10-Q 1 mhtx_10q.htm FORM 10-Q mhtx_10q.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 September 30, 2013
   
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.)
 
The Chrysler Building
405 Lexington Avenue, 32nd Floor
New York, New York, 10174
 (Address of principal executive offices) (Zip code)
 
Issuer’s telephone number: (212) 551-0577
 
None
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 x    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 462,963,554 shares outstanding of registrant’s common stock, par value $.001 per share, as of November 14, 2013.



 
 

 
 
TABLE OF CONTENTS
 
PART I  
         
Item 1.
Financial Statements
     
 
Consolidated Balance Sheets as of September 30, 2013 (unaudited) and December 31, 2012 (audited)
    1  
 
Unaudited Consolidated Statements of Operations and Other Comprehensive Income for the three and nine months ended September 30, 2013 and September 30, 2012
    2  
 
Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2013 and September 30, 2012
    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
    14  
Item 4
Controls and Procedures
    14  
           
PART II  
           
Item 1.
Legal Proceedings
    16  
Item 1A.
Risk Factors
    16  
Item 2
Unregistered Sales of Equity Securities and Use of Proceeds
    20  
Item 3
Defaults Upon Senior Securities
    21  
Item 4.
Mine Safety Disclosure
    21  
Item 5.
Other Information
    21  
Item 6.
Exhibits
    22  
SIGNATURES
    23  
 

 
 

 
 
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
   
September 30, 2013
   
December 31, 2012
 
             
ASSETS
           
Current assets:
           
Cash and cash equivalents
 
$
640,000
   
$
91,000
 
Account receivable
   
 -
     
257,000
 
Investments-available for sale
   
-
     
22,000
 
Prepaid expenses and other assets
   
70,000
     
164,000
 
Total current assets
   
710,000
     
534,000
 
                 
Investments
   
2,000
     
2,000
 
Property and equipment, net
   
196,000
     
32,000
 
Intellectual property, net
   
1,161,000
     
1,283,000
 
Other asset
   
2,000
     
2,000
 
Total assets
 
$
2,071,000
   
$
1,853,000
 
                 
LIABILITIES
               
Current liabilities
               
Accounts payable and accrued expenses
 
$
307,000
   
$
234,000
 
Accrued interest and expenses — related parties
   
804,000
     
372,000
 
Note payable to former officers
   
450,000
     
450,000
 
Note payable — other
   
896,000
     
896,000
 
Total current liabilities
   
2,457,000
     
1,952,000
 
                 
Long-term liabilities
               
Note payable, related party
   
279,000
     
447,000
 
Accrued interest, related party
   
-
     
251,000
 
Notes payable
   
1,167,000
     
-
 
Total long-term liabilities
   
1,446,000
     
698,000
 
Total  liabilities
   
3,903,000
     
2,650,000
 
                 
Commitments and Contingencies:
   
-
     
-
 
                 
STOCKHOLDERS’ 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, 462,599,918 and 440,058,609 shares issued, and outstanding, respectively
   
463,000
     
459,000
 
Additional paid-in-capital
   
57,472,000
     
56,231,000
 
Stock payable
   
1,140,000
     
-
 
Other accumulated comprehensive income
   
-
     
22,000
 
Accumulative deficit
   
(60,907,000
)
   
(57.509,000
)  
                 
Total stockholders' deficit
   
(1,832,000
)
   
(797,000
                 
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT
 
$
2,071,000
   
$
2,105,000
 
 
 
1

 
 
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
 
   
THREE MONTHS ENDED
   
NINE MONTHS ENDED
 
   
September 30, 2013
   
September 30, 2012
   
September 30, 2013
   
September 30, 2012
 
Revenue
 
$
17,000
   
$
173,000
   
$
652,000
   
$
516,000
 
Cost of revenue
   
-
     
-
     
-
     
-
 
Gross profit
   
17,000
     
173,000
     
652,000
     
516,000
 
                                 
Operating costs:
                               
General and administrative expenses
   
2,878,000
     
450,000
     
3,917,000
     
1,696,000
 
Research and development
   
-
     
68,000
     
55,000
     
-
 
                                 
Total operating costs and expenses
   
2,878,000
     
518,000
     
3,972,000
     
1,696,000
 
                                 
Loss from operations before other income and expenses
   
(2,861,000
)
   
(345,000
)
   
(3,320,000
)
   
(1,180,000
)
                                 
Other income and (expenses):
                               
Gain on debt write-off
   
-
     
33,0000
     
-
     
33,000
 
Interest and other expenses
   
(33,000
)
   
(12,000
)
   
(78,000
)
   
(460,000
)
Interest income
   
-
     
-
     
-
     
-
 
                                 
NET LOSS
   
(2,894,000
)
   
(324,000
)
   
(3,398,000
)
   
(1,607,000
)
                                 
Comprehensive income:
                               
Unrealized gain (loss) on available for sale investments
   
-
     
-
     
(22,000
   
11,000
 
                                 
COMPREHENSIVE LOSS
 
$
(2,894,000
)
 
$
(324,000
)
 
$
(3,420,000
)
 
$
(1,596,000
)
                                 
BASIC AND DILUTED LOSS PER COMMON SHARE:
                               
Weighted average number of common shares outstanding
   
462,498,831
     
450,909,871
     
460,338,270
     
447,298,355
 
                                 
Basic and diluted loss per common share
 
$
(0.01
)
 
$
(0.00
)
 
$
(0.01
)
 
$
(0.00
)

 
2

 
 
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
   
NINE MONTHS ENDED
 
   
September 30, 2013
   
September 30, 2012
 
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net loss
 
$
(3,398,000
)
 
$
(1,607,000
)
Adjustments to reconcile net loss to net cash used in operating activities:
               
Common stock issued for services
   
2,459,000
     
102,000
 
Debt discount and original issue discount accretion
   
-
     
423,000
 
Gain on debt write-off
   
-
     
(33,000
)
Depreciation and amortization
   
137,000
     
136,000
 
Changes in operating assets and liabilities:
               
Account receivable
   
257,000
     
85,000
 
Prepaid expenses and other assets
   
-
     
169,000
 
Accounts payable and accrued expenses
   
73,000
     
-
 
Accrued interest and expenses—related parties
   
13,000
     
21,000
 
                 
Net cash used in operating activities
   
(459,000
   
(704,000
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Purchase of fixed assets
   
     (179,000
)
    -
 
Net cash used in investing activities
   
(179,000
   
-
 
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Proceeds from notes payable
   
1,167,000
     
400,000
 
Payment on related party note payable
   
-
     
(18,000
Proceeds from issuance of common stock
   
20,000
     
630,000
 
                 
Net cash provided by financing activities
   
1,187,000
     
1,012,000
 
                 
NET INCREASE IN CASH AND CASH EQUIVALENTS
   
549,000
     
308,000
  
Cash and cash equivalents, beginning of period
   
91,000
     
157,000
 
                 
CASH AND CASH EQUIVALENTS, END OF PERIOD
 
$
640,000
   
$
465,000
 
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
               
Interest paid
 
$
-
   
$
-
 
                 
Income taxes paid
 
$
-
   
$
-
 

 
3

 

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, 2012. 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 nine month period ended September 30, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013.
 
NOTE 2 – ORGANIZATION AND OPERATIONS
 
Manhattan Scientifics, Inc., a Delaware corporation (formerly Grand Enterprises, Inc.) (the “Company”) was established on July 31, 1992 and has two operating wholly-owned subsidiaries: Metallicum, Inc., (“Metallicum”) and Senior Scientific, LLC ( “Senior Scientific”). On June 12, 2008, the Company acquired Metallicum, Inc., for 15,000,000 shares of Company’s common stock. The Company  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.
 
Metallicum is a nanotechnology start-up company located in Santa Fe, New Mexico. Metallicum has focused on the development and manufacturing of nanostructured metals for medical implants and other applications. Metallicum has established, and intends to establish, additional 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, and aircraft manufacturing industries. 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, and improvements on the patents or trade secrets whether or not patentable or registerable 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 (“Carpenter”) pursuant to which 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.

 
4

 
 
NOTE 2 – ORGANIZATION AND OPERATIONS (Continued)
 
On May 31, 2011, we entered into an Agreement and Plan of Reorganization to acquire Senior Scientific and Scientific Nanomedicine, Inc. (“Scientific Nanomedicine” or “SNMI”). We subsequently dissolved Scientific Nanomedice and transferred all remaining assets to Senior Scientific. 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.
 
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.
 
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 September 30, 2013 and December 31, 2012, accumulated amortization was $157,000 and $134,000, 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 September 30, 2013 and December 31, 2012, accumulated amortization was $16,000 and $13,000, 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.  
 
In 2011, the Company acquired Scientific Nanomemdicine, Inc. which holds the commercial rights to technology and intellectual property with respect to the early detection of diseases using nanotechnologies. The acquisition of Scientific Nanomedicine, Inc. has been accounted for as an asset purchase since this company had no tangible assets or liabilities and did not have the business inputs and outputs to be considered a business. The purchase price totaling $1,300,000 (fair value of 21,667,000 shares of common stocks issued) has been allocated to in process research and development and is being amortized over its estimated benefit period of 10 years. At September 30, 2013 and December 31, 2012, accumulated amortization was $304,000 and $207,000.  We subsequently dissolved Scientific Nanomedice and transferred all remaining assets to Senior Scientific.
 
 
5

 
 
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUTING POLICIES AND RELATED MATTERS (Continued)
 
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.
 
CASH CONCENTRATION:
 
The Company’s cash accounts are fully insured at September 30, 2013 and December 31, 2012.

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.
 
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

 
 
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 September 30, 2013 and December 31, 2012 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 September 30, 2013 and December 31, 2012 because of the relative short term nature of these instruments. At September 30, 2013 and December 31, 2012, the fair value of the Company’s debt approximates carrying value. The fair value of the Company’s available for sale securities was $-0- at September 30, 2013 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 discernible milestones.
 
NOTE 4 – CAPITAL TRANSACTIONS
 
Capital transactions during the nine months ended September 30, 2013 and 2012:
 
For the nine months ended September 30, 2013, the Company issued 175,438 shares to a consultant for services performed for the Company totaling $10,000; 132,000 shares to a consultant for services totaling $6,000 being performed over a three months period; 2,500,000 shares to a consultant for services totaling $113,000 being performed over six months period; 250,000 shares and a warrant for 250,000 shares to a consultant for services totaling $23,000; 600,000 shares on warrants exercised on a cashless basis; and granted 14,000,000 shares and warrants for 14,000,000 shares to officers and directors of the Company fair valued at $2,232,000 which the 14,000,000 shares have not been issued as of September 30, 2013 but have been recorded as a stock payable.
 
For the nine months ended September 30, 2012, the Company issued 12,600,000 shares of common stocks and warrants for 6,300,000 shares for a total consideration of $630,000 to seven individuals.  Further, the Company issued 2,983,871 shares to an attorney for legal services performed for the company totaling $124,000; 300,000 shares to another consultant for services to satisfy an outstanding obligation totaling $21,000; and 200,000 shares and warrants for 100,000 shares to a consultant for services totaling $10,000.
 
 
7

 
 
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 ofSeptember 30, 2013 and December 31, 2012, 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$-0- and $22,000 as of September 30, 2013 and December 31, 2012.
 
The Company has an additional investment in Aprilis, Inc. which is accounted for at a cost of $2,000 as of September 30, 2013 and December 31, 2012.
 
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. In December 2012, the former Chief Operating Officer forgave $80,000 of the accrued salaries balance. 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 $897,000 at September 30, 2013 and December 31, 2012 comprised of loans payable of $450,000 and $447,000, and $450,000 and $545,000 to its former Chief Operating Officer and Chief Executive Officer, respectively. Under the terms of the note extensions dated December 12, 2007, the loans bear interest at 5% per annum and are now due. The Company has recorded interest expense for notes payable to these former officers of approximately $13,000 and $39,000 for the three and nine months ended September 30, 2013 and 2012, respectively. Accrued interest related to these notes payable approximated $521,000 and $482,000 as of September 30, 2013 and December 31, 2012, respectively and is included in accrued liabilities, related parties.
 
NOTE 7 – NOTES PAYABLE – OTHER
 
From October 21, 2011 to April 26, 2012, the Company issued convertible notes for $600,000 (the "Convertible Notes") of which $200,000 was received on October 21, 2011, $100,000 was received on January 31, 2012 and $300,000 was received on April 26, 2012. The non-interest bearing notes can be converted into the Company’s common stock, at any date after six months from the issuance of each Note, at a conversion price of 67% of the fair value of the Company’s common stock upon the date of conversion notice, subject to a floor price of approximately $0.041 for the note issued in October 2011, approximately $0.044 for the note issued in January 2012 and approximately $0.034 for the note issued in April 2012. The holder of the notes has not converted any portion of the notes as of September 30, 2013. Additionally, the note holder was issued warrants for 6,000,000 shares of the Company’s common stock with an exercise price of $0.05 that expire on October 15, 2015 ("Warrants"). The conversion feature to the note payable has been accounted for as an original issue discount approximating $296,000 which has been fully accreted as of December 31, 2012. The warrant associated with the note has been accounted for as a debt discount with an approximate value of $296,000 which has been allocated to the note’s fully accreted value of $896,000 (original note amount plus original debt discount) on proportionate basis which amounted to $195,000. The warrant value of $252,000 was determined using the Black-Scholes option pricing model based on the following assumptions: 2 year term; volatility rate of 134% to 135%; and discount rate of 2.5%. For the years ended December 31, 2012 and 2011, the Company has recorded an expense associated with original debt discount and expense associated with the debt discount (warrants) of $422,000 and $67,000. Accordingly, the net carrying value of this note at September 30, 2013 and December 31, 2012 totals $896,000, comprising of $600,000 (original face value) plus the fully accreted original debt discount of $296,000.
 
 
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During 2013, the Company issued convertible notes for $1,167,000 through its wholly-owned subsidiary, Senior Scientific, LLC.  The convertible notes bear interest at 8%, mature four years from the date of issuance, and are convertible into either: (1) membership interests of Senior Scientific, LLC equal to the quotient of the principal due of the convertible notes divided by $2,500,000 multiplied by 18% of the total equity of Senior Scientific, LLC outstanding as of the date hereof; or (2) the number of shares of common stock of the Company equal to the quotient of the principal and interest payable due of the convertible notes divided by a conversion price of $0.055 per share.  The Company may not prepay the convertible notes.  In the event of a default and so long as the default exists, interest on the convertible notes will accrue at 10%.  The Company must pay all accrued interest on the convertible notes on the first calendar day of each quarter.  The conversion feature of the convertible notes has been evaluated by management and does not appear to have a beneficial conversion feature.
 
NOTE 8 – TECHNOLOGY SALE AND SUB-LICENSE AGREEMENT
 
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 many 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.
 
For the three and nine months ended September 30, 2013 , the Company earned $172,000 and $514,000 and recorded such amount as revenue. 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).
 
In January 2013, the Company entered into a licensing agreement with a party granting certain licensing rights to the Company's nanostructured metal technology. As consideration: the Company received $180,000 in January 2013, and will receive $30,000 by June 1, 2013; $30,000 by December 31, 2013; $30,000 by December 1, 2014; and $30,000 upon commercial launch by the party or the latest December 1, 2015.  For the three and nine months ended September 30, 2013, the Company recorded the receipt of $30,000 and $210,000 as revenue.

 
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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
 
Manhattan Scientifics, Inc. (OTCQB: MHTX) www.mhtx.com is focused on commercialization of disruptive technologies in the nano- medicine space. The company works among the brilliant minds and groundbreaking ideas in the fertile ground of New Mexico – home to two national laboratories, and one of the nation’s highest concentrations of PhD scientists. These technologies are scientifically advanced, but are rarely ready for commercialization.
 
We have expertise in licensing from the national laboratories and in working with individual inventors. We build intellectual property portfolios and business cases supporting new technologies, and shepherd them to relationships with industrial partners who are well-prepared to launch product. The result is a win for everyone – the lab and inventor see the technology enter the market, the industrial partner gets a solid foundation for a new product, and we profit from building the licensing bridge to industry.
 
We are currently focused on two opportunities: a nanostructured metals technology, and a nanoparticle-based technology that provides highly sensitive cancer detection.  The nanostructured metals technology has been revenue producing for several years.  The cancer detection technology can detect cancer years earlier, and is still pre-revenue.

In 2008, we acquired Metallicum Inc., along with its licensed patented nanostructured metals technology. We also licensed additional related intellectual property from Los Alamos National Laboratory, and filed additional patent applications related to the technology. The technology enables metals with uniform, ultrafine grains. This provides greater strength, lighter weight, and enhanced biocompatibility. It provides significant benefits across a wide range of metal applications – anywhere strength or weight is a concern.
 
In September 2009, we licensed the technology package in a defined field of use to Carpenter Technology Corporation, NYSE:CRS, Fortune/1000. Carpenter plans to aggressively market certain nanostructured ultra-fine grain metals to be mass manufactured under royalty agreements with Manhattan Scientifics. Carpenter has already paid significant fees to Manhattan Scientifics (about $1M/year for the last 4 years) in exchange for limited exclusivity grants made to them. The agreement calls for minimum annual revenues and minimum annual royalties which more than cover the company’s fixed overhead.
 
MHTX is contracted to receive a minimum of $9.5 million in royalties from Carpenter during the period 2015-2017 of which there is no guaranty.
 
We are continuing to develop the base technology for application in other fields of use, and are pursuing industrial partners in those other fields, e.g. aluminum, magnesium.

In 2011, we acquired Senior Scientific, LLC, www.seniorscientific.com and its technology for sensitive cancer detection. The technology uses iron oxide nanoparticles and very sensitive magnetic sensors to locate and measure cancer in the body. It can detect cancers 1 million times smaller than current technologies which is comparable to the difference between the unaided eye and an electron microscope.  It also means detection years earlier, which  can be the difference between life and death.

 
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Senior Scientific is bringing Dr. Edward R. Flynn’s nanomagnetic relaxometry (nanoMRX) from the laboratory to the clinic. nanoMRX can locate and measure tumors one millionth the size detectable by XRays and MRI – that’s like the difference between an electron microscope and the unaided eye. nanoMRX uses non-toxic iron oxide nanoparticles and ultrasensitive magnetic sensors – no XRay radiation, no large and expensive MRI magnets, no injected radioactive isotopes.  The technology has been proven in a research prototype instrument funded by the National Institutes of Health.

Our biggest impact, and largest market, is in human clinical applications. Cancer is estimated to cost the US $1 trillion per year.  Many cancers are fatal because they are not caught early enough. We believe we can slash years off the time cancer has to hide and grow untreated. Other cancers are fatal because doctors cannot determine where the cancer has spread, and when therapy has eliminated it all.  Our goal is to allow doctors to find more tumor sites, and monitor the effectiveness of therapy.

Our first human applications are likely to be in the detection of ovarian cancer. Ovarian cancer is the deadliest of gynecological cancers, in part because it stays hidden from current techniques until it has grown to billions of cells and hundreds of sites. Each year in the US, about 15,000 women die from ovarian cancer, and over 20,000 more women are diagnosed with the disease. We are working with Dr. Robert C. Bast Jr. of M.D. Anderson Cancer Center, one of the world’s preeminent researchers in ovarian cancer, to bring nanoMRX to bear on this disease. We are also collaborating with doctors working in breast cancer (230,000 new cases every year) and prostate cancer (240,000 new cases every year).

Bringing nanoMRX to clinical use requires that we demonstrate the technology in animal experiments, and then in clinical trials. Applying nanoMRX to animal experiments reveals an earlier market for us. Millions of animals are used in medical research each year, and this research will benefit from the marked increase in sensitivity available from nanoMRX. We have completed our first commercial instrument for animal measurements. We will use this instrument to further optimize nanoparticles, software tools, and procedures. Results from that instrument will be used to begin marketing to the animal research and veterinary markets (neither market requires FDA approval), as well as to fuel negotiations with strategic potential partners and prospective acquirers. We intend to place a second instrument in operation at MD Anderson early next year.  Our collaborators at MD Anderson are enthusiastic in support, and are already educating their staff about the instrument and beginning to schedule studies. We are currently funded for the two devices described above. We were also awarded a New Mexico Small Business Assistance grant that supports physicists from Los Alamos to help us optimize the specialized magnetic systems that are at the core of our measurement technology

Nanoparticles: The nanoparticles are the razor blade or ink cartridge in our business model. The science was originally proven using nanoparticle from sources outside the company. It is very important for our technology to have control of the nanoparticles, thus the company has worked to create our own custom made nanoparticles. Our custom made nanoparticles have demonstrated excellent performance in cell binding studies with leukemia, ovarian and prostate cancer cells. We are working on improving performance, stability, and yield in collaboration with CINT (Center for Integrated Nanotechnologies) to support commercial sales.
 
RESULTS OF OPERATIONS
 
THREE MONTHS ENDED SEPTEMBER 30, 2013 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2012.
 
GROSS PROFIT. The $17,000 of revenue recognized for the three months ended September 30, 2013 decreased compared to the $173,000 in revenue earned during the three months ended September 30, 2012. The decrease in revenue is primarily due to the fees earned pursuant to the agreement with Carpenter were proportionately recognized as revenue based upon the total fees to be collected over a 42 month period of which as of September 30, 2013 was fully earned. 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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GENERAL AND ADMINISTRATIVE. General and administrative expenses consist of consultants, contractors, accounting, legal, travel, rent, telephone and other day to day operating expenses. General and administrative expenses were $2,878,000 for the three months ended September 30, 2013 compared with $450,000 for the three months ended September 30, 2012.  The increase is principally related to stock-based compensation comprising of stocks and warrants granted to the Company’s officers and director totaling $2,232,000.

RESEARCH AND DEVELOPMENT.  Research and Development was $-0-  for the three months ended September 30, 2013 compared with $68,000 for the three months ended September 30, 2012.

OTHER INCOME AND (EXPENSES).  Other income and (expenses) for the three months ended September 30, 2013 totaled $(33,000), a decrease compared to $11,000 for the three months ended September 30, 2012.  The decrease in expenses related to other income (expenses) was a result of a non-recurring gain on debt write-off totaling $33,000.

NET LOSS. Our net loss was $2,894,000 for three months ended September 30, 2013 compared to a net loss of $324,000 for the three months ended September 30, 2012. The decrease in net loss is attributable to the aforementioned factors.
 
COMPREHENSIVE LOSS: Our comprehensive loss was $-0-  for three months ended September 30, 2013 compared to comprehensive loss of $-0- for the three months ended September 30, 2012.  

NINE MONTHS ENDED SEPTEMBER 30, 2013 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2012.
 
GROSS PROFIT. The $652,000 of revenue recognized for the nine months ended September 30, 2013 increased compared to the $516,000 in revenue earned during the nine months ended September 30, 2012. The increase in revenue is primarily due to a new licensing agreement consummated in January 2013 in which the Company received $210,000 for such agreement during the nine months ended September 30, 2013. 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 of which as of September 30, 2013 was fully earned. 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).
 
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist of consultants, contractors, accounting, legal, travel, rent, telephone and other day to day operating expenses. General and administrative expenses were $3,917,000 for the nine months ended September 30, 2013 compared with $1,696,000 for the nine months ended September 30, 2012.  The increase is principally related to stock-based compensation comprising of stocks and warrants granted to the Company’s officers and director totaling $2,232,000.

RESEARCH AND DEVELOPMENT. Research and Development was $55,000 for the nine months ended September 30, 2013 compared with $0 for the nine months ended September 30, 2012.

OTHER INCOME AND (EXPENSES).  Other income and (expenses) for the nine months ended September 30, 2013 totaled $(78,000), a decrease compared to $(427,000) for the nine months ended September 30, 2012.  The decrease expenses related other income (expenses) was a result of a non-recurring charge totaling $423,000 related to beneficial conversion feature on convertible debts in 2012 that was recorded as interest expense.
 
NET LOSS. Our net loss was $3,398,000 for nine months ended September 30, 2013 compared to a net loss of $1,607,000 for the nine months ended September 30, 2012. The decrease in net loss is attributable to the aforementioned factors.
 
COMPREHENSIVE LOSS: Our comprehensive loss was $3,420,000 for nine months ended September 30, 2013 compared to comprehensive loss of $1,596,000 for the nine months ended September 30, 2012. The decrease in net loss is attributable to the aforementioned factors. 
 
LIQUIDITY AND CAPITAL RESOURCES
 
Stockholders’ deficit totaled $1,832,000 on September 30, 2013 and the working capital deficit was $1,747,000 on such date. We anticipate we may sell additional common stock and issue shares and/or options in exchange for services cover the cash needs of our overhead and the cost of our operations.
 
We had an increase of $549,000 in cash and cash equivalents for the nine months ended September 30, 2013, as a result of cash provided by financing activities.  For the nine months ended September 30, 2013, cash used in operating activities was $459,000 compared to cash of $704,000 used in operating activities for the nine months ended September 30, 2012. Cash used in operating activities was primarily as a result of our net loss primarily related to non-cash expenditures of $2,500,000 of stock-based compensation.  Cash used in investing activities in during the nine months ended September 30, 2013 totaled $179,000 compared $-0- cash used in the same period of 2012 which was primarily related to purchase of fixed assets.  There was $1,200,000 of cash provided by financing activities in the nine months of 2013 as the result of issuance of convertible notes in 2013 compared to $1,012,000 cash provided by financing activities during the same period of 2012.

 
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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 September 30, 2013, we had $640,000 in cash. We intend to satisfy our capital requirements for the next 12 months from our cash on hand and additional sale of debt and/or equity securities.

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.

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.
 
In January 2013, the Company entered into a licensing agreement with a party granting certain licensing rights to the Company's nanostructured metal technology. As consideration: the Company received $180,000 in January 2013, and will receive $30,000 by June 1, 2013; $30,000 by December 31, 2013; $30,000 by December 1, 2014; and $30,000 upon commercial launch by the party or the latest December 1, 2015.  

 
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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 discernible 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.
 
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
 
As a smaller reporting company, we are not required to include disclosure under this item. 
 
ITEM 4. 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 September 30, 2013 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.
 
 
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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 September 30, 2013, 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.

 
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PART II – OTHER INFORMATION

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 September 30, 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 1A. RISK FACTORS

An investment in the Common Stock involves a high degree of risk. In addition to the other information in this Report, the following risk factors should be considered carefully in evaluating the Company and our business. If you decide to buy our securities, you should be able to afford a complete loss of your investment.
 
WE MAY NOT BE ABLE TO SUCCESSFULLY DEVELOP AND COMMERCIALIZE OUR NEW TECHNOLOGIES WHICH WOULD RESULT IN CONTINUED LOSSES.
 
We are currently developing new technologies and a commercial product. We have generated our first revenues but we are unable to project when we will achieve regular profitability, if at all. As is the case with any new technology, we expect the development process to continue. We cannot assure that our resources will be able to develop and commercialize our technology fast enough to meet market requirements. We can also not assure that our technology will gain market acceptance and that we will be able to overcome obstacles, such as potential FDA approvals. The failure to successfully develop and commercialize the technologies would result in continued losses and may require us to curtail operations.
 
THE SUCCESS OF OUR BUSINESS MAY REQUIRE CONTINUED FUNDING. IF WE CANNONT RAISE THE MONEY WE NEED TO SUPPORT OUR OPERATIONS UNTIL WE EARN SIGNIFICANT REVENUES, WE MAY BE REQUIRED TO CURTAIL OR TO CEASE OUR OPERATIONS AND YOU COULD LOSE YOUR ENTIRE INVESTMENT.
 
Our ability to develop our business depends upon our receipt of money to continue our operations while we introduce our products and a market for them develops. If this funding is not received as needed, it is unlikely that we could continue our business, in which case you would lose your entire investment. Our ability to access the capital markets has been hindered generally by the general difficult economic climate, beginning in 2008, for small technology concept companies, without significant revenues or earnings.

To the extent that we need additional funding, we cannot assure you that such financing will be available to us when needed, on commercially reasonable terms, or at all. If we are unable to obtain additional financing, we may be required to curtail the commercialization of our products and possibly cease our operations.

OUR ABILITY TO EFFECTUATE OUR BUSINESS MODEL MAY BE LIMITED, WHICH WOULD ADVERSELY EFFECT OUR BUSINESS AND FINANCIAL CONDITIONS.

Our future performance will depend to a substantial degree upon our ability to effectuate and generate revenues from our licensing and royalty business model. As a result, we may continue to incur substantial operating losses until such time as we are able to generate revenues from the sale or license of our products. There can be no assurance that businesses and customers will adopt our technology and products, or that businesses and prospective customers will agree to pay for or license our products. In the event that we are not able to significantly increase the number of customers that purchase or license our products, or if we are unable to charge the necessary prices or license fees, our financial condition and results of operations will be materially and adversely affected.

 
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WE MAY FACE STRONG COMPETITION FROM LARGER, ESTABLISHED COMPANIES.

We likely will face intense competition from other companies, both globally and within the United States, in the development of haptics and fuel cell technologies, virtually all of which can be expected to have longer operating histories, greater name recognition, larger installed customer bases and significantly more financial resources and research and development facilities than Manhattan Scientifics. There can be no assurance that developments by our current or potential competitors will not render our proposed products obsolete.
 
WE MAY NOT BE ABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY OR WE COULD BECOME INVOLVED IN LITIGATION WITH OTHERS REGARDING OUR INTELLECTUAL PROPERTY. EITHER OF THESE EVENTS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS.

We rely on a combination of intellectual property law, nondisclosure, trade secret and other contractual and technical measures to protect our proprietary right. Our success will depend, in part, on our technology’s commercial viability and on the strength of our intellectual property rights. However, we cannot assure you that these provisions will be adequate to protect our intellectual property. In addition, the laws of certain foreign countries do not protect intellectual property rights to the same extent as the laws of the United States.

Although we believe that our intellectual property does not infringe upon the proprietary rights of third parties, competitors may claim that we have infringed on their products.

We could incur substantial costs in defending ourselves in suits brought against us for alleged infringement of another party’s intellectual property rights as well as in enforcing our rights against others, and if we are found to infringe, the manufacture, sale and use of our or our customers’ or partners’ products could be enjoined. Any claims against us, with or without merit, would likely be time-consuming, requiring our management team to dedicate substantial time to addressing the issues presented. Furthermore, the parties bringing claims may have greater resources than we do.
 
OUR MANAGEMENT IS ABLE TO EXERCISE SIGNIFICANT INFLUENCE OVER ALL MATTERS REQUIRING SHAREHOLDER APPROVAL.
 
Our existing directors and executive officers are the beneficial owners of approximately 18% of the outstanding shares of common stock, excluding stock options and warrants. As a result, our existing directors, executive officers, principal shareholders and their respective affiliates, if acting together, would be able to exercise significant influence over all matters requiring shareholder approval, including the election of directors and the approval of significant corporate transactions. Such concentration of ownership may also have the effect of delaying or preventing a change in control of our company.

 
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THE TRADING PRICE OF OUR COMMON STOCK MAY DECREASE DUE TO FACTORS BEYOND OUR CONTROL.
 
The trading price of our common stock is subject to significant fluctuations in response to numerous factors, including without limitation:
 
 
·  variations in anticipated or actual results of operations;
 
·  announcements of new products or technological innovations by us or our competitors;
 
·  changes in earnings estimates of operational results by analysts;
 
·  inability of market makers to combat short positions on the stock;
 
·  an overall downturn in the financial markets and stock markets;
 
·  the use of stock to pay employees and consultants if sufficient working capital is not available;
 
·  inability of the market to absorb large blocks of stock sold into the market; and
 
·  developments or disputes concerning our intellectual property.

Moreover, the stock market from time-to-time has experienced extreme price and volume fluctuations, which have particularly affected the market prices for small technology companies without significant revenues. These broad market fluctuations may adversely affect the market price of our Common Stock. If our shareholders sell substantial amounts of their common stock in the public market, the price of our common stock could fall. These sales also might make it more difficult for us to sell equity or equity-related securities in the future at a price we deem appropriate.
 
ALL OF OUR CURRENT REVENUE IS GENERATED FROM ONE CUSTOMER.
 
For the year ended December 31, 2012, all of our revenue was generated by one customer, Carpenter Technology Corporation. If Carpenter Technology Corporation was unable to satisfy its obligations under our agreements, it would materially impact our revenue, net income and financial position.

WE HAVE NOT PAID CASH DIVIDENDS AND IT IS UNLIKELY THAT WE WILL PAY CASH DIVIDENDS IN THE FORESEEABLE FUTURE.
 
We plan to use all of our earnings, to the extent we have significant earnings, to fund our operations. We do not plan to pay any cash dividends in the foreseeable future. We cannot guarantee that we will, at any time, generate sufficient surplus cash that would be available for distribution as a dividend to the holders of our Common Stock. You should not expect to receive cash dividends on our Common Stock.
 
WE MAY NOT HAVE SUFFICIENT CAPITAL TO RUN OUR OPERATIONS.

If we are unable to obtain further financing, it may jeopardize our ability to continue our operations. To the extent that additional capital is raised through the sale of equity and/or convertible debt securities, the issuance of such securities could result in dilution to our shareholders and/or increased debt service commitments. If adequate funds are not available, we may be unable to sufficiently develop or maintain our existing operations.

 
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WE HAVE THE ABILITY TO ISSUE ADDITIONAL SHARES OF OUR COMMON STOCK WITHOUT ASKING FOR SHAREHOLDER APPROVAL, WHICH COULD CAUSE YOUR INVESTMENT TO BE DILUTED.
 
Our Certificate of Incorporation currently authorizes the Board of Directors to issue up to 500,000,000 shares of Common Stock and 1,000,000 shares of Preferred Stock. The power of the Board of Directors to issue shares of Common Stock or warrants or options to purchase shares of Common Stock is generally not subject to shareholder approval. Accordingly, any additional issuance of our Common Stock may have the effect of further diluting your investment.
 
We require substantial working capital to fund our business. If we raise additional funds through the issuance of equity, equity-related or convertible debt securities, those securities may have rights, preferences or privileges senior to those of the holders of our Common Stock. The issuance of additional Common Stock or securities convertible into Common Stock by our management will also have the effect of further diluting the proportionate equity interest and voting power of holders of our Common Stock.
 
WE MAY RUN OUT OF AUTHORIZED CAPITAL PRIOR TO RECEIVING SHAREHOLDER APPROVAL TO AMEND OUR CERTIFICATE OF INCORPORATION TO INCREASE OUR AUTHORIZED CAPITAL.
 
As of September 30, 2013, our certificate of incorporation, as amended, authorizes us to issue 500,000,000 shares of common stock. If we are not able to increase our authorized capital, we may not be able to raise additional funds or pay service providers which could be harmful to our business or cause us to cease operations altogether.
 
LIMITED PUBLIC MARKET FOR OUR COMMON STOCK MAY AFFECT OUR SHAREHOLDERS' ABILITY TO SELL OUR COMMON STOCK.
 
Our Common Stock currently is quoted on the Over-The-Counter Bulletin Board, which is generally considered to be a less efficient market than national exchanges. Consequently, the liquidity of our securities could be impaired, not only in the number of securities which could be bought and sold, but also through SEC regulations, delays in the timing of transactions, difficulties in obtaining price quotations, reduction in security analysts' and the new media's coverage of us, if any, and lower prices for our securities than might otherwise be attained. This circumstance could have an adverse effect on the ability of an investor to sell any shares of our common stock as well as on the selling price for such shares. In addition, the market price of our common stock may be significantly affected by various additional factors, including, but not limited to, our business performance, industry dynamics or changes in general economic conditions.
 
APPLICABILITY OF "PENNY STOCK RULES" TO BROKER-DEALER SALES OF OUR COMMON STOCK COULD HAVE A NEGATIVE EFFECT ON THE LIQUIDITY AND MAREKT PRICE OF OUR COMMON STOCK.
 
A penny stock is generally a stock that is not listed on national securities exchange and is quoted on the "pink sheets" or on the OTC Bulletin Board, has a price per share of less than $5.00 and is issued by a company with net tangible assets less than $5 million.
 
The penny stock trading rules impose additional duties and responsibilities upon broker-dealers and salespersons effecting purchase and sale transactions in Common Stock and other equity securities, including determination of the purchaser's investment suitability, delivery of certain information and disclosures to the purchaser, and receipt of a specific purchase agreement before effecting the purchase transaction.
 
Many broker-dealers will not effect transactions in penny stocks, except on an unsolicited basis, in order to avoid compliance with the penny stock trading rules. When our Common Stock is subject to the penny stock trading rules, such rules may materially limit or restrict the ability to resell our Common Stock, and the liquidity typically associated with other publicly traded equity securities may not exist.

 
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
On April 3, 2013, the Company and its wholly-owned subsidiary, Senior Scientific, LLC ("Subsidiary"), entered into Convertible Note Purchase Agreements with Raymond A. Mason, William B. Jones and the Ferdinand J. Crovato Trust (the “April 2013 Investors”) providing for the sale to the April 2013 Investors of Convertible Promissory Notes in the aggregate amount of up to $2,500,000 (the "Convertible Notes"). The closing of the initial $1,000,000 in Convertible Notes occurred on April 3, 2013 and the second tranche of $500,000 closed on October 1, 2013. The balance of the funding will be provided on April 1, 2014 ($500,000) and October 1, 2014 ($500,000).  The Company is on schedule with the instrument assembly and prove-ins set forth in the financing agreement.  In addition, the Company and the Subsidiary entered a Guaranty and Security Agreements with the April 2013 Investors whereby the Company agreed to unconditionally guaranty to the April 2013 Investors the full, prompt and punctual performance with respect to the Convertible Notes, agreed to subordinate any claim that the Company may have against the Subsidiary to that of the April 2013 Investors and granted the April 2013 Investors a security interest in the Company’s assets including its ownership interest in the Subsidiary. 
 
The Convertible Notes bear interest at 8%, mature four (4) years from the date of issuance and are convertible at the April 2013 Investors options at any time upon ten (10) days written notice to the Company into either: (1) the number of membership interests of the Subsidiary equal to the quotient of the principal due under the respective convertible promissory note divided by $2,500,000 multiplied by 18% of the total equity of the Subsidiary outstanding as of the date hereof; or (2) the number of shares of common stock of the Company equal to the quotient of the principal and interest payable under the Convertible Notes divided by a conversion price of $0.055 per share.
 
The Company may not prepay the Convertible Notes. In the event of a default and so long as any default exists, interest on the Convertible Notes will accrue at 10%. The Company must pay all accrued interest on the Convertible Notes on the first calendar day of each quarter, commencing on July 13, 2013.
 
The initial sale of the Convertible Notes in the principal amount of $1,000,000 was completed on April 3, 2013 and the second tranche in the principal amount of $500,000 was completed on October 1, 2013. As of the date hereof, the Company is obligated on $1,500,000 in aggregate face amounts of the Convertible Notes issued to the April 2013 Investors. The Convertible Notes are debt obligations arising other than in the ordinary course of business which constitute direct financial obligations of the Company.
  
During April 2013, the Company issued 175,438 shares of common stock to a consultant for services performed valued at $10,000.
 
During June 2013, the Company issued 132,000 shares of common stock to a consultant for services to be performed over a three month period beginning June 2013 valued at $6,000.
 
During June 2013, the Company issued 2,500,000 shares of common stock to a consultant for services to be performed over a nine month period beginning June 2013 valued at $112,500.

During July 2013, the Company issued 250,000 shares of common stock to a consultant for services to be performed over a 12 month period beginning on June 27, 2013 valued at $11,000.

During September 2013, the Company entered into a Securities Purchase Agreement with an accredited investor pursuant to which the investor provided the Company with deposit in the amount of $20,000 (the "Deposit") and agreed to purchase $100,000 of common stock of the Company at $0.05 per share by October 30, 2013, at which point the Deposit will be returned to the investor. If the investor does not provide $100,000 by October 30, 2013, the Deposit will be converted into an investment at $0.055.
 
The above securities were offered and sold to the parties in private placement transactions made in reliance upon exemptions from registration pursuant to Section 4(2) under the Securities Act of 1933 and Rule 506 promulgated thereunder. Each of the parties are accredited investors as defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933.
 
 
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES
 
None.
 
ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.
 
ITEM 5. OTHER INFORMATION
 
On November 5, 2013, the Company entered into a Conversion Agreement with Marvin Maslow (the "Holder") pursuant to which the Company agreed to convert $1,057,608 of debt (the "Debt"), including principal and interest, currently owed to Holder into 105,761 shares of Series D Preferred Shares of the Company. The Debt has been outstanding since 2007.

The above transactions were approved by the Board of Directors of the Company. The Series D Preferred Stock does not pay dividends and the does not have a liquidation preference. The Holder of the Series D Preferred Stock will be entitled to 20 votes for each share of common stock that the Series D Preferred Stock are convertible into. The Series D Preferred Stock has a conversion price of $0.055 (the “Conversion Price”) and a stated value of $10.00 (the “Stated Value”) per share. Each share of Series D Preferred Stock is convertible, at the option of the Holder, into such number of shares of common stock of the Company as determined by dividing Stated Value by the Conversion Price.

Holder may only convert the Series D Preferred Stock upon certain Convertible Promissory Notes, whether presently outstanding or to be issued, issued to three accredited investors (the "Note Investors") in accordance with those certain Convertible Note Purchase Agreements between the Company and the Note Investors dated April 3, 2013, have either (i) been converted in full or in part by the Note Investors into shares of common stock of the Company, (ii) the Note Investors have sold or assigned all or a part of their Convertible Promissory Notes to third parties, or (iii) the Note Investors have been paid in full or in part. The Holder will only be permitted to convert such number of Series D Preferred Stock equal to the pro rata amount of the Convertible Promissory Notes converted, assigned or paid. In the event the Note Investors agree in writing that these restrictions may be terminated, then the Holder will be entitled to convert the Series D Preferred Stock at the Holder’s election and the above restrictions will be null and void. Additionally, Holder may not convert the Series D Preferred Stock until the ten day average daily trading volume is greater than $20,000.

In the event the Holder terminates its consulting agreement or violates a non-compete covenant, then the Series D Preferred Shares shall be returned to the Company for cancellation and the Company shall be obligated on the Debt.

The issuance of the Series D Preferred Stock was made in reliance upon exemptions from registration pursuant to Section 4(2) under the Securities Act of 1933 and/or Rule 506 promulgated under Regulation D thereunder. The Holder of the Series D Preferred Stock is an accredited investor as defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933. 

 
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ITEM 6. EXHIBITS
 
Index to Exhibits
 
 
4.1   Certificate of Designation for the Series D Preferred Stock (Incorporated by reference to the Form 8-K Current Report filed on November 8, 2013)
     
10.1   Conversion Agreement by and between Manhattan Scientifics Inc. and Marvin Maslow dated November 5, 2013 (Incorporated by reference to the Form 8-K Current Report filed on November 8, 2013)
     
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
     
EX-101.SCH**
 
XBRL Taxonomy Extension Schema Document
     
EX-101.CAL**
 
XBRL Taxonomy Extension Calculation Linkbase
     
EX-101.DEF**
 
XBRL Taxonomy Extension Definition Linkbase
     
EX-101.LAB**
 
XBRL Taxonomy Extension Labels Linkbase
     
EX-101.PRE**
 
XBRL Taxonomy Extension Presentation Linkbase
_________
** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 
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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 14th day of November, 2013.
 
 
MANHATTAN SCIENTIFICS, INC.
 
       
 
By:
/s/ Emmanuel Tsoupanarias
 
 
Name:
Emmanuel Tsoupanarias
 
 
Title:
 
Chief Executive Officer
(Principal Executive and Accounting Officer)
 
       
       
 
By:
/s/ Chris Theoharis
 
 
Name:
Chris Theoharis
 
 
Title:
Treasurer
(Principal Financial Officer)
 
 
 
 
  
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