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, 2012
 
o 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.)

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

Issuer's telephone number: (212) 541-2405
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
o
Accelerated filer
o
Non-accelerated filer
o
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 29, 2012 was $19,847,114. 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 28, 2013 there were 458,542,480 shares of common stock of the issuer issued and outstanding.
 


 
 

 
 
TABLE OF CONTENTS
 
     
PAGE
 
PART I
         
ITEM 1.
DESCRIPTION OF BUSINESS
    3  
ITEM 1A.
RISK FACTORS
    12  
ITEM 2.
DESCRIPTION OF PROPERTIES
    16  
ITEM 3.
LEGAL PROCEEDINGS
    16  
ITEM 4.
MINE SAFETY DISCLOSURES
    16  
           
PART II
           
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
    17  
ITEM 6
SELECTED FINANCIAL DATA
    21  
ITEM 7
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    22  
ITEM7A
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    25  
ITEM 8.
FINANCIAL STATEMENTS
    F -1  
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
    26  
ITEM 9A(T)
CONTROLS AND PROCEDURES
    26  
ITEM 9B.
OTHER INFORMATION
    27  
           
PART III
           
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTORS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
    28  
ITEM 11.
EXECUTIVE COMPENSATION
    30  
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
    32  
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
    32  
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
    33  
ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
    34  
 
SIGNATURES
    36  

 
2

 

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, 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. (the “Company” or “Manhattan Scientifics”), a Delaware corporation, was established on July 31, 1992 and has two operating wholly-owned subsidiaries: Metallicum, Inc., (“Metallicum”) and Senior Scientific LLC (“Senior Scientific”). On June 12, 2008, the Company acquired Metallicum, Inc., for 15,000,000 shares of Company’s common stock. 
 
Manhattan Scientifics is focused on technology transfer and commercialization of disruptive technologies in the nano medicine space. The company is presently developing commercial medical prosthetics applications for its ultra-fine grain metals and plans to commercialize the cancer research work and nano medical applications developed by Senior Scientific, a unit of the Company.

The Company’s business model capitalizes on inventions and technology from which profits could be earned primarily through licensing. Manhattan Scientifics is dedicated to earning profit for its 8,600 owner-shareholders by identifying, developing, patenting, supporting and marketing technical innovation by harvesting top technology talent to bring game-changing products to market. Manhattan Scientifics assists and acquires early stage technologies and assists entrepreneurial founders and management to stage them to become commercial. Our investment philosophy is defined by our desire to help build innovative companies with exceptional potential. We emphasize novel technologies in the nano-medicine space with the potential to be disruptive and the ability to establish sustainable businesses. We are patient capital with experienced business-building partners who bring the perspective of merchant-bankers not venture capitalists. Our approach to assist scientists to commercialize their work is by providing a forum within which the commercialization process is fostered through partnerships with existing companies (Fortune 1000 or larger). We believe the entrepreneurial scientists and engineers who join us are enticed in part by the offer to potentially create personal success and wealth by virtue of ownership of our publicly traded shares common stock under the symbol MHTX.

Manhattan Scientifics distinguishes itself from most venture capital firms in that it uses its own, rather than managed capital. Consequently, Manhattan Scientifics’ actions are not constrained by preset rules and fund-life-time tables, and the technologist avoids many of the sometimes-adversarial aspects of venture capital relationships. Technologists who are “partnered” with our company also enjoy the diversity of shared success with their brother technologists at Manhattan Scientifics - success at any one of the company’s technologies finds its way into the value of our shares, and that success is shared by the entrepreneur whose concept or acceptance in the market place has not yet matured. Manhattan Scientifics brings its expertise with capital, but also with talent including IP counsel, experienced marketers and networkers with global reach.

Such companies allow the new technology to avoid the many pitfalls of the “Do it yourself” approach of startups (most of which fail). Our company earns profit through royalty-bearing licenses as part of the technology transfer process.
 
 
3

 
 
TWO BUSINESSES EXIST WITHIN MANHATTAN SCIENTIFICS

Two nanotechnology businesses exist within Manhattan Scientifics. Both “units” are wholly-owned subsidiaries, both focused on nanotechnology applications in medicine.

The first (Metallicum Inc.) – successfully demonstrates our business-model, a licensing model, given that we are an inventions commercialization company.

Manhattan’s second business is called Senior Scientific LLC, and is at the crossroads of biotechnology and nanotechnology.

Our novel bioimaging and nanomagnetic detection systems have been developed specifically to detect cancer and other diseases earlier and with higher specificity than is currently possible. We have developed proprietary hardware and software for the highly sensitive detection of nanomagnetic particles that can be linked to antibodies for the detection and treatment of cancer and other human diseases—all without the use of ionizing radiation or large magnetic fields.

Our novel technologies make possible the earlier detection of cancer in vivo, the ability to analyze biopsies with greater sensitivity and accuracy, the ability to monitor the therapeutic effectiveness of anticancer treatments—both in humans and in animal models—and allow us to detect cancer recurrence with significantly improved sensitivity. Please see: www.SeniorScientific.com

The technology was developed by Edward R. Flynn, PhD, Senior Scientific’s founder and chief scientist, in collaboration with Richard S. Larson, MD, PhD, Executive Vice Chancellor, UNM Health Sciences Center in New Mexico.

ACQUISITIONS

In June 2008, we acquired Metallicum, Inc. (“Metallicum”) and its licensed patented technology. We entered into a stock purchase agreement with Metallicum, Inc. to acquire all of the outstanding capital in exchange for 15,000,000 restricted shares of our common stock. An additional 15,000,000 shares of our common stock will be payable to Metallicum in the event of meeting certain milestones. At December 31, 2011, one milestone was met. Metallicum was granted an exclusive license by The Los Alamos National Laboratory on patents related to nanostructured metals. In September 2009, we entered into a technology transfer agreement and sale with Carpenter Technology Corporation, (“Carpenter”) wherein Carpenter will fully develop, manufacture and market a new class of high strength metals. We earn annual revenues from these agreements and we expect to earn licensing royalties when Carpenter begins selling our licensed technology.
 
On May 31, 2011, we entered into an Agreement and Plan of Reorganization to acquire Senior Scientificand Scientific Nanomedicine, Inc. (“Scientific Nanomedicine” or “SNMI”) . We subsequently dissolved Scientific Nanomedice and transferred all remaining assets to Senior Scientific. The total purchase price was 21,668,000 restricted shares of our common stock (less 7,667,000 shares previously issued pursuant to an option agreement). As a result of this acquisition, we own patented technologies that can use biosafe nanoparticles and sensitive magnetic sensors to detect and measure cancer cells in biopsies or in the human body with the potential to transform how cancer is detected and treated.
 
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 with significant customers in the medical device and prosthetics industries.

 
4

 
 
NANOMEDICINE

Our acquisition of Senior Scientific gives us the commercial rights to technology and intellectual property with respect to the detection and monitoring of diseases using nanotechnologies. The technology is intended for the early detection of cancers, quantitative in vivo assessments of tumors, and similar applications with other diseases identifiable by cell surface markers. The technology does not require surgery, biopsy, radioactivity, or exotically expensive instruments. Nanoparticles are introduced to the body, for example, by intravenous injection. A sensitive magnetic instrument is used to magnetize and measure the nanoparticles that have bound to the specific targets (e.g., cells of a specific type of cancer). Other tissues, bone, scars, etc. are all transparent to the magnetic fields used, so the technology can be used to image and measure tumors in places inaccessible to other tests, and tumors while they are still small enough to be treatable. The nanoparticles are nontoxic, and the magnetic instrument is not harmful or expensive, so the tests can be repeated as needed. The following bullet points summarize management's current beliefs with respect to the benefits and commercialization of our nanomedicine technology:
 
• 
Our technology can detect cancer at a mass of 100,000 cells, and is currently being programmed to detect down to 12,000 cells;
• 
After development for commercial use – our technology may detect cancer before stage one -- down to "a few thousand cells";
• 
Our technology uses 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.
 
OUR DEVELOPMENT MODEL
 
Our goal has been to influence the future through the development of potentially life changing technologies. Our business model is to: (i) identify significant technologies, (ii) acquire them or the rights to them, (iii) secure the services of inventors, engineers or other staff who were instrumental in their creation, (iv) provide or contract for suitable work facilities, laboratories, and other aids where appropriate, (v) prototype the technologies to demonstrate "proof of principle" feasibility, (vi) secure patent and or other intellectual property protection, (vii) secure early customers for product trials where feasible and appropriate, and (viii) commercialize through licenses, sales or cooperative efforts with other manufacturing and distribution firms.
 
Since our technologies are still in their development phase, the need for operating and acquisition capital is a continuous concern requiring the ongoing efforts of our management. The Company’s success will depend in part on its ability to obtain patents and product license rights, maintain trade secrets, and operate without infringing on the proprietary rights of others, both in the United States and other countries. There can be no assurance that patents issued to or licensed by the Company will not be challenged, invalidated, or circumvented, or that the rights granted thereunder will provide proprietary protection or competitive advantages to the Company.

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.
 
 
5

 
 
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, 2012 and 2011, the Company recorded $686,000 and $686,000 as revenue for the years ended December 31, 2012 and 2011. 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, 2011 and 2012, 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.
 
In January 2013, the Company entered into a licensing agreement with a party granting certain licensing rights to the Company's nanostructured metal technology. As consideration: the Company will receive $180,000 in January 2013 which has been received; $30,000 by June 1, 2013; $30,000 by December 31, 2013; $30,000 by December 1, 2014; and $30,000 upon commercial launch by the party or the latest December 1, 2015.

In the near future, the Company believes that Carpenter will commercialize our metals technology which will provide a steady revenue stream. Carpenter has expressed optimism about the future and importance of the technology licensed from us. They recently disclosed that they believe the technology is going to change the future of metals over the next few decades. At a September investors meeting for Carpenter’s analysts, portfolio managers and shareholders, Carpenter discussed the interest in the medical community about the advanced metal, which Carpenter has trademarked under the name MithralMax. Carpenter reported that it has sub-licensed the technology to a yet to be named, premium dental implant manufacturer. Carpenter now says it is showing the material to many orthopedic companies. Carpenter also reported to the financial community that it is going to take a look at how the metal works in aerospace and energy industries such as fasteners for the aerospace industry. We expect to receive a minimum of $9 million in royalties from Carpenter during the period from 2015 to 2017. We anticipate, however, that we will receive additional royalties before 2015.

 
6

 
 
NANOMEDICINE

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

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

We have invested approximately $2.0 million in the Senior Scientific cancer project in the past two years. We continue to progress in advancing the technology toward commercialization.

·  
We are currently performing the detailed design of two next generation instruments, which should be 1000X more sensitive than our research prototype, and will offer automation and laboratory integration required for use in customer labs. The first instrument will be placed into service at our Albuquerque lab. We are working with the MD Anderson Cancer Center to ensure that their facility is ready to accept the second instrument and place it promptly into use. We are identifying and qualifying vendors for the systems, and anticipate having the first instrument operational within about 6 months after close of financing. We are also implementing and testing our own, proprietary nanoparticle chemistry and production, to give us control over the quality and economics of this important consumable in our business model.

·  
Senior Scientific has joined NMBio as a corporate member, improving our access to and visibility within the New Mexico biotechnology community.

·  
We are working with several groups at the MD Anderson Cancer Center to deliver a preclinical instrument for their testing and use. The work of Dr. Robert C. Bast Jr., Vice President for Translational Research at MD Anderson, (widely credited for the discovery of the ovarian cancer marker CA-125) with our technology earned the attention of the National Foundation for Cancer Research, which featured the technology as a “2012 Research Breakthrough.” We have frequent meetings with Dr. John Hazle, Chairman, Department of Imaging Physics, Division of Diagnostic Imaging, regarding the user and facility requirements for the instrument to be placed at MD Anderson. We have acquired preliminary data regarding a prostate cancer application in collaboration with MD Anderson, and are negotiating a larger collaboration in that area.

·  
The first results from our clinical trial related to determination of minimum residual disease in leukemia were sufficiently promising that we have paused the trial while we integrate our in-house nanoparticles. The inclusion of our in-house nanoparticles in the trial should place us in better position to market the technology when the trial is complete.

·  
We are continuing work under our $100,000 (approx.) NIH grant to develop a version of our technology using atomic magnetometer technology. We have begun qualifying commercial vendors for production of a commercial prototype atomic magnetometer-based instrument.

·  
We have hired a full time Chief Nanoparticle Chemist, and renewed our user agreement with the Center for Integrated Nanotechnologies at Sandia National Laboratories.

 
7

 
 
All of these programs are designed to validate our technology for the market, which will produce value for our shareholders. Our technology makes possible the detection of specific cancer cells. Physicians may then select a broad range for initial diagnosis, or a single type for monitoring therapy or detecting metastases. Small quantities of biosafe nanoparticles with attached targeting agents are introduced into the patient where they “stick” only to the targeted cancer cells. A weak magnetic field is applied to magnetize the particles, and sensitive magnetic detectors count the number of particles that have stuck to cancer cells. Due to the highly specialized nature of both the nanoparticles and our detection device, only those particles stuck to their targeted cells are detected, making the results highly specific, objective (the results depend only on the cells, not a human interpretation of an image), and sensitive (only a few thousand cells are required, instead of hundreds of millions for conventional techniques).
 
Our technology makes possible improvements across a wide range of cancer fighting areas: detection of cancers years earlier; noninvasive, specific diagnosis after conventional screening; earlier, faster discovery of drugs; precise, personalized monitoring of therapy; detection of metastases while still treatable; and accurate monitoring of new therapies. Our technology has been proven in animal models using human cancer cells, in human trials using bone marrow biopsy samples, and is the subject of over 20 patent applications and14 peer-reviewed publications. Our success will depend in part on its ability to obtain regulatory approvals required for human application of its technologies, both in the United States and other countries. There can be no assurance that such approvals will be obtained.
 
Our next step is placing instruments into operation. We have the instruments designed, and the cancer institutes are preparing to receive them. We need capital to produce the instruments, support the first users, and get the validation results. This will take about 12 months, and, at the end, we will have the technology ready for launch into significant non-FDA markets, or license for use in human applications, or both. 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).
 
We are now at an important juncture in our program. We have met with major medical device companies, and they have posed specific technology validation questions that we will answer. Leading physicians at various cancer institutes are eager to get started with studies that will provide that validation. Regulatory approvals are required for applications of the technology in humans. Regulatory approval for in vivo applications may require demonstration that the targeted nanoparticles are safe for injection into humans, that the instrument is also safe, and that the resulting measurement provides information useful in assessing the state of a patient. We believe that the constituent parts of the targeted nanoparticles have already been approved for injection in humans in other applications. Initial toxicology studies in cell cultures suggest that the combination of the parts into targeted nanoparticles is not toxic. Significant effort is still required to document these results under the laboratory and manufacturing practices that the FDA is likely to require. The instrument comprises passive sensors and a magnetizing system, which applies a magnetic field much less powerful than that already approved in other instruments. The correlation of the instrument reading to the underlying biological phenomena has been demonstrated in preclinical studies for selected cancer/antibody combinations. Significant effort is still required to demonstrate the translation of the preclinical results to human pilot studies. We are currently working on defining the projects required to secure regulatory approval.
 
The total market for all applications of our technology is hard to estimate, given the breadth of the platform and our ability to develop the commercial application. Our measurement approach is a platform technology with applications in many areas. A few examples: there are about 1M prostate cancer biopsies in the US each year; replacing those with our superior and less invasive test is about a $3B market. There are 2M prostate cancer survivors in the US; annual monitoring of those men for recurrence is about a $6B market. There are 1.6M breast cancer biopsies in the US each year; replacing those with our superior and less invasive test is about a $4.8B market. Monitoring cancer in laboratory animals, necessary in all new drug development as well as many other research applications, is an independent $100M/year opportunity with no need for FDA approval.
 
Our first markets may be the use of our technology for in vitro laboratory measurements, preclinical research and ex vivo disease monitoring. We have received interest from clinicians in applying our technology to other cancers and other stages of cancer therapy. The selection of the initial market entries will be informed by size of market, and by time and risk of regulatory requirements. More than 100 million screening tests for cancer are performed each year in the US at a cost of over $14 billion. Ultimately, our technology, after development, has the potential to replace these screening tests or the more expensive, invasive tests that follow a positive screening result.
 
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.
 
 
8

 
 
Available cash has been used to refine and improve the cancer detection technology system. The new system will give us the ability to detect down to a few hundred cells, 100 times more sensitive in detecting cancer cells than the present instrument which is already 1,000 times more sensitive than a mammogram. This is extremely important in detecting cancer that has metastasized. The technology has now been used to increase the sensitivity and specificity for finding ovarian cancer at an early stage. Results of experiments on ovarian cancer cell has shown this technology can easily identify the different types of ovarian cells and is now being used to do research on new markers for ovarian disease. These very important results will lead to earlier identification of ovarian cancer as well as identification of new methods for determining it is ovarian cancer and not a benign cyst in the ovaries. These results will shortly be submitted for publication in a peer-reviewed publication.

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 acquired Senior Scientific and all of its intellectual property. Incident to the acquisition, we assigned certain of the intellectual property to Scientific Nanomedicine, Inc., a subsidiary formed solely for that purpose. The need for that subsidiary has passed, and we have assigned all the intellectual property to Senior Scientific. Senior Scientific’s patent estate includes the patents and applications in the following schedule. We continue to prosecute our patent applications and file new applications as the technology progresses.

SenSci IP schedule:

Title
Application #
Filing date
Patent #
Country
Magnetic Needle Biopsy
60/549,501
1-Mar-2004
 
US
Magnetic Needle Biopsy
11/069,361
28-Feb-2005
7,309,316
US
Biomagnetic Detection And Treatment Of Alzheimer's Disease
60/866,095
16-Nov-2006
 
US
Biomagnetic Detection And Treatment Of Alzheimer's Disease
11/940,673
15-Nov-2007
8,060,179
US
Magnetic Needle Biopsy
11/957,988
17-Dec-2007
 
US
Magnetic Needle Biopsy
12/337,554
17-Dec-2008
8,118,754
US
Leukemia Cell Detection Using A Novel Magnetic Needle And Nanoparticles
61/248,775
5-Oct-2009
 
US
Early Detection Of Breast Cancer Using Magnetic Nanoparticles And Ultra-Sensitive Magnetic Field Sensors
61/259,011
6-Nov-2009
 
US
Detection Of Breast Cancer In Tissue Incompatible With Other Methods, And At Levels Undetectable By Other Means
61/308,897
27-Feb-2010
 
US
Apparatus And Method To Detect Ovarian Cancer In Tissue
61/310,700
4-Mar-2010
 
US
Nonsurgical Determination Of Organ Transplant Acceptance
61/314,370
16-Mar-2010
 
US
Method And System For In-Vivo Detection Of Hodgkin’s Lymphoma
61/314,392
16-Mar-2010
 
US
Nanoparticles And Methods For Making, Characterizing, And Testing Nanoparticles, Suitable For Use In Magentic Field Relaxometry Applications
61/329,076
28-Apr-2010
 
US
 
 
9

 
 
High-Temperature Superconducting Quantum Interference Device Apparatus
61/329,198
29-Apr-2010
 
US
Apparatus And Method To Detect Prostate Cancer In Tissue
61/331,816
5-May-2010
 
US
Methods And Apparatuses For The Localization And Treatment Of Cancer
61/352,782
8-Jun-2010
 
US
Methods And Apparatuses Using An Atomic Magnetometer To Detect Disease In Tissue
61/361,998
7-Jul-2010
 
US
Methods And Apparatuses To Detect Cancer Metastasis Or Recurrence
61/377,854
27-Aug-2010
 
US
Conjugated Nanoparticles As Contrast Agents
61/386,961
27-Sep-2010
 
US
Detection, Imaging, And Quantitation Of Targeted Cells
61/389,233
3-Oct-2010
 
US
Cell Detection Using Targeted Nanoparticles And Magnetic Properties Thereof
PCT/US2010/051417
5-Oct-2010
 
US
Detection, Measurement, And Imaging Of Cells Such As Cancer And Other Biologic Substances Using Targeted Nanoparticles And Magnetic Properties Thereof
PCT/US2010/055729
5-Nov-2010
 
US
Biological Application Of Magnetic Relaxometry With Atomic Magnetometer And SQUID Sensors
61/454,560
20-Mar-2011
 
US
Nonsurgical Determination Of Organ Transplant Condition
PCT/US2011/28746
16-Mar-2011
 
US
Magnetic Relaxometry Methods And Apparatuses
61/468,575
29-Mar-2011
 
US
Methods And Apparatuses For The Localization And Treatment Of Cancer
PCT/US2011/39349
7-Jun-2011
 
US
Detection, Measurement, And Imaging Of Cells Such As Cancer And Other Biologic Substances Using Targeted Nanoparticles And Magnetic Properties Thereof
13/249,994
30-Sep-2011
 
US
Magnetic Needle Biopsy
13/399,733
17-Feb-2012
 
US
Detection, Measurement, And Imaging Of Cells Such As Cancer And Other Biologic Substances Using Targeted Nanoparticles And Magnetic Properties Thereof
13/503674
24-Apr-2012
 
US
Magnetic Relaxometry Using Brownian Randomization, Neel Relaxation, Or Combinations Thereof
61/639,827
27-Apr-2012
 
US
Detection, Measurement, And Imaging Of Cells Such As Cancer And Other Biologic Substances Using Targeted Nanoparticles And Magnetic Properties Thereof
     
Japan
Detection, Measurement, And Imaging Of Cells Such As Cancer And Other Biologic Substances Using Targeted Nanoparticles And Magnetic Properties Thereof
     
Israel
Detection, Measurement, And Imaging Of Cells Such As Cancer And Other Biologic Substances Using Targeted Nanoparticles And Magnetic Properties Thereof
     
Canada
Detection, Measurement, And Imaging Of Cells Such As Cancer And Other Biologic Substances Using Targeted Nanoparticles And Magnetic Properties Thereof
     
Singapore
Detection, Measurement, And Imaging Of Cells Such As Cancer And Other Biologic Substances Using Targeted Nanoparticles And Magnetic Properties Thereof
     
Australia
Detection, Measurement, And Imaging Of Cells Such As Cancer And Other Biologic Substances Using Targeted Nanoparticles And Magnetic Properties Thereof
     
China
 
 
10

 
 
Detection, Measurement, And Imaging Of Cells Such As Cancer And Other Biologic Substances Using Targeted Nanoparticles And Magnetic Properties Thereof
     
EPO
Detection, Measurement, And Imaging Of Cells Such As Cancer And Other Biologic Substances Using Targeted Nanoparticles And Magnetic Properties Thereof
     
India
Detection, Measurement, And Imaging Of Cells Such As Cancer And Other Biologic Substances Using Targeted Nanoparticles And Magnetic Properties Thereof
     
Russia
Detection, Measurement, And Imaging Of Cells Such As Cancer And Other Biologic Substances Using Targeted Nanoparticles And Magnetic Properties Thereof
     
S. Korea
Applications Of Magnetic Relaxometry In Ovarian Cancer Nanomedicine
61/691,913
22-Aug-2012
 
US
Method For Measuring The Viscosity Of A Fluid Using Magnetic Nanoparticles
 
1-Mar-2011
 
US
Magnetic Relaxometry Using Brownian Randomization, Neel Relaxation, Or Combinations Thereof
61/639,827
27-Apr-2012
 
US
Magnetic Relaxometry Using Magnetization And Measurement Fields
61/715,791
18-Oct-2012
 
US

•           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.  

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.

 
11

 
 
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, 2012 and 2011, all of our revenue was generated by one customer, Carpenter Technology Corporation. We did not have any significant suppliers.

EMPLOYEES
 
As of December 31, 2012, 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.
 
 
12

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

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

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

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

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.
 
 
13

 
 
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, 2012, all of our revenue was generated by one customer, Carpenter Technology Corporation. If Carpenter Technology Corporation was unable to satisfy its obligations under our agreements, it would materially impact our revenue, net income and financial position.

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

If we are unable to obtain further financing, it may jeopardize our ability to continue our operations. To the extent that additional capital is raised through the sale of equity and/or convertible debt securities, the issuance of such securities could result in dilution to our shareholders and/or increased debt service commitments. If adequate funds are not available, we may be unable to sufficiently develop or maintain our existing operations.
 
 
14

 
 
WE HAVE THE ABILITY TO ISSUE ADDITIONAL SHARES OF OUR COMMON STOCK WITHOUT ASKING FOR SHAREHOLDER APPROVAL, WHICH COULD CAUSE YOUR INVESTMENT TO BE DILUTED.
 
Our Certificate of Incorporation currently authorizes the Board of Directors to issue up to 500,000,000 shares of Common Stock and 1,000,000 shares of Preferred Stock. The power of the Board of Directors to issue shares of Common Stock or warrants or options to purchase shares of Common Stock is generally not subject to shareholder approval. Accordingly, any additional issuance of our Common Stock may have the effect of further diluting your investment.
 
We require substantial working capital to fund our business. If we raise additional funds through the issuance of equity, equity-related or convertible debt securities, those securities may have rights, preferences or privileges senior to those of the holders of our Common Stock. The issuance of additional Common Stock or securities convertible into Common Stock by our management will also have the effect of further diluting the proportionate equity interest and voting power of holders of our Common Stock.
 
WE MAY RUN OUT OF AUTHORIZED CAPITAL PRIOR TO RECEIVING SHAREHOLDER APPROVAL TO AMEND OUR CERTIFICATE OF INCORPORATION TO INCREASE OUR AUTHORIZED CAPITAL.
 
As of December 31, 2012, 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.
 
 
15

 
 
ITEM 2. DESCRIPTION OF PROPERTIES
 
Our principal executive office is at The Chrysler Building, 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 2012. 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, 2012, 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. MINE SAFETY DISCLOSURES

Not applicable.

 
16

 
 
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, 2012 and December 31, 2011, 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.

2012
           
First Quarter
 
$
0.068
   
$
0.051
 
Second Quarter
 
$
0.055
   
$
0.040
 
Third Quarter
 
$
0.063
   
$
0.043
 
Fourth Quarter
 
$
0.060
   
$
0.046
 

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
 

As of March 28, 2013, there were 458,942,480 shares of common stock of the issuer issued and outstanding and 643 record shareholders.

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:
 
2012

The Company issued 12,800,000 shares of common stocks and warrants for 6,400,000 shares for a total consideration of $640,000 to seven individuals. Further, the Company issued 2,983,871 shares to an attorney for legal services for the Company totaling $124,000, and 300,000 shares to another consultant for services to satisfy an outstanding obligation totaling $21,000. Additionally, the Company issued 200,000 shares and warrants for 100,000 shares to a consultant for services rendered to the Company totaling $10,000.   The fair value of the 200,000 shares and warrants for 100,000 shares of common stock was based on the unit offering price of a private placement agreement during the same period totaling $0.05 per unit which a unit consisted of 1 share of common stock and warrant for half a share.

 
17

 
 
On February 8, 2012, the Company issued 6,000,000 shares to Crovato, Montgomery & Mason for $300,000 in cash.

On May 6, 2012, the Company issued 483,871 shares to Gerald Grafe for legal services.

On May 29, 2012, the Company issued 3,000,000 shares to Serenissima Group for $150,000 in cash.

On May 29, 2012, the Company issued 300,000 shares to Udo Retteberg for consulting fees.

On September 19, 2012, the Company issued 1,000,000 shares and warrants for 500,000 shares with exercise price of $0.07 per share to ESNO Inc. c/oFrancisco Escobar for $50,000 in cash.

On September 19, 2012, the Company issued 200,000 shares and warrants for 100,000 shares with exercise price of $0.07 per share to ESNO Inc. c/oFrancisco Escobar for $10,000 in services.

On September 10, 2012, the Company issued 2,500,000 shares to Gerald Grafe for legal services from June 1 - December 1, $0.04 per share value.

On September 10, 2012, the Company issued 1,600,000 shares and warrants for 800,000 shares with exercise price of $0.07 per share to Robert Reveley for $80,000 in cash.

On September 27, 2012, the Company issued 1,000,000 shares and warrants for 500,000 shares with exercise price of $0.07 per share to Michael R Napolitano GST for $50,000 in cash

On December 7, 2012, the Company issued 2,500,000 shares to Gerald Grafe for legal services from December 1 - June 1, $0.05 per share value

On December 17, 2012, the Company issued 300,000 shares to Steven Miller for services at $0.05 per share

We issued convertible notes for $400,000 (the "Convertible Notes") of which $100,000 was issued on January 31, 2012 and $300,000 was issued on April 26, 2012. The non-interest bearing notes can be converted into the Company’s common stock, at any date after six months from the issuance of each Note, at a conversion price of 67% of the fair value of the Company’s common stock upon the date of conversion notice, subject to a floor price of approximately $0.044 for the note issued in January 2012 and approximately $0.034 for the note issued in April 2012. The holder of the notes has not converted any portion of the notes as of June 30, 2012. Additionally, the note holder was issued warrants for 6,000,000 shares of the Company’s common stock with an exercise price of $0.05 that expire on October 15, 2015.

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. We subsequently dissolved Scientific Nanomedicine and tranfered all assets to Senior Scientific.
 
 
18

 
 
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.

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.

The issuances were not public offerings based upon the following factors: (i) the issuance of the securities was an isolated private transaction; (ii) a limited number of securities were issued to a limited number of offerees; (iii) there was no public solicitation; (iv) each offeree was an “accredited investor,” (v) the investment intent of the offerees; and (vi) the restriction on transferability of the securities issued. There no underwriter used in any transaction. The proceeds from the private offerings will be used for working capital, general corporate expenses and the acquisition and exploration of properties. No underwriters were used for any offering. All of the foregoing securities were issued in reliance upon the exemption from registration pursuant to Section 4(2) of the Securities Act and/or Rule 506 of Regulation D or Rule 903 of Regulation S.
 
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, 2012 was 500,000.
 
 
19

 
 
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, 2012 was 4,868,763.
 
Set forth in the table below is information regarding awards made through compensation plans or arrangements through December 31, 2012.
 
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
                27,649,763  
Total
                27,649,763  

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, 2010
    30,950,000          
 
      31,560,000  
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  
Granted
    3,000,000       0.07       0.07       3,000,000  
Expired
    -                       -  
Outstanding as of December 31, 2012
    39,700,000                       39,700,000  

 
20

 
 
Exercise prices and weighted-average contractual lives of 39,700,000 stock options outstanding as of December 31, 2012 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       4.68       0.01       25,000,000       0.01  
  0.07       6,000,000       8.58       0.07       6,000,000       0.07  
  0.02       3,000,000       0.32       0.02       3,000,000       0.02  
  0.05       1,500,000       0.79       0.05       1,500,000       0.05  
  0.06       1,200,000       2.38       0.06       1,200,000       0.06  
  0.07       3,000,000       7.98       0.07       3,000,000       0.07  
 
The fair value for options granted were determined using the Black-Scholes option-pricing model.

At December 31, 2012, the 39,700,000 outstanding options had an aggregate intrinsic value of $1,146,000.
 
The Company issued the following warrants at the corresponding weighted average exercise price as of December 31, 2012.

   
Warrants
   
Weighted average
Exercise Price
 
             
Outstanding as of December 31, 2010
    6,000,000     $ 0.07  
Issued/Vested
    2,000,000       0.05  
Cancelled/Expired
    0          
Outstanding as of December 31, 2011
    8,000,000       0.07  
Issued/Vested
    6,400,000       0.33  
Cancelled/Expired
    0          
Outstanding as of December 31, 2012
    14,400,000       0.26  
 
Date
 
Number of
Warrants
   
Exercise Price
   
Contractual Life Remaining
 
Number of Shares
Exercisable
 
                       
October 11, 2007
    3,200,000       .01       7
 years
    3,200,000  
November 9, 2007
    800,000       .01       7
 years
    800,000  
September 8, 2009
    312,000       .10-.25       1
 year
    312,000  
November 1, 2009
    1,688,000       .15-.30       1
 year
    1,688,000  
October 21, 2011
    2,000,000       0.05       1
 year
    2,000,000  
February 1, 2012
    1,500,000       0.05       1
 year
    1,500,000  
April 26, 2012
    3,000,000       0.05       1
 year
    3,000,000  
September 10, 2012
    800,000       0.07       2
 years
    800,000  
September 19, 2012
    600,000       0.07       2
 years
    600,000  
September 27, 2012
    500,000       0.07       2
 years
    500,000  
 
    14,400,000                
 
    14,400,000  
 
The fair value for warrants granted were determined using the Black-Scholes option-pricing model. As of December 31, 2012,warrant for 6,400,000 shares were granted associated with convertible notes payable with exercise prices ranging from $0.05 to $0.07 per share, see Note 5 for additional discussions. As of December 31, 2011, warrants for 2,000,000 shares were granted associated with a convertible note payable with an exercise price of $0.05 per share, see Note 5 for additional discussions.
 
ITEM 6. SELECTED FINANCIAL DATA
 
N/A

 
21

 
 
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

The Company’s goal is to nurture visionary technologies into life changing success stories and Metallicum and Senior Scientific 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.

TWO BUSINESSES EXIST WITHIN MANHATTAN SCIENTIFICS

Two nanotechnology businesses exist within Manhattan Scientifics Inc;  Both “units” are wholly-owned subsidiaries, both focused on nanotechnology applications in medicine.

The first (Metallicum Inc.) – successfully demonstrates our business-model, a licensing model, given that we are an inventions commercialization company.

Manhattan’s second business is called Senior Scientific LLC, and is at the crossroads of biotechnology and nanotechnology.

Our novel bioimaging and nanomagnetic detection systems have been developed specifically to detect cancer and other diseases earlier and with higher specificity than is currently possible. We have developed proprietary hardware and software for the highly sensitive detection of nanomagnetic particles that can be linked to antibodies for the detection and treatment of cancer and other human diseases—all without the use of ionizing radiation or large magnetic fields.
 
Our novel technologies make possible the earlier detection of cancer in vivo, the ability to analyze biopsies with greater sensitivity and accuracy, the ability to monitor the therapeutic effectiveness of anticancer treatments—both in humans and in animal models—and allow us to detect cancer recurrence with significantly improved sensitivity. Please see: www.SeniorScientific.com

The technology was developed by Edward R. Flynn, PhD, Senior Scientific’s founder and chief scientist, in collaboration with Richard S. Larson, MD, PhD, Executive Vice Chancellor, UNM Health Sciences Center in New Mexico.

In June 2008, we acquired Metallicum, Inc. (“Metallicum”) and its licensed patented technology. We entered into a stock purchase agreement with Metallicum, Inc. to acquire all of the outstanding capital in exchange for 15,000,000 restricted shares of our common stock. An additional 15,000,000 shares of our common stock will be payable to Metallicum in the event of meeting certain milestones. At December 31, 2011, one milestone was met. Metallicum was granted an exclusive license by The Los Alamos National Laboratory on patents related to nanostructured metals. In September 2009, we entered into a technology transfer agreement and sale with Carpenter Technology Corporation, (“Carpenter”) wherein Carpenter will fully develop, manufacture and market a new class of high strength metals. We earn annual revenues from these agreements and we expect to earn licensing royalties when Carpenter begins selling our licensed technology.
 
On May 31, 2011, we entered into an Agreement and Plan of Reorganization to acquire Senior Scientific. The total purchase price was 21,668,000 restricted shares of our common stock (less 7,667,000 shares previously issued pursuant to an option agreement). As a result of this acquisition, we own patented technologies that can use biosafe nanoparticles and sensitive magnetic sensors to detect and measure cancer cells in biopsies or in the human body with the potential to transform how cancer is detected and treated.

 
22

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

YEAR ENDED DECEMBER 31, 2012 COMPARED TO YEAR ENDED DECEMBER 31, 2011.

GROSS PROFIT. The $693,000 of revenue recognized for the year ended December 31, 2012 related to service income and is nearly equivalent to the $687,000 in revenue earned during the year ended December 31, 2011. The fees earned pursuant to the agreement with Carpenter are being proportionately recognized as revenue based upon the total fees to be collected over a 42 month period. The 42 month period is based on the time periods described in the Agreement (6 months after the Effective Date), (12 months after the Effective Date), and (each of the first 3 anniversaries of Annuity date where the “Annuity date” is March 12, 2011. The cost of revenue totaling $112,000 for the year ended December 31, 2011 represents consulting fees paid during the period.

GENERAL AND ADMINISTRATIVE. General and administrative expenses consist of consultants, contractors, accounting, legal, travel, rent, telephone and other day to day operating expenses. General and administrative expenses were $2,069,000 for the year ended December 31, 2012 compared with $2,541,000 for the year ended December 31, 2011. General and administrative expenses decreased primarily as a result of costs incurred for common stock issued for services and stock based compensation related to vesting of warrants in 2011 partially offset by higher costs incurred related to research, patent applications for Senior Scientific technology and costs associated with investor relations.

NET LOSS. Our net loss was $2,090,000 for the year ended December 31, 2012 compared to a net loss of $2,287,000 for the year ended December 31, 2011. The decrease in net loss resulted from lower general and administrative costs in 2011.

COMPREHENSIVE LOSS: Our comprehensive loss was $2,100,000 for the year ended December 31, 2012 compared to comprehensive loss of $2,320,000 for the year ended December 31, 2011. The comprehensive loss was the result of a net loss during the year ended December 31, 2012 and 2011 offset by $(10,000) and $(33,000) in 2012 and 2011, respectively, related to unrealized gain (loss) in the market value of our shares of Novint Technologies, Inc. (“Novint”). As of December 31, 2012 and December 31, 2011, we owned 1,075,648 shares of common stock of Novint.

LIQUIDITY AND PLAN OF OPERATIONS

Stockholders’ deficit totaled $797,000 on December 31, 2012 and the working capital deficit was $1,418,000 on such date. We anticipate we will sell additional common stock and issue shares and/or options in exchange for services. While we anticipate that our 2013 revenues received from our technology sales and service agreement will cover the cash needs of our overhead, we need to raise fund for the costs incurred related to research and patents for Senior Scientific technology.

At December 31, 2012, our significant assets include our portfolio of intellectual property relating to the various technologies, our contracts with third parties pertaining to technology development, acquisition, and licensing, and 1,075,648 shares of common stock of Novint; our cash on hand; and our strategic alliances with various scientific laboratories, educational institutions, scientists and leaders in industry and government.

We had a decrease of $66,000 in cash and cash equivalents for the year ended December 31, 2012, as a result of cash provided by financing activities offset by our net loss. For the year ended December 31, 2012, cash used by operating activities was $1,078,000 compared to $1,196,000 used by operating activities for the year ended December 31, 2011. Cash used by operating activities in 2012 was primarily as a result of our net loss which was offset by non-cash expenditures related to stock-based expenses totaling $436,000, debt discount and original issue discount of $424,000, and depreciation and amortization expense of $182,000. There was no cash used in investing activities in either the first quarters of 2012 and nominal amount in 2011. There was $1,012,000 of cash provided by financing activities in the year ended December 31, 2012 as the result of issuance of common stock and a promissory note in 2012 compared to no cash provided or used by financing activities during the same period of 2011.

Based upon current projections, our principal cash requirements for the next 12 months consists of (1) fixed expenses, including payroll, investor relations services, public relations services, bookkeeping services, consultant services, and rent; and (2) variable expenses, including technology research and development, milestone payments and intellectual property protection, and additional scientific consultants. As of December 31, 2012, we had $91,000 in cash. We intend to satisfy our capital requirements for the next 12 months from our cash on hand and cash generated from our technology transfer agreements which we anticipate will cover the cash needs of our overhead and the cost of our operations.

 
23

 
 
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.

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. 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.

 
24

 
 
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

As a Small Reporting Company, we are not required to provide the information under Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
 
 
25

 
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
REPORT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
F-2
 
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2012 AND 2011
 
 
F-3
 
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE LOSS FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011
 
 
F-4
 
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011
 
 
F-5
 
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011
 
 
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
Manhattan Scientifics, Inc.;

We have audited the accompanying consolidated balance sheets of Manhattan Scientifics, Inc. (the “Company”) as of December 31, 2012 and 2011, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years ended December 31, 2012 and 2011.  These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these 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 audits 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. An audit also includes 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. as of December 31, 2012 and 2011, and the related statements of operations, stockholders’ equity, and cash flows for the years ended December 31, 2012 and 2011in conformity with accounting principles generally accepted in the United States.
 

PMB Helin Donovan, LLP
 
/s/ PMB Helin Donovan, LLP

April 1 , 2013
Seattle, Washington
 
 
F-2

 
 
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 
   
December 31,
2012
   
December 31,
2011
 
ASSETS
           
Current assets:
           
Cash and cash equivalents
  $ 91,000     $ 157,000  
Account receivable
    257,000       171,000  
Investments-available for sale
    22,000       32,000  
Prepaid expenses and other assets
    164,000       244,000  
Total current assets
    534,000       604,000  
                 
Fixed assets, net
    32,000       -  
Investments
    2,000       2,000  
Intellectual property, net
    1,283,000       1,447,000  
Other asset
    2,000       2,000  
Total assets
  $ 1,853,000     $ 2,105,000  
                 
LIABILITIES
               
Current liabilities
               
Accounts payable and accrued expenses
  $ 234,000     $ 252,000  
Accrued interest and expenses – related parties
    372,000       365,000  
Note payable to former officers
    450,000       450,000  
Notes payable – other
    896,000       225,000  
Total current liabilities
    1,952,000       1,292,000  
                 
Long-term Liabilities
               
Note payable, related party
    447,000       545,000  
Accrued interest, related party
    251,000       231,000  
Total long-term liabilities
    698,000       776,000  
Total liabilities
    2,650,000       2,068,000  
                 
Commitments and contingencies
    -       -  
                 
STOCKHOLDERS' EQUITY (DEFICIT)
               
Capital stock $.001 par value
               
Preferred, authorized 1,000,000 shares
               
Series A convertible, redeemable, 10 percent cumulative, authorized 182,525
    -       -  
shares; issued and outstanding - none
               
Series B convertible, authorized 250,000 shares; 49,999 shares issued and
    -       -  
Outstanding
               
Series C convertible, redeemable, authorized 14,000 shares;
    -       -  
issued and outstanding - none
               
Common, authorized 500,000,000 shares, 458,942,480 and 440,058,609 shares issued and outstanding, respectively
    459,000       440,000  
Additional paid-in-capital
    56,231,000       54,984,000  
Other accumulated comprehensive income
    22,000       32,000  
Accumulated deficit
    (57,509,000 )     (55,419,000 )
Total stockholders' equity (deficit)
    (797,000 )     37,000  
                 
Total liabilities and stockholders' equity (deficit)
  $ 1,853,000     $ 2,105,000  
 
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,
 
   
2012
   
2011
 
             
Revenue
  $ 693,000     $ 687,000  
Cost of revenues
    -       112,000  
Gross profit
    693,000       575,000  
                 
Operating costs and expenses:
               
General and administrative
    2,069,000       2,541,000  
Research and development
    274,000       204,000  
Total operating costs and expenses
    2,343,000       2,745,000  
                 
Loss from operations before other income and expenses
    (1,650,000 )     (2,170,000 )
                 
Other income and expenses:
               
Gain on debt extinguishment
    33,000       -  
Interest and other expenses
    (473,000 )     (117,000 )
                 
NET LOSS BEFORE INCOME TAXES
    (2,090,000 )     (2,287,000 )
                 
Income tax expense
    -       -  
                 
NET LOSS AFTER INCOME TAXES
    (2,090,000 )     (2,287,000 )
                 
Other comprehensive income:
               
Unrealized loss on available for sale investments
    (10,000 )     (33,000 )
                 
COMPREHENSIVE LOSS
  $ (2,100,000 )   $ (2,320,000 )
                 
BASIC LOSS PER COMMON SHARE:
               
                 
Weighted average number of common shares outstanding
    449,696,878       425,578,607  
                 
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' Deficit
For The Years Ended December 31, 2012 And 2011
 
 
 
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, 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
 
 
 
 
 
 
 
 
 
 
12,287,683
 
 
 
12,000
 
 
 
792,000
 
 
 
 
 
 
 
 
 
 
 
804,000
 
Recognition of debt discount on
    warrants associated with debt
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
75,000
 
 
 
 
 
 
 
 
 
 
 
75,000
 
Vesting of stock options
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
408,000
 
 
 
 
 
 
 
 
 
 
 
408,000
 
Comprehensive income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(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
 
                                                               
Issuance of shares for cash
 
 
 
 
 
 
 
 
 
 
12,600,000
 
 
 
13,000
 
 
 
617,000
 
 
 
 
 
 
 
 
 
 
630,000
 
Issuance of shares for services
 
 
 
 
 
 
 
 
 
 
6,283,871
 
 
 
6,000
 
 
 
289,000
 
 
 
 
 
 
 
 
 
 
295,000
 
Recognition of debt discount on
    warrants associated with debt 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
120,000
 
 
 
 
 
 
 
 
 
 
120,000
 
Vesting of stock options
                                   
141,000
                     
141,000
 
Forgiveness of debt by shareholder
                                   
80,000
                     
80,000
 
Comprehensive loss
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(10,000)
 
 
 
 
 
 
 
(10,000)
 
Net loss
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(2,090,000)
 
 
 
(2,090,000
)
                                                               
Balance December 31, 2012
 
 
49,999
 
 
$
-
 
 
 
458,942,480
 
 
$
459,000
 
 
$
56,231,000
 
 
$22,000
 
 
$
(57,509,000
)
 
$
(797,000)
 
 
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,
 
   
2012
   
2011
 
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net loss
  $ (2,090,000 )   $ (2,287,000 )
Adjustments to reconcile net loss to net cash used in operating activities:
               
Common stock issued for services
    295,000       480,000  
Stock options issued/vested for services
    141,000       408,000  
Debt discount and original issue discount accretion
    424,000       -  
Gain on debt write-off
    (33,000 )     -  
Amortization of technology license, patents and intellectual property
    182,000       121,000  
Changes in:
               
Accounts receivable
    (86,000 )     (171,000 )
Prepaid expenses and other assets
    80,000       166,000  
Accounts payable
    (18,000 )     67,000  
Accrued interest and expenses, related parties
    27,000       20,000  
                 
Net cash used in operating activities
    (1,078,000 )     (1,196,000 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Purchase of fixed assets
    -       (2,000 )
                 
Net cash used in investing activities
    -       (2,000 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Proceeds from note payable
    400,000       200,000  
Payment on related party note payable
    (18,000 )     -  
Proceeds from issuance of common stock, net of offering costs
    630,000       100,000  
                 
Net cash provided by financing activities
    1,012,000       300,000  
                 
NET DECREASE IN CASH AND CASH EQUIVALENTS
    (66,000 )     (898,000 )
Cash and cash equivalents, beginning of period
    157,000       1,055,000  
                 
CASH AND CASH EQUIVALENTS, END OF PERIOD
  $ 91,000     $ 157,000  
                 
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
  $ 120,000     $ 75,000  
Forgiveness of debt by shareholder and accounted for as additional paid-capital
  $ 80,000     $ -  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
F-6

 
 
MANHATTAN SCIENTIFICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012 AND 2011
 
NOTE 1 – ORGANIZATION AND OPERATIONS

Manhattan Scientifics, Inc., a Delaware corporation (formerly Grand Enterprises, Inc) (“Grand”) was established on July 31, 1992 and has four wholly-owned subsidiaries: Metallicum, Inc. (“Metallicum”), Senior Scientific LLC, 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.
 
 
F-7

 
 
MANHATTAN SCIENTIFICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012 AND 2011

The Company’s success will depend in part on its ability to obtain patents and product license rights, maintain trade secrets, and operate without infringing on the proprietary rights of others, both in the United States and other countries. There can be no assurance that patents issued to or licensed by the Company will not be challenged, invalidated, or circumvented, or that the rights granted thereunder will provide proprietary protection or competitive advantages to the Company.
 
Prior to September 2009, the Company had been considered a development stage company. As a result of the September 2009 technology 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, Metallicum and Senior Scientific. 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, 2012 and 2011.
 
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, 2012 and 2011.
 
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.
 
 
F-8

 
 
MANHATTAN SCIENTIFICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012 AND 2011

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, 2012 and 2011, accumulated amortization was $134,000 and $104,000. 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, 2012 and 2011, accumulated amortization was $13,000 and $10,000. 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, 2012 and 2011, accumulated amortization was $207,000 and $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.
 
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, 2012 AND 2011

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 $274,000 and $204,000 for the years ended December 31, 2012 and 2011.

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 9).
 
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, 2012 AND 2011

STOCK-BASED COMPENSATION:
 
The Company accounts for stock-based compensation based on the fair value of all option grants or stock issuances made to employees or directors on or after its implementation date (the beginning of fiscal 2006), as well as a portion of the fair value of each option and stock grant made to employees or directors prior to the implementation date that represents the unvested portion of these share-based awards as of such implementation date, to be recognized as an expense, as codified in ASC 718. The Company calculates stock option-based compensation by estimating the fair value of each option as of its date of grant using the Black-Scholes option pricing model. These amounts are expensed over the respective vesting periods of each award using the straight-line attribution method. Compensation expense is recognized only for those awards that are expected to vest, and as such, amounts have been reduced by estimated forfeitures. The Company has historically issued stock options and vested and non-vested stock grants to employees and outside directors whose only condition for vesting has been continued employment or service during the related vesting or restriction period.
 
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 December 31, 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, 2012 and December 31, 2011 because of the relative short term nature of these instruments. At December 31, 2012 and December 31, 2011, the fair value of the Company’s debt approximates carrying value. The fair value of the Company’s available for sale securities was $22,000 and $32,000 at December 31, 2012 and 2011, respectively, and these securities are classified as Level 1.
 
 
F-11

 

MANHATTAN SCIENTIFICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012 AND 2011
 
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 did not 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 did not 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 did not have a material impact on our consolidated financial statements.
 
NOTE 3 – INVESTMENTS
 
As of December 31, 2012 and 2011, the Company owned 1,075,648 shares of Novint common stock or approximately 3%. The fair value of the Novint shares was $22,000 and $32,000 as of December 31, 2012 and 2011, respectively.
 
The Company has an additional investment in Aprils, Inc. which is accounted for at a cost of $2,000.
 
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. In December 2012, the former Chief Operating Officer forgave $80,000 of the accrued salaries balance. The amount forgiven has been accounted for as contributed capital. Additionally, the Company repaid $5,000 of the former Chief Executive Officer’s note payable balance. The remaining unpaid notes payable balances totaling $897,000 and $995,000 at December 31, 2012 and 2011 comprised of loans payable of $450,000 and $447,000, and $450,000 and $545,000 to its former Chief Operating Officer and Chief Executive Officer, respectively.
 
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, 2012 and 2011, respectively. Accrued interest related to these notes payable approximated $482,000 and $432,000 as of December 31, 2012 and 2011, respectively and is included in accrued liabilities, related parties.
 
The related party note payable of $447,000 and its accrued interest have been classified at December 31, 2012 and 2011 to long-term because the holder has waived his right to call the note and related interest until after March 31, 2014.
 
 
F-12

 
 
MANHATTAN SCIENTIFICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012 AND 2011

NOTE 5 –NOTE PAYABLE – OTHER
 
From October 21, 2011 to April 26, 2012, the Company issued convertible notes for $600,000 (the "Convertible Notes") of which $200,000 was received on October 21, 2011, $100,000 was received on January 31, 2012 and $300,000 was received on April 26, 2012. The non-interest bearing notes can be converted into the Company’s common stock, at any date after six months from the issuance of each Note, at a conversion price of 67% of the fair value of the Company’s common stock upon the date of conversion notice, subject to a floor price of approximately $0.041 for the note issued in October 2011, approximately $0.044 for the note issued in January 2012 and approximately $0.034 for the note issued in April 2012. The holder of the notes has not converted any portion of the notes as of December 31, 2012. Additionally, the note holder was issued warrants for 6,000,000 shares of the Company’s common stock with an exercise price of $0.05 that expire on October 15, 2015 ("Warrants"). The conversion feature to the note payable has been accounted for as an original issue discount approximating $296,000 which has been fully accreted as of December 31, 2012. The warrant associated with the note has been accounted for as a debt discount with an approximate value of $296,000 which has been allocated to the note’s fully accreted value of $896,000 (original note amount plus original debt discount) on proportionate basis which amounted to $195,000. The warrant value of $252,000 was determined using the Black-Scholes option pricing model based on the following assumptions: 2 year term; volatility rate of 134% to 135%; and discount rate of 2.5%. For the years ended December 31, 2012 and 2011, the Company has recorded an expense associated with original debt discount and expense associated with the debt discount (warrants) of $422,000 and $67,000. Accordingly, the carrying net value of this note at December 31, 2012 totals $896,000, comprising of $600,000 (original face value) plus the fully accreted original debt discount of $296,000. 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 December 31, 2004, the Company issued convertible notes in the amount of $33,000. The notes had a one year maturity date, are noninterest bearing and upon maturity convertible at the current per share price. As of December 31, 2012, the Company has written off the $33,000 convertible note based upon the passing of the legal statute of limitation.
 
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, 2012 and 2011, 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, 2012 and 2011, 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.
 
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, 2012 and 2011, no shares of Preferred Stock were issued and outstanding.
 
The Company has 553,475 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.
 
 
F-13

 
 
MANHATTAN SCIENTIFICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012 AND 2011
 
Common Stock
The Company has a total of 500,000,000 shares of authorized common shares. As of December 31, 2012 and 2011, 458,942,480 and 440,058,609 shares of common stock were issued and outstanding, respectively.
 
Stocks issued during 2012
For the year ended December 31, 2012, the Company issued 12,800,000 shares of common stocks and warrants for 6,400,000 shares for a total consideration of $640,000 to seven individuals. Further, the Company issued 5,483,871 shares to an attorney for legal services for the Company totaling $249,000, and 600,000 shares to two consultants for services to satisfy an outstanding obligation totaling $36,000. Additionally, the Company issued 200,000 shares and warrants for 100,000 shares to a consultant for services rendered to the Company totaling $10,000. The fair value of the 200,000 shares and warrants for 100,000 shares of common stock was based on the unit offering price of a private placement agreement during the same period totaling $0.05 per unit which a unit consisted of 1 share of common stock and warrant for half a share.
 
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 three and nine months ended September 30, 2011, the Company expensed $15,000 and $30,000, respectively, with a prepaid consulting expense balance of $150,000 as of September 30, 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 three and nine months ended September 30, 2011, the Company expensed $32,000 with a prepaid consulting expense balance of $10,000 as of September 30, 2011.
 
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.
 
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 12, with total value of $460,000.
 
 
F-14

 
 
MANHATTAN SCIENTIFICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012 AND 2011
 
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, 2012 and 2011 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, 2012 and 2011 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, 2012 was 4,868,763.
 
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%.
 
During 2012, the Company granted options for 3,000,000 shares of common stock vesting immediately, exercise price of $0.07 per share, and 8 year life. The fair value of these options totaled $142,000 based on the Black-Scholes option pricing model using the following assumptions: 8 year term; volatility rate ranging from 134% to 135%; and discount rate of 2.5%.
 
 
F-15

 

MANHATTAN SCIENTIFICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012 AND 2011
 
Set forth in the table below is information regarding awards made through compensation plans or arrangements through December 31, 2012, 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
 
 
 
 
   
27,649,763
 
Total
 
 
 
 
   
27,649,763
 
 
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, 2010
    30,950,000          
 
      31,560,000  
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  
Granted
    3,000,000       0.07       0.07       3,000,000  
Expired
    -                       -  
Outstanding as of December 31, 2012
    39,700,000                       39,700,000  

Exercise prices and weighted-average contractual lives of 39,700,000 stock options outstanding as of December 31, 2012 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       4.68       0.01       25,000,000       0.01  
  0.07       6,000,000       8.58       0.07       6,000,000       0.07  
  0.02       3,000,000       0.32       0.02       3,000,000       0.02  
  0.05       1,500,000       0.79       0.05       1,500,000       0.05  
  0.06       1,200,000       2.38       0.06       1,200,000       0.06  
  0.07       3,000,000       7.98       0.07       3,000,000       0.07  

The fair value for options granted were determined using the Black-Scholes option-pricing model.

At December 31, 2012, the 39,700,000 outstanding options had an aggregate intrinsic value of $1,146,000.
 
 
F-16

 

MANHATTAN SCIENTIFICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012 AND 2011

Warrants:
 
The Company issued the following warrants at the corresponding weighted average exercise price as of December 31, 2012.
 
   
Warrants
   
Weighted average
Exercise Price
 
Outstanding as of December 31, 2010
    6,000,000     $ 0.07  
Issued/Vested
    2,000,000       0.05  
Cancelled/Expired
    0          
Outstanding as of December 31, 2011
    8,000,000       0.07  
Issued/Vested
    6,400,000       0.33  
Cancelled/Expired
    0          
Outstanding as of December 31, 2012
    14,400,000       0.26  
 
Date
 
Number of
Warrants
 
Exercise
Price
 
Contractual
Life Remaining
 
Number of Shares
Exercisable
October 11, 2007
 
 
3,200,000
 
 
.01
    7 years
 
 
3,200,000
 
November 9, 2007
 
 
800,000
 
 
.01
    7 years
 
 
800,000
 
September 8, 2009
 
 
312,000
 
 
.10-.25
    1 year
 
 
312,000
 
November 1, 2009
 
 
1,688,000
 
 
.15-.30
    1 year
 
 
1,688,000
 
October 21, 2011
   
2,000,000
   
0.05
    1 year    
2,000,000
 
February 1, 2012
   
1,500,000
   
0.05
    1 year    
1,500,000
 
April 26, 2012
   
3,000,000
   
0.05
    1 year    
3,000,000
 
September 10, 2012
   
800,000
   
0.07
    2 years    
800,000
 
September 19, 2012
   
600,000
   
0.07
    2 years    
600,000
 
September 27, 2012
   
500,000
   
0.07
    2 years    
500,000
 
 
 
 
14,400,000
 
 
 
   
 
 
 
14,400,000
 
 
The fair value for warrants granted were determined using the Black-Scholes option-pricing model. As of December 31, 2012,warrant for 6,400,000 shares were granted associated with convertible notes payable with exercise prices ranging from $0.05 to $0.07 per share, see Note 5 for additional discussions. As of December 31, 2011, warrants for 2,000,000 shares were granted associated with a convertible note payable with an exercise price of $0.05 per share, see Note 5 for additional discussions.
 
NOTE 7 – INCOME TAXES
 
The provision for income taxes on the statements of operations consists of $-0- and $-0- for the years ended December 31, 2012 and 2011, respectively. Deferred tax assets are comprised of the following at December 31:
 
 
 
2012
 
2011
Net operating loss carryforward
 
$
10,100,000
 
 
$
9,552,000
 
Temporary differences
 
 
5,621,000
 
 
 
5,277,000
 
Less valuation allowance
 
 
(15,721,000
)
 
 
(14,829,000
)
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, 2012 and 2011, 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, 2012 and 2011, net operating loss carryforwards were approximately $39,518,000 and $37,428,000, respectively, for federal tax purposes that expire at various dates from 2012 through 2031 and for state tax purposes expire in 2012 through 2022.
 
 
F-17

 
 
MANHATTAN SCIENTIFICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012 AND 2011
 
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, 2012 and 2011, the provision for income taxes differs from the amount computed by applying the U.S. federal statutory tax rate (34% in 2012 and 2011) to income taxes as follows:
 
 
 
2012
 
2011
Tax benefit computed at 34%
 
$
344,000
 
 
$
615,000
 
Change in valuation allowance
 
 
(892,000
)
 
 
(970,000
)
Change in carryovers and tax attributes
 
 
548,000
 
 
 
355,000
 
Income tax provision
   
-
     
-
 
 
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 the years ended December 31, 2012 and 2011, rent expense was $6,000, and $6,000 respectively.
 
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, 2012 and 2011, 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 3, 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.
 
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. 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, 2012, 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.
 
 
F-18

 
 
MANHATTAN SCIENTIFICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012 AND 2011
 
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, 2012, the Company has so far only achieved milestone 1.
 
Joint Venture
 
Metallicum entered a joint venture agreement with Danlin Products Inc. and BASIC Dental Inc. with respect to the development and manufacture of nano-titanium dental implants based upon Metallicum’s proprietary technology for nanostructuring metals and alloys. Metallicum has terminated this joint venture.
 
NOTE 9 – 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, 2012 and 2011, the Company earned $686,000 and $686,000 and recorded such amount as revenue for the years ended December 31, 2012 and 2011. The amount received by the Company relates to services provided under the first element of the contract regarding additional services. The Company earned service income for time that a consultant to the Company, Dr. Lowe, made himself available to Carpenter in accordance with the Technology Transfer Agreement. The fees earned pursuant to the agreement with Carpenter are being proportionately recognized as revenue based upon the total fees to be collected over a 42 month period. The 42 month period is based on the time periods described in the Agreement (6 months after effective date), (12 months after effective date), and (each of the first 3 anniversaries of Annuity date where the “Annuity date” is the date of the latter of 18 months after the effective date or the date Manhattan Scientific fully satisfies its duties under of the Agreement). The cost of revenue totaling $-0- and $112,000 for the years ended December 31, 2012 and 2011 relates to consulting fees paid to Dr. Lowe during the period.
 
 
F-19

 

MANHATTAN SCIENTIFICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012 AND 2011
 
NOTE 10 – 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 purchased 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.
 
The Company subsequently dissolved SNMI and transferred all assets to Senior Scientific.
 
NOTE 11 – SUBSEQUENT EVENTS
 
In January 2013, the Company entered into a licensing agreement with a party granting certain licensing rights to the Company's nanostructured metal technology. As consideration: the Company received $180,000 in January 2013, and will receive $30,000 by June 1, 2013; $30,000 by December 31, 2013; $30,000 by December 1, 2014; and $30,000 upon commercial launch by the party or the latest December 1, 2015.
 
 
F-20

 
 
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, 2012. Based on this assessment, management concluded that the Company did not maintain effective internal controls over financial reporting as a result of the identified material weakness in our internal control over financial reporting described below. In making this assessment, management used the framework set forth in the report entitled Internal Control--Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO. The COSO framework summarizes each of the components of a company's internal control system, including (i) the control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication. and (v) monitoring.
 
 
26

 
 
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, 2012:
 
Resources: As of December 31, 2012, 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 inInternal 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.
 
 
27

 
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, 2012 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
 
60
 
Chairman of the Board, President and Chief Executive Officer
Leonard Friedman
 
75
 
Secretary and Director
Frank Georgiou
 
62
 
Director
Chris Theoharis
 
60
 
Director
Larry Schatz
 
66
 
Director
Marvin Maslow
 
75
 
Chairman Emeritus
Gerald Grafe
 
47
 
President of Senior Scientific

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 ten 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.
 
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.

 
28

 
 
LARRY SCHATZ has served as a director since June 2010. He is of Counsel at Grubman Indursky Shire & Meiselas, 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 serves as a paid consultant to the Company, attends board meetings and serves as a special advisor to the Board of Directors. He also serves as a Maanger of the Company’s Senior Scientifics LLC subsidiary.

GERALD GRAFE has been President of Senior Scientific LLC at Manhattan Scientifics, Inc. since August 2, 2011. Mr. Grafe has focused his career on developing new technologies. He has served as legal counsel and advisor to over 100 early stage companies, with successes in strategic IP and patent planning, venture capital financing, and technology transfer with Sandia and Los Alamos labs and with the University of New Mexico. Mr. Grafe has served in private legal practice for the past decade as general counsel and intellectual property counsel for various venture-funded and public companies and New Mexico venture capitalist investors. Mr. Grafe has for many years been an advisor to early stage technology companies at TVC's Equity Capital Symposium. Before he began his work with startup companies, Mr. Grafe was an attorney in Sandia National Laboratories, where he worked as Intellectual Property legal counsel for divisions including robotics, computing, and systems. He helped define intellectual property mining and protection practices, filed and prosecuted a number of patents, developed technology transfer practices, and helped close many technology transfer transactions. Before moving to the legal department, he was a Senior Member of Technical Staff at Sandia National Laboratories, working on topics involving advanced electrical and computer technology, including: medical imaging, parallel computer architectures, network computing, embedded computing, and robotic vision. He has been Director of Novint Technologies Inc. since September 20, 2006. Mr. Grafe has a B.S. in Electrical Engineering, summa cum laude, from Texas A&M University, an M.S. in Electrical and Computer Engineering from the University of New Mexico, and was first in his class when receiving the J.D. degree from the University of New Mexico.
 
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, 2012, 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 The Chrysler Building, 405 Lexington Avenue, 26th Floor, New York, New York, 10174.
 
 
29

 
 
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, 2012 and 2011.  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
 
2012
    150,000       --       --       --       --       --             150,000  
CEO and Chairman
 
2011
    100,000       --       --       408,000       --       --       --       508,000  
                                                                     
Gerald Grafe
President of
 
2012
  $ 201,875       --     $ 249,194        --       --       --       --     $ 451,069  
Senior Scientific
 
2011
    --       --       --       --       --       --       --       --  

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.

 
30

 
 
On March 28, 2013, the Company entered into an Employment Agreement with Emmanuel Tsoupanarias, our CEO. The agreement is for a term of five years and Mr. Tsoupanarias shall receive an annual salary of $150,000 per year and additional cash incentive consideration as determined by the Board. In the event the employment agreement is terminated by the Company without cause, then the Mr. Tsoupanarias shall receive 50% of the base salary remaining on the term and all options and other securities he would have been entitled to for an additional three months shall vest.

Director Compensation
 
For the year ended December 31, 2012, for their service as directors, each of the directors received $6,000 in fees.
 
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.

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, 2012.
 
 
31

 
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
 
The following table sets forth, as of March 28, 2013, 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, The Chrysler Building, 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)
   
16,800,000
     
3.7
%
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
%
Gerald Grafe
   
15,626,554
     
  3.4
%
Directors and Executive Officers as a group (5 persons)
   
72,501,765
     
16.0
%
Marvin Maslow (5)
   
53,697,606
     
11.7
%
Total
   
126,199,371
     
27.7 
%
____________
(1) This tabular information is intended to conform to 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 458,942,480 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 10,000,000 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.
 
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, 2014. Sums earned to date from the Company in connection with equity and debt transactions have been credited to a reduction of the Company’s liability to him.

 
32

 
 
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, 2012 and December 31, 2011:
 
Fee Category
 
Fiscal 2012
   
Fiscal 2011
 
             
Audit and audit related fees
 
$
62,000
   
$
63,000
 
Tax fees
   
-
     
-
 
Other fees
   
-
     
-
 
Total fees
 
$
62,000
   
$
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, 2012 and December 31, 2011.

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, 2012 and December 31, 2011.

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.
 
 
33

 
 
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 dated August 1, 1995
3.2
 
Certificate of Amendment to Certificate of Incorporation dated January 8, 1998
3.3
 
Bylaws (1)
3.4
 
Certificate of Amendment of Certificate of Incorporation dated January 16, 2001
3.5
 
Certificate of Amendment of Certificate of Incorporation dated August 8, 2007
4.1
 
Certificate of Designation, Preferences and Rights of Series B Preferred Stock
4.2
 
Amended Certificate of Designation, Preferences and Rights of Series B Preferred Stock
4.3
 
Certificate of Designation, Preferences and Rights of Series C Preferred Stock
4.4
 
Amended Certificate of Designation, Preferences and Rights of Series C Preferred Stock (2)
10.1
 
Manhattan Scientifics, Inc. 1998 Stock Option Plan (1)
10.2
 
Stock Purchase Agreement between Manhattan Scientifics, Inc., Projectavision, Inc., and Lancer Partners, L.P. (3)
10.3
 
Manhattan Scientifics, Inc. 2000 Equity Incentive Plan (5)
10.4
 
2004 Consultant Stock Plan (6)
10.5
 
Manhattan Scientifics 2005 Equity Incentive Plan (8)
10.6
 
Technology Transfer Agreement by and between Carpenter Technology Corporation and Manhattan Scientifics, Inc, effective as of the 12th day of September 2009 (7)
10.7
 
Acquisition Option Agreement by and among Senior Scientific LLC, Edward R. Flynn, Ph.D., Scientific Nanomedicine, Inc. and Manhattan Scientifics, Inc. (10)
10.8
 
Stock Purchase Agreement, dated as of June 12, 2008, among Manhattan Scientifics, Inc., Metallicum, Inc., and the shareholders of Metallicum (9)
10.9
 
Settlement and Memorandum of Agreement among Marvin Maslow, Jack B. Harrod and Manhattan Scientifics, Inc. (9)
10.10
 
Patent License Agreement Between Los Alamos National Security, LLC and Manhattan Scientifics, Inc. (10)
10.11
 
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)
10.12
 
Purchase Agreement by and among the Company, Senior Scientific LLC and Edward R. Flynn. (11)
10.13   Consulting Agreement dated June 1, 2011 between Manhattan Scientifics Inc. and V. Gerald Grafe
10.14   Employment Agreement dated March 28, 2013 between Manhattan Scientifics Inc. and Emmanuel Tsoupanarias
10.15   Consulting Agreement between Normandie New Mexico Corp. and Manhattan Scientifics Inc. dated October 1, 2009
10.16   Amendment to the Consulting Agreement between Normandie New Mexico Corp. and Manhattan Scientifics Inc. dated October 1, 2009
14.1
 
Code of Ethics (9)
21.1
 
List of Subsidiaries
 
 
34

 
 
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 LINKBASE
______________
(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, 2011.
(12) Incorporated by reference to the registrant's Form 10-K filed with the Commission on March 30, 2012.
 
** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
 
 
35

 
 
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 1st day of April 2013.
 
 
 
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 April 1, 2013 on behalf of the registrant and in the capacities indicated.
 
 
Signature
 
Title
     
/s/ Emmanuel Tsoupanarias
 
Chief Executive Officer, President, Chairman of the Board
Emmanuel Tsoupanarias
 
(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
   
 
 
36

EXHIBIT 3.1
 
 
 
1

 
 
 
 
 
 
2
EXHIBIT 3.2
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

EXHIBIT 3.4
 
EXHIBIT 3.5
 
EXHIBIT 4.1
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
 
 
 

EXHIBIT 4.2
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
 
 
 

 
EXHIBIT 4.3
 
 
 
1

 
 
 
 
2

 
 
 
 
 
3

 
 
 
 
4

 
 
 
 
5

 
 
 
 
6

 
 
 
 
 
7

 
 
 
 
8

 
 
 
 
9

EXHIBIT 10.13
 
CONSULTING AGREEMENT
 
CONSULTING AGREEMENT, dated as of June 1, 2011, by and between MANHATTAN SCIENTIFICS, INC., a Delaware corporation with its principal place of business located at 405 Lexington Avenue, 26 th Floor, New York, New York 10174 (the “ Company ”), and V. Gerald Grafe, an individual with a principal place of business located at [*] (“ Consultant ”).
 
W I T N E S S E T H :
 
WHEREAS, Consultant has experience in providing legal counsel for intellectual property and business development for numerous startups, venture-funded companies, and public companies;
 
WHEREAS, the Company wishes to retain Consultant to serve as an executive officer and provide counsel to Senior Scientific LLC (“Senior Scientific”) and Scientific Nanomedicine, Inc. (“SNMI”), the Company’s wholly-owned subsidiaries;
 
WHEREAS, the Consultant, in accordance with the terms and provisions set forth below, desires to be retained by the Company under this Agreement.
 
NOW, THEREFORE, in consideration of the mutual covenants and the premises set forth herein, the Consultant and the Company hereby agree as follows:
 
1. Services .
 
(a) The Company hereby engages Consultant to serve as an executive officer of Senior Scientific and SNMI and to manage the commercialization of the technology owned by Senior Scientific and SNMI. Services would include strategic planning, managing and cultivating business relationships, applying for and managing grants and developing business plans (the “Commercialization Services”).
 
(b) In addition to the Commercialization Services, the Company shall have a separate engagement agreement pursuant to which the Consultant shall provide legal services to the Company and its subsidiaries.
 
(c) In performing the Services, Consultant shall report to the Company’s chief executive officer. Consultant shall not have any authority to execute contracts or make any commitments on behalf of the Company or its subsidiaries.
 
(d) Consultant accepts the engagement provided in this Agreement and agrees to perform the Services in a professional manner, diligently and in good faith. Notwithstanding anything to the contrary contained herein, Consultant shall not be required to devote his full time and attention to the Services. The Company recognizes that the Consultant has other business activities to which he devotes a significant amount of his time and that provision of the Services by Consultant hereunder will be subject to the Consultant’s other professional commitments.
 
 
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2. Term . This Agreement shall, subject to Section 4 hereof, have a six-month term (the “ Term ”) commencing on the date hereof and ending on [December 1], 2011 (“ Initial Termination Date ”). The Term may be extended by the Company for another six months after the Initial Termination Date on the terms herein.
 
3. Compensation . In consideration of the Services to be rendered by Consultant, the Company will pay Consultant:
 
(a) Stock Compensation . Upon execution and delivery of this Agreement, the Company will issue to Consultant 2,307,692 shares of the Company’s restricted (unregistered) common stock valued at $75,000. The Company will pay applicable gross receipts tax promptly on issuance of the stock.
 
(b) Monthly Compensation . During the Term, the Company agrees to pay to Consultant a monthly consulting fee of $12,500, to be paid on the last day of each month.
 
(c) Gross Receipts Tax . The Company will pay all gross receipts taxes on compensation paid to Consultant.
 
(d) Cost Reimbursement . Consultant shall invoice the Company, and the Company will promptly reimburse Consultant, for Costs incurred by Consultant in performing the Services.
 
(e) Extension. If the Term is extended by the Company, the Consultant shall receive a distribution of shares of the Company’s restricted (unregistered) common stock equal to $75,000 divided by 50% of the closing market price on the Initial Termination Date.
 
4. Termination of Agreement .
 
(a) This Agreement is terminable at any time by either party on not less than 30 days’ prior written notice to the other.
 
(b) This Agreement shall terminate immediately upon the death or disability of the Consultant. The term “ disability ” shall mean any illness, disability, incapacity or condition of the Consultant which prevents him from substantially performing the Services on behalf of Consultant for a period of two (2) consecutive months.
 
(c) The Company may terminate this Agreement at any time for Cause upon written notice to Consultant The term “ Cause ” shall mean (i) a material breach by Consultant of the provisions of Section 6 hereof after written notice by the Company affording Consultant a reasonable opportunity to cure in the case of a breach that is susceptible to cure, (ii) intentional and material acts of dishonesty or deliberate misconduct on the part of Consultant, in each case in connection with the performance of the Services, after written notice by the Company affording Consultant a reasonable opportunity to cure in the case of a breach that is susceptible to cure, or (iii) failure by Consultant to perform the Services after written notice by the Company affording Consultant a reasonable opportunity to cure.
 
 
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5. Assignment of Rights .
 
(a) Consultant shall have no proprietary interest in the work performed by Consultant (hereinafter referred to as “ work product ”) during the course of performing the Services, whether during or after working hours, and Consultant agrees that such work product (whether performed during or after working hours and whether performed at the Company’s premises, Consultant’s office or otherwise) is work made for hire and that the Company shall have all proprietary rights in such work product and any derivative work product throughout the world.
 
(b) With respect to any work which is developed by Consultant with respect to the Services during the Term and which is not deemed to be work made for hire, Consultant hereby irrevocably assigns and transfers to the Company, its successors, assigns or nominees, in perpetuity throughout the world all of Consultant’s right, title and interest in and to all such work product.
 
(c) Consultant’s work product, whether the work product is described in Sections 5(a) or 5(b) hereof, may be used by the Company for any purpose or in any media whatsoever, whether now known or developed in the future in perpetuity and throughout the world, and Consultant hereby releases the Company from any payments for any use of the work product other than the compensation provided pursuant to this Agreement. It is further agreed that, without charge to the Company, but at the Company’s expense, Consultant will execute and deliver all such further papers as may be necessary, in any and all countries, to vest title in the work product in the Company.
 
6. Confidential Information .
 
(a) Consultant recognizes and acknowledges that during the course of performing the Services, Consultant will acquire information regarding the Company and the Company’s business methods, technology, products, plans and clients and other information which is not publicly known and which the Company regards as proprietary to it and includes any confidential proprietary information (“ Confidential Information ”). Without limiting the generality of the foregoing, Confidential Information includes all proprietary know-how, use and applications know-how, technical information, product formulae and formulations and other trade secrets relating to the Company’s products and proposed products, any information or other information contained in any patent application, regardless of whether a patent is ever issued with respect to such application, results of studies and surveys, in any stage of development, including, without limitation, modifications, enhancements, designs, concepts, techniques, methods, ideas, flow charts and all other information relating to the Company’s products.
 
(b) With the exception of disclosures concerning the SNMI Technology in connection with the performance of the Services, Consultant agrees that it will not, at any time, whether during or after the Term, disclose to any person or use, directly or indirectly, for Consultant’s own benefit or the benefit of others, or aid or assist others in using any Confidential Information, or permit any person to examine or make copies of any document which may contain or is derived from Confidential Information, whether prepared by Consultant or otherwise coming into Consultant’s possession or control.
 
 
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(c) In the event that Consultant is, pursuant to, or required by, applicable law, regulation or legal process, to disclose any of the Confidential Information, Consultant will notify the Company promptly so that the Company may, at its cost, seek a protective order or other appropriate remedy or, in its sole discretion, waive compliance with the terms of this Section 6. Consultant shall not disclose any Confidential Information until the court has made a ruling. In the event that no such protective order or other remedy is obtained, or in the event that the disclosing party waives compliance with the terms of this Section 6, Consultant will furnish only that portion of the Confidential Information which it is advised by counsel is legally required and will exercise all reasonable efforts to obtain reliable assurance that confidential treatment will be accorded the Confidential Information.
 
7. Return of Confidential Information . Consultant shall, upon completion of the Services or upon termination of Consultant’s engagement with the Company, or earlier at the request of the Company, turn over to the Company all documents, papers, computer disks or other material in Consultant’s possession or under Consultant’s control which may contain or be derived from Confidential Information, together with all documents, notes or other work products which are connected with or derived from the Services. To the extent that any Confidential Information is on Consultant’s hard drive or other storage media, Consultant shall, upon the request of the Company, cause such information to be erased from its computer disks and all other storage media.
 
8. Injunctive Relief . Consultant acknowledges that the violation or threatened violation by Consultant of any of the provisions of Sections 6 and 7 hereof shall cause immediate and irreparable harm to the Company. In the event of any breach or threatened breach of any of said provisions, Consultant consents to the entry of preliminary and permanent injunctions by a court of competent jurisdiction prohibiting Consultant from any violation or threatened violation of such provisions and compelling Consultant to comply with such provisions. This Section 8 shall not affect or limit, and the injunctive relief provided in this Section 8 shall be in addition to, and not in lieu of, any other remedies available to the Company at law or in equity for any such violation by Consultant.
 
9. Independent Contractor . It is expressly agreed that the Company and Consultant are acting hereunder as independent contractors. Neither party shall be deemed to an employer, employee, agent, partner or joint venturer of the other. Neither party has authority to enter into agreements on behalf of any other party or to bind any other party in any way. Consultant shall maintain liability insurance, workman’s compensation and any other required insurance and shall be liable for any personal injury or damages to property which occurs as a result of its actions during the performance of the Services.
 
10. Notices . Any notices required or permitted to be sent hereunder shall be in writing and shall be sent by certified or registered mail, return receipt requested, or by messenger or overnight courier which provides evidence of delivery, or by telecopier or similar means of communication if the receipt is acknowledged or if a copy thereof is sent in the manner provided in this Section 10. Notices shall be sent to the addresses first set forth above or to such other address as a party may designate by notice pursuant hereto, or, if sent by telecopier, to the telecopier number set forth on the signature page of this Agreement. Notices shall be effective upon the date when delivery is either effected or refused.
 
 
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11. Survival . The provisions of Sections 6, 7, 8, 9, 10, 11 and 12 hereof shall survive any termination of this Agreement or the Term.
 
12. Miscellaneous .
 
(a) Consultant represents, warrants, covenants and agrees that it has a right to enter into this Agreement, that it is not a party to any agreement or understanding, oral or written, which would prohibit performance of its obligations under this Agreement, and that it will not use in the performance of its obligations hereunder any proprietary information of any other party which Consultant is legally prohibited from using.
 
(b) This Agreement, and the respective rights, duties and obligations of the parties pursuant to this Agreement, shall be governed and construed in accordance with the laws of the State of New Mexico applicable to agreements executed and to be performed wholly within such state without regard to principles of conflicts of law. Each party hereby (i) irrevocably consents and agrees that any legal or equitable action or proceeding arising under or in connection with this Agreement may be brought in any federal or state court situated in the City of New Mexico, (ii) irrevocably submits to and accepts, with respect to its properties and assets, generally and unconditionally, the in personam jurisdiction of the aforesaid courts and waives the defense of an inconvenient forum to the maintenance of such action or proceeding, and (iii) agrees that service in any such action may be made either (x) by mailing or delivering a copy of such process to such party in the manner set forth in Section 10 hereof, other than by facsimile transmission, or (y) by any other manner permitted by law.
 
(c) This Agreement shall bind and inure to the benefit of the parties, and their respective successors and assigns; provided, however, that neither party may assign its obligations under this Agreement.
 
(d) If any provision of this Agreement is found to be void or unenforceable by a court of competent jurisdiction, the remaining provisions of this Agreement, shall, nevertheless, be binding upon the parties with the same force and effect as though the unenforceable part has been severed and deleted.
 
(e) Each of the parties to this Agreement shall execute and deliver to the other party, without charge to the other party, any further instruments and documents and take such other action as may be requested by the other party in order to provide for the other party the benefits of this Agreement.
 
(f) This Agreement may be executed in one or more counterparts, all of which shall be deemed to be duplicate originals.
 
[Balance of page intentionally left blank; signature page to follow.]
 
 
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IN WITNESS WHEREOF, the parties hereto have caused this Consulting Agreement to be executed as of the date first above written.
 
  MANHATTAN SCIENTIFICS, INC.  
       
 
By:
/s/ Emmanuel Tsoupanarias  
   
Emmanuel Tsoupanarias,
Chief Executive Officer
 
    Fax No. - (614) 455-6714  
       
  By: /s/ V. Gerald Grafe  
    V. Gerald Grafe
Manager
Fax No. 505-213-0998
 
 
 
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EXHIBIT 10.14
 
MANHATTAN SCIENTIFICS, INC.
 
EMPLOYMENT AGREEMENT
 
This EMPLOYMENT AGREEMENT (this “ Agreement ”) is entered into by and between MANHATTAN SCIENTIFICS, INC., a Delaware corporation (“ Company ”) and Emmanuel Tsoupanarias (“ Executive ”), and is effective on the date of the last signature between the Company and Executive on the signature page hereto.
 
WHEREAS, the Company wishes to employ Executive as Chief Executive Officer, and Executive wishes to be employed by the Company, all on the terms and conditions contained herein.
 
AGREEMENT
 
NOW, THEREFORE, in consideration of the mutual premises and covenants set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
 
1. Employment .
 
1.1 Title . The Company hereby retains the services of Executive as its Chief Executive Officer. Executive shall report directly to the Company’s Board of Directors (the “Board”).
 
1.2 Duties . Executive’s duties shall include, but not be limited to, the following, all of which shall collectively be referred to hereinafter as the “ Services ”, and may be amended from time to time by the Board:
 
(a) the usual responsibilities of a Chief Executive Officer of a public company registered with the U.S. Securities and Exchange Commission;
 
(b) serving as either the sole board member or Chairman of all of the Company's subsidiaries;
 
(c) hiring and supervising all employees and/or consultants engaged by the Company unless the Executive reasonably delegates this authority; and
 
(c) other executive and managerial powers and duties with respect to the Company, as may reasonably be assigned to Executive by the Company’s Board, to the extent consistent with Executive’s position and status as Chief Executive Officer.
 
1.3 Full and Exclusive Basis . Executive shall dedicate his full working time and efforts to the Company to enable him to faithfully perform the Services, provided that, Executive may serve on other boards of directors, with the approval of the Board, or engage in charitable or other community activities as long as such services and activities are disclosed to the Board and do not materially interfere with the Executive’s performance of his duties to the Company as provided in this Agreement.
 
2. Term . The initial term of this Agreement (“ Initial Term ”) shall commence on Jan 1, 2013 (the “Commencement Date”) until the fifth anniversary of the Commencement Date; provided however, that the term of this Agreement shall automatically be extended for one additional year on the fifth anniversary of the Commencement Date and for each anniversary thereafter, unless, not less than 60 days prior to each such date, either party shall have given notice to the other that it does not wish to extend this Agreement, subject to earlier termination under Section 5. The Initial Term, including any renewal or extension of the Initial Term may hereinafter be referred to as the “Term”.
 
3. Compensation . In consideration for the Services, Executive shall be entitled to and shall receive the following compensation:
 
 
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3.1 Annual Salary . Executive’s salary during the Initial Term shall be One Hundred Fifty Thousand US Dollars (USD 150,000) (the “Base Salary”) payable in monthly installments.
 
3.2 Incentive Compensation . The Executive shall be eligible to receive cash incentive compensation as determined by the Board from time to time.
 
3.3 Expenses . The Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by him in performing services hereunder during the Term, in accordance with the policies and procedures then in effect and established by the Company for its senior executive officers.
 
3.4 Other Benefits . During the Term, the Executive shall be entitled to continue to participate in or receive benefits under all of the Company’s Employee Benefit Plans in effect on the date hereof, or under plans or arrangements that provide the Executive with benefits at least substantially equivalent to those provided under such Employee Benefit Plans as shall be approved by the Board or the Compensation Committee. As used herein, the term “Employee Benefit Plans” includes, without limitation, each pension and retirement plan; supplemental pension, retirement and deferred compensation plan; savings and profit-sharing plan; stock ownership plan; stock purchase plan; stock option plan; life insurance plan; medical insurance plan; disability plan; and health and accident plan or arrangement established and maintained by the Company on the date hereof for employees of the same status within the hierarchy of the Company. During the Term, the Executive shall be entitled to participate in or receive benefits under any employee benefit plan or arrangement which may, in the future, be made available by the Company to its executives and key management employees, subject to and on a basis consistent with the terms, conditions and overall administration of such plan or arrangement. Any payments or benefits payable to the Executive under a plan or arrangement referred to in this Section 3.4 in respect of any calendar year during which the Executive is employed by the Company for less than the whole of such year shall, unless otherwise provided in the applicable plan or arrangement, be prorated in accordance with the number of days in such calendar year during which he is so employed. Should any such payments or benefits accrue on a fiscal (rather than calendar) year, then the proration in the preceding sentence shall be on the basis of a fiscal year rather than calendar year.
 
3.5 Vacation . The Executive shall be entitled to four (4) weeks of paid vacation days in each calendar year, which shall be accrued ratably during the calendar year. The Executive shall also be entitled to all paid holidays given by the Company to its employees.
 
4. Confidential Information; Non-Disclosure . In connection with performing the Services, Executive hereby represents and agrees as follows:
 
4.1 Definition . For purposes of this Agreement, the term “ Confidential Information ” means:
 
4.1.1 Any information that the Company possesses that has been created, discovered, or developed by or for the Company, and that has or could have commercial value or utility in the business in which the Company is engaged; or
 
4.1.2 Any information that is related to the business of the Company and is generally not known by non-Company personnel.
 
4.1.3 By way of illustration, but not limitation, Confidential Information includes trade secrets and any information concerning products, processes, formulas, designs, inventions (whether or not patentable or registrable under copyright or similar laws, and whether or not reduced to practice), discoveries, concepts, ideas, improvements, techniques, methods, research, development and test results, specifications, data, know-how, software, formats, marketing plans, and analyses, business plans and analyses, strategies, forecasts, customer and supplier identities, characteristics, and agreements.
 
 
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4.2 Exclusions . Notwithstanding the foregoing, the term Confidential Information shall not include:
 
4.2.1 Any information that becomes generally available to the public other than as a result of a breach of the confidentiality portions of this Agreement, or any other agreement requiring confidentiality between the Company and Executive;
 
4.2.2 Information received from a third party in rightful possession of such information who is not restricted from disclosing such information;
 
4.2.3 Information known by Executive prior to receipt of such information from the Company, which prior knowledge can be documented; or
 
4.2.4 Information that is disclosed to an order or requirement of a court, government administrative agency, or other governmental body.
 
4.3 Documents . Executive agrees that he will not remove from the Company's premises, unless in the course of performing the Services, any notes, formulas, programs, data, records, machines, or any other items that in any manner contain or constitute Confidential Information, nor will Executive make reproductions or copies of same. Executive shall promptly return any such documents or items, along with any reproductions or copies to the Company upon the Company's demand, upon termination of this Agreement, or upon his termination or resignation pursuant to Section 5.
 
4.4 No Disclosure . Executive agrees that he will hold in trust and confidence all Confidential Information and will not disclose to others, directly or indirectly, any Confidential Information or anything relating to such information without the prior written consent of the Company, except as may be necessary in the course of performing the Services. Executive further agrees that he will not use any Confidential Information without the prior written consent of the Company, except as may be necessary in the course of performing the Services, and that the provisions of this Section 4.4 shall survive termination of this Agreement.
 
5. Termination .
 
5.1 Death . The Executive’s employment hereunder shall terminate upon his death.
 
5.2 Disability . The Company may terminate the Executive’s employment if he is disabled and unable to perform the essential functions of the Executive’s then existing position or positions under this Agreement with or without reasonable accommodation for a period of 180 days (which need not be consecutive) in any 12-month period.
 
5.3 Termination by Company for Cause . At any time during the Term, the Company may terminate the Executive’s employment hereunder for Cause (as hereinafter defined) if at a meeting of the Board called and held for such purpose, a majority of the Board determines in good faith that the Executive is guilty of conduct that constitutes “Cause” as defined herein. For purposes of this Agreement, “Cause” shall mean: (i) conduct by the Executive constituting a material act of willful misconduct in connection with the performance of his duties, including, without limitation, misappropriation of funds or property of the Company or any of its subsidiaries or affiliates other than the occasional, customary and de minimis use of Company property for personal purposes; (ii) the commission by the Executive of any felony or a misdemeanor involving moral turpitude, deceit, dishonesty or fraud, or any conduct by the Executive that would reasonably be expected to result in material injury to the Company or any of its subsidiaries and affiliates if he were retained in his position; (iii) continued, willful and deliberate non-performance by the Executive of his duties hereunder (other than by reason of the Executive’s physical or mental illness, incapacity or disability) which has continued for more than 30 days following written notice of such non-performance from the Board (iv) a breach by the Executive of any of the provisions contained in Section 4 of this Agreement; (v) a violation by the Executive of the Company’s employment policies which has continued following written notice of such violation the Board of (vi) willful failure to cooperate with a bona fide internal investigation or an investigation by regulatory or law enforcement authorities, after being instructed by the Company to cooperate, or the willful destruction or failure to preserve documents or other materials known to be relevant to such investigation or the willful inducement of others to fail to cooperate or to produce documents or other materials in connection with such investigation. For purposes of clauses (i), (iii) or (vi) hereof, no act, or failure to act, on the Executive’s part shall be deemed “willful” unless done, or omitted to be done, by the Executive without reasonable belief that the Executive’s act or failure to act, was in the best interest of the Company and its subsidiaries and affiliates.
 
 
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5.4 Termination Without Cause . At any time during the Term, the Company may terminate the Executive’s employment hereunder without Cause. Any termination by the Company of the Executive’s employment under this Agreement which does not constitute a termination for Cause under Section 5.3 and does not result from the death or disability of the Executive under Section 5.1 or Section 5.2 shall be deemed a termination without Cause.
 
5.5 Termination by the Executive . At any time during the Term, the Executive may terminate his employment hereunder for any reason, including but not limited to Good Reason (as hereinafter defined). If the Executive provides notice to the Company under Section 2 that he elects to discontinue the extension of the term, such action shall be deemed a voluntary termination by the Executive and one without Good Reason. For purposes of this Agreement, “Good Reason” shall mean that the Executive has complied with the “Good Reason Process” (hereinafter defined) following the occurrence of any of the following events: (i) a material diminution in the Executive’s responsibilities, authority or duties; (ii) a material diminution in the Executive’s Base Salary except for across-the-board salary reductions based on the Company’s financial performance similarly affecting all or substantially all senior management employees of the Company; or (iii) the material breach of this Agreement by the Company. “Good Reason Process” shall mean that (i) the Executive reasonably determines in good faith that a “Good Reason” condition has occurred; (ii) the Executive notifies the Company in writing of the occurrence of the Good Reason condition within 60 days of the occurrence of such condition; (iii) the Executive cooperates in good faith with the Company’s efforts, for a period not less than 30 days following such notice (the “Cure Period”), to remedy the condition; (iv) notwithstanding such efforts, the Good Reason condition continues to exist; and (v) the Executive terminates his employment within 60 days after the end of the Cure Period. If the Company cures the Good Reason condition during the Cure Period, Good Reason shall be deemed not to have occurred.
 
5.6 Notice of Termination . Except for termination as specified in Section 5.1, any termination of the Executive’s employment by the Company or any such termination by the Executive shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon.
 
5.7 Date of Termination . “Date of Termination” shall mean: (i) if the Executive’s employment is terminated by his death, the date of his death; (ii) if the Executive’s employment is terminated on account of disability under Section 5.2 or by the Company for Cause under Section 5.3, the date on which Notice of Termination is given; (iii) if the Executive’s employment is terminated by the Company under Section 5.4, 30 days after the date on which a Notice of Termination is given; (iv) if the Executive’s employment is terminated by the Executive under Section 5.5 without Good Reason, 30 days after the date on which a Notice of Termination is given, and (v) if the Executive’s employment is terminated by the Executive under Section 5.5 with Good Reason, the date on which a Notice of Termination is given after the end of the Cure Period. Notwithstanding the foregoing, in the event that the Executive gives a Notice of Termination to the Company, the Company may unilaterally accelerate the Date of Termination and such acceleration shall not result in a termination by the Company for purposes of this Agreement.
 
 
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6. Compensation Upon Termination .
 
6.1 Termination Generally . If the Executive’s employment with the Company is terminated for any reason during the Term, the Company shall pay or provide to the Executive (or to his authorized representative or estate) any earned but unpaid base salary, incentive compensation earned but not yet paid, unpaid expense reimbursements, accrued but unused vacation and any vested benefits the Executive may have under any employee benefit plan of the Company (the “Accrued Benefit”) within 30 days of the Executive’s Date of Termination.
 
6.2 Termination by the Company Without Cause or by the Executive with Good Reason . If the Executive’s employment is terminated by the Company without Cause as provided in Section 5.4, or the Executive terminates his employment for Good Reason as provided in Section 5.5, then the Company shall, through the Date of Termination, pay the Executive his Accrued Benefit.
 
Additionally
 
(i) the Company shall pay the Executive an amount equal to 50% of the Base Salary for the remaining Term of this Agreement; and
 
(ii) upon the Date of Termination, all stock options and other stock-based awards held by the Executive in which the Executive would have vested if he had remained employed for an additional three (3) months following the Date of Termination shall vest and become exercisable or nonforfeitable as of the Date of Termination.
 
7.  Miscellaneous Provisions .
 
7.1 Non-Competition; Non-Solicitation . W ithout the prior written approval of the Board of Directors, Executive shall not, directly or indirectly, during his employment and until the end of six (6) months after termination of employment pursuant to Section 5.3 (Termination for Cause) or Section 5.5 (Termination by Executive):
 
(a) Engage in a “Competing Business’’, as defined below, whether as a sole proprietor, partner, corporate officer, employee, director, shareholder, consultant, agent, independent contractor, trustee, or in any other manner by which Executive holds any beneficial interest in a Competing Business, derives any income from any interest in a Competing Business, or provides any service or assistance to a Competing Business. “Competing Business” shall mean any business that manufactures or licenses a product or technology that competes with a product that the Company licenses or manufactures;
 
(b) (ii) Contact or solicit, or direct or assist others to contact or solicit, for the purpose of promoting any person’s or entity’s attempt to compete with Employer or any of its Affiliates, in any business carried on by Employer or any of its Affiliates during the period in which Executive was an employee of Employer, any suppliers, independent contractors, vendors, or other business associates of Employer or any of its Affiliates that were existing or identified prospective suppliers, independent contractors, vendors, or business associates during such period, or (ii) otherwise interfere in any way in the relationships between Employer or any of its Affiliates and their suppliers, independent contractors, vendors, and business associates;
 
(c) (i) Solicit, offer employment to, otherwise attempt to hire, or assist in the hiring of any employee or officer of Employer or any of its Affiliates; (ii) encourage, induce, assist or assist others in inducing any such person to terminate his or her employment with Employer or any of its Affiliates; or (iii) in any way interfere with the relationship between Employer or any of its Affiliates and their employees; or
 
(d) Make any public statement or perform or do any other act prejudicial or injurious to the reputation or goodwill of Employer or any of its Affiliates or otherwise interfere with the business of Employer or any of its Affiliates.
 
 
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8. Miscellaneous Provisions .
 
8.1 The parties hereto agree to execute any and all documents necessary to effectuate the intent of this Agreement.
 
8.2 This Agreement shall be the full and final agreement between the parties and shall constitute the full and final agreement between the parties with respect to the subject matter of this Agreement. This Agreement shall supersede any prior or contemporaneous employment agreement, oral or written, between the parties.
 
8.3 If any provision of this Agreement shall be found to be invalid or unenforceable in any respect, the remainder of the Agreement shall remain in full force and effect. The Agreement shall be interpreted to provide a full and reasonable commercial interpretation.
 
8.4 Any and all modifications or amendments to this Agreement must be in writing and signed by all parties.
 
8.5 This Agreement shall be governed and construed according to the laws of the State of New York. The parties agree that any action or proceeding arising directly, indirectly or otherwise, in connection with, out of, or from this Agreement, any breach hereof, or any transaction covered hereby shall be resolved, whether by arbitration or otherwise, within the State of New York. Accordingly, the parties consent and submit to the jurisdiction of the state courts located within the State of New York and to the United States Federal Courts sitting in the State of New York .
 
8.6 The prevailing party in any such litigation shall be entitled to their reasonable attorney's fees and costs.
 
8.7 All payments made by the Company to the Executive under this Agreement shall be net of any tax or other amounts required to be withheld by the Company under applicable law.
 
8.8 All parties warrant that they possess the full authority and capacity to enter into this Agreement and bind their respective associates.
 
8.9 Any notices, requests, demands and other communications provided for by this Agreement shall be sufficient if in writing and delivered in person or sent by a nationally recognized overnight courier service or by registered or certified mail, postage prepaid, return receipt requested, to the Executive at the last address the Executive has filed in writing with the Company or, in the case of the Company, at its main offices, attention of the Board.
 
8.10 Wherever used herein, a pronoun in the masculine gender shall be considered as including the feminine gender unless the context clearly indicates otherwise.
 
8.11 Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by arbitration and by a neutral arbitrator to be chosen by both parties, and the parties hereby agree to be bound by the results. Such arbitration shall be held before the American Arbitration Association in accordance with their rules and procedures. Payment of arbitration fees is to be decided by the arbitrator and judgment upon the award rendered may be entered in any court possessing jurisdiction of arbitration awards.
 
8.12 This Agreement may not be assigned by Executive, and the Services contracted for herein are specific to Executive and may not be delegated and or assigned to any other person other than Executive.
 
8.13 This Agreement may be executed in any number of counterparts and by facsimile, each of which when so executed and delivered shall be taken to be an original; but such counterparts shall together constitute one and the same document.
 
 
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COMPANY:   EXECUTIVE:
     
Manhattan Scientifics, Inc.    
     
By: /s/   /s/ Emmanuel Tsoupanarias
     
Name:   Emmanuel Tsoupanarias
     
Its:   Date: March 28, 2013
     
Date: March 28, 2013    
 
 
[SIGNATURE PAGE TO EMPLOYMENT AGREEMENT]
 
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EXHIBIT 10.15
 
 
 
1

 
 
 
 
2

 
 
 
 
3

 
 
 
 
4

 
 
 
 
5

 
 
  MANHATTAN SCIENTIFICS, INC.  
       
 
By:
/s/ Emmanuel Tsoupanarias  
    Name: Emmanuel Tsoupanarias  
    Title: Chief Executive Officer  
       
       
  NORMANDIE NEW MEXICO CORP.  
       
  By: /s/ Marvin Maslow  
    Name: Marvin Maslow  
    Title: President  
 
 
 
6

 
EXHIBIT 10.16
 
MANHATTAN SCIENTIFICS, INC.
The Chrysler Building
405 Lexington Avenue, 26th Floor
New York, New York 10174
March 28, 2013
 
Marvin Maslow, President
Normadie New Mexico Corp.
 
Re: Consulting Agreement dated October 1, 2009 between Manhattan Scientifics, Inc. and Normadie New Mexico Corp. (the “Agreement”)
 
Dear Mr. Maslow:
 
Reference is hereby made to the Agreement. The parties hereby agree to amend and restate Section 3(b) of the Agreement as follows:
 
Upon the completion of a successful debt and/or equity investment financing made by Company, during the term of this Agreement, in which investors and/or investment consultants or bankers introduced to Company by Consultant or with respect to which Consultant has a pivotal role in completing any such investment transaction, Company hereby agreed to use a portion of the proceeds of such transaction to pay off debt owed to Consultant. In addition, the Company, at the discretion of the Board of Directors, may provide additional compensation in the form of a bonus upon the closing of such transaction.
 
If you agree with the above terms, please execute below and return to the undersigned.
 
    Manhattan Scientifics, Inc.  
         
   
By:
   
    Name:    
    Title:    
         
ACKNOLEDGED AND AGREED:        
         
Normadie New Mexico Corp.        
         
By:          
Name: Marvin Maslow        
Title: President        
 
EXHIBIT 21
 
Subsidiaries of the Registrant Listing the Jurisdiction of Organization
 
SUBSIDIARY
 
JURISDICTION
Metallicum, Inc.
 
New Mexico
Senior Scientific LLC
 
New Mexico
     
EXHIBIT 31.1
 
Certifications
 
I, Emmanuel Tsoupanarias, certify that:
 
1.
I have reviewed this annual report on Form 10-K 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: April 1, 2013
By:
/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 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: April 1, 2013
By:
/s/ Chris Theoharis
 
   
Chris Theoharis
 
   
(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 for the period ended December 31, 2012 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: April 1, 2013
By:
/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  for the period ended December 31, 2012 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: April 1, 2013
By:
/s/ Chris Theoharis
 
   
Chris Theoharis
 
   
(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 .