than we have. Furthermore, competitors may introduce new products that address our potential markets. Competition could have a material adverse effect on our business, financial condition and results of our operations.

The markets in which we compete are highly competitive and constantly evolving. We believe that the principal competitive factors in our technology markets include without limitation:

 
·capitalization;
 
·cost of product;
 
·first to market with product in market segment;
 
·strong intellectual portfolio;
 
·product reliability;
 
·strong customer base; and
 
·strong manufacturing and supplier relationships.

CUSTOMERS AND SUPPLIERS

For the three months ended March 31, 2012 and 2011, all of our revenue was generated by one customer, Carpenter Technology Corporation. We did not have any significant suppliers.

RESULTS OF OPERATIONS
 
THREE MONTHS ENDED MARCH 31, 2012 COMPARED TO THREE MONTHS ENDED MARCH 31, 2011.
 
GROSS PROFIT. The $171,000 of revenue recognized for the three months ended March 31, 2012 related to service income and is equivalent to the $171,000 in revenue earned during the three months ended March 31, 2011. The fees earned pursuant to the agreement with Carpenter are being proportionately recognized as revenue based upon the total fees to be collected over a 42 month period.  The 42 month period is based on the time periods described in the Agreement (6 months after effective date), (12 months after effective date), and (each of the first 3 anniversaries of Annuity date where the “Annuity date” is the date of the latter of 18 months after the effective date or the date Manhattan Scientific fully satisfies its duties under of the Agreement).  The cost of revenue totaling $28,000 for the three months ended March 31, 2011  represents  consulting fees paid during the period.
 
GENERAL AND ADMINISTRATIVE. General and administrative expenses consists of consultants, contractors, accounting, legal, travel, rent, telephone and other day to day operating expenses. General and administrative expenses were $602,000 for the three months ended March 31, 2012 compared with $431,000 for the three months ended March 31, 2011.  General and administrative expenses increased primarily as a result of costs incurred related to researching patents for Senior Scientific technology and costs associated with investor relations.
 
 
 
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NET LOSS. Our net loss was $594,000 for three months ended March 31, 2012 compared to a net loss of $300,000 for the three months ended March 31, 2011. The increase in net loss resulted from higher general and administrative costs and higher costs of revenues.
 
COMPREHENSIVE LOSS: Our comprehensive loss was $583,000 for three months ended March 31, 2012 compared to comprehensive loss of $300,000 for the three months ended March 31, 2011. The comprehensive loss was the result of a higher net loss in the first quarter of 2012 over the first quarter of 2011 offset by a $11,000 unrealized gain in the market value of our shares of Novint Technologies, Inc. (“Novint”) during the first quarter of 2011. As of March 31, 2012 and March 31, 2011, we owned 1,075,648 shares of common stock of Novint.  
 
LIQUIDITY AND PLAN OF OPERATIONS
 
Stockholders’ deficit totaled $208,000 on March 31, 2012 and the working capital deficit was $880,000 on such date. Although, we anticipate we may sell additional common stock and issue shares and/or options in exchange for services, we anticipate that our 2012 revenues received from our technology sales and service agreement will cover the cash needs of our overhead and the cost of our operations.
 
At March 31, 2012, our significant assets include our portfolio of intellectual property relating to the various technologies, our contracts with third parties pertaining to technology development, acquisition, and licensing, and 1,075,648 shares of common stock of Novint; our cash on hand; and our strategic alliances with various scientific laboratories, educational institutions, scientists and leaders in industry and government.
  
We had an increase of $558,000 in cash and cash equivalents for the three months ended March 31, 2012, as a result of cash provided by financing activities offset by our net loss.  For the three months ended March 31, 2012, cash used by operating activities was $158,000 compared to $216,000 provided by operating activities for the three months ended March 31, 2011. Cash provided by operating activities was primarily as a result of our net loss which was exceeded by deferred revenue $257,000, debt discount and original issue discount of $151,000, a decrease in accounts receiveable of $171,000 and a decrease in other assets of $90,000.  There was no cash used in investing activities in either the first quarters of 2012 or 2011.  There was $400,000 of cash provided by financing activities in the first quarter of 2012 as the result of issuance of common stock and a promissory note in 2012 compared to no cash provided or used by financing activities during the first quarter of 2011.
 
Based upon current projections, our principal cash requirements for the next 12 months consists of (1) fixed expenses, including payroll, investor relations services, public relations services, bookkeeping services, consultant services, and rent; and (2) variable expenses, including technology research and development, milestone payments and intellectual property protection, and additional scientific consultants. As of March 31, 2012, we had $715,000 in cash. We intend to satisfy our capital requirements for the next 12 months from our cash on hand and cash generated from our technology transfer agreements which we anticipate will cover the cash needs of our overhead and the cost of our operations.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES
 
Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America.
 
Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amount of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. A significant estimate includes the carrying value of our patents, fair value of our common stock, assumptions used in calculating the value of stock options, depreciation and amortization.



 
16

 

Impairment of Long-Lived Assets:

We assess the impairment of our long-lived assets periodically in accordance with Financial Accounting Standards Board ("FAS") Accounting Standard Codification (“ASC”) Topic 10. Whenever events or changes in circumstances indicate that the carrying amounts of long-lived assets may not be recoverable, we will compare undiscounted net cash flows estimated to be generated by those assets to the carrying amount of those assets. When these undiscounted cash flows are less than the carrying amounts of the assets, we will record impairment losses to write the asset down to fair value, measured by the discounted estimated net future cash flows expected to be generated from the assets. To date there has been no impairment.

License Agreements

In 2008, the Company obtained licenses to the rights of certain patents regarding nano-structured materials developed by another company as a result of the acquisition of Metallicum. The purchase price paid for these licenses was $305,000, which represents its fair value. The Company obtained an exclusive license on two patents and a non-exclusive license on the third patent. The value attributable to license agreements is being amortized over the period of its estimated benefit period of 10 years. Under the terms of the agreement, the Company may be required to pay royalties, as defined, to the licensors.

In 2009, the Company entered into a patent license agreement with Los Alamos National Security LLC for the exclusive use of certain technology relating to the manufacture and application of nanostructuring metals and alloys. The value attributable to license agreements is being amortized over the period of its estimated benefit period of 10 years. Under the terms of the agreement the Company is required to pay an annual license fee of $10,000 and, may be required to pay royalties, as defined, to the licensors.

On May 31, 2011, we entered into an Agreement and Plan of Reorganization to acquire Senior Scientific and Scientific Nanomedicine. The total purchase price was 21,668,000 restricted shares of our common stock (less 7,667,000 shares previously issued pursuant to an option agreement. As a result of this acquisition, we own patented technologies that can use biosafe nanoparticles and sensitive magnetic sensors to detect and measure cancer cells in biopsies or in the human body with the potential to revolutionize how cancer is detected and treated.

Revenue Recognition

Revenue is recognized when the four basic criteria of revenue recognition are met: (i) a contractual agreement exists; (ii) transfer of technology (intellectual property) has been completed or services have been rendered; (iii) the fee is fixed or determinable, and (iv) collectability is reasonably assured. Service revenue is recognized when specific milestones are reached or as service is provided if there are no discernable milestones.

Investments: Available-for-Sale Investments

Investments that we designate as available-for-sale are reported at fair value, with unrealized gains and losses, net of tax, recorded in accumulated other comprehensive income (loss). We determine the cost of the investment sold based on the specific identification method. Our available-for-sale investments include Marketable equity securities. We acquire these equity investments for the promotion of business and strategic objectives. We record the realized gains or losses on the sale or exchange of marketable equity securities in gains (losses) on other equity investments, net.

Stock-Based Compensation:

The Company follows the provision of FASB ASC Topic 718 for the measurement and recognition of compensation expense for all share-based payment awards to employees, directors and non-employees. Additionally, the Company follows the SEC’s Staff Accounting Bulletin No. 107 “Share-Based Payment” (“SAB 107”), as amended by Staff Accounting Bulletin No. 110 (“SAB 110”), which provides supplemental application guidance based on the views of the SEC. The Company estimates the expected term, which represents the period of time from the grant date that the Company expects its stock options to remain outstanding, using the simplified method as permitted by SAB 107 and SAB 110. Under this method, the expected term is estimated as the mid-point between the time the options vest and their contractual terms. The Company continues to apply the simplified method because it does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected terms due to the limited period of time its equity shares have been publicly traded and the limited number of its options which have so far vested and become eligible for exercise.

The estimated fair value of grants of stock options and warrants to our nonemployees is charged to expense, if applicable, in the financial statements. These options vest in the same manner as the employee options granted under each of the option plans as described above.
 
 
 
17

 
 
OFF BALANCE SHEET ARRANGEMENTS
 
We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations liquidity, capital expenditures or capital resources and would be considered material to investors.
 
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
Not applicable
 
ITEM 4T. CONTROLS AND PROCEDURES
 
(a) Evaluation of Disclosure Controls and Procedures
 
We conducted an evaluation under the supervision and with the participation of our management, of the effectiveness of the design and operation of our disclosure controls and procedures.  The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended (“Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms.  Disclosure controls and procedures also include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our principal executive and principal financial officers concluded as of March 31, 2012 that our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses in our internal controls over financial reporting discussed immediately below.
 
This quarterly report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting.  Management's report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permits us to provide only management's report in this quarterly report.
 
Management’s Report on Internal Control Over Financial Reporting
 
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  Our internal control over financial reporting includes those policies and procedures that:
 
 
1. 
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
 
2.
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with the authorization of our management and directors; and
 
3.
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
 
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
 
Management assessed the effectiveness of our internal control over financial reporting as of March 31, 2012. Based on this assessment, management concluded that the Company did not maintain effective internal controls over financial reporting as a result of the identified material weakness in our internal control over financial reporting described below. In making this assessment, management used the framework set forth in the report entitled Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO. The COSO framework summarizes each of the components of a company's internal control system, including (i) the control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication, and (v) monitoring.  
 
 
 
18

 

 
Identified Material Weakness
 
A material weakness in our internal control over financial reporting is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected.
 
Management identified the following material weakness during its assessment of internal controls over financial reporting:
 
Resources: We had one full-time employee in general management and no full-time employees with the requisite expertise in the key functional areas of finance and accounting.  As a result, there is a lack of proper segregation of duties necessary to insure that all transactions are accounted for accurately and in a timely manner.
 
Written Policies & Procedures: We need to prepare written policies and procedures for accounting and financial reporting to establish a formal process to close our books monthly on an accrual basis and account for all transactions, including equity transactions, and prepare, review and submit SEC filings in a timely manner.
 
Audit Committee: We do not have, and are not required, to have an audit committee.  An audit committee would improve oversight in the establishment and monitoring of required internal controls and procedures.
   
(b)
Changes In Internal Control Over Financial Reporting
 
During the quarter ended March 31, 2012, the Company prepared written policies and procedures for accounting and financial reporting to establish a formal process to close our books monthly on an accrual basis and account for all transactions, including equity transactions There were no other changes in our internal controls over financial reporting during this fiscal quarter that materially affected, or is reasonably likely to have a materially affect, on our internal control over financial reporting.
 
PART II
 
ITEM 1. LEGAL PROCEEDINGS
 
We are subject from time to time to litigation, claims and suits arising in the ordinary course of business. As of March 31, 2012, we were not a party to any material litigation, claim or suit whose outcome could have a material effect on our financial statements.
 
ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
For the three months ended March 31, 2012, the Company issued 6,000,000 shares of common stock and warrants exerciseable at $0.07 for 3,000,000 shares for a total cash consideration of $300,000. The Company also issued $100,000 of convertible notes with warrants for 1,000,0000 shares exercisable at $0.05.
 
The issuances were not public offerings based upon the following factors: (i) the issuance of the securities was an isolated private transaction; (ii) a limited number of securities were issued to a limited number of offerees; (iii) there was no public solicitation; (iv) each offeree was an “accredited investor,” (v) the investment intent of the offerees; and (vi) the restriction on transferability of the securities issued. There no underwriter used in any transaction. The proceeds from the private offerings will be used for working capital, general corporate expenses and the acquisition and exploration of properties. No underwriters were used for any offering.  All of the foregoing securities were issued in reliance upon the exemption from registration pursuant to Section 4(2) of the Securities Act and/or Rule 506 of Regulation D or Rule 903 of Regulation S.  Cash proceeds raised will be used for working capital and general corporate purposes.
 
 
19

 
 
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
 
Not Applicable
 
ITEM 4. (Removed and Reserved)
 
ITEM 5. OTHER INFORMATION
 
Not Applicable.
 
ITEM 6. EXHIBITS
 
Index to Exhibits
 
31.1
   
Certification of Chief Executive Officer under Rule 13(a) — 14(a) of the Exchange Act.
     
31.2
   
Certification of Chief Financial Officer under Rule 13(a) — 14(a) of the Exchange Act.
     
32
   
Certification of CEO and CFO under 18 U.S.C. Section 1350
     
EX-101.INS
 
XBRL Instance Document
     
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EX-101.DEF
 
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EX-101.LAB
 
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20

 
 
SIGNATURES
 
 
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this 15th day of May, 2012.
 
 
MANHATTAN SCIENTIFICS, INC.
 
       
 
By:
/s/ Emmanuel Tsoupanarias
 
   
Emmanuel Tsoupanarias
 
   
Chief Executive Officer
 
       
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
21
EX-31.1 2 ex311.htm EXHIBIT 31.1 ex311.htm
Exhibit 31.1
CERTIFICATION
I, Emmanuel Tsoupanarias, certify that:
 
1.  I have reviewed this quarterly report on Form 10-Q of Manhattan Scientifics, Inc. for the period ended March 31, 2012 of Manhattan Scientifics, Inc.;
 
2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.  The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
 
(a)     designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
 
(b)    designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; 
 
 
(c)    evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
 
(d)    disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.  The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
 
(a)   all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 
(b)  any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. 
 
 
By:  /s/ Emmanuel Tsoupanarias     
 
Name: Emmanuel Tsoupanarias
 
Title:   Title: Chairman and Chief Executive Officer
(Principal Executive Officer)
 
   
 
May 15, 2012

 
EX-31.2 3 ex312.htm EXHIBIT 31.2 ex312.htm
Exhibit 31.2
CERTIFICATION
I, Chris Theoharis, certify that:
 
1.  I have reviewed this quarterly report on Form 10-Q of Manhattan Scientifics, Inc. for the period ended March 31, 2012 of Manhattan Scientifics, Inc.;
 
2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.  The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
 
(a)     designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
 
(b)    designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; 
 
 
(c)    evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
 
(d)    disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.  The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
 
(a)   all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 
(b)  any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. 
 
 
By:  /s/ Chris Theoharis     
 
Name: Chris Theoharis
 
Title:   Principal Financial Officer
 
   
 
May 15, 2012
EX-32 4 ex321.htm EXHIBIT 32 ex321.htm
Exhibit 32
 
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 
In connection with the quarterly report of Manhattan Scientifics, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacities and on the date indicated below, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
 
(1)            The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
 
(2)            The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
By:  /s/ Emmanuel Tsoupanarias     
Name: Emmanuel Tsoupanarias
Title:   Title: Chairman and Chief Executive Officer
(Principal Executive Officer)
   
May 15, 2012
 
 
By:  /s/ Chris Theoharis     
Name: Chris Theoharis
Title:   Principal Financial Officer
   
May 15, 2012
 
 
A signed original of this written statement required by Section 906 has been provided to Manhattan Scientifics, Inc. and will be retained by Manhattan Scientifics, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

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Accordingly, these financial statements do not include all of the disclosures required by generally accepted accounting principles in the United States of America for complete financial statements. These unaudited interim financial statements should be read in conjunction with the audited financial statements and the notes thereto included on Form 10-K for the year ended December 31, 2011. In the opinion of management, the unaudited interim financial statements furnished herein include all <font style="display: inline; font-size: 10pt;"></font>adjustments, all of which are of a normal recurring nature, necessary for a fair statement of the results for the interim period presented.</font></div><div align="left" style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><br /><font style="display: inline; font-family: times new roman; font-size: 10pt;">The preparation of financial statements in accordance with generally accepted accounting principles in the United States of America requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and the reported amounts of revenues and expenses during the reporting period. Uncertainties with respect to such estimates and assumption are inherent in the preparation of the Company&#8217;s financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions that could have a material effect on the reported amounts of the Company&#8217;s financial position and results of operations.</font></div><div align="left" style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><br /><font style="display: inline; font-family: times new roman; font-size: 10pt;">Operating results for the three months period ended March 31, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012.</font></div> <div align="left" style="display: block; margin-left: 0pt; text-indent: 0pt; margin-right: 0pt;"><font style="display: inline; font-weight: bold; font-size: 10pt; font-family: times new roman;">NOTE 2 &#8211; ORGANIZATION AND OPERATIONS</font></div> <div align="left" style="display: block; margin-left: 0pt; text-indent: 0pt; margin-right: 0pt;"><font style="display: inline; font-size: 10pt; font-family: times new roman;">&#160;</font></div> <div align="left" style="display: block; margin-left: 0pt; text-indent: 0pt; margin-right: 0pt;"><font style="display: inline; font-size: 10pt; font-family: times new roman;">Manhattan Scientifics, Inc., a Delaware corporation (formerly Grand Enterprises, Inc) (&#8220;Grand&#8221;) was established on July 31, 1992 and has three wholly-owned subsidiaries: Metallicum, Inc., (&#8220;Metallicum&#8221;), Senior Scientific, LLC, Scientific Nanomedicine, Inc., Tamarack Storage Devices, Inc. (&#8220;Tamarack&#8221;) and Teneo Computing, Inc. (&#8220;Teneo&#8221;) (collectively &#8220;the Company&#8221;). Currently, Metallicum and Senior Scientific, LLC are the only operating subsidiaries; and Tamarack and Teneo are dormant. On June 12, 2008, the Company acquired Metallicum, Inc, for 15,000,000 shares of Company&#8217;s common stock. Manhattan Scientifics, Inc., operates as a technology incubator that seeks to acquire, develop and commercialize life-enhancing technologies in various fields, with emphasis in the areas of nanotechonogies and nanomedicine. In this capacity, the Company continues to identify emerging technologies through strategic alliances with scientific laboratories, educational institutions, and scientists and leaders in industry and government. The Company has a long standing relationship with Los Alamos Laboratories in New Mexico. During 2008, the Company refocused its efforts from the development of its fuel cell technologies to its current focus on the development of nanomaterials through the acquisition of Metallicum and early cancer detection through the acquisition of Senior Scientific, LLC.</font></div> <div align="left" style="display: block; margin-left: 0pt; text-indent: 0pt; margin-right: 0pt;"><font style="display: inline; font-size: 10pt; font-family: times new roman;">&#160;</font></div> <div align="left" style="display: block; margin-left: 0pt; text-indent: 0pt; margin-right: 0pt;"><font style="display: inline; font-size: 10pt; font-family: times new roman;">Metallicum is a nanotechnology start-up company located in Santa Fe, New Mexico. Metallicum Inc. has focused on the development and manufacturing of nanostructured metals for medical implants and other applications. Metallicum intends to establish manufacturing partner relationships with major Fortune 500 metals companies and strategic partnering with significant customers in the medical device &amp; prosthetics industries as well as in auto, truck, &amp; aircraft manufacturing industries. Metallicum&#8217;s initial products include nanostructured bulk metals and alloys in the form of rod, bar, wire and foil. The Company conducts its operations primarily in the United States.</font></div> <div align="left" style="display: block; margin-left: 0pt; text-indent: 0pt; margin-right: 0pt;"><font style="display: inline; font-size: 10pt; font-family: times new roman;">&#160;</font></div> <div align="left" style="display: block; margin-left: 0pt; text-indent: 0pt; margin-right: 0pt;"><font style="display: inline; font-size: 10pt; font-family: times new roman;">Manhattan Scientifics purchased Metallicum to acquire its licensed rights to patented technology. The technology is comprised of three US Patents (US Patent numbers 7152448, 6197129 and 6399215) for which Metallicum (subsequently, Manhattan) had been assigned exclusive license rights by Los Alamos National Security LLC (LANL). 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The Company has recorded interest expense for notes payable to these former officers of approximately $12,000 and $12,000 for the three months ended March 31, 2012 and 2011, respectively. 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Carpenter agrees to pay a sales price of $600,000 and pay royalties for products developed using this technology. In addition, the Company can receive additional service income for assisting Carpenter in the production process. These additional services are elective and do not affect the sale of the technology. The second element of the agreement is a sub-license to Carpenter for patents (the LANS patents) that are licensed by the Company from Los Alamos Laboratories. The sub-license agreement obligates Carpenter to pay MSI a running royalty on the sales of products that require license to the LANS patents but does not have any upfront fee or annual minimum royalties.</font></div><div align="left" style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><br /><font style="display: inline; font-family: times new roman; font-size: 10pt;">The Company recognized the sales revenue upon transfer of the technology and the service income over the term of the agreement. 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The fees earned pursuant to the agreement with Carpenter are being proportionately recognized as revenue based upon the total fees to be collected over a 42 month period. The 42 month period is based on the time periods described in the Agreement (6 months after effective date), (12 months after effective date), and (each of the first 3 anniversaries of Annuity date where the &#8220;Annuity date&#8221; is the date of the latter of 18 months after the effective date or the date Manhattan Scientific fully satisfies its duties under of the Agreement). 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CAPITAL TRANSACTIONS
3 Months Ended
Mar. 31, 2012
Stockholders Equity Note [Abstract]  
CAPITAL TRANSACTIONS
NOTE 4 – CAPITAL TRANSACTIONS
 
Capital transactions during the three months ended March 31, 2012 and 2011:

For the three months ended March 31, 2012, the Company issued 6,000,000 shares of common stocks and warrants for 3,000,000 shares for a total consideration of $300,000 to three individuals.

For the three months ended March 31, 2011, the Company issued 1,000,000 shares of common stock to a consultant as a signing bonus for serving as a Director of Strategic Industry Relations. The shares were valued at $60,000 or $0.06 per share based on the current fair value of such shares on the date of the consulting agreement.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RELATED MATTERS
3 Months Ended
Mar. 31, 2012
Accounting Policies [Abstract]  
SUMMARY OF SIGNIFICANT ACCOUTING POLICIES AND RELATED MATTERS
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUTING POLICIES AND RELATED MATTERS
 
PRINCIPLES OF CONSOLIDATION:
 
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All material intercompany accounts and transactions have been eliminated.
 
INTANGIBLE ASSETS:
 
License Agreements
 
In 2008, the Company obtained licenses to the rights of certain patents regarding nanostructured materials developed by another company as a result of the acquisition of Metallicum. The purchase price paid for these licenses was $305,000, which represented its fair value.  The Company obtained an exclusive license on two patents and a non-exclusive license on the third patent. The value attributable to license agreements is being amortized over the period of its estimated benefit period of 10 years. At March 31, 2012 and December 31, 2011, accumulated amortization was $112,000 and $104,000, respectively. Under the terms of the agreement, the Company may be required to pay royalties, as defined, to the licensors.  
 
In 2009, the Company entered into a patent license agreement with Los Alamos National Security LLC for the exclusive use of certain technology relating to the manufacture and application of nanostructuring metals and alloys.  The purchase price paid for this license agreement was $33,000 based on the fair market value of 2,000,000 shares of common stock issued.  The value attributable to license agreements is being amortized over the period of its estimated benefit period of 10 years. At March 31, 2012 and December 31, 2011, accumulated amortization was $11,000 and $10,000, respectively. Under the terms of the agreement the Company is required to pay an annual license fee of $10,000 starting in February 2010 and, may be required to pay royalties, as defined, to the licensors. 
 
USE OF ESTIMATES:
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amount of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. A significant estimate includes the carrying value of the Company’s patents, fair value of the Company’s common stock, assumptions used in calculating the value of stock options, depreciation and amortization.
 
INVESTMENTS
 
Available-for-Sale Investments
 
Investments that the Company designates as available-for-sale are reported at fair value, with unrealized gains and losses, net of tax, recorded in accumulated other comprehensive income (loss). The Company determines the cost of the investment sold based on the specific identification method. The Company’s available-for-sale investments include:
 
• 
Marketable equity securities The Company acquires these equity investments for the promotion of business and strategic objectives. The Company records the realized gains or losses on the sale or exchange of marketable equity securities in gains (losses) on other equity investments, net.
 
Non-Marketable and Other Equity Investments
 
The Company accounts for non-marketable and other equity investments under either the cost or equity method and include them in other long-term assets. The non-marketable and other equity investments include:
 
• 
Non-marketable cost method investments when the equity method does not apply. The Company records the realized gains or losses on the sale of non-marketable cost method investments in gains (losses) on other equity investments, net.
 
STOCK-BASED COMPENSATION
 
The Company accounts for stock-based compensation based on the fair value of all option grants or stock issuances made to employees or directors on or after its implementation date (the beginning of fiscal 2006), as well as a portion of the fair value of each option and stock grant made to employees or directors prior to the implementation date that represents the unvested portion of these share-based awards as of such implementation date, to be recognized as an expense, as codified in ASC 718. The Company calculates stock option-based compensation by estimating the fair value of each option as of its date of grant using the Black-Scholes option pricing model.  These amounts are expensed over the respective vesting periods of each award using the straight-line attribution method. Compensation expense is recognized only for those awards that are expected to vest, and as such, amounts have been reduced by estimated forfeitures. The Company has historically issued stock options and vested and non-vested stock grants to employees and outside directors whose only condition for vesting has been continued employment or service during the related vesting or restriction period.  The estimated fair value of grants of stock options and warrants to nonemployees of the Company is charged to expense, if applicable, in the financial statements. The Company did not issue any options or warrants during the three months ended March 31, 2012 and 2011.
 
FAIR VALUE OF FINANCIAL INSTRUMENTS
 
Effective January 1, 2008, the Company adopted FASB ASC 820, Fair Value Measurements and Disclosures, Pre Codification SFAS No. 157, “Fair Value Measurements”, which provides a framework for measuring fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The standard also expands disclosures about instruments measured at fair value and establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
 
Level 1 — Quoted prices for identical assets and liabilities in active markets;
 
Level 2 — Quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and
 
Level 3 — Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. 
 
 
The Company designates cash equivalents (consisting of money market funds) and investments in securities of publicly traded companies as Level 1. The total amount of the Company’s investment classified as Level 3 is de minimis.
 
The fair value of the Company’s debt as of March 31, 2012 and December 31, 2011 approximated their fair value at those times.
 
Fair value of financial instruments: The carrying amounts of financial instruments, including cash and cash equivalents, short-term investments, accounts payable, accrued expenses and notes payables approximated fair value as of March 31, 2012 and December 31, 2011 because of the relative short term nature of these instruments. At March 31, 2012 and December 31, 2011, the fair value of the Company’s debt approximates carrying value. The fair value of the Company’s available for sale securities was $43,000 at March 31, 2012 and these securities are classified as Level 1.
 
BASIC AND DILUTED LOSS PER SHARE
 
In accordance with FASB ASC 260, “Earnings Per Share,” the basic loss per share is computed by dividing the loss attributable to common stockholders by the weighted average number of common shares outstanding during the period. Basic net loss per share excludes the dilutive effect of stock options or warrants and convertible notes.  Diluted net earnings (loss) per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents, consisting of shares that might be issued upon exercise of common stock options and warrants. In periods where losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive.
 
REVENUE RECOGNITION
 
To date the only revenue generated is from the sale of field technology developed by Metallicum related to the Company’s nanotechnology, services provided and sample materials (See Note 8).
 
Revenue is recognized when the four basic criteria of revenue recognition are met: (i) a contractual agreement exists; (ii) transfer of technology (intellectual property) has been completed or services have been rendered; (iii) the fee is fixed or determinable, and (iv) collectability is reasonably assured. Service revenue is recognized when specific milestones are reached or as service is provided if there are no discernable milestones.
 
RECENTLY ISSUED ACCOUNTING STANDARDS
 
In April 2010, the FASB reached a consensus on the Milestone Method of Revenue Recognition which provides guidance on the criteria that should be met for determining whether the milestone method of revenue recognition is appropriate. A vendor can recognize consideration that is contingent upon the achievement of a milestone in its entirety as revenue in the period in which the milestone is achieved only if the milestone meets all criteria to be considered substantive. The updated guidance is effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years beginning on or after June 15, 2010, with early adoption permitted. We adopted the provisions of the guidance as of January 1, 2011 on a prospective basis. The prospective application had no impact on our consolidated financial statements for the three months ended March 31, 2012.
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CONSOLIDATED BALANCE SHEETS (USD $)
Mar. 31, 2012
Dec. 31, 2011
Current assets:    
Cash and cash equivalents $ 715,000 $ 157,000
Account receivable   171,000
Investments-available for sale 43,000 32,000
Prepaid expenses and other assets 154,000 244,000
Total current assets 912,000 604,000
Investments 2,000 2,000
Property and equipment, net 45,000 50,000
Intellectual property, net 1,406,000 1,447,000
Other asset 2,000 2,000
Total assets 2,367,000 2,105,000
Current liabilities    
Accounts payable and accrued expenses 287,000 252,000
Accrued interest and expenses - related parties 360,000 365,000
Deferred revenue 257,000  
Note payable to former officers 450,000 450,000
Note payable - other 438,000 225,000
Total current liabilities 1,792,000 1,292,000
Long-term liabilities    
Note payable, related party 545,000 545,000
Accrued interest, related party 238,000 231,000
Total long-term liabilities 783,000 776,000
Total liabilities 2,575,000 2,068,000
Commitments and Contingencies:      
Capital stock $.001 par value    
Common, authorized 500,000,000 shares, 412,769,926 and 411,769,926 shares issued, and outstanding, respectively 446,000 440,000
Additional paid-in-capital 55,316,000 54,984,000
Other accumulated comprehensive income 43,000 32,000
Accumulative deficit (56,013,000) (55,419,000)
Total stockholders' equity (deficit) (208,000) 37,000
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) 2,367,000 2,105,000
Preferred Series A convertible, redeemable, 10 percent cumulative
   
Capital stock $.001 par value    
Preferred stock, value      
Preferred Series B convertible
   
Capital stock $.001 par value    
Preferred stock, value      
Preferred Series C convertible, redeemable
   
Capital stock $.001 par value    
Preferred stock, value