UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-K
 
 
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the fiscal year ended December 31, 2011
 
 
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the transition period from _______ to _______.
 
 
MANHATTAN SCIENTIFICS, INC.
 
 
(Name of small business issuer in its charter)
 
 
 
Delaware
000-28411
85-0460639
(State of Incorporation)
(Commission File Number)
(IRS Employer Identification No.)

405 Lexington Avenue, 26th Floor, New York, New York, 10174
(Address of principal executive offices) (Zip code)

Issuer's telephone number: (212) 551-0577
Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 par value
(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.
 
Yes ¨ No x
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 ¨
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨
 
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 (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x   No ¨
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer ¨
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 ¨   No x
 
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the issuer as of June 30, 2011 was $22,863,620.  For purposes of this computation, all executive officers, directors and 10% shareholders were deemed affiliates. Such a determination should not be construed as an admission that such 10% shareholders are affiliates.
 
As of March 30, 2012 there were 446,058,609 shares of common stock of the issuer issued and outstanding.
 

 
 
 

TABLE OF CONTENTS
 
 
 
 
PART I
PAGE
ITEM 1.
 
DESCRIPTION OF BUSINESS
 
1
 
ITEM 1A.
 
RISK FACTORS
 
6
 
ITEM 2.
 
DESCRIPTION OF PROPERTIES
 
9
 
ITEM 3.
 
LEGAL PROCEEDINGS
 
9
 
ITEM 4.
 
RESERVED
 
9
 
 
 
 
 
 
 
 
 
 
 
PART II
 
 
 
 
 
 
 
 
 
 
 
ITEM 5.
 
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
 
10
 
ITEM 6
 
SELECTED FINANCIAL DATA
 
13
 
ITEM 7
 
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
14
 
ITEM7A
 
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
16
 
ITEM 8.
 
FINANCIAL STATEMENTS
 
F-1
 
ITEM 9.
 
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
 
17
 
ITEM 9A(T)
 
CONTROLS AND PROCEDURES
 
17
 
ITEM 9B.
 
OTHER INFORMATION
 
18
 
 
 
 
 
 
 
 
 
 
 
PART III
 
 
 
 
 
 
 
 
 
 
 
ITEM 10.
 
DIRECTORS, EXECUTIVE OFFICERS, PROMOTORS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
 
18
 
ITEM 11.
 
EXECUTIVE COMPENSATION
 
20
 
ITEM 12.
 
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
 
21
 
ITEM 13.
 
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
 
22
 
ITEM 14.
 
PRINCIPAL ACCOUNTANT FEES AND SERVICES
 
22
 
ITEM 15.
 
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
 
23
 
 
 
SIGNATURES
 
24
 



 
 
 

PART I

Forward Looking Statements
 
This Form 10-K contains "forward-looking" statements including statements regarding our expectations of our future operations. For this purpose, any statements contained in this Form 10-K 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, competition within our chosen industry, including competition from much larger competitors, technological advances, our ability to obtain approval from the FDA or other governmental agencies and the failure by us to successfully develop business relationships. 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 and mass production of, among other things, the advanced materials, the nanomedicine, the haptics, and the micro fuel cell and mid-range fuel cells; successful protection of our licensed 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 to these forward-looking statements to reflect the effect of events or circumstances that may arise after the date of this report. All written and oral forward-looking statements made subsequent to the date of this report and attributable to us or persons acting on our behalf are expressly qualified in their entirety by this section.
 
ITEM 1. DESCRIPTION OF BUSINESS
 
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 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 using 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 revolutionize how cancer is detected and treated.

 
1
 
 
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 Technology Corporation, (“Carpenter”).   Pursuant to these revenue generating agreements, Carpenter will fully develop, manufacture and market a new class of high strength metals.  Metallicum intends to establish other manufacturing partner relationships witj significant customers in the medical device and prosthetics industries.

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 b eliefs 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 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.
 
 
2
 

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.

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 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 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.

As of December 31, 2011 and 2010, the Company recorded $686,000 and $1,686,000 as revenue for the years ended December 31, 2011 and 2010.  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).
 
 
3
 

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 revolutionize 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 can 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).

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 first 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

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 has the potential to replace these screening tests or the more expensive, invasive tests that follow a positive screening result.

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.
 
 
4
 

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.
 
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.
 
 
 
5
 

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 years ended December 31, 2011 and 2010, all of our revenue was generated by one customer, Carpenter Technology Corporation.  We did not have any significant suppliers.

EMPLOYEES
 
As of December 31, 2011, we had one full-time employee in general management. We do not expect any significant change in the total number of employees in the near future. Most of our research and development work has been performed by employees of our various research and development independent contractors (see below). We have historically indirectly funded the salaries of these individuals through our contract research and development payments to their employers. Although not technically our employees, we have considered these individuals to be an integral part of our research and development team.  None of our employees or contractors is members of any union or collective bargaining organization. We consider our relationships with our employee and our independent contractor employees to be good.
 
As noted above, a significant portion of our research and development has been performed by independent contractors from whom we acquired or licensed certain technologies, and their various employees.  Our independent contractors utilize a number of their own various employees to satisfy their research and development obligations to us, and their employees are considered to be part of our research and development team.
 
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.
 
 
 
6
 
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 o vercome 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.

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.
 
 
7
 
 
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.

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, 2011, 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.
 
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.
 
 
8
 
 
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 December 31, 2011, 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.
 
ITEM 2. DESCRIPTION OF PROPERTIES
 
Our principal executive office is at 405 Lexington Avenue, 26th Floor, New York, New York, 10174. We lease approximately 300 square feet of office space on a month-to-month basis. The aggregate annual rent for this office space was $3,000 in 2010.  We believe our facilities are adequate for our current and planned business operations.
 
ITEM 3. LEGAL PROCEEDINGS
 
We are subject from time to time to litigation, claims and suits arising in the ordinary course of business. As of December 31, 2011, we were not a party to any material litigation, claim or suit whose outcome could have a material effect on our financial statements other than the litigation described above which was subsequently settled.
 
ITEM 4. RESERVED

 
9
 

PART II
 
 
ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
 
Beginning on July 8, 2009, our Common Stock began quotations, and is currently being quoted, on the OTC Bulletin Board under the symbol MHTX.OB.  From May 2007 to July 2009, our common stock was quoted on the OTC Pink Sheets under the symbol “MHTX.PK” after being removed from trading on the Over-The-Counter Bulletin Board.  The following table sets forth for the periods indicated, the high and low per share bid information for our common stock for the fiscal years ended December 31, 2011 and December 31, 2010, as reported by www.otcmarkets.com. Such high and low bid information reflects inter-dealer quotes, without retail mark-ups, mark-downs or commissions and may not represent actual transactions.

2011
 
 
   
 
 
First Quarter
  $ 0.105     $ 0.062  
Second Quarter
  $ 0.083     $ 0.049  
Third Quarter
  $ 0.080     $ 0.035  
Fourth Quarter
  $ 0.070     $ 0.042  

2010
 
 
   
 
 
First Quarter
  $ 0.121     $ 0.080  
Second Quarter
  $ 0.093     $ 0.060  
Third Quarter
  $ 0.070     $ 0.059  
Fourth Quarter
  $ 0.108     $ 0.058  
 
As of March 30, 2012, we had 634 registered shareholders and 446,058,609 shares of Common Stock issued and outstanding.

DIVIDENDS
 
We have never paid any cash dividends. We presently intend to reinvest earnings, if any, to fund the development and expansion of our business and, therefore, do not anticipate paying cash dividends on our common stock in the foreseeable future. The declaration of cash dividends will be at the discretion of our board of directors and will depend upon our earnings, capital requirements, financial position, general economic conditions and other pertinent factors.

RECENT SALES OF UNREGISTERED SECURITIES
 
During   the   past   three   years,   we   have   issued   unregistered   shares   of   common   stock   and options and warrants for the purchase of common stock in the following transactions in reliance on an exemption from registration pursuant to Section 4(2) of the Securities Act:
 
2011

On January 1, 2011, the Company issued 1,000,000 shares of common stock to a consultant for services related to the Company's nanomedicine project with Senior Scientific, Inc. 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.
 
On April 28, 2011, the Company issued 3,000,000 shares of common stock to a consultant for services. The services are being rendered over a thirty-nine months period commencing on January 1, 2011. The shares were valued at $180,000 or $0.06 per share based on the current fair value of such shares on the date of the consulting agreement. For the year ended December 31, 2011, the Company expensed $45,000 with a prepaid consulting expense balance of $135,000 as of December 31, 2011.
 
On May 31, 2011, the Company issued 14,001,000 shares of common stock related to acquisition of Scientific Nanomedicine, Inc. and Senior Scientific, LLC, see Note 11 for further discussions.
 
On August 8, 2011, the Company issued 525,000 shares of common stock for public relations services.  The services are being rendered over a twelve months period commencing on January 1, 2011.  The shares were valued at $42,000 or $0.08 per share based on the current fair value of such shares on the date of the public relations services agreement.  For the year ended December 31, 2011, the Company expensed $42,000.
 
 
10
 

On August 28, 2011, the Company issued a total of 3,000,000 shares of common stock (2,000,000 shares to a director of the Company and 1,000,000 shares to a consultant).  The shares were valued at $210,000 or $0.07 per share based on the current fair value of such shares on the date of the award.

On December 2, 2011, the Company issued 2,000,000 shares of common stock to an individual for cash totaling $100,000 or $0.05 per share.

On December 5, 2011, the Company issued 2,454,991 shares of common stock for legal services over a period of six months.  The shares were valued at $150,000 or $0.08 per share based on the current fair value of such shares on the date of the legal service agreement.  As of December 31, 2011, $25,000 of the total value of these shares has been expensed with $125,000 recorded as prepaid expenses which will be expensed over the service period of legal service agreement.

2010

During February 2010 through March 2010, the Company received $216,000 related to a private placement offering for shares of the Company’s common stock at a price of $0.08 per share for a total of 2,700,000 shares.

In September 2010, the Company received $15,000 related to a private placement offering for shares of the Company’s common stock at a price of $0.06 per share for a total of 250,000 shares.

In July 2010, the Company issued 350,000 shares of common stock to a consultant for services valued at $24,500.  The consultant provided public relations and marketing services for a period of six months having commenced in June 2010.  Also in July 2010, the Company issued 1,000,000 shares of common stock as a signing incentive to a new board of director valued at $70,000.
 
In October 2010, the Company issued 2,000,000 shares of common stock for legal services totaling $120,000.

In November 2010, the Company issued 7,667,000 shares of common stock related to an Acquisition Option Agreement, as further discussed in Note 11 of the Company’s financial statements, with total value of $460,000.

In November 2010, the Company issued 350,000 shares of common stock for consulting services totaling $21,000.

2009
 
In February 2009, the Company issued 2,000,000 shares of common stock for securing a licensing agreement with Los Alamos National Security LLC for the exclusive use of certain technology relating to the manufacture and application of nanstructuring metals and alloys for a total fair value of $33,000.
 
In February 2009, the Company issued 12,250,000 shares of common stock for approximately $201,000 from a private placement offering.
 
In May 2009, the Company issued 2,025,000 shares of common stock related to stock options exercised on a cashless basis. Shares exercisable under the stock option agreement totaled 3,000,000 at an exercise price of $0.013 per share. The closing stock price on the date of exercise was $0.04 per share resulting in 975,000 shares as the portion of the stock option agreement being retained as the cost for the 3,000,000 shares having been exercised on a cashless basis.
 
In May 2009, the Company issued 1,000,000 shares of common stock for legal services with a fair value of $30,000.

 In July 2009, the Company granted options for 500,000 shares of common stock with an exercise price of $0.05 per share to two consultants.  The value of these options totaled $15,000 which was valued using the Black-Scholes option pricing model.
 
In September 2009, the Company entered into an agreement with a consultant and issued 600,000 shares of common stock with a fair value of $35,000.  The consulting agreement is for a twelve month period.  For the year ended December 31, 2009, the Company expensed $12,000 of the value of this consulting agreement and recorded a prepaid expense totaling $23,000 at December 31, 2009.  Additionally, the Company granted warrants for 1,000,000 shares of common stock related to this consulting agreement with exercise prices ranging $0.10 to $0.25 per share.  The value of these warrants approximated $43,000 which was valued using the Black-Scholes option pricing model.  The Company recognized a total of $14,000 of expense related to the value of the warrants for the year ended December 31, 2009.
 
In November 2009, the Company entered into an agreement with a consultant and issued 600,000 shares of common stock with a fair value of $72,000.  The consulting agreement is for a twelve month period.  For the year ended December 31, 2009, the Company expensed $12,000 of the value of this consulting agreement and recorded a prepaid expense totaling $60,000 at December 31, 2009.  Additionally, the Company granted warrants for 1,000,000 shares of common stock related to this consulting agreement with exercise prices ranging $0.15 to $0.30 per share.  The value of these warrants approximated $95,000 which was valued using the Black-Scholes option pricing model.  The Company recognized a total of $16,000 of expense related to the value of the warrants for the year ended December 31, 2009.
 
11
 
 
Securities Authorized for Issuance under Equity Incentive Plans
 
In November 2004, our Board of Directors adopted the 2004 Consultant Stock Plan (the "2004 Plan"). The purpose of this 2004 Consultant Stock Plan is to advance our interests by helping us obtain and retain the services of persons providing consulting services upon whose judgment, initiative, efforts and/or services we are substantially dependent, by offering to or providing those persons with incentives or inducements affording such persons an opportunity to become owners of our capital stock. We reserved 2,000,000 shares of our Common Stock for awards to be made under the 2004 Plan. We filed a registration statement on Form S-8 with the SEC on November 26, 2004 to register the shares underlying the 2004 plan. The 2004 Plan is administered by a committee of two or more members of the Board of Directors or, if no committee is appointed, then by the Board of Directors. The committee, or the Board of Directors if there is no committee, determines who is eligible to receive awards under the plan, grant awards and interpret the 2004 Plan. The number of shares under the 2004 Plan available for grant at December 31, 2011 was 500,000.
 
On May 9, 2005, our Board of Directors adopted the 2005 Equity Compensation Plan (the "2005 Plan"). The purpose of this Plan is to provide incentives to attract, retain and motivate eligible persons whose present and potential contributions are important to our success, by offering them an opportunity to participate in the our future performance through awards of Options, the right to purchase Common Stock and Stock Bonuses. We reserved 10,000,000 shares of our Common Stock for awards to be made under the 2005 Plan. The 2005 Plan is administered by a committee of two or more members of the Board of Directors or, if no committee is appointed, then by the Board of Directors. The committee, or the Board of Directors if there is no committee, determines who is eligible to receive awards under the plan, grant awards and interpret the 2005 Plan. We filed a registration statement on Form S-8 with the SEC on June 8, 2005 to register the shares underlying the 2005 plan. The number of shares under the 2005 Plan available for grant at December 31, 2011 was 4,868,763.
 
Set forth in the table below is information regarding awards made through compensation plans or arrangements through December 31, 2011.
 
Equity Compensation Plan Information
Plan category
 
Number of securities to be issued
upon exercise of outstanding
options, warrants and rights
(a)
 
Weighted-average
exercise price of
outstanding options, warrants and rights
 
Number of securities remaining available for future issuance under equity compensation plans
(excluding securities reflected in column (a))
Equity compensation plans approved by security holders
 
 
—
     
—
 
 
 
—
 
Equity compensation plans not approved by security holders
 
 
—
     
—
 
 
 
30,649,763
 
Total
 
 
—
     
—
 
 
 
30,649,763
 

Exercise prices and weighted-average contractual lives of 30,950,000 stock options, issued outside of the incentive equity plans, outstanding as of December 31, 2011 are as follows:

           
Options Outstanding
   
Options Exercisable
 
Exercise Price
   
Number
Outstanding
   
Weighted Average
Remaining
Contractual Life
   
Weighted Average
Exercise
Price
   
Number
Exercisable
   
Weighted Average
Exercise
Price
 
$ 0.01       25,000,000       5.68       0.01       25,000,000       0.01  
  0.07       6,000,000       9.58       0.07       6,000,000       0.07  
  0.02       3,000,000       1.32       0.02       3,000,000       0.02  
  0.05       1,500,000       1.79       0.05       1,500,000       0.05  
  0.06       1,200,000       3.38       0.06       1,200,000       0.06  

 
12
 

The fair value for options granted were determined using the Black-Scholes option-pricing model.  At December 31, 2010, the 36,700,000 outstanding options had an aggregate intrinsic value of $1,835,000.

The Company issued the following warrants at the corresponding weighted average exercise price as of December 31, 2011.
 
   
Warrants
   
Weighted average
Exercise Price
Outstanding as of December 31, 2009
    4,477,000     $ 0.03  
Issued/Vested
    1,523,000       0.09  
Cancelled/Expired
    0          
Outstanding as of December 31, 2010
    6,000,000       0.07  
Issued/Vested
    2,000,000       0.07  
Cancelled/Expired
    0          
Outstanding as of December 31, 2011
    8,000,000       0.07  
 
Date
 
Number of
Warrants
   
Exercise Price
 
Contractual Life
 
Number of Shares
Exercisable
 
October 11, 2007
    3,200,000       .01   9   years     3,200,000  
November 9, 2007
    800,000       .01   9   years     800,000  
September 8, 2009
    312,000       .10-.25   3   years     312,000  
November 1, 2009
    1,688,000       .15-.30   3   years     1,688,000  
October 21, 2011
    2,000,000       0.07   2  years     2,000,000  
 
    8,000,000          
 
    8,000,000  

The fair value for warrants granted were determined using the Black-Scholes option-pricing model.  During the year ending December 31, 2011, warrants for 2,000,000 shares were granted associated with a convertible note payable with an exercise price of $0.07 per share, see Note 5 for additional discussions.  For the year ended December 31, 2010, there were no warrants granted.
 
ITEM 6. SELECTED FINANCIAL DATA
 
N/A

 
13
 

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis should be read in conjunction with our financial statements and accompanying notes appearing elsewhere in this Form 10-K.

OVERVIEW

We have been acquiring and licensing technologies, directing, supervising and coordinating our research and development efforts, raising capital, and initiating commercialization activities and dialogue with potential customers.  We do not know if our research and development and marketing efforts will be successful, that we will ever have commercially acceptable products, or that we will achieve significant sales of any such products. We operate in an environment of rapid change in technology and we are dependent upon the services of our employees, consultants and independent contractors. If we are unable to successfully bring our technologies to commercialization, we would likely have to significantly alter our business plan and may cease operations.

YEAR ENDED DECEMBER 31, 2011 COMPARED TO YEAR ENDED DECEMBER 31, 2010.

REVENUES. The Company earned $687,000 and $1,686,000 and recorded such amount as revenue for the years ended December 31, 2011 and 2010.  Pursuant to the contract with Carpenter Technology Corp, we agreed to sell certain nanostructured metal technologies 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 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 year ended December 31, 2009, the Company received from Carpenter $0.6 million of income for assisting with the development of the technology and is recognizing this 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 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.

EXPENSES:  The following chart summarizes our operating expenses and other income and expenses as described below:

 
 
Year ended December 31,
 
 
 
2011
 
 
2010
 
General and administrative expenses
 
 
2,541,000
 
 
 
1,520,000
 
Research and development
 
 
204,000
 
 
 
28,000
 
Total operating costs and expenses
   
2,745,000
     
1,548,000
 
 
Net interest expense
 
 
117,000
 
 
 
50,000
 

GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expenses were $2,541,000 for the year ended December 31, 2011 versus general and administrative expenses of $1,520,000 for the year ended December 31, 2010, an overall increase of $1,021,000.  General and administrative expenses increased primarily as a result of increased stock based compensation ($513,000) related to an officer stock option award and consultants stock compensation, and research and development ($176,000).

NET LOSS. We reported a net loss of $2,287,000 for the year ended December 31, 2011 versus a net loss of $43,000 for the year ended December 31, 2010, an overall increase in net loss of $2,244,000, principally resulting from a combination of lower recognized revenues from our technology transfer agreement and increased general and administrative expenses.

 
14
 

LIQUIDITY AND PLAN OF OPERATIONS

Prior to September 2009, the Company had been considered a development stage company. As a result of the September 2009 technology transfer agreement and sale of technology to Carpenter, the Company has fully commenced its planned operations and generation of significant revenues.  Accordingly, we have relied primarily upon private placements and subscription sales of stock to fund our continuing activities and acquisitions. To a limited extent, we have also relied upon borrowing from our officers.

Our working capital was $108,000 on December 31, 2011.  The decrease from December 31, 2010 was primarily the result of increased spending on developing our technologies.  Stockholders’ equity totaled $37,000 on December 31, 2011, a decrease from a surplus of $71,000 on December 31, 2010 as a result of increased net losses during 2011.  Although, we anticipate we may sell additional common stock and issue shares and/or options in exchange for services, we anticipate that in 2012 revenues from our technology transfer agreements will cover our entire overhead and the cost of our operations for the next year.

At December 31, 2011, our primary assets include cash of $157,000, account receivable of $171,000, prepaid expenses of $244,000, and the value of our intellectual property of $1,447,000.

We had a decrease of $898,000 in cash and cash equivalents for the year ended December 31, 2011, as a result of cash used in our operating activities.
 
For the year ended December 31, 2011, cash used in operating activities was $1,196,000 compared to $462,000 of cash provided by operating activities for the year ended December 31, 2010.  The decrease in cash was primarily as a result of a higher net loss of $2,244,000 in 2011.  The net loss for the year ended December 31, 2011, however, did  include non-cash items such as common stock issued for services.  In 2011, the Company issued 12,288,000 shares of common stock for consultant services totaling $804,000 and stock option award to an officer totaling $408,000.
 
We do not expect any significant change in the total number of employees in the near future. We intend to continue to identify and target appropriate technologies for possible acquisition or licensing over the next 12 months, although we have no agreements regarding any such technologies as of the date hereof.

Based upon current projections, our principal cash requirements for the next 12 months consists of (1) fixed expenses, including rent, payroll, investor relations services, bookkeeping services and consultant services and (2) variable expenses, including technology research and development, milestone payments, intellectual property protection, utilities and telephone, office supplies, additional consultants, legal and accounting. As of December 31, 2011, we had $157,000 in cash. We intend to satisfy our capital requirements and cost of our operations for the next 12 months from our cash, revenues from our technology transfer agreements and sale of additional securities to fund research for our nanomedicine projects.

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.
 
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.

 
15
 
 
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.

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 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

N/A
 
 
16
 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
 
 
 
REPORT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
F-2
 
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2011 AND 2010
 
 
F-3
 
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE LOSS FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010
 
 
F-4
 
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31,  2011 AND 2010
 
 
F-5
 
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED
DECEMBER 31, 2011 AND 2010
 
 
F-6
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 
F-7
 
 
 

 
 
F-1
 
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
To the Board of Directors and
 
Stockholders of Manhattan Scientifics, Inc.
 
We have audited the accompanying consolidated balance sheets of Manhattan Scientifics, Inc.  (“the Company”) as of December 31, 2011 and 2010, and the related consolidated statements of operations, stockholders’ equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
 
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Manhattan Scientifics, Inc. at December 31, 2011 and 2010, and the results of its operations, stockholders’ equity and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
 
PMB Helin Donovan, LLP
 
San Francisco, California
 
March 29, 2012
 
 
F-2
 

 
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

   
December 31, 2011
   
December 31, 2010
 
ASSETS
           
Current assets:
           
Cash and cash equivalents
  $ 157,000     $ 1,055,000  
Account receivable
    171,000       -  
Investments-available for sale
    32,000       65,000  
Prepaid expenses and other assets
    244,000       86,000  
Total current assets
    604,000       1,206,000  
                 
Investments
    2,000       2,000  
Property and equipment, net     50,000       -  
Intellectual property, net
    1,447,000       257,000  
Deposit on Acquisition Option Agreement
    -       460,000  
Other asset
    2,000       2,000  
Total assets
  $ 2,105,000     $ 1,927,000  
                 
LIABILITIES
               
Current liabilities
               
Accounts payable and accrued expenses
  $ 252,000     $ 271,000  
Accrued interest and expenses -,related parties
    365,000       327,000  
Note payable to former officers
    450,000       450,000  
Notes payable – other
    225,000       33,000  
Total current liabilities
    1,292,000       1,081,000  
                 
Long-term Liabilities
               
Note payable, related party
    545,000       545,000  
Accrued interest, related party
    231,000       230,000  
Total long-term liabilities
    776,000       775,000  
Total liabilities
    2,068,000       1,856,000  
                 
Commitments and contingencies
    -       -  
                 
STOCKHOLDERS' EQUITY
               
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 outstanding - none
               
Common, authorized 500,000,000 shares, 440,058,609 and 411,769,926 shares issued and outstanding, respectively
    440,000       412,000  
Additional paid-in-capital
    54,984,000       52,726,000  
Other accumulated comprehensive income
    32,000       65,000  
Accumulated deficit
    (55,419,000 )     (53,132,000 )
Total stockholders' equity
    37,000       71,000  
                 
Total liabilities and stockholders' equity
  $ 2,105,000     $ 1,927,000  

The accompanying notes are an integral part of these consolidated financial statements.
 
 
F-3
 
 
 
 
 
 
 
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE LOSS
 
   
Year Ended December 31,
 
   
2011
   
2010
 
             
Revenue
  $ 687,000     $ 1,686,000  
Cost of revenues
    112,000       131,000  
 Gross profit
    575,000       1,555,000  
                 
Operating costs and expenses:
               
General and administrative
    2,541,000       1,520,000  
Research and development
    204,000       28,000  
Total operating costs and expenses
    2,745,000       1,548,000  
                 
Gain (loss) from operations before other income and expenses
    (2,170,000 )     7,000  
                 
Other income and expenses:
               
 Interest and other expenses
    (117,000 )     (50,000 )
                 
                 
NET LOSS BEFORE INCOME TAXES
  $ (2,287,000 )   $ (43,000 )
                 
Income tax
    -       -  
                 
NET LOSS AFTER INCOME TAXES
  $ (2,287,000 )   $ (43,000 )
                 
Other comprehensive income:
               
  Unrealized loss on available for sale investments
    (33,000 )     (86,000 )
                 
 COMPREHENSIVE LOSS
  $ (2,320,000 )   $ (129,000 )
                 
BASIC LOSS PER COMMON SHARE:
               
Weighted average number of common shares
               
outstanding
    425,578,607       401,924,304  
                 
Basic loss per common share
  $ (0.00 )   $ (0.00 )
                 

The accompanying notes are an integral part of these consolidated financial statements.
 
F-4
 
 
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARIES
 Consolidated Statements of Stockholders' Equity
 For The Years Ended December 31, 2011 And 2010
 
 
 
Preferred Stock
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$.001 Par Value
 
 
Common Stock
 
 
Additional
 
 
Other
 
 
 
 
 
 
 
 
 
Series B
 
 
$.001 Par Value
 
 
Paid-in
 
 
Comprehensive
 
 
Accumulated
 
 
 
 
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
Capital
 
 
Income
 
 
Deficit
 
 
Total
 
Balance December 31, 2009
 
 
49,999
 
 
$
-
 
 
 
397,452,926
 
 
$
398,000
 
 
$
51,692,000
 
 
$
151,000
 
 
$
(53,089,000
)
 
$
(848,000
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Issuance of shares for cash
 
 
 
 
 
 
 
 
 
 
2,950,000
 
 
 
3,000
 
 
 
228,000
 
 
 
 
 
 
 
 
 
 
 
231,000
 
Issuance of shares related to
  required deposit on Acquisition
  Option Agreement
 
 
 
 
 
 
 
 
 
 
7,667,000
 
 
 
7,000
 
 
 
453,000
 
 
 
 
 
 
 
 
 
 
 
460,000
 
Issuance of shares for services
 
 
 
 
 
 
 
 
 
 
3,700,000
 
 
 
4,000
 
 
 
231,000
 
 
 
 
 
 
 
 
 
 
 
235,000
 
Vesting of stock  warrants
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
122,000
 
 
 
 
 
 
 
 
 
 
 
122,000
 
Comprehensive loss
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(86,000
)
 
 
 
 
 
 
(86,000
)
Net loss
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(43,000
)
 
 
(43,000
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance December 31, 2010
 
 
49,999
 
 
$
-
 
 
 
411,769,926
 
 
$
412,000
 
 
$
52,726,000
 
 
$
65,000
 
 
$
(53,132,000
)
 
$
71,000
 
                                                               
Issuance of shares for cash
 
 
 
 
 
 
 
 
 
 
2,000,000
 
 
 
2,000
 
 
 
98,000
 
 
 
 
 
 
 
 
 
 
100,000
 
Issuance of shares related to
  acquisition of Senior Scientific
  and Scientific Nanomedicine
 
 
 
 
 
 
 
 
 
 
14,001,000
 
 
 
14,000
 
 
 
885,000
 
 
 
 
 
 
 
 
 
 
899,000
 
Issuance of shares for services
  Rendered
 
 
 
 
 
 
 
 
 
 
12,287,683
 
 
 
12,000
 
 
 
792,000
 
 
 
 
 
 
 
 
 
 
804,000
 
Recognition of debt discount on
  warrants associated with debt
                                   
         75,000
                     
75,000
 
Stock option award – fully vested
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
408,000
 
 
 
 
 
 
 
 
 
 
 
408,000
 
Comprehensive loss
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(33,000)
 
 
 
 
 
 
 
(33,000)
 
Net loss
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(2,287,000)
 
 
 
(2,287,000
)
                                                               
Balance December 31, 2011
 
 
49,999
 
 
$
-
 
 
 
440,058,609
 
 
$
440,000
 
 
$
54,984,000
 
 
$32,000
 
 
$
(55,419,000
)
 
$
37,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

The accompanying notes are an integral part of these consolidated financial statements.
 
F-5
 
 
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 
       
   
YEAR ENDED DECEMBER 31,
 
   
2011
   
2010
 
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net loss
  $ (2,287,000 )   $ (43,000 )
Adjustments to reconcile net loss to net cash used in operating activities:
               
Common stock issued for services
    480,000       235,000  
Stock options issued for services
    408,000       122,000  
Depreciation and amortization
    121,000       33,000  
Changes in:
               
Accounts receivable
    (171,000 )     -  
Prepaid expenses and other assets
    166,000       (3,000 )
Acounts payable     67,000       52,000  
Accrued interest and expenses,related parties
    20,000       66,000  
                 
Net cash provided by (used in) operating activities
    (1,196,000 )     462,000  
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Purchase of property and equipment
    (2,000 )     -  
                 
Net cash used in investing activities
    (2,000 )     -  
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Proceeds from note payable
    200,000       -  
Proceeds from issuance of common stock, net of offering costs
    100,000       231,000  
                 
 Net cash provided by financing activities
    300,000       231,000  
                 
                 
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
    (898,000 )     693,000  
Cash and cash equivalents, beginning of period
    1,055,000       362,000  
                 
CASH AND CASH EQUIVALENTS, END OF PERIOD
  $ 157,000     $ 1,035,000  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
               
Interest paid
  $ -     $ -  
                 
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:
         
Issuance of 14,001,000 common shares for acquisition of Senior Scientific
  and Scientific Nanomedicine
  $ 899,000     $ -  
Recognition of debt discount on warrants associated with debt
  $ 75,000     $ -  
Issuance of 7,667,000 common shares related to deposit for Acquisition Option
  Agreement
  $ -     $ 460,000  
Issuance of 2,000,000 common shares related to licensing agreement
  $ -     $ -  
Issuance of 2,200,000 common shares for prepaid expenses
  $ -     $ -  
Exercise of options for 2,025,000 common shares on a cashless basis
  $ -     $ -  

The accompanying notes are an integral part of these consolidated financial statements.
 
F-6
 
MANHATTAN SCIENTIFICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2011 AND 2010


NOTE 1 – 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”), Tamarack Storage Devices, Inc. (“Tamarack”) and Teneo Computing, Inc. (“Teneo”) (collectively “the Company”), a development stage enterprise.  Currently, Metallicum is the only operating subsidiary; 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 nano-techonogies and nano-medicine. 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.
 
Metallicum is a nanotechnology start-up company located in Santa Fe, New Mexico. Metallicum Inc. has focused on the development and manufacture 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 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 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 our 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”). 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 has agreed to purchase all of the common stock of Nanomedicine. The purchase price for the common stock of Nanomedicine is 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 has agreed to purchase all of the membership interests of Senior Scientific. The purchase price for the membership interests of Senior Scientific is 1,000 restricted shares of the Company’s voting common stock. Senior Scientific operates a research laboratory in New Mexico.

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.

 
F-7
 
MANHATTAN SCIENTIFICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2011 AND 2010
 
 
 
NOTE 1 – ORGANIZATION AND OPERATIONS (Continued)
 
Prior to September 2009, the Company had been considered a development stage company. As a result of the September 2009 technology transfer agreement with 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 2 - SUMMARY OF SIGNIFICANT ACCOUTING POLICIES AND RELATED MATTERS

BASIS OF CONSOLIDATION:

The consolidated financial statements include the accounts of Manhattan Scientific, Inc. and its wholly owned subsidiaries Tamarack, Teneo and Metallicum. All significant intercompany balances and transactions have been eliminated. The accompanying consolidated financial statements include the operating activities of Metallicum, Inc. for the years ended December 31, 2011 and 2010.

The fiscal year end of the Company is December 31.

USE OF ESTIMATES:

The preparation of consolidated 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 amounts in the financial statements and accompanying notes. Actual results could differ from those estimates.

Management makes estimates that affect, carrying value of the Company’s patents, deferred income tax assets, estimated useful lives of property and equipment, useful lives of intangible assets,  accrued expenses, fair value of equity instruments and reserves for any other commitments or contingencies. Any adjustments applied to estimates are recognized in the year in which such adjustments are determined.

CASH AND CASH EQUIVALENTS:

The Company considers all highly liquid investments purchased with an original maturity of three months or less at the time of purchase to be cash equivalents for the purposes of the statement of cash flows.

CASH CONCENTRATION:

 The Company’s cash accounts are fully insured at December 31, 2011 and 2010.

PROPERTY AND EQUIPMENT:

Property and equipment are recorded at cost. Expenditures for major additions and improvements are capitalized, and minor replacements, maintenance, and repairs are charged to expense as incurred. When property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes (generally 3 to 7 years, using the straight-line method for financial statement purposes)  Depreciation expense for the year ended December 31, 2011 was $12,000.
 
 
F-8
 
MANHATTAN SCIENTIFICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2011 AND 2010
 
 

 
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RELATED MATTERS (Continued)
 
IMPAIRMENT OF LONG-LIVED ASSETS:

The Company applies the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 360-10, Property, Plant and Equipment, where applicable to all long lived assets. FASB ASC 360-10 addresses accounting and reporting for impairment and disposal of long-lived assets. The Company periodically evaluates the carrying value of long-lived assets to be held and used in accordance with FASB ASC 360-10. FASB ASC 360-10 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair market values are reduced for the cost of disposal.
 
INTANGIBLE ASSETS:

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. At December 31, 2011 and 2010, accumulated amortization was $104,000 and $75,000. 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 December 31, 2011 and 2010, accumulated amortization was $10,000 and $7,000. 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 December 31, 2011, accumulated amortization was $77,000.

INCOME TAXES:

The Company accounts for income taxes under an asset and liability approach. This process involves calculating the temporary and permanent differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The temporary differences result in deferred tax assets and liabilities, which would be recorded on the Company’s consolidated balance sheets in accordance with ASC 740, which established financial accounting and reporting standards for the effect of income taxes. The Company must assess the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent the Company believes that recovery is not likely, the Company must establish a valuation allowance. Changes in the Company’s valuation allowance in a period are recorded through the income tax provision on the consolidated statements of operations.

On January 1, 2007, the Company adopted ASC 740-10 (formerly known as FIN No. 48, Accounting for Uncertainty in Income Taxes). ASC 740-10 clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements and prescribes a recognition threshold and measurement attributes for financial statement disclosure of tax positions taken or expected to be taken on a tax return. Under ASC 740-10, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, ASC 740-10 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. As a result of the implementation of ASC 740-10, the Company recognized no material adjustment in the liability for unrecognized income tax benefits.

 
F-9
 
MANHATTAN SCIENTIFICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2011 AND 2010
 
 
 
 
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RELATED MATTERS (Continued)

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.

RESEARCH AND DEVELOPMENT:

Research and development costs are expensed as incurred and amounted to $204,000 and $28,000 for the years ended December 31, 2011 and 2010.

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 includes 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.
 
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 10).
 
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.

 
F-10
 
MANHATTAN SCIENTIFICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2011 AND 2010
 
 
 
 
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RELATED MATTERS (Continued)

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 no 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.

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 December 31, 2011 and 2010 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 December 31, 2011 and 2010 because of the relative short term nature of these instruments. At December 31, 2011 and 2010, the fair value of the Company’s debt approximates carrying value. The fair value of the Company’s available for sale securities was $32,000 and $65,000 at December 31, 2011 and 2010, respectively, and these securities are classified as Level 1.

 
F-11
 
MANHATTAN SCIENTIFICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2011 AND 2010

 
 
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RELATED MATTERS (Continued)

RECENT ACCOUNTING PRONOUNCEMENTS:

In December 2011, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2011-12, Deferral of the Effective Date for Amendments to the Presentation of Reclassification of Items Out of Accumulated Other Comprehensive Income . In June 2011, the FASB issued ASU 2011-05, Comprehensive Income: Presentation of Comprehensive Income , which requires an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. It eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders' equity. ASU 2011-05 does not change the items which must be reported in other comprehensive income, how such items are measured or when they must be reclassified to net income. ASU 2011-12 only defers those changes in ASU 2011-05 that relate to the presentation of reclassification adjustments. Both ASUs are effective for interim and annual periods beginning after December 15, 2011. Our adoption of this ASU is not expected to have a material impact on our consolidated financial statements.

In September 2011, the FASB issued ASU No. 2011-08, Testing Goodwill for Impairment, which provides entities testing goodwill for impairment to now have an option of performing a qualitative assessment before having to calculate the fair value of a reporting unit. If an entity determines, on the basis of qualitative factors, that the fair value of the reporting unit is more-likely-than-not less than the carrying amount, the existing quantitative impairment test is required. Otherwise, no further impairment testing is required. This ASU is effective for fiscal years beginning after December 15, 2011. Our adoption of this ASU is not expected to have a material impact on our consolidated financial statements.

In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement: Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs , which converges common fair value measurement and disclosure requirements in accordance with GAAP and International Financial Reporting Standards, or IFRS. This ASU is effective for interim and annual periods beginning after December 15, 2011. Our adoption of this ASU is not expected to have a material impact on our consolidated financial statements.

NOTE 3 – 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 December 31, 2011 and 2010, 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 $32,000 and $65,000 as of December 31, 2011 and 2010, respectively.

The Company has an additional investment in Aprils, Inc. which is accounted for at a cost of $2,000.

 
F-12
 
MANHATTAN SCIENTIFICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2011 AND 2010
 
 
 
 
NOTE 4 – 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 December 31, 2011 and 2010 comprised of loans payable 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.  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 $50,000 and $50,000 for the years ended December 31, 2011 and 2010, respectively.  Accrued interest related to these notes payable approximated $432,000 and $382,000 as of December 31, 2011 and 2010, respectively and is included in accrued liabilities, related parties.

The related party note payable of $545,000 and its accrued interest have been classified to long term at December 31, 2011 and 2010 to long-term because the holder has waived his right to call the note and related interest until after March 31, 2013.

NOTE 5 –NOTE PAYABLE – OTHER

On October 21, 2011, the Company issued a convertible note for up to $300,000 of which $200,000 was received as of December 31, 2011.  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 holder on the $200,000 amount received is entitled to a warrant for 2,000,000 shares of the Company’s common stock with an exercise price of $0.05 and 2 year life.  The conversion feature to the note payable has been accounted for as an original issue discount approximating $98,000 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 $101,000 which has been allocated to the note’s fully accrete value of $298,000 (original note amount plus original debt discount) on proportionate basis which amounted to $75,000.  The warrant value of $98,000 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%.  As of December 31, 2011, the has recorded an expense associated with original debt discount of $38,000 and expense associated with the debt discount (warrants) of $29,000.  Accordingly, the carrying net value of this note at December 31, 2011 totals $192,000, comprising of $200,000 (original face value) plus accreted original debt discount of $38,000 less amortized debt discount of $46,000.

During the years ended December 31, 2005 and 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.

NOTE 6 – CAPITAL TRANSACTIONS

Preferred Stock
 
The Company has a total of 1,000,000 shares of authorized preferred shares which are segregated into three classes of preferred stock.

The Company has 182,525 authorized shares of convertible, redeemable, 10 percent cumulative, Class A, Preferred Stock with $0.001 par value. One Class A, Preferred share is convertible into 50 restricted common share and will be entitled to the number of votes equal to the number of shares of common stock into which such holder’s shares of Series A Preferred stock could be converted at the time of the vote. Class A, Preferred Stock is redeemable by the Company at $15 per share.  Upon liquidation the holders of Series A Preferred stock will be entitled to be paid out of the assets available for distribution of the corporation an amount equal to $10 per share, before any payment will be made to the common shareholders.  As of December 31, 2011 and 2010, no shares of Preferred Stock were issued and outstanding.

The Company has 250,000 authorized shares of Class B, Preferred Stock with $0.001 par value.  As of December 31, 2011 and 2010, 49,999 shares of Preferred Stock were issued and outstanding.  Series B preferred shares are convertible at a rate of 1 Series B preferred share to 10 common shares.

 
F-13
 
MANHATTAN SCIENTIFICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2011 AND 2010

 
 
NOTE 6 – CAPITAL TRANSACTIONS (Continued)

The Company has 14,000 authorized shares of redeemable, convertible, Class C, Preferred Stock with $100 stated value.  Class C, Preferred Stock is not entitled to receive dividends unless dividends are paid on common stock.  Upon liquidation Class C, Preferred Stock shall be treated as if it were converted to common stock prior to liquidation. Class C, Preferred Stock is convertible at $100 divided by the 10 day average closing price of common stock.  The Class C, Preferred Stock is redeemable by the Company at the stated value. As of December 31, 2011 and 2010, no shares of Preferred Stock were issued and outstanding.

The Company has 553,475 shares undesignated blank check preferred stock, $0.001 par value, authorized, none outstanding.  The preferred shares are to be issued in such series and to have such rights, preferences, and designation as determine by the Board of Directors of the Company.

Common Stock
 
The Company has a total of 500,000,000 shares of authorized common shares.  As of December 31, 2011 and 2010, 425,578,607 and 411,769,926 shares of common stock were issued and outstanding, respectively.

Stocks issued during 2011
 
On January 1, 2011, the Company issued 1,000,000 shares of common stock to a consultant for services related to the Company's nanomedicine project with Senior Scientific, Inc. 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.
 
On April 28, 2011, the Company issued 3,000,000 shares of common stock to a consultant for services. The services are being rendered over a thirty-nine months period commencing on January 1, 2011. The shares were valued at $180,000 or $0.06 per share based on the current fair value of such shares on the date of the consulting agreement. For the year ended December 31, 2011, the Company expensed $45,000 with a prepaid consulting expense balance of $135,000 as of December 31, 2011.
 
On May 31, 2011, the Company issued 14,001,000 shares of common stock related to acquisition of Scientific Nanomedicine, Inc. and Senior Scientific, LLC,  valued at $899,000, see Note 11 for further discussions.
 
On August 8, 2011, the Company issued 525,000 shares of common stock for public relations services.  The services are being rendered over a twelve months period commencing on January 1, 2011.  The shares were valued at $42,000 or $0.08 per share based on the current fair value of such shares on the date of the public relations services agreement.  For the year ended December 31, 2011, the Company expensed $42,000.

On August 28, 2011, the Company issued a total of 3,000,000 shares of common stock (2,000,000 shares to a director of the Company and 1,000,000 shares to a consultant).  The shares were valued at $210,000 or $0.07 per share based on the current fair value of such shares on the date of the award.

On December 2, 2011, the Company issued 2,000,000 shares of common stock to an individual for cash totaling $100,000 or $0.05 per share.

On December 5, 2011, the Company issued 2,454,991 shares of common stock for legal services over a period of six months.  The shares were valued at $150,000 or $0.08 per share based on the current fair value of such shares on the date of the legal service agreement.  As of December 31, 2011, $25,000 of the total value of these shares has been expensed with $125,000 recorded as prepaid expenses which will be expensed over the service period of legal service agreement.

Stocks issued during 2010

During February 2010 through March 2010, the Company received $216,000 related to a private placement offering for shares of the Company’s common stock at a price of $0.08 per share for a total of 2,700,000 shares. The private placement offering originally provided for the offer and sale of up to 5,000,000 unregistered shares of the Company’s common stock which has since been closed as of March 2010 of which of total of 2,700,000 shares had been sold.

 
F-14
 
MANHATTAN SCIENTIFICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2011 AND 2010

 
 
NOTE 6 – CAPITAL TRANSACTIONS (Continued)

In September 2010, the Company received $15,000 related to a private placement offering for shares of the Company’s common stock at a price of $0.06 per share for a total of 250,000 shares.

In July 2010, the Company issued 350,000 shares of common stock to a consultant for services valued at $24,500.  The consultant provided public relations and marketing services for a period of six months having commenced in June 2010.  Also in July 2010, the Company issued 1,000,000 shares of common stock as a signing incentive to a new board of director valued at $70,000.
In October 2010, the Company issued 2,000,000 shares of common stock for legal services totaling $120,000.

In November 2010, the Company issued 7,667,000 shares of common stock related to an Acquisition Option Agreement, as further discussed in Note 11, with total value of $460,000.

In November 2010, the Company issued 350,000 shares of common stock for consulting services totaling $21,000.

Options
 
In 2000, the Company’s Board of Directors adopted the 2000 Equity Incentive Plan (the "2000 Plan"). The 2000 Plan authorizes the issuance of options, right to purchase Common Stock and stock bonuses to officers, employees, directors and consultants. The Company reserved 30,000,000 shares of common Stock for awards to be made under the 2000 Plan.

On September 14, 2001, the Company filed a registration statement on Form S-8 to register 900,000 of these shares. On November 19, 2001, an additional 550,000 shares of common stock were registered for issuance under the 2000 Plan. On January 30, 2002, an additional 975,000 shares of common stock were registered for issuance under the 2000 Plan. On March 22, 2002, an additional 925,000 shares of common stock were registered for issuance under the 2000 Plan. On July 12, 2002, an additional 990,000 shares of common stock were registered for issuance under the 2000 Plan. On January 17, 2003, the Company registered an additional 8,000,000 of common stock for issuance under the 2000 Plan.

The 2000 Plan is administered by a committee of two or more members of the Board of Directors or, if no committee is appointed, then by the Board of Directors. The 2000 Plan allows for the issuance of incentive stock options (which, pursuant to Section 422 of the Internal Revenue Code, can only be granted to employees), non-qualified stock options, stock appreciation rights, stock awards, or stock bonuses. The committee, or the Board of Directors if there is no committee, determines the type of option granted, the exercise price, the option term, which may be no more than ten years, terms and conditions of exercisability and methods of exercise. Options must vest within ten-years. Under the 2000 Plan, the exercise price may not be less than fair market value on the date of grant for the incentive stock options. The 2000 Plan also allows for the granting of Stock Appreciation Rights. No Stock Appreciation Rights have been granted. The number of shares under the 2000 Plan available for grant at December 31, 2010 was 25,281,000.

In November 2004, the Company’s Board of Directors adopted the 2004 Consultant Stock Plan (the "2004 Plan"). The purpose of this 2004 Consultant Stock Plan is to advance the Company’s interests by helping the Company obtain and retain the services of persons providing consulting services upon whose judgment, initiative, efforts and/or services we are substantially dependent, by offering to or providing those persons with incentives or inducements affording such persons an opportunity to become owners of our capital stock.    The Company reserved 2,000,000 shares of Common Stock for awards to be made under the 2004 Plan. A registration statement on Form S-8 was filed with the SEC on November 26, 2004 to register the shares underlying the 2004 plan. The 2004 Plan is administered by a committee of two or more members of the Board of Directors or, if no committee is appointed, then by the Board of Directors. The committee or the Board of Directors if there is no committee, determines who is eligible to receive awards under the plan, grant awards and interpret the 2004 Plan. The number of shares under the 2004 Plan available for grant at December 31, 2010 was 500,000.

On May 9, 2005, the Company’s Board of Directors adopted the 2005 Equity Compensation Plan (the "2005 Plan"). The purpose of this Plan is to provide incentives to attract, retain and motivate eligible persons whose present and potential contributions are important to our success, by offering them an opportunity to participate in the Company’s future performance through awards of Options, the right to purchase Common Stock and Stock Bonuses. The Company reserved 10,000,000 shares of Common Stock for awards to be made under the 2005 Plan. The 2005 Plan is administered by a committee of two or more members of the Board of Directors or, if no committee is appointed, then by the Board of Directors. The committee or the Board of Directors if there is no committee, determines who is eligible to receive awards under the plan, grant awards and interpret the 2005 Plan. A registration statement on Form S-8 was filed with the SEC on June 8, 2005 to register the shares underlying the 2005 plan. The number of shares under the 2005 Plan available for grant at December 31, 2010 was 4,868,763.

 
F-15
 
MANHATTAN SCIENTIFICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2011 AND 2010
 
 

 
NOTE 6 – CAPITAL TRANSACTIONS (Continued)

On August 5, 2011, the Company awarded the Chief Executive Officer an option for 6,000,000 shares of common stock vesting immediately, exercise price of $0.07 per share, and 10 year life.  The fair value of this option award totaled $408,000 based on the Black-Scholes option pricing model using the following assumptions: 10 year term; volatility rate of 135%; and discount rate of 2.5%.
 
Set forth in the table below is information regarding awards made through compensation plans or arrangements through December 31, 2011, the most recently completed fiscal year.

Equity Compensation Plan Information
Plan category
 
Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
(a)
 
Weighted-average
exercise price of
outstanding options,
warrants and rights
Number of securities remaining
available for future issuance
under equity compensation
plans (excluding securities
reflected in column (a))
Equity compensation plans approved by security holders
 
 
—
 
 
 
—
 
—
Equity compensation plans not approved by security holders
 
 
—
 
 
 
—
 
30,649,763
Total
 
 
—
 
 
 
—
 
30,649,763

A summary of the Company’s stock option activity and related information is as follows:

   
Number
of Options
   
Exercise Price
Per Share
   
Weighted Average
Exercise Price
   
Number of Options
Exercisable
 
Outstanding as of December 31, 2009
    31,560,000          
 
      31,560,000  
Expired
    (610,000 )     2.25-2.40       2.37       (610,000 )
Outstanding as of December 31, 2010
    30,950,000                       30,950,000  
Granted
    6,000,000       0.07       0.07       6,000,000  
Expired
    (250,000 )     0.39       0.39       (250,000 )
Outstanding as of December 31, 2011
    36,700,000                       36,700,000  

Exercise prices and weighted-average contractual lives of 36,700,000 stock options outstanding as of December 31, 2011 are as follows:
 
           
Options Outstanding
   
Options Exercisable
 
Exercise Price
   
Number
Outstanding
   
Weighted Average
Remaining
Contractual Life
   
Weighted Average
Exercise
Price
   
Number
Exercisable
   
Weighted Average
Exercise
Price
 
$ 0.01       25,000,000       5.68       0.01       25,000,000       0.01  
  0.07       6,000,000       9.58       0.07       6,000,000       0.07  
  0.02       3,000,000       1.32       0.02       3,000,000       0.02  
  0.05       1,500,000       1.79       0.05       1,500,000       0.05  
  0.06       1,200,000       3.38       0.06       1,200,000       0.06  
 
 
The fair value for options granted were determined using the Black-Scholes option-pricing model.

At December 31, 2011, the 36,700,000 outstanding options had an aggregate intrinsic value of $1,835,000.

 
F-16
 
MANHATTAN SCIENTIFICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2011 AND 2010
 
 
 
 
NOTE 6 – CAPITAL TRANSACTIONS (Continued)

Warrants:
The Company issued the following warrants at the corresponding weighted average exercise price as of December 31, 2011.

   
Warrants
   
Weighted average
Exercise Price
 
Outstanding as of December 31, 2009
    4,477,000     $ 0.03  
Issued/Vested
    1,523,000       0.09  
Cancelled/Expired
    0          
Outstanding as of December 31, 2010
    6,000,000       0.07  
Issued/Vested
    2,000,000       0.07  
Cancelled/Expired
    0          
Outstanding as of December 31, 2011
    8,000,000       0.07  
 
 
Date
 
Number of
Warrants
   
Exercise Price
 
Contractual Life
 
Number of Shares
Exercisable
 
October 11, 2007
    3,200,000       .01   9   years     3,200,000  
November 9, 2007
    800,000       .01   9   years     800,000  
September 8, 2009
    312,000       .10-.25   3   years     312,000  
November 1, 2009
    1,688,000       .15-.30   3   years     1,688,000  
October 21, 2011
    2,000,000       0.07   2  years     2,000,000  
 
    8,000,000          
 
    8,000,000  
 
The fair value for warrants granted were determined using the Black-Scholes option-pricing model.  As of December 31, 2011, warrants for 2,000,000 shares were granted associated with a convertible note payable with an exercise price of $0.07 per share, see Note 5 for additional discussions.  For the year ended December 31, 2010, there were no warrants granted.

NOTE 7 – INCOME TAXES

The provision for income taxes on the statements of operations consists of $-0- for each of the years ended December 31, 2011 and 2010.    Deferred tax assets are comprised of the following at December 31:
 
 
 
2011
 
2010
Net operating loss carryforward
 
  $
9,552,000
 
 
  $
8,937,000
 
Temporary differences
 
 
5,277,000
 
 
 
4,922,000
 
Less valuation allowance
 
 
(14,829,000
)
 
 
(13,859,000
)
Deferred tax asset, net
   
-
     
-
 
 
Deferred taxes arise from temporary differences in the recognition of certain expenses for tax and financial reporting purposes. At December 31, 2011 and 2010, management determined that realization of these benefits is not assured and has provided a valuation allowance for the entire amount of such benefits. At December 31, 2011 and 2010, net operating loss carryforwards were approximately $37,428,000 and $35,141,000, respectively, for federal tax purposes that expire at various dates from 2012 through 2030 and for state tax purposes expire in 2012 through 2021.

Utilization of net operating loss carryforwards may be subject to substantial annual limitations due to the “change in ownership” provisions of the Internal Revenue Code of 1986, as amended, and similar state regulations. The annual limitation may result in the expiration of substantial net operating loss carryforwards before utilization.

For December 31, 2011 and 2010, the provision for income taxes differs from the amount computed by applying the U.S. federal statutory tax rate (34% in 2011 and 2010) to income taxes as follows:

 
 
2011
 
2010
Tax benefit computed at 34%
 
$
615,000
 
 
$
24,000
 
Change in valuation allowance
 
 
(970,000
)
 
 
(73,000
)
Change in carryovers and tax attributes
 
 
355,000
 
 
 
49,000
 
Income tax provision
   
-
     
-
 
 

 
F-17
 
MANHATTAN SCIENTIFICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2011 AND 2010

 
NOTE 8 – COMMITMENTS

Operating Leases
The Company’s principal executive offices in New York are leased on a month to month basis for $500 per month.  For each of the years ended December 31, 2011 and 2010, rent expense was $6,000.

Litigation
The Company is subject from time to time to litigation, claims and suits arising in the ordinary course of business.  As of December 31, 2011 and 2010, the Company was not party to any material litigation, claims or suit whose outcome could have material effect to the financial statements.

License Agreement
As discussed in Note 2, 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.  Under the terms of the agreement, the Company may be required to pay royalties, as defined, to the licensors.  The license rights also require the Company to meet certain milestones.  Twelve months from the effective date of the license rights agreement Manhattan will initiate negotiations with at least five companies regarding manufacture and distribution of licensed products.  Within twenty-four months Manhattan will establish capability for manufacturing a licensed product in New Mexico and within thirty-six months Manhattan will either manufacture a licensed product or close a sublicense agreement, or initiate a request for required government approval for a licensed product.

 
F-18
 
MANHATTAN SCIENTIFICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2011 AND 2010
 
 

 
NOTE 9 – ACQUISITION OF METALLICUM, INC.

In June 2008, the Company completed the purchase of Metallicum, Inc., a privately held research and development company of nano-structured materials, by acquiring all of the outstanding capital stock of Metallicum, Inc. for a total purchase price of $305,000. Metallicum, Inc.’s results of operations have been included in the consolidated financial statements since the date of acquisition. As a result of the acquisition, the Company is expected to be a leading provider of nano-structured materials and uses of these materials.

The purchase price exceeded the fair values of the net assets acquired by $305,000, and this total amount was assigned to “License Agreements,” which are being amortized on the straight-line method over the estimated remaining lives of ten years.

In connection with the Metallicum acquisition, the Company has agreed to pay additional consideration in future periods, based upon the attainment by the acquired entity of defined operating objectives. In accordance with FASB ASC 805, the Company does not accrue contingent consideration obligations prior to the attainment of the objectives. At December 31, 2011, maximum potential future consideration pursuant to such arrangements, to be resolved over the following years, is the potential issuance of 15 million restricted shares of the Company’s common stock having a current approximate value of $750,000. Any such payments would result in increases in intangible assets.

The required milestones for the issuance of these contingent shares are as follows:

1.
Metallicum is granted an exclusive license by The Los Alamos National Laboratory (LANL) on patent numbers U.S.7152448, U.S.6399215 and U.S. 6197129 related to nanostructured materials.
2.
Metallicum sells nanostructured titanium to a partner or customer company which manufactures and sells in the United States a nonostructured titanium product which receives, if required, FDA approval.
3.
Metallicum, with purchaser’s cooperation, develops and submits U.S. patent applications to protect the current titanium nanostructuring technology for dental implants and additional medical device applications
4.
Metallicum secures commercial contracts for, in purchaser’s reasonable good faith judgment, material sales of nanostructured metal with at least two customers.

Upon achieving milestones 1 and 2 Metallicum will receive 6,000,000 shares of common stock. Upon achieving each milestone 3, 4 and 5 Metallicum shareholders will receive 3,000,000 shares of common stock for each milestone reached.    As of December 31, 2011, the Company has so far only achieved milestone 1.

License Rights
The Company 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.

Joint Venture
Metallicum has a joint venture agreement with Danlin Products Inc, (“Danlin”) and BASIC Dental Inc., (“BASIC”),  Danlin and BASIC own patents to which Metallicum has right of use.  Danlin and BASIC own machinery and equipment to which Metallicum has rights of use under the joint venture agreement. Metallicum, through its joint venture has co-developed and manufactured nano-titanium dental implants based upon Metallicum’s proprietary technology for nanostructuring metals and alloys. In January 2009, Danlin and BASIC received FDA approval to market the Company’s nano-titanium dental implants.

Metallicum will receive revenue from the transfer of nanostructured metal from Metallicum to Danlin equal to 10% of the revenue from the sales of BASIC dental implants that are made from the supplied nanostructured metal. As of December 31, 2011, Metallicum has received approximately $1,000 of income related to the sales of BASIC dental implants.

Revenue from sales of nanostructured titanium for all other purposes other than the implants will go to the joint venture to be paid to Metallicum.

Any techniques, know-how, improvements, or modification to the existing inventions, intellectual property and technologies that are developed by the joint venture will be the sole and exclusive property of Metallicum.

 
F-19
 
MANHATTAN SCIENTIFICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2011 AND 2010

 
 
NOTE 10– TECHNOLOGY TRANSFER AGREEMENT 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: and 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.
 
As of December 31, 2011 and 2010, the Company earned $686,000 and $1,687,000, respectively, and recorded such amount as revenue for the years ended December 31, 2011 and 2010.  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 $112,000 and $131,000 for the years ended December 31, 2011 and 2010, respectively, relates to consulting fees paid to Dr. Lowe during the period.
 
NOTE 11 – ACQUISITION OF SCIENTIFIC NANOMEDICINE, INC. AND SENIOR SCIENTIFIC, LLC

On February 10, 2010 (“effective date”), the Company entered into Acquisition Option Agreement with and among Senior Scientific LLC, Edward R. Flynn, Ph.D and Scientific Nanomedicine, Inc. (“SNMI”) whereby the Company shall have the right to acquire 100% ownership of SNMI at any time during an Option Period of nine (9) months from the effective date of the Acquisition Option Agreement. SNMI owns intellectual property in the nanomedicine technology field generally related to detection of biological materials, including detection and treatment of cancer and application to other areas of biology. The total consideration for the acquisition of SNMI pursuant to the Acquisition Option Agreement shall consist of $100,000 and 20,000,000 shares of the Company’s restricted common stock. As of December 31, 2010, the Company had issued a total of 7,667,000 shares of the Company’s restricted common stock of which 6,000,000 shares of the total 7,667,000 shares issued were for the First Payment and partial Second Payment pursuant to the Acquisition Option Agreement. The 1,667,000 shares of the total 7,667,000 shares issued were for payment in lieu of required cash payment of $100,000 required under Acquisition Option Agreement. The value of the 7,667,000 shares issued totaling $460,000 or $0.06 per share (fair value at the effective date) was recorded as a deposit towards the purchase of SNMI under the Acquisition Option Agreement.
 
On May 31, 2011, the Company completed the remaining required restricted common stock consideration totaling 14,000,000 shares pursuant through an Agreement and Plan of Reorganization with Scientific Nanomedicine, Inc., thus completing the acquisition of 100% ownership of SNMI. Concurrently, the Company entered and completed a Purchase Agreement with Senior Scientific, LLC, and Edward R. Flynn and Maureen A. Flynn to acquire 100% of the voting stock Senior Scientific, LLC in exchange for 1,000 shares of the Company’s common stock.
 
The acquisition of SNMI has been accounted for as an asset purchase since SNMI has no tangible assets or liabilities and does 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 will be amortized over 10 year period.
 
The acquisition of Senior Scientific, LLC has been accounted for as a purchase under the business combination rules. Senior Scientific, LLC net assets totaling approximately $60,000 consisted of fixed assets and no liabilities. The consideration of 1,000 shares of the Company’s common stock has been valued at $60,000 based on the identifiable fixed assets of Senior Scientific, LLC.

 
F-20
 
MANHATTAN SCIENTIFICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2011 AND 2010

 
 
NOTE 12– SUBSEQUENT EVENTS

In January 2012, the Company received $100,000 related to the convertible note discussed in Note 5.  The convertible promissory note has no stated interest rate and is convertible into shares of common stock at a conversion price equal to 67% of the fair market value of the Company’s common stock provided that the conversion price shall not be less than the fair market value of the common stock on the issuance date.  Additionally, the note holder related to the $100,000 portion shall receive a warrant to purchase 1,000,000 shares of common stock at an exercise price of $0.07 per share.
 
 
 
 
F-21
 
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

None

ITEM 9T. CONTROLS AND PROCEDURES
 
 
(a) Evaluation of Disclosure Controls and Procedures
 
Our principal executive and principal financial officers have evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a – 15(e) and 15d – 15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act") that arc designed to ensure that information required to be disclosed in our reports under the Exchange Act, is recorded, processed, summarized and reported within the time periods required under the SEC's rules and forms and that the information is gathered and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure.
 
Our principal executive officer and principal financial officer evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(c) as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report.
 
This annual 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.
 
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(t) 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 December 31,2010. 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.
 
 
17
 
 
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 or the financial statements will not be prevented or detected.
 
Management identified the following material weakness during its assessment of internal controls over financial reporting as or December 31, 2011:
 
Resources: As of December 31, 2011, 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.
 
Management's Remediation Initiatives
 
We plan 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. We also plan to add an audit committee financial expert to our board and create an audit committee made up of our independent directors.
 
(b)  Changes In   Internal Control Over Financial Reporting
 
There were no 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.
 
ITEM 9B. OTHER INFORMATION

None.
 
PART III
 
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
 
The names, ages and biographical information of each of our directors and executive officers as of December 31, 2011 are set forth below. There are no existing family relationships between or among any of our executive officers or directors.

NAME
 
AGE
 
POSITION
Emmanuel Tsoupanarias
 
59
 
Chairman of the Board, President and Chief Executive Officer
Leonard Friedman
 
74
 
Secretary and Director
Frank Georgiou
 
61
 
Director
Chris Theoharis
 
59
 
Director
Larry Schatz
 
65
 
Director
Marvin Maslow
 
74
 
Chairman Emeritus

Members of the Board serve until the next annual meeting of stockholders and until their successors are elected and qualified. Officers are appointed by and serve at the discretion of the Board.  There are no family relationships among any of our directors or officers.
 
None of our directors or executive officers has, during the past five years:
 
· been convicted in a criminal proceeding and none of our directors or executive officers is subject to a pending criminal proceeding,
· been subject to any order, judgment, or decree not subsequently reversed, suspended or vacated of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities, futures, commodities or banking activities, or
· been found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.
 
 
18
 

EMMANUEL TSOUPANARIAS has served as our chief executive officer and chairman of the Board since November 1, 2007.  Mr. Tsoupanarias is the president, founder and editor of FuelCellsWorks.com, a weekly trade publication that has become the voice of the fuel cell industry. He is internationally recognized as an expert in fuel cell development.  Prior to his tenure at FuelCellsWorks.com, Mr. Tsoupanarias was an executive in the power generation manufacturing sector. From 1992 to 2007 Mr. Tsoupanarias has served as a Project Manager in the power generation sector and from 2000 has served as a consultant in the fuel cell industry.  His technical and engineering background and his three-year tenure as the Company’s CEO qualify him for the Company’s Board.
LEONARD FRIEDMAN has served as a director since October 2007.  Mr. Friedman is an honors graduate of Hunter College with a B.S. degree in economics and a minor in accounting.  He is also a graduate of Brooklyn Law School.  Mr. Friedman was a founder and partner in the law firm of Anes, Friedman, Leventhal & Rubin from which he retired in 2000.  Until 2002, he was CEO of Fiasco of New York, Inc., a restaurant and real estate corporation that owned and operated eight restaurants in New York and California.  Mr. Friedman’s legal knowledge, managerial experience and knowledge of the Company qualify him to serve on the Company’s Board.

FRANK GEORGIOU has served as a director since October 2007.  Since 1993, Mr. Georgiou has been the President of Three Diamond Diner Corp., a private company that owns and operates the Mount Kisco Coach Diner.  He is the former President of the Upper New York Pangregorian, a consortium of restaurant owners.  Mr. Georgiou’s business experience as president of a private company is valuable to the Company’s Board.

LARRY SCHATZ has served as a director since June 2010.  He is Of Counsel at Grubman Indursky & Shire, P.C., a law firm where he has advised clients on business and corporate matters for the last 15 years.  Mr. Schatz has practiced law in New York and Florida for over 40 years.  He has served on boards of several public companies, including the Company from June 2003 to January 2006.  Mr. Schatz’s experience advising clients on business and corporate matters and his experience on the boards of other public companies qualify him to serve on the Company’s Board.

CHRIS THEOHARIS has served as a director since October 2007.   Since 2003, Mr. Theoharis has worked as a consultant, both advising companies on small business acquisitions and business practices in the retail industry.  Mr. Theoharis has also served as a consultant to Maximum Quality Foods Inc. and Vested Business Brokers.  Prior to his work in the consulting industry, he worked as a stockbroker and financial advisor for Morgan Stanley from 1996 to 2003, leaving Morgan Stanley as an Associate Vice President.  Mr. Theoharis has also worked for a public accounting firm.  He graduated from Adelphi University in 1970 with a B.B.A. in Accounting.  Mr. Theoharis’s accounting and finance knowledge qualify him as a member of the Company’s Board.

MARVIN MASLOW served as the CEO of Manhattan Scientifics from January 1998 until November 2007. From June 1990 through September 1996, Mr. Maslow served as chief executive officer of Projectavision, Inc., a company he co-founded to develop and market video projection technology. He has also served as chief executive officer and chairman of the board of Tamarack Storage Devices, Inc. and as a director of Novint, Inc. For more than 20 years, Mr. Maslow has been President of Normandie Capital Corp., a private investment and consulting company. Mr. Maslow is credited with the starting up and financing of more than 20 enterprises during his career. Mr. Maslow received an A.A.S. degree from the Rochester Institute of Technology in 1957 and an honorable discharge from the U.S. Army Signal Corps in 1963. Mr. Maslow attends board mettings and a special advisor to the Board of Directors.
 
SECCTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
 
Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors, and persons who own more than ten percent of our common stock to file reports of ownership and change in ownership with the Securities and Exchange Commission and the exchange on which the common stock is listed for trading. Executive officers, directors and more than ten percent stockholders are required by regulations promulgated under the Exchange Act to furnish us with copies of all Section 16(a) reports filed. Based solely on our review of copies of the Section 16(a) reports filed for the fiscal year ended December 31, 2011, we believe that our executive officers, directors and ten percent stockholders complied with all reporting requirements applicable to them.
 
CODE OF ETHICS
 
On March 31, 2005, we adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.   A copy of the Company’s Code of Ethics can be viewed on our website at www.mhtx.com/code-of-ethics.htm or obtained free of charge by sending a written request to the attention of the Company’s Chief Executive Officer, Emmanuel Tsoupanarias at 405 Lexington Avenue, 26th Floor, New York, New York, 10174.
 
 
19
 
 
CORPORATE GOVERNANCE

We do not have a separately-designated standing audit committee.  The entire Board of Directors of the Company acts as the audit committee. The Board of Directors of the Company has determined that it does not have an "audit committee financial expert" as such term is defined in the rules adopted by the SEC requiring companies to disclose whether or not at least one member of the audit committee is an "audit committee financial expert."  The Board of Directors believes that the aggregate technical, commercial and financial experience of its members, together with their knowledge of the Company, provides the Board with the ability to monitor and direct the goals of the Company and to protect the best interests of its shareholders.  Four of the five members of the Board of Directors are "independent," as that term is defined in Section 10A(m) of the Securities Exchange Act of 1934, and  that the members' independence qualifies it to monitor the performance of management, the public disclosures by the Company of its financial condition and performance, the Company's internal accounting operations and its independent auditors. In addition, the Board of Directors is authorized to engage independent financial consultants, auditors and counsel whenever it believes it is necessary and appropriate.

ITEM 11. EXECUTIVE COMPENSATION
 
The following tables set forth all compensation awarded by us to our executive officers for the fiscal years ended December 31, 2011, 2010 and 2009.   We do not have employment agreements with any of our officers.
 
Name
Year
 
Salary ($)
 
 
Bonus ($)
 
 
Stock Awards ($)
 
 
Option Awards
($)
 
 
Non-Equity Incentive Plan Compensation ($)
 
 
Changes in Pension Value and Nonqualified Deferred Compensation Earnings
($)
 
 
All Other Compensation ($)
 
 
Total
($)
 
Emmanuel Tsoupanarias
2011
 
 
100,000
 
 
 
-
 
 
 
-
 
 
 
408,000
 
 
 
-
 
 
 
-
 
 
   
 
 
 
508,000
 
 CEO and Chairman
2010
 
 
100,000
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
100,000
 
 
2009
 
 
100,000
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
100,000
 

The independent members of the Company’s Board of Directors serve as the Compensation Committee.  The Company’s Board of Directors relies on its independent judgment in determining the compensation to be paid to the Company’s executive officer.  Mr. Emmanuel Tsoupanarias, our Chief Executive Officer, does not have an employment agreement.  His salary, set at $100,000, was set by the Board of Directors in 2007.  On August 5, 2011, as compensation for the completion of the acquisition of Senior Scientific, the Company awarded the Chief Executive Officer an option for 6,000,000 shares of common stock vesting immediately, exercise price of $0.07 per share, and 10 year life.  The fair value of this option award totaled $408,000 based on the Black-Scholes option pricing model using the following assumptions: 10 year term; volatility rate of 135%; and discount rate of 2.5%.

The independent members of the Company’s board of directors, acting as a compensation committee, reviewed the compensation policies and practices relating to the compensation provided to the Company’s employees to determine whether such policies and practices are reasonably likely to have a material adverse effect on the Company.  Based on the review and the compensation paid by the Company to its only employee, the Company determined that any risks associated with the Company’s compensation practices were not reasonably likely to have a material adverse effect on the Company.

Director Compensation
 
To conserve cash resources, the board of directors did not receive any compensation in 2011.
 
Compensation Committee Interlocks and Insider Participation
 
Our entire board currently acts as our compensation committee. Emmanuel Tsoupanarias is the sole executive officer of our company. No member of the compensation committee is employed by or serving as a member of the board of directors or compensation committee of any entity that has one or more of its executive officers serving as a member of our board.

 
20
 
 
OUTSTANDING EQUITY AWARDS
 
                           
Name
Grant Date
 
Number of Securities Underlying Unexercised Warrants (#) Exercisable
 
 
Number of Securities Underlying Unexercised Warrants (#) Unexercisable (1)
 
 
Warrant Exercise Price
($)
 
Warrant Expiration Date
 
 
 
 
 
 
 
 
 
 
 
 
Emmanuel Tsoupanarias, Chairman and CEO
11/9/2007
 
 
800,000
 
 
 
-
 
 
$
0.013
 
1/9/2017
                             
Emmanuel Tsoupanarias, Chairman and CEO
08/5/2011
 
 
6,000,000
 
 
 
-
 
 
$
0.070
 
08/5/2021
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leonard Friedman, Director
10/11/2007
 
 
800,000
 
 
 
-
 
 
$
0.013
 
10/11/2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Frank Georgiou, Director
10/11/2007
 
 
800,000
 
 
 
-
 
 
$
0.013
 
10/11/2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Chris Theoharis, Director
10/11/2007
 
 
800,000
 
 
 
-
 
 
$
0.013
 
10/11/2017

Grant of Plan Based Awards

No plan-based awards were made during the fiscal year ended December 31, 2011.
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
 
The following table sets forth, as of March 30, 2012, the names, addresses and number of shares of common stock beneficially owned by (i) all persons known to us to be the beneficial owners of more than 5% of the outstanding shares of common stock, (ii) each of our directors, (iii) each of our executive officers, and (iv) all of our directors and executive officers as a group. Except as indicated, each beneficial owner listed exercises sole voting power and sole dispositive power over the shares beneficially owned. Share ownership in each case includes shares issuable upon exercise of options exercisable within 60 days of the date of this Annual Report that would be required to be reported pursuant to Rule 13d-3 of the Securities Exchange Act of 1934 for purposes of computing the percentage of common stock owned by such person but not for purposes of computing the percentage owned by any other person. Unless otherwise indicated, the address of the below-listed persons is our address, 405 Lexington Avenue, 26th Floor, New York, New York 10174.
 
 
Name and Address of Beneficial Owner
 
Number of Shares Beneficially Owned
   
Percent
of Class(1)
 
Emmanuel Tsoupanarias (2)
    21,250,106       4.7 %
Leonard C. Friedman (3)
    10,000,000       2.2 %
Frank Georgiou (4)
    22,500,106       5.0 %
Chris Theoharis (4)
    4,575,105       1.0 %
Larry Schatz
    3,000,000       0.7 %
Directors and Executive Officers as a group (5 persons)
    61,325,317       13.5 %
Marvin Maslow (5)
    53,697,606       11.4 %
Total     115,022,923       23.9  %
 
(1) This tabular information is intended to conform with Rule 13d-3 promulgated under the Securities Exchange Act of 1934 relating to the determination of beneficial ownership of securities.  The percent of class is based on 446,058,609 shares and, for each beneficial owner, gives effect to the exercise of warrants or options exercisable within 60 days of the date of this table owned, in each case, by the person or group whose percentage ownership is set forth herein.
(2) Includes 14,200,106 owned by Saraklis Inc, a corporation controlled by Mr. Tsoupanarias, a warrant to purchase 800,000 shares at a price of $0.013 per share and options to purchase 6,000,000 shares at $0.07.
(3) Includes 2,500,000 shares owned in joint tenancy with his wife and a warrant to purchase 800,000 shares at a price of $0.013 per share.
(4) Includes a warrant to purchase 800,000 shares at a price of $0.013 per share.
(5) Includes 27,897,606 shares of Common Stock, options to purchase 25,000,000 shares of Common Stock, a warrant to purchase 800,000 shares of Common Stock.

 
21
 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
 
In December 2007, the former Chief Operating Officer, Jack Harrod, and former Chief Executive Officer, Marvin Maslow, 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 Marvin Maslow’s note payable balance.  The remaining unpaid notes payable balances totaling $995,000 at December 31, 2011 and 2010 comprised of loans payable of $450,000 and $545,000 to Jack Harrod and Marvin Maslow, respectively.  Neither Mr. Harrod nor Mr. Maslow are officers or directors of the Company.  Mr. Harrod resigned April 1, 2006.  Mr. Maslow resigned November 1, 2007.  Mr. Maslow is a related party as a result of his beneficial ownership of more than 10% of the Company’s common stock. The loans bore interest at 5.5% per annum and were initially due December 31, 2002 and have been mutually extended.  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 $50,000 and $50,000 for the years ended December 31, 2011 and 2010, respectively.  Accrued interest related to these notes payable approximated $432,000 and $382,000 as of December 31, 2011 and 2010, respectively and is included in accrued liabilities, related parties.  Mr. Maslow has agreed to waive any and all request for full payment of the amount owed to him until March 31, 2013.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

INDEPENDENT AUDITOR FEES

The following is a summary of the fees billed to us by our independent auditors for the fiscal years ended December 31, 2011 and December 31, 2010:
Fee Category
 
Fiscal 2010
   
Fiscal 2011
 
Audit and audit related fees
  $ 63,000     $ 63,000  
Tax fees
    -       -  
Other fees
    -       -  
Total fees
  $ 63,000     $ 63,000  

Audit Fees. Consists of aggregate fees billed for professional services rendered for the audit of our consolidated financial statements and review of the interim consolidated financial statements included in quarterly reports and services that are normally provided by our auditors in connection with statutory and regulatory filings or engagements.

Tax Fees. Consists of aggregate fees billed for professional services for tax compliance, tax advice and tax planning. These services include assistance regarding federal and state tax compliance.  There were no tax services provided in fiscal years ended December 31, 2011 and December 31, 2010.

Other Fees. Consists of fees for products and services other than the services reported above. There were no management consulting services provided in fiscal years ended December 31, 2011 and December 31, 2010.

We do not currently have an Audit Committee. Our full Board of Directors considers whether the provision of these services is compatible with maintaining the auditor's independence, and has determined such services

BOARD OF DIRECTORS POLICY ON PRE-APPROVAL OF SERVICES OF INDEPENDENT AUDITORS

The Board of Directors’ policy is to pre-approve all audit and permissible non-audit services provided by the independent auditors on a case-by-case basis. These services may include audit services, audit-related services, tax services and other services.
 
 
22
 

ITEM 15. EXHIBITS

(a) EXHIBITS
 
Exhibit
Number
 
 
Description of Exhibit
2.1
 
 
Agreement and Plan of Reorganization (1)
2.2
 
 
Agreement and Plan of Merger (1)
3.1
 
 
Certificate of Incorporation (1)
3.2
 
 
Amendment to Certificate of Incorporation (1)
3.3
 
 
Bylaws (1)
4.1
 
 
Amended Certificate of Designation, Preferences and Rights of Series C Preferred Stock (2)
10.6
 
 
Manhattan Scientifics, Inc. 1998 Stock Option Plan (1)
10.10
 
 
Stock Purchase Agreement between Manhattan Scientifics, Inc., Projectavision, Inc., and Lancer Partners, L.P. (3)
10.12
 
 
Manhattan Scientifics, Inc. 2000 Equity Incentive Plan (5)
10.13
 
 
2004 Consultant Stock Plan (6)
10.16
 
 
Manhattan Scientifics 2005 Equity Incentive Plan (8)
10.17
 
 
Technology Transfer Agreement by and between Carpenter Technology Corporation and Manhattan Scientifics, Inc, effective as of the 12th day of September 2009 (7)
10.18
 
 
Acquisition Option Agreement by and among Senior Scientific LLC, Edward R. Flynn, Ph.D., Scientific Nanomedicine, Inc. and Manhattan Scientifics, Inc. (10)
10.19
 
 
Stock Purchase Agreement, dated as of June 12, 2008, among Manhattan Scientifics, Inc., Metallicum, Inc., and the shareholders of Metallicum (9)
10.20
 
 
Settlement and Memorandum of Agreement among Marvin Maslow, Jack B. Harrod and Manhattan Scientifics, Inc. (9)
10.21
 
 
Patent License Agreement Between Los Alamos National Security, LLC and Manhattan Scientifics, Inc. (10)
10.22    
Agreement and Plan of Reorganization by and among the Company, Scientific Nanomedicine, Inc., Edward, R. 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. (11)
10.23    
Purchase Agreement by and among the Company, Senior Scientific LLC and Edward R. Flynn. (11)
14
 
 
Code of Ethics (9)
21
 
 
List of Subsidiaries (11)
31.1
 
 
Certification of Principal Executive Officer Pursuant to Rule 13a-14(a) and 15d- 14(a) (12)
31.2
 
 
Certification of Principal Financial Officer Pursuant to Rule 13a-14(a) and 15d- 14(a) (12)
32.1
 
 
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (12)
32.2
 
 
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (12)
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 LINKBAS

(1) Incorporated by reference to the registrant's Form 10-SB filed with the Commission on December 8, 1999.
(2) Incorporated by reference to the registrant's Form 10-QSB filed with the Commission on August 14, 2000 for the period ended June 30, 2000.
(3) Incorporated by reference as Amendment No. 2 to the registrant's Form 10-SB filed with Commission on February 9, 2000.
(4) Reserved.
(5) Incorporated by reference to the registrant's proxy statement filed on Schedule 14C filed with the Commission on December 26, 2000.
(6) Incorporated by reference to the registrant's registration statement filed on Form S-8 filed with the Commission on November 26, 2004.
(7) Incorporated by reference to Amendment No. 2 to the registrant’s Form 10-Q/A for the period ended September 30, 2009 filed with the Commission on October 4, 2010.
(8) Incorporated by reference to the registrant's registration statement in Form S-8 filed with the Commission on June 8, 2005.
(9) Incorporated by reference to the registrant's Form 10-K filed with the Commission on April 9, 2010.
(10) Incorporated by reference to the registrant’s Form 10-K/A filed with the Commission on March 25, 2011.
(11) Incorporated by reference to the registrant's Form 8-K filed with the Commission on June 6, 2012.
(12) Filed herewith.
 
 
23
 

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 30th day of March 2011.
 
 
 
 
 
 
MANHATTAN SCIENTIFIC, INC.
 
 
 
 
 
 
By:
/s/ Emmanuel Tsoupanarias
 
 
 
Emmanuel Tsoupanarias
 
 
 
Chief Executive Officer
 
 
 
 
 
 
In accordance with the Exchange Act, this report has been signed below by the following persons on March 30, 2011on behalf of the registrant and in the capacities indicated.
 
 
Signature
Title
 
 
/s/ Emmanuel Tsoupanarias
Chief Executive Officer,
Emmanuel Tsoupanarias
President, Chairman of the Board
(Principal Executive Officer and Principal Accounting Officer )
 
 
/s/ Leonard Friedman
Secretary and Director
Leonard Friedman
 
 
 
/s/ Frank Georgiou
Director
Frank Georgiou
 
   
/s/ Larry Schatz
Director
Frank Georgiou
 
   
/s/ Chris Theoharis
Treasurer and Director (Principal Financial Officer)
Chris Theoharis
 
 
 
 
 
 
 
24
 
EXHIBIT 21



Subsidiaries of the Registrant Listing the Jurisdiction of Organization


SUBSIDIARY
 
JURISDICTION
Metallicum, Inc.
 
New Mexico
Senior Scientific LLC
 
New Mexico
Scientific Nanomedicine, Inc.
 
New Mexico
EXHIBIT 31.1
 
Certifications
 
I, Emmanuel Tsoupanarias, certify that:
 
1.
I have reviewed this annual report on Form 10-K /A 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(s) 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(s) 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.
 
 
Date: March 30, 2012
 
/s/ Emmanuel Tsoupanarias
Emmanuel Tsoupanarias
Chief Executive Officer
(Principal Executive Officer)
 
 
EXHIBIT 31.2
Certifications
 
I, Chris Theoharis, certify that:
 
1.
I have reviewed this annual report on Form 10-K / A 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(s) 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(s) 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.
 
Date: March 30, 2012
 
/s/ Chris Theoharis
Chris Theoharis
Chief Financial Officer
(Principal Financial Officer)
 

EXHIBIT 32.1

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 Annual Report of Manhattan Scientifics, Inc. (the “Company”) on Form 10-K / A for the period ended December 31, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Emmanuel Tsoupanarias, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 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; and
 
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
Date: March 30, 2012
 
/s/ Emmanuel Tsoupanarias
Emmanuel Tsoupanarias
Chief Executive Officer (Principal Executive Officer)

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version 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 .

EXHIBIT 32.2
 

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 Annual Report of Manhattan Scientifics, Inc. (the “Company”) on Form 10-K / A for the period ended December 31, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Chris Theoharis, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 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; and
 
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
Date: March 30, 2012

/s/ Chris Theoharis
Chris Theoharis
Chief Financial Officer (Principal Financial Officer)
 
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version 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 .