SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
Exchange Act of 1934
For the quarterly period ended March 31, 2002
|_| Transition report under Section 13 or 15(d) of
the Exchange Act.
For the transition period from ______________ to ______________
Commission file number 000-28411
MANHATTAN SCIENTIFICS, INC.
---------------------------
(Exact name of registrant as specified in its charter)
Delaware 85-0460639
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
641 Fifth Avenue, Suite 36F, New York, New York 10022
- ----------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(212) 752-0505
--------------
Issuer's telephone number, including area code
Former name, former address and formal fiscal year, if changed since last
report: N/A
Indicate by check 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 /_/
The number of shares outstanding of each of the issuer's classes of common
equity as of May 12, 2002 was as follows: 120,900,282 shares of Common Stock.
Transitional Small Business Disclosure Format: YES /_/ NO /X/
MANHATTAN SCIENTIFICS, INC. AND SUBSIDARIES
FIRST QUARTER 2002 REPORT ON FORM 10-QSB
TABLE OF CONTENTS
PAGE
----
PART I. FINANCIAL INFORMATION
-----------------------------
Item 1. Consolidated Financial Statements
Unaudited Consolidated Balance Sheet
March 31, 2002 .................................................... 3
Unaudited Consolidated Statements of Operations
Three Months Ended March 31, 2002 and 2001 and from
July 31, 1992 (Inception) Through March 31, 2002 .................. 4
Unaudited Consolidated Statements of Cash Flows
Three Months Ended March 31, 2002 and 2001 and from
July 31, 1992 (Inception) Through March 31, 2002 .................. 5
Unaudited Consolidated Statements of Stockholders' Equity
(Capital Deficiency) For the Cumulative Period from July
31, 1992 (Inception) through March 31, 2002 ....................... 6
Notes to Unaudited Consolidated Financial Statements .............. 10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ..................... 33
PART II. OTHER INFORMATION
--------------------------
Item 1. Legal Proceedings ................................................ 35
Item 2. Changes in Securities ............................................ 35
Item 3. Defaults Upon Senior Securities .................................. 36
Item 4. Submission of Matters to a Vote of Security Holders .............. 36
Item 5. Other Information ................................................ 36
Item 6. Exhibits and Reports on Form 8-K ................................. 36
Signatures ................................................................ 37
2
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARIES
(a development stage enterprise)
CONSOLIDATED BALANCE SHEET
MARCH 31, 2002
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 81,000
Stock subscription receivable 100,000
Prepaid expenses and other assets 28,000
-------------
Total current assets 209,000
Property and equipment, net 103,000
Patents, net 1,606,000
Investment in Novint Technologies, Inc. 322,000
Technology license, net 439,000
Security deposit 7,000
-------------
$ 2,686,000
=============
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses $ 631,000
Note payable to officers 525,000
Note payable - other 290,000
-------------
Total current liabilities 1,446,000
-------------
Commitments
STOCKHOLDERS' EQUITY
Capital stock $.001 par value
Preferred, authorized 1,000,000 shares
Series A convertible, redeemable, 10 percent
cumulative, authorized 182,525 shares;
issued and outstanding - none
Series B convertible, authorized 250,000 shares;
74,999 shares issued and outstanding
Series C convertible, redeemable, authorized
14,000 shares; issued and outstanding - none
Common, authorized 250,000,000 shares, 120,275,005 shares
issued, and outstanding, 25,277 shares issuable 119,000
Additional paid-in capital 40,314,000
Deferred compensation (206,000)
Deficit accumulated during the development stage (38,987,000)
-------------
Total stockholders' equity 1,240,000
-------------
$ 2,686,000
=============
SEE NOTES TO FINANCIAL STATEMENTS
3
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARIES
(a development stage enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
PERIOD FROM
JULY 31, 1992
THREE MONTHS ENDED (INCEPTION)
MARCH 31, THROUGH
------------------------------ MARCH 31,
2002 2001 2002
------------- ------------- -------------
Revenues $ 250,000
--------------
Operating costs and expenses:
General and administrative $ 867,000 $ 1,061,000 29,746,000
Research and development 539,000 973,000 7,219,000
-------------- -------------- --------------
Total operating costs and expenses 1,406,000 2,034,000 36,965,000
------------- ------------- -------------
Loss from operations before other income and expenses (1,406,000) (2,034,000) (36,715,000)
Other income and expenses:
Contract revenue 3,602,000
Interest and other expense (11,000) (10,000) (621,000)
Interest income 4,000 12,000 171,000
Equity in losses of investees (114,000) (419,000)
-------------- -------------- --------------
NET LOSS/COMPREHENSIVE LOSS (1,527,000) (2,032,000) $ (33,982,000)
-------------- -------------- ==============
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS $ (1,527,000) $ (2,032,000)
============== ==============
BASIC AND DILUTED LOSS PER SHARE:
Weighted average number of common shares
outstanding 118,550,150 106,232,000
============== ==============
Basic and diluted loss per share $ (.01) $ (.02)
============== ==============
SEE NOTES TO FINANCIAL STATEMENTS
4
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARIES
(a development stage enterprise)
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
PERIOD FROM
JULY 31, 1992
(INCEPTION)
THREE MONTHS ENDED THROUGH
MARCH 31, MARCH 31,
2002 2001 2002
------------- ------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,527,000) $ (2,032,000) $(33,982,000)
Adjustments to reconcile net loss to net cash used in
operating activities:
Common stock issued for services 801,000 182,000 3,462,000
Preferred stock issued for services 598,000
Stock options issued for services 353,000 9,414,000
Warrants issued for services 2,532,000
Financing costs payable with common stock 191,000
Loss of equity investee 87,000 392,000
Depreciation and amortization 169,000 67,000 1,845,000
Changes in:
Prepaid expenses 56,000 12,000 14,000
Accounts payable and accrued expenses 58,000 148,000 986,000
------------- ------------- -------------
Net cash used in operating activities (356,000) (1,270,000) (14,548,000)
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES;
Purchase of equipment (3,000) (423,000)
Purchase of investment (100,000)
Proceeds from sale of equipment 14,000
------------- ------------- -------------
Net cash used in investing activities (3,000) (509,000)
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock (100,000)
Proceeds from note payable to stockholders 2,399,000
Proceeds from note payable - other 3,000 303,000
Repayment of note payable - other (4,000) (13,000)
Net proceeds from issuance of preferred stock 3,569,000
Net proceeds from issuance of common stock 355,000 234,000 9,148,000
Loan repayment to preferred stockholder (148,000)
Capital lease payments (13,000)
Security deposit paid (7,000)
------------- ------------- -------------
Net cash provided by financing activities 358,000 230,000 15,138,000
------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,000 (1,043,000) 81,000
Cash and cash equivalents, beginning of period 79,000 1,520,000
------------- ------------- -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 81,000 $ 477,000 $ 81,000
============= ============= =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 3,000 $ 6,000 $ 17,000
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Fixed assets contributed to the Company in exchange for
Series A preferred stock $ 45,000
Issuance of 14,391,627 common shares to acquire intangible assets $ 15,000
Special distribution of 14,391,627 shares of common stock to
stockholder in settlement of stockholder advances $ 376,000
Issuance of 7,200,000 common shares to acquire intangible assets $ 1,440,000
Issuance of Series A preferred stock and warrants in settlement
of note payable and accrued interest $ 1,830,000
Issuance of 1,000,000 common shares to acquire intangible assets $ 1,000,000
Issuance of 100,000 common shares to acquire furniture and fixtures $ 49,000
Issuance of 78,000 common shares in satisfaction of accrued expenses $ 15,000
Issuance of 10,500 shares to acquire furniture and fixtures $ 40,000
Issuance of 1,400,000 of common shares to acquire Teneo Computing $ 785,000
Issuance of 1,000,000 of common shares to purchase 42% of Novint
Technologies $ 561,000
SEE NOTES TO FINANCIAL STATEMENTS
5
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY)
(NOTES A AND F)
FOR THE CUMULATIVE PERIOD FROM JULY 31, 1992 (INCEPTION) THROUGH MARCH 31, 2002
(Unaudited)
PREFERRED STOCK
$.001 PAR VALUE
---------------------------- COMMON STOCK
SERIES A SERIES B $.001 PAR VALUE
PREFERRED ---------------------------- -----------------------------
STOCK SHARES AMOUNT SHARES AMOUNT
------------- ------------- ------------- ------------- -------------
Initial issuance of shares to
founders on contribution of
intangible assets at historic
cost basis 14,391,627 $ 14,500
Additional founders' contribution
Issuance of 1,037,000 shares of
Series A preferred Stock, net
of issuance costs $ 10,000
Net loss
------------- ------------- -------------
BALANCE, MARCH 31, 1993 10,000 14,391,627 14,500
Issuance of shares to investor at
approximately $.21 per share 14,391,627 14,500
Issuance of shares on exercise
of options 479,720 1,000
Services performed in exchange
for Series A Preferred stock
issued in fiscal 1993
Net loss
------------- ------------- -------------
BALANCE, MARCH 31, 1994 10,000 29,262,974 30,000
Services performed for Series A
preferred stock issued in
fiscal 1993
Issuance of shares at approximately
$.52 per share 345,399
Net loss
------------- ------------- -------------
BALANCE, DECEMBER 31, 1994 10,000 29,608,373 30,000
Issuance of 163,000 shares of
Series A Preferred stock 2,000
Write-off of amounts receivable
from stockholders
Net loss
------------- ------------- -------------
BALANCE, DECEMBER 31, 1995 12,000 29,608,373 30,000
Issuance of shares upon exercise
of option for $ 15,000 14,391,627 14,000
Net loss
------------- ------------- -------------
BALANCE, DECEMBER 31, 1996 12,000 44,000,000 44,000
Purchase and retirement of
1,200,000 shares of
Series A preferred stock (12,000)
Purchase of 7,195,814 treasury
shares of common stock
for $15,000
Net loss/comprehensive loss
------------- ------------- ------------- ------------- -------------
BALANCE, DECEMBER 31, 1997
(CARRIED FORWARD) 0 0 0 44,000,000 44,000
(CONTINUED)
DEFICIT
AMOUNTS ACCUMULATED
ADDITIONAL RECEIVABLE DURING THE
PAID-IN FROM DEVELOPMENT TREASURY
CAPITAL STOCKHOLDERS STAGE STOCK TOTAL
------------- ------------- ------------- ------------- -------------
Initial issuance of shares to
founders on contribution of
intangible assets at historic
cost basis $ 500 $ 15,000
Additional founders' contribution 40,000 $ (40,000) 0
Issuance of 1,037,000 shares of
Series A preferred Stock, net
of issuance costs 1,020,000 (286,000) 744,000
Net loss $ (543,000) (543,000)
------------- ------------- ------------- -------------
BALANCE, MARCH 31, 1993 1,060,500 (326,000) (543,000) 216,000
Issuance of shares to investor at
approximately $.21 per share 2,985,500 3,000,000
Issuance of shares on exercise
of options 49,000 50,000
Services performed in exchange
for Series A Preferred stock
issued in fiscal 1993 127,000 127,000
Net loss (2,292,000) (2,292,000)
------------- ------------- ------------- -------------
BALANCE, MARCH 31, 1994 4,095,000 (199,000) (2,835,000) 1,101,000
Services performed for Series A
preferred stock issued in
fiscal 1993 159,000 159,000
Issuance of shares at approximately
$.52 per share 182,000 182,000
Net loss (2,250,000) (2,250,000)
------------- ------------- ------------- -------------
BALANCE, DECEMBER 31, 1994 4,277,000 (40,000) (5,085,000) (808,000)
Issuance of 163,000 shares of
Series A Preferred stock 161,000 163,000
Write-off of amounts receivable
from stockholders (40,000) 40,000 0
Net loss (972,000) (972,000)
------------- ------------- ------------- -------------
BALANCE, DECEMBER 31, 1995 4,398,000 0 (6,057,000) (1,617,000)
Issuance of shares upon exercise
of option for $ 15,000 1,000 15,000
Net loss (284,000) (284,000)
------------- ------------- ------------- -------------
BALANCE, DECEMBER 31, 1996 4,399,000 0 (6,341,000) (1,886,000)
Purchase and retirement of
1,200,000 shares of
Series A preferred stock (58,000) (70,000)
Purchase of 7,195,814 treasury
shares of common stock
for $15,000 $ (15,000) (15,000)
Net loss/comprehensive loss (335,000) (335,000)
------------- ------------- ------------- ------------- -------------
BALANCE, DECEMBER 31, 1997
(CARRIED FORWARD) 4,341,000 0 (6,676,000) (15,000) (2,306,000)
The accompanying notes are an integral part of these financial statements
6
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY) (CONTINUED)
(NOTES A AND F)
FOR THE CUMULATIVE PERIOD FROM JULY 31, 1992 (INCEPTION) THROUGH MARCH 31, 2002
(CONTINUED)
(Unaudited)
PREFERRED STOCK
$.001 PAR VALUE
----------------------------- COMMON STOCK
SERIES A SERIES B $.001 PAR VALUE
PREFERRED ----------------------------- -----------------------------
STOCK SHARES AMOUNT SHARES AMOUNT
------------- ------------- ------------- ------------- -------------
BALANCE, DECEMBER 31, 1997 (BROUGHT
FORWARD) 0 0 0 44,000,000 $ 44,000
Purchase of 7,195,813 treasury shares
of common stock for $15,000
Special distribution of 14,391,627
shares of Common stock to
Projectavision, Inc.
Shares deemed issued in connection
with reverse merger 11,000,000 11,000
Issuance of 182,525 shares of Series
A preferred stock and warrants
exercisable into 750,000 Shares
of common stock at an exercise
price of $.10 per share in exchange
for note payable of $1,500,000 and
accrued interest of $330,000
Including deemed dividend in
connection with Beneficial
conversion feature of preferred
stock
Issuance of shares at $.20 per share,
net of Issuance costs 5,000,000 5,000
Issuance of shares to purchase
intangible assets 7,200,000 7,000
Issuance of shares at $.58 per share
for Consulting services 1,000,000 1,000
Issuance of warrants on February 10,
1998 to Purchase 2,000,000 shares
of common stock
Exercisable at $.75 per share at
fair value for Services resulting
from cashless exercise feature
Issuance of shares at $.18 per share 275,000
Issuance of shares on conversion of
182,525 shares of Series A
preferred stock 9,435,405 10,000
Issuance of shares at $.05 per share 20,340,000 20,000
Issuance of stock options and warrants
at fair value for services
Net loss/comprehensive loss
------------- ------------- ------------- ------------- -------------
BALANCE, DECEMBER 31, 1998
(CARRIED FORWARD) 0 0 0 98,250,405 98,000
(CONTINUED)
DEFICIT
AMOUNTS ACCUMULATED
ADDITIONAL RECEIVABLE DURING THE
PAID-IN FROM DEVELOPMENT TREASURY
CAPITAL STOCKHOLDERS STAGE STOCK TOTAL
------------- ------------- ------------- ------------- -------------
BALANCE, DECEMBER 31, 1997 (BROUGHT
FORWARD) $ 4,341,000 $ 0 $ (6,676,000) $ (15,000) $ (2,306,000)
Purchase of 7,195,813 treasury shares
of common stock for $15,000 (15,000) (15,000)
Special distribution of 14,391,627
shares of Common stock to
Projectavision, Inc. 346,000 30,000 376,000
Shares deemed issued in connection
with reverse merger (11,000)
Issuance of 182,525 shares of Series
A preferred stock and warrants
exercisable into 750,000 Shares
of common stock at an exercise
price of $.10 per share in exchange
for note payable of $1,500,000 and
accrued interest of $330,000
Including deemed dividend in
connection with Beneficial
conversion feature of preferred
stock 2,850,000 (1,020,000) 1,830,000
Issuance of shares at $.20 per share,
net of Issuance costs 970,000 975,000
Issuance of shares to purchase
intangible assets 1,433,000 1,440,000
Issuance of shares at $.58 per share
for Consulting services 579,000 580,000
Issuance of warrants on February 10,
1998 to Purchase 2,000,000 shares
of common stock
Exercisable at $.75 per share at
fair value for Services resulting
from cashless exercise feature 660,000 660,000
Issuance of shares at $.18 per share 50,000 50,000
Issuance of shares on conversion of
182,525 shares of Series A
preferred stock (10,000)
Issuance of shares at $.05 per share 997,000 1,017,000
Issuance of stock options and warrants
at fair value for services 2,165,000 2,165,000
Net loss/comprehensive loss (4,580,000) (4,580,000)
------------- ------------- ------------- ------------- -------------
BALANCE, DECEMBER 31, 1998
(CARRIED FORWARD) 14,370,000 0 (12,276,000) 0 2,192,000
The accompanying notes are an integral part of these financial statements
7
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY)(CONTINUED)
(NOTES A AND F)
FOR THE CUMULATIVE PERIOD FROM JULY 31, 1992 (INCEPTION) THROUGH MARCH 31, 2002
(CONTINUED)
(Unaudited)
PREFERRED STOCK
$.001 PAR VALUE
----------------------------- COMMON STOCK
SERIES A SERIES B $.001 PAR VALUE
PREFERRED ----------------------------- -----------------------------
STOCK SHARES AMOUNT SHARES AMOUNT
------------- ------------- ------------- ------------- -------------
(BROUGHT FORWARD) 0 0 $ 0 98,250,405 $ 98,000
Issuance of shares in satisfaction
Of accrued expenses 78,000
Issuance of shares at $.49 per
Share for consulting services 10,000
Issuance of shares at $.49 per
Share to purchase furniture
and fixtures 100,000
Issuance of shares at market
Prices as consulting services
were performed 17,269
Issuance of shares to purchase
Intangible assets 1,000,000 1,000
Issuance of shares at $1.25 per
Share for services 1,600
Issuance of stock options
at fair value for services
Issuance of warrants on February
10, 1998 to purchase 2,000,000
shares of common stock exercisable
at $.75 per share for Consulting
services resulting from
Notification of warrant holder of
intent to exercise
Shares issuable at $1.27 per
Share in connection with note
Payable
Issuance of shares on exercise
Of 100,000 options at $.20 per
Share 100,000
Issuance of Series B convertible
Preferred shares at $6.00 per
share including deemed dividend
in connection with Beneficial
conversion feature of preferred
stock 245,165
Issuance of shares at $.75 per share 533,000 1,000
Net loss/comprehensive loss
------------- ------------- ------------- ------------- -------------
BALANCE, DECEMBER 31, 1999
(CARRIED FORWARD) 0 245,165 0 100,090,274 100,000
(CONTINUED)
DEFICIT
AMOUNTS ACCUMULATED
ADDITIONAL RECEIVABLE DURING THE
PAID-IN FROM DEVELOPMENT TREASURY
CAPITAL STOCKHOLDERS STAGE STOCK TOTAL
------------- ------------- ------------- ------------- -------------
(BROUGHT FORWARD) $ 14,370,000 $ 0 $(12,276,000) $ 0 $ 2,192,000
Issuance of shares in satisfaction
Of accrued expenses 15,000 15,000
Issuance of shares at $.49 per
Share for consulting services 5,000 5,000
Issuance of shares at $.49 per
Share to purchase furniture
and fixtures 49,000 49,000
Issuance of shares at market
Prices as consulting services
were performed 15,000 15,000
Issuance of shares to purchase
Intangible assets 999,000 1,000,000
Issuance of shares at $1.25 per
Share for services 2,000 2,000
Issuance of stock options
at fair value for services 6,572,000 6,572,000
Issuance of warrants on February
10, 1998 to purchase 2,000,000
shares of common stock exercisable
at $.75 per share for Consulting
services resulting from
Notification of warrant holder of
intent to exercise 1,090,000 1,090,000
Shares issuable at $1.27 per
Share in connection with note
Payable 191,000 191,000
Issuance of shares on exercise
Of 100,000 options at $.20 per
Share 20,000 20,000
Issuance of Series B convertible
Preferred shares at $6.00 per
share including deemed dividend
in connection with Beneficial
conversion feature of preferred
stock 2,942,000 (1,471,000) 1,471,000
Issuance of shares at $.75 per share 399,000 400,000
Net loss/comprehensive loss (9,800,000) (9,800,000)
------------- ------------- ------------- ------------- -------------
BALANCE, DECEMBER 31, 1999
(CARRIED FORWARD) 26,669,000 0 (23,547,000) 0 3,222,000
The accompanying notes are an integral part of these financial statements
8
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY)
(NOTES A AN F)
FOR THE CUMULATIVE PERIOD FROM JULY 31, 1992 (INCEPTION) THROUGH MARCH 31, 2002
(Unaudited)
PREFERRED STOCK PREFERRED STOCK
$.001 PAR VALUE $.001 PAR VALUE
----------------- ----------------- COMMON STOCK
SERIES B SERIES C $.001 PAR VALUE
----------------- ----------------- -----------------------
SERIES A
PREFERRED
STOCK SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------ --------- ------ --------- ------ ------------ ---------
BALANCE, DECEMBER 31, 1999 241,165 100,090,274 100,000
Issuance of shares at $0.75
per share 515,000 1,000
Issuamce of shares at market
price for service 4,942
Issuance of common stock to
Equilink LLC on exercise
of cashless warrants 1,076,923 1,000
Shares issued of Series C
convertible preferred shares
at $100 per share including
deemed dividend in connection
with conversion feature of
preferred stock 14,000
Issuance of shares in
connection with Series
C preferred stock private
placement investment 700,000 1,000
Shares issuable at $2.23 per
share in connection with
research and development
license agreement
Issuance of shares at market
price for services 11,083
Issuance of options at market
price for services
Issuance of stock options in
connection with deferred
compensation agreement
Amortization of deferred
compensation
Issuance of shares to purchase
furniture and fixtures 10,500
Issuance of shares in
connection with Series
C preferred stock private
placement investment 10,000
Issuance of shares at $1.25
per share 1,600,050 2,000
Conversion of Series B
preferred stock to common stock (60,000) 600,000
Issuance of shares at market
price for services 51,000
Shares issuable at market
price for services
Net loss/comprehensive loss
------ --------- ------ --------- ------ ------------ ---------
BALANCE, DECEMBER 31, 2000 - 181,165 - 14,000 - 104,669,772 105,000
(CONTINUED)
AMOUNTS DEFICIT
RECEIVABLE ACCUMULATED
ADDITIONAL DEFERRED FROM DURING THE
PAID-IN COMPEN- STOCK- DEVELOP- TREASURY
CAPITAL SATION HOLDERS MENT STAGE STOCK TOTAL
------------ --------- ------- ------------ -------- ------------
BALANCE, DECEMBER 31, 1999 26,669,000 - - (23,547,000) - 3,222,000
Issuance of shares at $0.75
per share 385,000 386,000
Issuamce of shares at market
price for service -
Issuance of common stock to
Equilink LLC on exercise
of cashless warrants (1,000) -
Shares issued of Series C
convertible preferred shares
at $100 per share including
deemed dividend in connection
with conversion feature of
preferred stock 2,199,000 (1,400,000) 799,000
Issuance of shares in
connection with Series
C preferred stock private
placement investment 600,000 601,000
Shares issuable at $2.23 per
share in connection with
research and development -
license agreement 1,115,000 (1,115,000) -
Issuance of shares at market
price for services 24,000 24,000
Issuance of options at market
price for services 229,000 229,000
Issuance of stock options in
connection with deferred
compensation agreement 425,000 (425,000) -
Amortization of deferred
compensation 113,000 113,000
Issuance of shares to purchase
furniture and fixtures 40,000 40,000
Issuance of shares in
connection with Series
C preferred stock private
placement investment -
Issuance of shares at $1.25
per share 1,998,000 2,000,000
Conversion of Series B
preferred stock to common stock -
Issuance of shares at market
price for services 102,000 102,000
Shares issuable at market
price for services 88,000 88,000
Net loss/comprehensive loss (4,736,000) (4,736,000)
------------ --------- ------- ------------ -------- ------------
BALANCE, DECEMBER 31, 2000 33,873,000 (312,000) (30,798,000) 2,868,000
9
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY)
(NOTES A AN F)
FOR THE CUMULATIVE PERIOD FROM JULY 31, 1992 (INCEPTION) THROUGH MARCH 31, 2002
(Unaudited)
PREFERRED STOCK PREFERRED STOCK
$.001 PAR VALUE $.001 PAR VALUE
----------------- ----------------- COMMON STOCK
SERIES B SERIES C $.001 PAR VALUE
----------------- ----------------- -----------------------
SERIES A
PREFERRED
STOCK SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------ --------- ------ --------- ------ ------------ ---------
BALANCE, DECEMBER 31, 2000 185,165 14,000 104,669,772 105,000
Issuance of shares in connection
with private placement offerings 1,097,500 1,000
Issuance of shares upon conversion
of Series B preferred stock (100,166) 1,001,660 1,000
Issuance of shares upon conversion
of Series C preferred stock (14,000) 2,800,000 2,800
Issuance of shares upon exercise
of stock options 15,000
Issuance of shares to aquire Teneo
Computing, Inc. 1,400,000 1,000
Issuance of shares to purchase 42% of
Novint Technologies, Inc. 1,000,000 1,000
Issuance of shares for services at
fair market value 3,388,097 2,200
Exercise of warrants issued for services 942,281 1,000
Issuance of stock options for services
Amortization of defered compensation
Net loss/comprehensive loss
------ --------- ------ --------- ------ ------------ ---------
BALANCE, DECEMBER 31, 2001 84,999 116,314,310 115,000
Issuance of shares in connection with
private placement offerings 1,535,700 1,600
Issuance of shares upon conversion of
Series B preferred stock (10,000) 100,000
Issuance of shares for services at
fair market value 2,350,272 2,400
Amortization of deferred compensation
Net loss/comprehensive loss
------ --------- ------ --------- ------ ------------ ---------
BALANCE, MARCH 31, 2002 74,999 120,300,282 119,000
(CONTINUED)
AMOUNTS DEFICIT
RECEIVABLE ACCUMULATED
ADDITIONAL DEFERRED FROM DURING THE
PAID-IN COMPEN- STOCK- DEVELOPMENTAL TREASURY
CAPITAL SATION HOLDERS STAGE STOCK TOTAL
------------ --------- ------- ------------ -------- ------------
BALANCE, DECEMBER 31, 2000 33,873,000 (312,000) (30,798,000) 2,868,000
Issuance of shares in connection
with private placement offerings 694,000 695,000
Issuance of shares upon conversion
of Series B preferred stock 1,000
Issuance of shares upon conversion
of Series C preferred stock 2,800
Issuance of shares upon exercise
of stock options 3,000 3,000
Issuance of shares to aquire Teneo
Computing, Inc. 784,000 785,000
Issuance of shares to purchase 42% of
Novint Technologies, Inc. 560,000 561,000
Issuance of shares for services at
fair market value 2,138,000 2,140,200
Exercise of warrants issued for services 782,000 783,000
Issuance of stock options for services 250,000 250,000
Amortization of defered compensation 85,000 85,000
Net loss/comprehensive loss (6,662,000) (6,662,000)
------------ --------- ------- ------------ -------- ------------
BALANCE, DECEMBER 31, 2001 39,084,000 (227,000) (37,460,000) 1,512,000
Issuance of shares in connection with
private placement offerings 453,000 454,600
Issuance of shares upon conversion of
Series B preferred stock
Issuance of shares for services at
fair market value 777,000 779,400
Amortization of deferred compensation 21,000 21,000
Net loss/comprehensive loss (1,527,000) (1,527,000)
------------ --------- ------- ------------ -------- ------------
BALANCE, MARCH 31, 2002 40,314,000 (206,000) (38,987,000) 1,240,000
10
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARIES
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002
Unaudited)
NOTE A - ORGANIZATION AND OPERATIONS
Manhattan Scientifics, Inc. (formerly Grand Enterprises, Inc. ("Grand"), and its
wholly-owned subsidiaries Tamarack Storage Devices, Inc. and Teneo Computing,
Inc. ("Teneo") (collectively "the Company"), a development stage enterprise,
operates in a single business segment as a technology incubator that seeks to
acquire, develop and bring to market technologies with an emphasis on consumer
and commercial electronics. At March 31, 2002, the Lauer Entities (Lancer
Management Group, LLC) claim beneficial ownership of approximately 38% of the
Company's common stock.
In January 1998, Manhattan Scientifics, Inc., then a non-operating public
corporation with nominal net assets acquired all of the outstanding common stock
of Tamarack Storage Devices, Inc. ("Tamarack") by issuing 44 million shares of
its common stock including approximately 43,120,000 shares issued to
Projectavision, a public company which gave the stockholders of Tamarack actual
control of the combined company. In addition, Manhattan Scientifics, Inc. issued
182,525 shares Series A preferred stock and a warrant to purchase 750,000 shares
of its common stock at an exercise price of $.10 per share in exchange for a
note payable of $1.5 million plus accrued interest of $330,000 due to
Projectavision from Tamarack. In connection with the legal form of this
transaction, Tamarack became a wholly-owned subsidiary of Manhattan Scientifics,
Inc. For accounting purposes, the acquisition was treated as a recapitalization
of Tamarack rather than a business combination. Tamarack as the accounting
acquiror of the public shell did not record goodwill or any other intangible
asset for this "Reverse Acquisition". The historical financial statements are
those of Tamarack. Tamarack, a development stage enterprise, was a Texas
corporation formed in July 1992. Tamarack was involved in the research and
development of products based on holographic data storage technology. Loss per
share has been restated for all periods prior to the acquisition to include the
number of equivalent shares received by Tamarack's stockholders in the Reverse
Acquisition.
Prior to this transaction, Projectavision owned approximately 98% of Tamarack.
Projectavision through cash investments acquired approximately 65% of Tamarack
through December 31, 1996. During late 1997 and early 1998, as a result of a
treasury stock transaction between Tamarack and its two founding stockholders,
Projectavision came to own approximately 97% of the outstanding shares of
Tamarack. In lieu of repayment of certain advances made by Projectavision
amounting to approximately $376,000, Tamarack made a special dividend
distribution to Projectavision of the 14,391,627 treasury shares increasing
Projectavision's ownership of Tamarack to 98%. The value ascribed to this
transaction amounted to a reduction of the treasury stock at historical cost and
a contribution to additional paid-in capital of $346,000 as part of the reverse
acquisition.
Concurrently with the Reverse Acquisition, Tamarack merged with DKY, Inc., a
newly formed company. In connection with this transaction, Tamarack, as the
surviving entity, obtained certain license/intellectual property assignment
rights held by DKY, Inc. In addition, the Company issued 7,200,000 common shares
to acquire certain intangible assets from DKY, Inc.'s stockholder valued at $1.4
million.
In May 2001 as part and parcel of a series of transactions between the Company
and Novint Technologies, Inc. ("Novint") modifying an earlier agreement, the
Company acquired all of the outstanding common stock of Teneo by issuing
1,400,000 common shares to the stockholders of Teneo valued at $785,000 and 42%
of the outstanding common stock of Novint by issuing 1,000,000 common shares to
Novint valued at $561,000. Teneo and Novint are both development stage
enterprises involved in research and development of proprietary technologies and
products in the area of haptics (see Note D). Haptics is an emerging technology
that allows computer users to have the physical sensation of manipulating and
touching objects on a computer screen as if they were three-dimensional, using a
special mouse.
The Company, has been engaged primarily in directing, supervising and
coordinating research and development efforts and raising funds. The Company
conducts its operations primarily in the United States and Germany.
11
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARIES
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002
Unaudited)
NOTE A - ORGANIZATION AND OPERATIONS (CONTINUED)
There is no assurance that the Company's research and development and marketing
efforts will be successful, or that the Company will achieve significant sales
of any products derives therefrom. The Company has incurred net losses and
negative cash flows from operations since its inception. In addition, the
Company operates in an environment of rapid change in technology and is
dependent upon the services of its employees and its consultants. If the Company
is unable to successfully commercialize its technologics, it is unlikely that it
will continue in business.
The accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America, which
contemplates continuation of the Company as a going concern and realization of
assets and settlement of liabilities and commitments in the normal course of
business. The Company will continue to require the infusion of capital until
operations become profitable. During 2002, the Company anticipates raising
additional capital, generating revenues and continuing to monitor their expenses
primarily in the area of personnel.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RELATED MATTERS
[1] CASH AND CASH EQUIVALENTS:
The Company maintains cash and cash equivalents with various financial
institutions. The Company performs periodic evaluations of the relative
credit standing of the financial institutions which is considered in
the Company's investment strategy.
[2] PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of the
Company and its two wholly-owned subsidiaries. All material
intercompany accounts and transactions have been eliminated.
[3] PROPERTY AND EQUIPMENT:
Property and equipment are recorded at cost. The cost of maintenance
and repairs is charged against results of operations as incurred.
Depreciation is charged against results of operations using the
straight-line method over the estimated economic useful life of the
asset.
[4] INTANGIBLE ASSETS:
Patents and licenses are recorded at cost. Amortization is charged
against results of operations using the straight-line method over the
estimated economic useful life. Patents related to the mid-range fuel
cell, micro fuel cell and solar fuel cell technologies are estimated to
have an economic useful life of 10 years. Licenses relating to the
haptics technology are estimated to have economic useful lives ranging
from two to three years.
12
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARIES
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002
(Unaudited)
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RELATED MATTERS
(CONTINUED)
[5] INCOME TAXES:
The Company recognizes deferred tax liabilities and assets for the
expected future tax consequences of events that have been included in
the financial statements or tax returns. Under this method, deferred
tax liabilities and assets are determined on the basis of the
differences between the tax basis of assets and liabilities and their
respective financial reporting amounts ("temporary differences") at
enacted tax rates in effect for the years in which the differences are
expected to reverse.
[6] PER SHARE DATA:
The basic and diluted per share data has been computed on the basis of
the net loss available to common stockholders for the period divided by
the historic weighted average number of shares of common stock
outstanding. All potentially dilutive securities (see Note F) have been
excluded from the computations since they would be antidilutive.
[7] RESEARCH AND DEVELOPMENT EXPENSES:
Costs of research and development activities are expensed as incurred.
[8] ADVERTISING EXPENSES:
The Company expenses advertising costs which consist primarily of
promotional items and print media, as incurred. Advertising expenses
amounted to $9,000, $1,000, and $80,000 for the three months ended
March 31, 2002 and 2001 and for the cumulative period July 31, 1992
(inception) through March 31, 2002, respectively.
[9] 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.
[10] INVESTMENTS:
The Company recorded its investments in NMXS.com, Inc. and Novint at
cost and uses the equity method of accounting to record its share of
income or loss. See Notes D[1] and D[2].
[11] REVENUE RECOGNITION:
Revenue was recognized in 2000 upon production and delivery of fuel
cell prototypes. Contract revenues represent primarily reimbursed
expenditures incurred in prior years in connection with a government
research contract. The significant aspects of this contract were
completed in 1997 and the Company does not expect any reimbursements
beyond 1997. Amounts reimbursed represent miscellaneous other income.
The Company expects to earn revenues from the sale or licensing of its
products and such revenue will be recognized in accordance with the
terms of the underlying agreements at the time such transactions are
consummated.
13
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARIES
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002
(Unaudited)
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RELATED MATTERS
(CONTINUED)
[12] IMPAIRMENT OF LONG-LIVED ASSETS
Long-lived assets, including patents and technology licenses to be held
and used are reviewed for impairment whenever events or changes in
circumstances indicate that the related carrying amounts may not be
recoverable using expected future undiscounted cash flows. When
required, impairment losses on assets to be held and used are
recognized based on the excess of the asset's carrying amount over its
fair value as determined by selling prices for similar assets or
application of other appropriate valuation techniques. Long-lived
assets to be disposed of are reported at the lower of their carrying
amount of fair value less disposal costs. The Company has reviewed its
patents and technology licenses for impairment and determined that no
adjustments to their carrying values were needed.
[13] RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:
The Financial Accounting Standards Board ("FASB") recently issued
Statements of Financial Accounting Standards Nos. 141 and 142 ("SFAS
141" and "SFAS 142"). Both of these pronouncements are effective fiscal
years beginning after December 31, 2001. Under SFAS 141, a company must
use the purchase method of accounting for all business acquisitions.
SFAS 142 requires a company to periodically evaluate for impairment (as
opposed to amortize) goodwill and intangible assets with indefinite
lives. The Company does not believe the implementation of SFAS 141 or
SFAS 142 will have a material effect on its financial position or
results of operations. The FASB also issued SFAS No. 144 "Accounting
for the Impairment or Disposal of Long-Lived Assets" which supercedes
SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of." SFAS 144 requires that long-lived
assets be measured at the lower of carrying amount or fair value, less
cost to sell, whether reported in continuing operations or in
discontinued operations. SFAS 144 is effective for fiscal years
beginning after December 15, 2001 and interim periods within those
years. The Company does not believe that the implementation of SFAS 144
will have a material impact on its financial position or results of
operations.
[14] Interim financial statements:
Financial statements as of March 31, 2002 and the three months ended
March 31, 2002 and 2001 and the respective amounts included in the
period from inception July 31, 1992 are unaudited but in the opinion of
management, the financial statements include all adjustments consisting
of normal recurring accruals necessary for a fair presentation of the
comparative financial position and results of operations. Results of
operations for interim periods are not necessarily indicative of those
to be achieved or expected for the entire year.
14
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARIES
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002
(Unaudited)
NOTE C - PROPERTY AND EQUIPMENT
Property and equipment as of March 31, 2002 consists of the following:
USEFUL LIVES
IN YEARS
--------
Furniture and fixtures 5 $ 98,000
Computers 3 44,000
Equipment 5 173,000
-----------
315,000
Less accumulated depreciation 212,000
-----------
$ 103,000
===========
The Company depreciates property and equipment using the straight-line method
over five years. The depreciation expense for three months ended March 31, 2002
was approximately $10,000.
NOTE D - INVESTMENTS
[1] NMXS.COM, INC.:
On June 3, 1999, the Company entered into an agreement with NMXS.com,
Inc. (formerly New Mexico Software, Inc.) and invested $100,000
($70,000 June 1999 and $30,000 July 1999) for 5,416,300 shares of
common stock which resulted in the Company owning approximately 49% of
NMXS.com. The initial investment amount exceeded the underlying net
equity by approximately $63,000. The Company treated such excess as an
expense to fund the development of software.
During 1999, in connection with NMXS.com's transactions in its own
common stock, the Company's ownership was first reduced to 31% and then
in August 1999, the Company realized gains amounting to approximately
$532,000 and its ownership percentage was further diluted to 28% when
NMXS.com became public through a reverse merger. The Company's equity
in the net losses of NMXS.com exceeded such gains. As a result of net
losses through December 31, 1999 amounting to $632,000, including the
above transactions, the Company's investment in NMXS.com was reduced to
zero.
Similarly during 2000, the Company realized gains amounting to
approximately $305,000 resulting from NMXS.com's capital transactions,
which diluted the Company's ownership interest to 26%. The Company's
equity in net losses of NMXS.com during 2000 exceeded such gain.
On June 24, 2000, in connection with a private placement offering, the
Company delivered 100,000 shares of NMXS.com stock to a stockholder.
The Company recognized a gain of approximately $169,000 from this
transaction. The gain was offset by losses of $481,000 in 2000. In
addition, the Company delivered an option to purchase an additional
100,000 shares of the Company's holdings in NMXS.com for a purchase
price of $1 per share.
On July 27, 2000 the Company exchanged 5,000 shares of NMXS.com stock
for the purchase of furniture and fixtures.
On February 20, 2001 the Company entered into a stock swap agreement
with NMXS.com. The agreement provides for the exchange of cashless
assignable warrants to purchase 1,500,000 shares of NMXS.com common
stock at an exercise price of $0.50 per share for 150,000 restricted
shares of the Company's common stock. The transaction was recorded as
an investment valued at $225,000, which represents the market value of
the Company's common stock exchanged on the date of the agreement.
15
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARIES
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002
(Unaudited)
NOTE D - INVESTMENTS (CONTINUED)
[1] NMXS.COM, INC. (CONTINUED)
On April 12, 2001 the Company sold 250,000 shares of its NMXS.com
common stock to a third party for a $62,500 note payable at over three
years.
On June 27, 2001, the Company issued 150,000 shares of its NMXS.com
common stock to a third party as a prepayment for services.
During 2001 the Company realized gains amounting to approximately
$29,000 resulting from NMXS.com capital transactions. The Company's
equity in net losses of NMXS.com during 2001 exceeded such gain.
As of March 31, 2002, the Company owns approximately 22% of NMXS.com.
The Company will not record any earnings associated with NMXS.com until
the losses recognized during the period the equity method was suspended
have been recovered. As of March 31, 2002 the cumulative losses in
excess of the amount invested amounted to $165,000. As of March 31,
2002 the market value of the Company's investment in NMXS.com is
approximately $1,964,000. In addition, through August 1999, pursuant to
the stock purchase agreement with NMXS.com, the Company provided
NMXS.com with management services without remuneration. Also, in
consideration for his services through December 2000, including board
membership provided to NMXS.com the Company's chief executive officer
received a salary of $60,000 and leased a car from NMXS.com. During
2002 and 2001 the Company's chief executive officer did not receive any
compensation from NMXS.com.
The following is a summary of financial data derived from the March 31,
2002 financial statements of NMXS.com, regarding financial position and
results of operations of NMXS.com as of March 31, 2002 and for the
three months ended March 31, 2002:
Current assts (including cash of $85,000) $ 358,000
Furniture and equipment 630,000
Goodwill 97,000
Other assets 49,000
---------------
$ 1,134,000
===============
Liabilities $ 1,007,000
Stockholders' equity 127,000
---------------
$ 1,134,000
===============
Revenue $ 522,000
===============
Net loss $ (74,000)
===============
16
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARIES
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002
(Unaudited)
NOTE D - INVESTMENTS (CONTINUED)
[2] NOVINT:
In June 2000 the Company entered into an agreement with Novint ("2000
agreement") to exclusively sub-license a development stage computer
software technology on a worldwide basis, to fund research and
development of such technology, and to exchange certain securities. In
May 2001, the Company entered into a series of transactions with Novint
and Teneo, ("2001 agreement") through which the 2000 agreement was
modified. Pursuant to the 2001 agreement the Company acquired all of
the outstanding common stock of Teneo and 42% of the outstanding common
stock of Novint, the Company also agreed to fund additional amounts to
Novint to fulfill the Company's $1,500,000 research and development
commitment under 2000 agreement. The Company is obligated to pay Novint
a 5% royalty fee on net revenue from products developed from the Novint
technology. As of March 31, 2002 the Company and Novint have not
completed negotiating a research and development funding agreement to
replace the 2000 agreement, however the Company has funded $58,000 in
2001 for research and development in addition to the $1,500,000 funded
pursuant to the 2000 agreement.
In May of 2001, the Company issued 1,400,000 shares of common stock,
valued at $785,000, to acquire all the outstanding common stock of
Teneo. The entire purchase price has been allocated to the Teneo
haptics technology and its related technology license and it is being
amortized over two years. During 2001 the Company has recorded
approximately $245,000 in amortization expense related to the Teneo
technology. In May of 2001, the Company also issued 1,000,000 shares of
common stock, valued at $561,000, to acquire 42% of the outstanding
common stock of Novint. The initial $561,000 investment in Novint
exceeded the underlying net equity in Novint by approximately $523,000.
The excess purchase price over the underlying net equity in Novint has
been assigned to the Novint haptics technology and its related license
and it is being amortized over three years.
During the three months ended March 31, 2002 the Company has recorded
approximately $44,000 in amortization expense relating to the Novint
technology. This charge is included in the loss from equity method
investments in the statement of operations.
As part of the 2001 agreement Novint exclusively licensed the Teneo
haptics technology from the Company. In consideration for the license
Novint has agreed to assume all of the current and future obligations
of Teneo as it relates to Teneo's license agreement with Harvard
University ("Harvard"), the patent holder for the Teneo haptics
technology. Novint, through its license with Teneo, is obligated to
make certain royalty and research and development payments to Harvard.
Novint will be required to make royalty payments of 5% of net revenue,
up to $1 million, and 2.5% of net revenue, in excess $1 million, on
sales derived from the Teneo technology. Novint is also obligated to
make certain research payments to Harvard.
At March 31, 2002 the Company owns approximately 42% of Novint. During
the three months ended March 31, 2002 the Company recorded a loss of
$44,000 pursuant to its ownership interest in Novint. The following is
a summary of financial data regarding financial position and results of
operations derived from the March 31, 2002 financial statements of
Novint as of March 31, 2002 and for the three months ended
March 31, 2002:
17
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARIES
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002
(Unaudited)
NOTE D - INVESTMENTS (CONTINUED)
[2] NOVINT: (CONTINUED)
Current assets (including cash of $26,000) $ 396,000
Property and equipment 182,000
Other assets 76,000
--------------
$ 654,000
==============
Liabilities $ 321,000
Stockholders' equity 333,000
--------------
$ 654,000
==============
Revenue $ 42,000
==============
Net loss $ (106,000)
==============
NOTE E - NOTES PAYABLE
In August 2000, the Company obtained a line of credit from a financial
institution in the amount of $300,000. This line of credit bears interest at a
rate of the 30-day Dealer Commercial paper rate plus 2.60%. This line of credit
will terminate on July 31, 2002. As of December 31, 2001, the Company was
indebted in the amount of $287,000 which includes interest for the month of
December 2001. This line of credit is guaranteed by the Chief Executive Officer
of the Company. Interest expense for the three months ended March 31, 2002
amounted to approximately $3,000.
In August 1999, the Company borrowed $275,000 from the Chief Operating Officer.
The loan bears interest at the rate of 5.5% per annum and is due upon the
earlier of 18 months or the date of a private placement raising at least
$1,500,000. Repayment of the loan was extended for a six-month term until June
30, 2002. The Chief Operating Officer had originally delivered to the Company
$275,000 to exercise options, each exercisable to purchase common stock, but
such exercise was rescinded and the options have been treated as if not
exercised. No shares were delivered as a result of this transaction. Interest
expense for the three months ended March 31, 2002 amounted to approximately
$4,000.
In August 1999, a stockholder provided bridge financing to the Company in the
amount of $500,000. Interest on the loan was at 13.5% per annum. The loan was
repaid in October 1999 with a subsequent borrowing from another stockholder as
described below.
In October 1999, the Company obtained a $500,000 loan from a stockholder (the
Peters Corporation) with interest at prime plus 1%. The loan was paid in full in
December 1999 plus interest amounting to $7,000. In connection with this loan,
the Company arranged to have 150,000 common shares of the Company delivered to
the Peters Corporation from another stockholder. The fair market value of the
Company's stock was approximately $1.27 per share at the date of the
transaction. Subsequently, the Company agreed to issue to the third party
shareholder 150,000 common shares in replacement of shares provided by the third
party. The Company recognized a charge in 1999 of $191,000 for the value of the
shares delivered with a corresponding credit to additional paid-in capital.
In August 2001, the Company borrowed $250,000 from the Chief Executive Officer.
The loan bears interest at the rate of 5.5% per annum and was due December 31,
2001. Pursuant to a loan and security agreement this loan was extended to August
31, 2002. Interest expense for the three months ended March 31, 2002 amounted to
approximately $3,000.
18
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARIES
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002
(Unaudited)
NOTE F - CAPITAL TRANSACTIONS
[1] COMMON STOCK:
The following common stock transactions include the effects of
restating of stockholders' equity for the shares received in the
recapitalization/merger as a result of the reverse acquisition. The
exchange rate of such shares was 9.59 Manhattan Scientifics, Inc.
common shares for each Tamarack common share. Accordingly, the
Company's financial statement presentation indicates that there were
44,000,000 common shares outstanding immediately prior to consummating
the reverse merger.
Effective July 31, 1992, the Company issued 14,391,627 shares of common
stock to the founders for certain intangible assets.
During 1994, the Company effected the following stock transactions:
Issued 14,391,627 shares of common stock to Projectavision,
Inc. at approximately $.21 per share in accordance with a
stock purchase agreement.
Issued 479,720 shares of common stock on exercise of options
at a price of approximately $.10 per share.
Issued 345,399 shares of common stock at a price of
approximately $.52 per share.
During 1996, the Company issued 14,391,627 shares of common stock for
$15,000.
During 1997, the Company repurchased 7,195,814 shares of common stock
for $15,000.
During 1998, the Company effected the following transactions:
In January 1998, repurchased 7,195,813 shares of common stock
for $15,000.
In January 1998, the Company made a special distribution to
Projectavision of 14,391,627 common shares held in treasury.
In January 1998, in accounting for the reverse merger
transaction, the Company was deemed to have issued 11 million
common shares for the net monetary assets of Grand which was
nominal.
In January 1998, issued 5,000,000 shares of common stock for
$.20 per share in a private placement offering.
In January 1998, issued 7,200,000 shares of common stock at
$.20 per share to acquire certain intangible assets.
In February 1998, issued 1,000,000 shares of common stock with
a market value of $.58 per share for consulting services.
In April 1998, issued 275,000 shares of common stock at $.18
per share to an accredited investor in a private placement
offering.
19
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARIES
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002
(Unaudited)
NOTE F - CAPITAL TRANSACTIONS (CONTINUED)
[1] COMMON STOCK: (CONTINUED)
In July 1998, issued 9,435,405 shares of common stock on
conversion of 182,525 shares of Series A convertible preferred
stock, and included 309,155 of common shares representing
payment in satisfaction of accumulated dividend of
approximately $100,000 at date of conversion.
In July 1998, as part of the private placement transaction
described below, the Company issued 10 million common stock
purchase warrants at an exercise price of $.05 per share to
the Lancer Management Group, LLC.. In addition, the Company
arranged for this third party to purchase 43,170,512 shares of
the Company's common stock from Projectavision, Inc.
Furthermore, the Company agreed to issue 20 million shares of
common stock to this third party at a price of $.05 per share,
together with rights to assign such shares to certain other
third parties. Such rights were assigned to the certain other
third parties as noted directly below.
From August 1998 through December 1998, issued 20,340,000 shares of its
common stock at $.05 per share in a private placement offering.
During 1999, the Company effected the following transactions:
In August 1999, issued 1,000,000 shares of common stock for
$1.00 per share to acquire certain intangible assets.
In October 1999, issued 78,000 shares in satisfaction of
accrued expenses.
In October 1999, issued 100,000 shares at $.49 per share to
acquire furniture and fixtures that were issuable in May.
In October 1999, issued 10,000 shares at $.49 per share for
consulting services that were issuable in May.
In October 1999 issued 17,269 shares at market prices from
April through September as consulting services were performed.
In October 1999, exercised 100,000 options into 100,000 shares
of common stock at $.20 per share.
In December 1999, issued 1,600 shares of its common stock at
$1.25 per share for services rendered.
In December 1999, issued 533,000 shares of common stock at
$.75 per share in a private placement offering.
During 2000, the Company effected the following transactions:
In January 2000, issued 515,000 shares of common stock at $.75
per share in a private placement offering.
In January 2000, issued 4,942 shares of common stock, at
market price, for consulting services performed.
In January 2000, issued 1,076,923 shares of common stock,
pursuant to the July 28, 1999 exercise of warrants by
Equilink, LLC.
20
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARIES
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002
(Unaudited)
NOTE F - CAPITAL TRANSACTIONS (CONTINUED)
[1] COMMON STOCK: (CONTINUED)
In April 2000, issued 1,500 shares of common stock, at market
price, for consulting services performed.
In June 2000, issued 700,000 shares of common stock in
connection with the private placement offering of Series C
preferred shares.
In July 2000 issued 5,833 shares of common stock, at market
price, for consulting services performed.
In July 2000 issued 5,000 shares of common stock, at market
price, to acquire furniture and fixtures.
In August 2000 issued 10,000 shares of common stock in
connection with the private placement offering of Series C
preferred shares (completed June 2000).
In August 2000, the Company issued 100,000 options to purchase
stock at $.40 per share for services rendered.
In September 2000 issued 5,500 shares of its common stock to
acquire furniture and fixtures.
In October 2000, issued 3,750 shares of common stock, at
market price, for services rendered.
In October 2000, issued 1,000 shares of common stock, at
market price, for services rendered.
On October 20, 2000, the Board of Directors of the Company
authorized to increase the total number of authorized shares
of common stock from 150,000,000 to 250,000,000.
In November 2000, issued 800,050 shares of common stock at
$1.25 per share in a private placement offering.
In December 2000, issued 600,000 shares of common stock in
connection with the conversion of Series B preferred shares at
a rate of 1 Series B preferred share to 10 common shares.
In December 2000, issued 50,000 shares of common stock, at
market price, for services rendered.
In December 2000, issued 800,000 shares of common stock at
$1.25 per share in a private placement offering.
During 2001, the Company effected the following transactions:
In January 2001, issued 5,040 shares of common stock at market
price for services rendered.
In January 2001, issued 666,660 shares of common stock in
connection with the conversion of Series B preferred shares at
a rate of 1 Series B preferred share to 10 common shares.
21
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARIES
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002
(Unaudited)
NOTE F - CAPITAL TRANSACTIONS (CONTINUED)
[1] COMMON STOCK: (CONTINUED)
In January 2001, 75,000 options were exercised for 73,064
shares of common stock on a cashless basis.
In February 2001, issued 150,000 shares of common stock in
exchange for 1,500,000 warrants of NMXS.com (see Note D).
In February 2001, issued 46,370 shares of common stock at
market price for services rendered.
In March 2001, issued 150,000 shares of common stock at $0.67
per share in a private placement offering.
In March 2001, issued 200,000 shares of common stock at $0.72
per share in a private placement offering.
In March 2001, issued 414,247 shares of common stock at market
price for services rendered.
In April 2001, issued 97,500 shares of common stock at the
market price for consulting services performed.
In April 2001, issued 112,500 shares of common stock at $0.62
per share in a private placement offering.
In April 2001, issued 3,125 shares of common stock at market
price for services rendered.
In May 2001, issued 800,000 shares of common stock in
connection with the conversion of Series C preferred shares at
the rate of 1 Series C preferred share to 200 common shares.
In May 2001, issued 200,000 shares of common stock at $0.83
per share in a private placement offering
In May 2001, issued 100,000 shares of common stock at $0.83
per share in a private placement offering.
In May 2001, issued 197,500 shares of common stock at market
price for services rendered.
In May 2001, issued 942,281 shares of common stock upon
exercise of warrants by a stockholder.
In May of 2001, issued 1,400,000 shares of common stock,
valued at $784,000, to acquire all the outstanding common
stock of Teneo.
In May of 2001 issued 1,000,000 shares of common stock, valued
at $560,000, to acquire 42% of the outstanding common stock of
Novint.
In June of 2001, issued 135,000 shares of common stock at
$0.92 per share in a private placement offering.
In June of 2001, issued 15,000 shares of common stock pursuant
to the exercise 15,000 options at $0.20 per share.
In June 2001, issued 720,382 shares of common stock at market
prices for services rendered.
22
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARIES
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002
(Unaudited)
NOTE F - CAPITAL TRANSACTIONS (CONTINUED)
[1] COMMON STOCK: (CONTINUED)
In July 2001, issued 200,000 shares of common stock at $0.50
per share in a private placement offering.
In July 2001, issued 2,000,000 shares of common stock in
connection with the conversion of Series C preferred shares at
a rate of 1 Series C preferred share to 200 common shares.
In July 2001, issued 229,165 shares of common stock at market
prices for services rendered.
In August 2001, issued 7,386 shares of common stock at market
price for services rendered.
In September 2001, issued 335,000 shares of common stock in
connection with the conversion of Series B preferred shares at
the rate of 1 Series B preferred share to 10 common shares.
In September 2001, issued 350,000 shares of common stock at
$0.45 for payment of research and development costs.
In September 2001, issued 155,208 shares of common stock at
the market price for services rendered.
In October 2001, issued 77,451 shares of common stock at the
market price for payment of research and development costs.
In November 2001, issued 322,549 shares of common stock at the
market price for payment of research and development costs.
In November 2001, issued 510,000 shares of common stock at the
market price for service rendered.
In December 2001, issued 10,000 shares of common stock at the
market price for services rendered.
During 2002, the Company effected the following transactions:
In January 2002, issued 850,000 shares of common stock at
$0.30 per share in a private placement offering.
In January 2002, issued 75,000 shares of common stock at
the market price for payment of research and development
costs.
In January 2002, issued 24,110 shares of common stock at the
market price for services rendered.
In January 2002, issued 285,700 shares of common stock at
$0.35 per share in a private placement offering.
In February 2002, issued 975,000 shares of common stock a
market price for research and development costs.
In February 2002, issued 620,000 shares of common stock at
market price For services rendered.
In March 2002, issued 400,000 shares of common stock at $0.25
per share in a private placement offering.
In March 2002, issued 100,000 shares of common stock in
connection with the conversion of series B preferred shares at
a rate of 1 series B preferred share to 10 common shares.
In March 2002, issued 500,000 shares of common stock at market
price for services rendered.
In March 2002, issued 150,000 shares of common stock at the
market price for research and development costs.
23
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARIES
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002
(Unaudited)
NOTE F - CAPITAL TRANSACTIONS (CONTINUED)
[2] PREFERRED STOCK:
During 1993, in accordance with a Share Purchase Agreement, the Company
issued 1,037,000 shares of its Series A preferred stock in exchange for
consideration of $1,037,000 in cash, goods and services provided to the
Company by an unrelated third party.
During 1995, the Company issued an additional 163,000 shares of its
Series A preferred stock in settlement of all amounts due to the above
mentioned third party in exchange for services value at $163,000.
During 1997, the Company repurchased all outstanding shares of its
Series A preferred stock from the above mentioned third party for
$70,000. In conjunction with this transaction, the Board of Directors
canceled and retired the then existing Series A preferred stock.
On January 8, 1998, the Board of Directors of the Company authorized
1,000,000 shares of preferred stock having a par value of $.001 per
share to be issued in such series and to have such rights, preferences
and designations as determined by the Board of Directors.
On January 8, 1998, the Board of Directors of the Company authorized
182,525 shares of Series A convertible redeemable preferred stock
having a par value of $.001. Dividends, which are cumulative, are paid
semi-annually in cash or common stock at the Company's option at a rate
of ten percent per share based on a liquidation value of $10 per share.
The Series A shares are convertible at the rate of fifty shares of the
Company's common stock for each Series A preferred share, are
redeemable at the option of the Company at $15 per share, have
preference in case of liquidation, and have voting rights equal to
fifty votes per share.
On January 8, 1998, in connection with the reverse merger transaction,
the Company issued 182,525 shares of its Series A convertible
redeemable preferred stock and a warrant to purchase 750,000 shares of
the Company's common stock at a price of $.10 per share in settlement
of a note payable due to Projectavision, Inc. in the amount of
$1,500,000 plus accrued interest of $330,000. The note required
interest at 6% per annum. Interest expense related to this note payable
for 1997 amounted to $90,000. The Company recorded a deemed dividend of
$1,020,000 in accordance with EITF D-60 as a result of the beneficial
conversion feature of such preferred shares at the date of issuance
with a corresponding increase to additional paid-in capital. The amount
of the deemed dividend was computed based upon the excess of the market
value of equivalent common shares which approximated $2,737,000 plus
the fair value of the warrant of $113,000, over the deemed proceeds in
the exchange for the settlement of the obligation with Projectavision.
The warrant was valued using the Black-Scholes option pricing model.
The following assumptions were used computing the fair value of the
warrant; Weighted risk free interest rate of 5.49%; zero dividend
yield; volatility of Company common stock of 43% and an expected life
of the warrant of ten years.
On July 28, 1998, the holder of the Series A convertible redeemable
preferred stock converted their shares into 9,435,405 shares of the
Company's common stock.
In December 1999, the Company issued 245,165 shares of Series B
convertible preferred stock at $6.00 per share in a private placement
offering. The shares are convertible at a rate of ten common shares for
each preferred share. These shares have voting rights and dividend
rights as if each share had been converted to common stock.
24
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARIES
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002
(Unaudited)
NOTE F - CAPITAL TRANSACTIONS (CONTINUED)
[2] PREFERRED STOCK: (CONTINUED)
The 1999 financial statements reflect the deemed dividend on the Series
B preferred stock of $1,471,000 in accordance with EITF 98-5 resulting
from the calculation of the beneficial conversion feature based on the
quoted market price of the common stock. The amount of the deemed
dividend was computed based upon the excess of the market value of
equivalent common shares deemed issued over the proceeds received from
the sale of the convertible preferred stock. The amount of the deemed
dividend has been limited to the offering proceeds.
In June 2000, the Company authorized 14,000 shares of Series C
convertible, redeemable preferred stock at $100 per share. The Series C
shares are convertible into common shares after 180 days, such
conversion is based upon a formula dividing the product of the stated
value of the preferred stock by the number of shares of Series C
preferred stock to be converted on the date of conversion by the
average closing price. The average closing price is the product of $.50
and the average closing bid price of the Company's common stock as
reported by the quotation system on which the common stock is quoted,
for the ten trading days immediately preceding the date that notice of
conversion of the shares is furnished to the Company. In no event shall
the Series C preferred stock be converted into more than an aggregate
of 2,800,000 shares of common stock or less than an aggregate of
933,334 shares of common stock. For the purposes of determining the
conversion ratio, the average closing price shall not be less than $.50
or greater than $1.50. The Series C shares are redeemable for the
stated value of the stock at the option of the Company from time to
time on or prior to 180 days from June 21, 2000, any or all of the
outstanding shares.
The 2000 financial statements reflect the deemed dividend on the Series
C preferred stock of $1,400,000 in accordance with EITF 98-5 resulting
from the calculation of the beneficial conversion feature based on the
quoted market price of the common stock. The amount of the deemed
dividend was computed based upon the excess of the market value of
equivalent common shares deemed issued over the proceeds received from
the sale of the convertible preferred stock. The amount of the deemed
dividend has been limited to the offering proceeds.
In 2001, pursuant to a conversion ratio of 10 common shares to 1
preferred share, 100,166 shares of the Company's Series B preferred
stock were converted into 1,001,660 shares of the Company's common
stock. Also, in 2001 all 14,000 shares of the Company's Series C
preferred stock were converted into 2,800,000 shares of the Company's
common stock. The 2,800,000 shares of common stock issued pursuant to
the Series C conversion was the maximum allowable under the Series C
preferred stock conversion formula.
In March 2002, pursuant to a conversion ratio of 10 common shares to 1
preferred share, 10,000 shares of the Company's series B preferred
stock were converted into 100,000 of the Company's common stock.
[3] STOCK OPTIONS:
The Company has elected to account for its employee stock options in
accordance with Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees ("APB No. 25"). Under APB No. 25,
generally, no compensation expense is recognized in the accompanying
financial statements in connection with the awarding of stock option
grants to employees provided that, as of the grant date, all terms
associated with the award are fixed and the quoted market price of the
Company's stock, as of the grant date, is not more than the amount an
employee must pay to acquire the stock as defined; however, to the
extent that stock options are granted to nonemployees, for goods or
services, the fair value of these options are included in operating
results as an expense.
25
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARIES
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002
(Unaudited)
NOTE F - CAPITAL TRANSACTIONS (CONTINUED)
[3] STOCK OPTIONS: (CONTINUED)
A summary of the Company's stock option activity and related
information is as follows:
WEIGHTED NUMBER OF
NUMBER OF EXERCISE AVERAGE COMMON
COMMON PRICE PER EXERCISE SHARES
SHARES SHARE PRICE EXERCISABLE
------------ --------------- ---------- ------------
Outstanding as of December 31, 1997 0 0
Granted 26,325,000 $0.05 - $0.20 $0.17 26,325,000
Canceled (15,000,000) 0.20 0.20 (15,000,000)
------------- ------------
Outstanding as of December 31, 1998 11,325,000 11,325,000
Granted 16,750,000 0.05 - 0.20 0.05 16,750,000
Exercised (100,000) (100,000)
------------- ------------
Outstanding as of December 31, 1999 27,975,000 27,975,000
Granted 610,000 2.25 - 2.40 2.37 110,000
------------- ------------
Outstanding as of December 31, 2000 28,585,000 28,085,000
Granted 450,000 0.39 - 1.25 0.77 450,000
Exercised (90,000) (90,000)
Options vested pursuant to deferred
compensation agreement 2.40 2.40 100,000
------------- ------------
Outstanding as of December 31, 2001 28,945,000 28,545,000
------------- ------------
Granted 0 0
Exercised 0 0
------------- ------------
Outstanding as of March 31, 2002 28,945,000 28,545,000
============= ============
All options issued during 2001, 2000 and 1999 vested within ninety days
from the date of grant and expire at various dates during 2008 and
2011.
Tamarack Storage Devices, Inc. 1992 Stock Option Plan was terminated in
connection with the reverse merger transaction. All options outstanding
were canceled at that time.
In 2000, the Company adopted its 2000 Stock Option Plan (the "Plan").
Under the Plan, incentive and nonqualified stock options, stock
appreciation rights ("SAR's") and restricted stock may be granted to
key employees and consultants at the discretion of the Board of
Directors. Any incentive option granted under the Plan will have an
exercise price of not less than 100% of the fair market value of the
shares on the date on which such option is granted. With respect to an
incentive option granted to a participant who owns more than 10% of the
total combined voting stock of the Company or of any parent or
subsidiary of the Company, the exercise price for such option must be
at least 110% of the fair market value of the shares subject to the
option on the date on which the option is granted. A nonqualified
option granted under the Plan (i.e., an option to purchase the common
stock that does not meet the Internal Revenue Code's requirements for
incentive options) must have an exercise price of not less than 100% of
the fair market value of the stock on the date of grant. The directors
determine the vesting of the options under the Plan at the date of
grant. A maximum of 30,000,000 options can be awarded under the Plan.
The terms of grant permit a noncash exercise.
26
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARIES
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002
(Unaudited)
NOTE F - CAPITAL TRANSACTIONS (CONTINUED)
[3] STOCK OPTIONS: (CONTINUED)
SAR's entitle a participant to receive a cash payment equal to the
difference between the fair market value of a share of common stock on
the exercise date and the exercise price of the SAR. The terms of the
SAR are determined by the board of directors at the date of grant.
Awards of restricted stock are grants of shares of common stock that
are subject to a restricted period during which such shares may not be
sold, assigned, transferred or gifted.
On July 28, 1998 in connection with a private placement transaction,
the holders of 15 million options relinquished those options. 10
million of such options were recast as warrants to purchase shares of
the Company's common stock at an exercise price of $.05 per share and
given to a third party as a portion of the consideration for the
private placement. No value such was ascribed to the 10 million
warrants as they have deemed to be issued in connection with the
private placement. The remaining 5 million options were also recast as
warrants to purchase shares of the Company's common stock at an
exercise price of $.05 per share and given to the original option
holders. The in the money feature of such options amounted to
$1,100,000 and was recorded as compensation and was classified in
general and administrative expense in the statements of operations for
the year ended December 31, 1998. The incremental fair value associated
with those warrants was computed using the Black-Scholes method which
approximated $115,000. On May 6, 1999, 500,000 options were repriced to
$.05 which were previously granted at $.20 on January 8, 1998 to a
director of the Company. The in the money feature of such options
amounted to $220,000 and was recorded as compensation and was
classified in general and administrative expense in the statement of
operations for the year ended December 31, 1999.
In September 2001, the Company granted 250,000 stock options to a
consultant for services. The exercise price for these options was
$0.39, which was the market price of the stock on the date of the
grant. The stock options became fully vested forty-five days from the
date of grant. This stock option grant permits a non cash exercise.
These stock options were valued using the Black-Scholes option pricing
model with the following assumptions; expected term, three years, risk
free interest rate, 4.75%, dividend yield, zero and volatility, 133%.
In 2001 the Company has recorded a charge of approximately $72,000
relating to these stock options.
27
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARIES
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002
(Unaudited)
NOTE F - CAPITAL TRANSACTIONS (CONTINUED)
[3] STOCK OPTIONS: (CONTINUED)
Disclosures required by Statement of Financial Accounting Standards No.
123, Accounting for Stock-Based Compensation ("SFAS No. 123"),
including pro forma operating results had the Company prepared its
financial statements in accordance with the fair value based method of
accounting for stock-based compensation are shown below.
Proforma net loss available to common shareholders for three months
ended March 31, 2002 ($1,582,000) Proforma basic and diluted loss per
share for March 31, 2002 was ($0.01)
Exercise prices and weighted-average contractual lives of stock options
outstanding as of March 31, 2002 are as follows:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------- -----------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICE OUTSTANDING LIFE PRICE EXERCISABLE PRICE
------- ------------ ------ -------- ------------ --------
$0.05 21,525,000 6.85 $ 0.05 21,525,000 $ 0.05
0.20 6,360,000 6.12 0.20 6,360,000 0.20
0.39 250,000 9.4 0.39 250,000 0.39
1.25 200,000 8.75 1.25 200,000 1.25
2.25 110,000 5.19 2.25 110,000 2.25
2.40 500,000 8.5 2.40 100,000 2.40
28
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARIES
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002
(Unaudited)
NOTE F - CAPITAL TRANSACTIONS (CONTINUED)
[4] WARRANTS:
The Company issued the following warrants at the corresponding weighted
average exercise price as of March 31, 2002:
WEIGHTED
AVERAGE
EXERCISE
WARRANTS PRICE
------------ ------------
Outstanding as of December 31, 1997 0 $0.16
Issued 17,750,000
------------
Outstanding as of December 31, 1998 17,750,000
Converted into stock options (2,500,000) 0.05
------------
Outstanding as of December 31, 1999 15,250,000
Converted into common stock (2,000,000) 0.75
------------
Outstanding as of December 31, 2000 13,250,000
Issued 942,281 0.01
Converted into common stock (942,281) 0.01
------------
Outstanding as of December 31, 2001 13,250,000
------------
Issued 0
Converted into common stock 0
------------
Outstanding as of March 31, 2002 13,250,000
============
NUMBER OF EXERCISE CONTRACTUAL NUMBER OF SHARES
DATE WARRANTS PRICE LIFE EXERCISABLE
--------------- ------------ ---------- --------- ---------------
January 8, 1998 750,000 $ .10 10 years 750,000
July 28, 1998 12,500,000 .05 10 years 12,500,000
------------ ---------------
13,250,000 13,250,000
============ ===============
On May 6, 1999, 2,500,000 warrants held by the Chief Executive Officer
were converted into 2,500,000 options.
In January 2000, the Company issued 1,076,923 shares of common stock,
pursuant to the July 28, 1999 exercise of warrants by Equilink, LLC.
In March of 2001, the Company executed a warrant agreement with an
existing stockholder as compensation for services. The agreement allows
the stockholder to purchase a variable quantity of common stock
(between 200,000 and 1,000,000 shares) at a variable strike price
(between $.01 and $1.25) based upon a market share price formula at the
time of exercise. The fair value associated with a minimum exercise of
200,000 warrants was computed using the Black-Scholes option pricing
model which approximated $150,000, which is included as a charge for
general and administrative costs in the statement of operations. In May
2001, the Company issued 942,281 shares of common stock at a market
price of $0.83 per share pursuant to the May 15, 2001 exercise of
warrants by the stockholder. An additional charge of $632,000 was
recorded in the statement of operations upon exercise of the warrants.
29
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARIES
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002
(Unaudited)
NOTE G - INCOME TAXES
There is no provision for federal, state or local income taxes for the periods
ended March 31, 2002 and 2001, since the Company has incurred net operating
losses.
The Company's deferred tax asset as of March 31,2002 represents benefits from
equity related compensation charges and net operating loss carryforwards of
approximately $4,362,000 and $6,032,000, respectively, which is reduced by a
valuation allowance of approximately $10,394,000 since the future realization of
such tax benefit is not presently determinable.
As of March 31, 2002, the Company has a net operating loss carryforward of
approximately $24,889,000 expiring in 2008 through 2021 for federal income tax
purposes and 2004 for state income tax purposes. As a result of ownership
changes, internal revenue code Section 382 limits the amount of such net
operating loss carryforward available to offset future taxable income to
approximately $15,188,000 in the aggregate.
The difference between the statutory federal income tax (rate) benefit applied
to the Company's net loss and the Company's effective income tax rate for the
three months ended March 31, 2002 and 2001 is summarized as follows:
YEAR ENDED
MARCH 31,
--------------------
2002 2001
------- -------
Statutory federal income tax rate (35)% (35)%
Increase in valuation allowance 35 % 35 %
------- -------
0.0 % 0.0 %
======= =======
NOTE H - COMMITMENTS
[1] LICENSE AND DEVELOPMENT AGREEMENTS:
In March 1997, the Company entered into a Cooperative Research and
Development Agreement (the "CRADA Agreement") with the Regents of the
University of California to develop a polymeric based recording media
that will satisfy all of the requirements for a holographic media
storage device. The work was to be completed within 25 months from the
original date of execution. Each party shall have the first option to
retain title to any subject inventions made by its employees during the
work under this agreement. The agreement provides that the Company's
contribution to funding will be $264,000. The CRADA research and
development expenses charged to the statement of operations for the
three months ended March 31, 2002 and 2001 and for the cumulative
period July 31, 1992 through March 31, 2001 amounted to $0, $0 and
$83,000, respectively.
30
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARIES
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002
(Unaudited)
NOTE H - COMMITMENTS (CONTINUED)
[1] LICENSE AND DEVELOPMENT AGREEMENTS: (CONTINUED)
On January 11, 1998, the Company entered into a research and
development agreement with Energy Related Devices, Inc. ("ERDI"). The
term of the agreement is for the later of three years from the
commencement date as defined in the agreement or the delivery of a
prototype suitable for commercial sale or license regarding the fuel
cell product defined in the agreement. The Company is obligated to fund
up to $1 million in accordance with certain milestones as defined in
the agreement. Upon the delivery of a prototype suitable for commercial
sale or license regarding the fuel cell product, the Company's
obligation will be to pay ERDI $10,000 per month until the Company
funds or determines not to fund the research and development of ERDI's
solar cell invention. Through December 31, 2000, the Company has
provided $1,000,000 to ERDI for research and development activities. In
addition, the Company is providing for key-man life insurance coverage
on the primary stockholder of ERDI. In May 1999, the Company committed
to additional funding of ERDI. For the year ended December 31, 2001,
the Company has funded an additional $805,000. There has been no
funding for the three months ended March 31, 2002.
In August 1999, the Company entered into a license option agreement
with the Regents with the University of California for Cyclodextrin
Polymer Separation materials. The agreement grants the Company an
exclusive option to negotiate an exclusive world-wide license under
University's patent rights. The initial term expired on February 29,
2000 and was extended for a second term to February 28, 2001. The
Company decided not to renew the license option agreement beyond
February 28, 2001. The Company paid $10,000 in 2000.
On March 7, 2000, the Company entered into a license option agreement
with a third party for nanoporous polymer molecular filter
technologies. The agreement grants the Company an exclusive option to
negotiate an exclusive world-wide license under the third party's
patent rights. The initial term expired on September 15, 2000 and was
renewed for an additional six months. The Company paid $10,000 to
execute the license option agreement and another $10,000 for its
renewal. The Company has decided not to renew the agreement.
[2] CONSULTING AGREEMENTS:
During 1998, the Company entered into a consulting agreement (the
"Agreement") with a former stockholder of Tamarack to provide research
related activities. In connection with the Agreement, the consultant
receives approximately $2,300 per month for such services and is
eligible for a lump sum payment of $50,000 upon the attainment of a
revenue milestone as defined in the Agreement. In accordance with the
Agreement, the Company issued stock options to purchase 250,000 shares
of the Company's common stock at $.20 per share.
200,000 of such options are subject to conditional vesting and are not
currently exercisable. The vesting of these options is based upon the
attainment of certain milestones as follows; 50,000 options upon
successful testing and acceptance by a third party of the holographic
storage media; 50,000 options upon commencement of commercial
production of devices incorporating holographic storage media; 100,000
options upon attainment of $250,000 of gross revenues resulting from
sales of devices incorporating the holographic storage media. These
options are subject to variable plan accounting treatment in accordance
with APB No. 25 and as such, the Company will record a charge to
operations if the criteria for vesting are attained. The measurement
date will be determined based upon the vesting.
31
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARIES
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002
(Unaudited)
NOTE H - COMMITMENTS (CONTINUED)
[2] CONSULTING AGREEMENTS: (CONTINUED)
In February 2001, the Company entered into a marketing and management
consulting agreement. In connection with this agreement the consulting
firm will receive a fee payable in stock. The term of the agreement is
for one year plus a one year automatic renewal. In March 2001, the
Company issued 200,000 shares of common stock to the consulting firm as
compensation for services rendered and to be rendered. The market value
of the stock on the date of issuance was $1.25 per share. This amount
is reflected in prepaid expenses as of December 31, 2001. The remaining
balance of $42,000 was amortized in the three months ended March 31,
2002. In addition, as of December 31, 2001, the Company has issued
897,500 and 626,250 additional shares to this consulting firm in
private placement transactions and for services rendered, respectively.
These additional shares were valued at $684,700 and $430,730,
respectively. In the three months ended March 31, 2002, the company
issued 50,000 common shares valued at $14,000.
[3] EMPLOYMENT AGREEMENT:
On August 30, 1999, the Company entered into an employment and
noncompetition agreement with an individual to provide research related
activities. The term of the agreement was for one year commencing on
September 1, 1999 and was renewed. The agreement allows for four one
year renewal options unless terminated by either party. The employment
agreement was renewed for an additional year effective September 1,
2000. Base salary is $90,000 per annum with available additional cash
compensation as defined in the agreement. In addition, the employee
received stock options to purchase 500,000 shares of common stock at
$.40 per share. The market price of the Company's common shares was
$1.25 per share on the date of grant. The total fair value of such
options approximated $425,000. In accordance with the agreement,
100,000 options vest each year on the anniversary date.
[4] INTANGIBLE ASSET ACQUISITION:
On August 6, 1999, the Company entered into an agreement with NovARS
GmbH ("Novars") to acquire all of the intellectual property rights of
Novars. As compensation, the Company issued 1,000,000 shares of its
common stock. The purchase price was estimated at $1,000,000 based upon
the value of the common shares issued at the date of the transaction as
determined by management. In addition, the Company is obligated to pay
a three percent royalty in perpetuity on the revenues earned by the
Company as defined in the agreement.
In conjunction with the above, the Company entered into a three year
research and development agreement with Novars with automatic one year
renewals unless terminated by either party. In accordance with this
agreement, the Company advanced $200,000 in August 1999. The Company
has amended the research and development agreement to provide for
additional funding based on a milestone timetable, as of March 31, 2002
the Company has funded an additional $1,620,000 and issued 1,550,000
shares of its common stock valued at $589,000 to be used for funding
research and development costs.
[5] LEASES:
The Company is obligated under two separate operating leases for office
space located in Los Alamos, New Mexico and New York City. The Company
renewed its lease in New York City for one year pursuant to the lease's
original terms. The Company has renegotiated its lease in Los Alamos
New Mexico. Subsequent to December 31, 2001 the Company will only lease
certain offices in Los Alamos New Mexico, while certain related parties
will lease the laboratory space previously leased by the Company. The
Company received reimbursement of $3,000 against rent charges for the
Three months ended March 31, 2002 from related parties. Rent expense
charged to operations was approximately $14,000 for the three months
March 31, 2002 and $14,000 for the three months ended March 31, 2001.
Minimum future rental payments under these leases is approximately
$52,000 through December 31, 2002.
32
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARIES
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002
(Unaudited)
NOTE I - RELATED PARTY TRANSACTIONS
The law firm of one director received approximately $38,000 and $34,000
of compensation for legal services rendered to the Company during the
three months ended March 31, 2002 and 2001, respectively.
The accounting firm of one of our directors received approximately
$22,000 and $25,000 of compensation for accounting services rendered to
the Company during the three months ended March 31, 2002 and 2001,
respectively.
NMXS.com, Inc. paid the Company's chief executive a yearly salary of
$36,000 and leases a car as consideration for his services in 2001. In
2002 there was no compensation paid.
During 1998, the Company entered into a research and development
agreement with Energy Related Devices, Inc. ("ERDI"), ERDI is
majority-owned by a shareholder of the Company (see Note H[1]).
The Company's Chief Operating Officer loaned the Company $275,000. This
loan is due on June 30, 2002 (see Note E).
In August 2001, the Company borrowed $250,000 from its Chief Executive
Officer. In addition, the Company's Chief Executive Officer guaranteed
a loan on the Company's behalf. The Company has issued a loan and
security agreement with respect to these transactions in which, the
Company agreed to pledge all of its assets as security.
NOTE J - CONTINGENCY
During the third quarter of 2001 a former consultant threatened to
bring a claim against the Company. As of the date of filing this 10QSB
no claim has been filed, nor does the Company anticipate such filing.
The Company believes that the consultants' threats are without merit
and would defend vigorously against any claims.
NOTE K - SUBSEQUENT EVENT
In April and May 2002 the company has issued or agreed to issue
1,500,000 shares of its common stock to third parties at prices ranging
from $0.10 to $0.25, in three private placement transactions. The
Company received gross proceeds of $250,000 from the aforementioned
private placement transactions.
In May 2002 the Company sold 110,000 common shares of NMXS.com at an
average net price of $0.36. The Company received proceeds of $39,000.
In April 2002 the Company signed a non-binding term sheet with a third
party concerning the possible transfer of certain intellectual property
related to Company's Holographics Data Storage Technologies.
33
ITEM 2. 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-QSB.
OVERVIEW
In January 1998, Manhattan Scientifics, Inc. then a non-operating
public corporation with nominal net assets acquired all of the outstanding
common stock of Tamarack Storage Devices, Inc. by issuing 44 million shares of
its common stock including approximately 43,120,000 shares issued to
Projectavision, a public company which gave the stockholders of Tamarack actual
control of the combined company. In addition, Manhattan Scientifics, Inc. issued
182,525 shares Series A preferred stock and a warrant to purchase 750,000 shares
of its common stock at an exercise price of 10 cents per share in exchange for a
note payable of $1.5 million plus accrued interest of $330,000 due to
Projectavision from Tamarack. In connection with the legal form of this
transaction, Tamarack became a wholly-owned subsidiary of Manhattan Scientifics,
Inc. For accounting purposes, the acquisition was treated as a recapitalization
of Tamarack rather than a business combination. Tamarack as the accounting
acquiror of the public shell did not record goodwill or any other intangible
asset for this "Reverse Acquisition". The historical financial statements are
those of Tamarack. Tamarack, a development stage enterprise, was a Texas
corporation formed in July 1992. Since inception, Tamarack has been, and
continues to be, involved in the research and development of products based on
holographic data storage technology. Loss per share has been restated for all
periods prior to the acquisition to include the number of equivalent shares
received by Tamarack's stockholders in the Reverse Acquisition.
Since the reverse merger we have been acquiring and licensing
technologies, directing, supervising and coordinating our research and
development efforts, raising capital, and initiating commercialization
activities and dialogue with potential customers.
As of March 31, 2002, we had an accumulated loss since inception, 1992,
of $33,982,000. Of this accumulated loss, approximately $17,400,000 was derived
from non-cash charges that were required by generally accepted accounting
principles and approximately $6,700,000 from Tamarack prior to our acquisition
of Tamarack. Non-cash charges are recorded expenditures that do not require an
outlay of cash. Accordingly cash losses from inception to March 31, 2002 were
approximately $9,775,000. We expect operating losses to continue for the
foreseeable future because we will be continuing to fund research and
development efforts as well as general and administrative expenses prior to
receiving any revenues from our technologies.
We do not know if our research and development and marketing efforts
will be successful, that we will ever have commercially acceptable products, or
that we will achieve significant sales of any such products. We operate in an
environment of rapid change in technology and we are dependent upon the services
of our employees, consultants and independent contractors. If we are unable to
successfully bring our technologies to commercialization, we would likely have
to significantly alter our business plan and may cease operations.
COMPARISON OF THREE MONTHS ENDED MARCH 31, 2002 TO THREE MONTHS ENDED MARCH 31,
2001.
NET LOSS. We reported a net loss of $1,527,000, or $.01 per common
share, basic and diluted, for the three months ended March 31, 2002, versus a
net loss of $2,032,000, or $.02 per common share, basic and diluted, for the
three months ended March 31, 2001. The decrease of $505,000, or 25%, resulted
from our reduced spending commitments for research and development. In addition,
we recorded a charge for the issuance of stock options, whereas in the fiscal
2002 period, we did not issue any options.
REVENUES. We had no revenues for the three months ended March 31, 2002
and the three months ended March 31, 2001.
34
OPERATING COSTS AND EXPENSES. Operating costs and expenses for the
three months ended March 31, 2002 totaled $1,406,000, a decrease of $628,000, or
31%, versus costs and expenses of $2,034,000 for the three months ended March
31, 2001. These costs and expenses are detailed below.
GENERAL AND ADMINISTRATIVE. General and administrative expenses were
$867,000 for the three months ended March 31, 2002, which consisted of
consultants, contractors, accounting, legal, travel, rent, telephone and other
day to day operating expenses, versus general and administrative expenses of
$1,061,000 for the three months ended March 31, 2001. This decrease of $194,000,
or 18%, is primarily a result of the fact that, in 2001, we recorded a charge
for the issuance of stock options, whereas in the fiscal 2002 period, we did not
issue any options. We anticipate no significant change in general and
administrative expenses in the near future.
RESEARCH AND DEVELOPMENT. Research and development expenses were
$539,000 for the three months ended March 31, 2002, which consisted of payments
on research and development agreements with various contractors, amortization of
patents, ,and salary to our Chief Polymer Scientist. Research and development
expenses amounted to $973,000 for the three months ended March 31, 2001. This
decrease of $434,000, or 45% resulted from our reduced spending commitments for
research and development. We expect research and development costs to increase
as we develop our existing technologies and acquire or license new ones.
LIQUIDITY AND PLAN OF OPERATIONS
We are a development stage company and are in the technology
acquisition and development phase of our operations. Accordingly, we have relied
primarily upon private placements and subscription sales of stock to fund our
continuing activities and acquisitions. To a limited extent, and as described
below, we have also relied upon borrowing from the Company's two senior
officers, CEO Maslow and COO Harrod, and through a bank guarantee made by Mr.
Maslow of a traditional loan. Until we generate revenue from sales and licensing
of technology, or receive a large infusion of cash from a potential strategic
partner, we intend to continue to rely upon these methods of funding our
operations during the next year.
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, our holdings
of approximately 4.9 million shares of common stock in NMXS.Com, Inc.(which had
a market value of approximately $1,964,000 as of March 31, 2002), and 40,672
shares of common stock of Novint Technologies, Inc.; our cash on hand; and our
strategic alliances with various scientific laboratories, educational
institutions, scientists and leaders in industry and government.
Stockholders' equity totaled $1,240,000 on March 31, 2002 and the
working capital was a deficit of $1,237,000 on such date.
We do not expect any significant change in the total number of
employees in the near future. We intend to continue to identify and target
appropriate technologies for possible acquisition or licensing over the next 12
months, although we have no agreements regarding any such technologies as of the
date of this Report.
Based upon current projections, our principal cash requirements for the
next 12 months consists of (1) fixed expenses, including rent, payroll, investor
relations services, public relations services, bookkeeping services, graphic
design services, consultant services, and reimbursed expenses; and (2) variable
expenses, including technology research and development, milestone payments,
intellectual property protection, utilities and telephone, office supplies,
additional consultants, legal and accounting. As of March 31, 2002, we had
$81,000 in cash (since April 1, 2002, we raised $250,000 in private placements).
As of March 31, 2001, we had $477,000 in cash. We intend to satisfy our capital
requirements for the next 12 months by continuing to pursue private placements
to raise capital, using our common stock as payment for services in lieu of cash
where appropriate, borrowing as appropriate, and our cash on hand. However, we
do not know if those resources will be adequate to cover our capital
requirements.
RECENTLY ISSUED ACCOUNTING STANDARDS
The Financial Accounting Standards Board ("FASB") recently issued
Statements of Financial Accounting Standards Nos. 141 and 142 ("SFAS 141" and
"SFAS 142"). Both of these pronouncements are effective fiscal years beginning
after December 31, 2001. Under SFAS 141, a company must use the purchase method
of accounting for all business acquisitions. SFAS 142 requires a company to
periodically evaluate for impairment (as opposed to amortize) goodwill and
intangible assets. The Company does not believe the implementation of SFAS 141
or SFAS 142 will have a material effect on its financial position or results of
operations.
35
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
In January 2002, issued 850,000 shares of common stock at
$0.30 per share in a private placement offering. The shares
were issued to accredited investor(s) as defined under
Regulation D and were exempt from Registration pursuant to
Section 4(2) of the Securities Act.
In January 2002, issued 75,000 shares of common stock at the
market price for payment of research and development costs.
The shares were issued to accredited investor(s) as defined
under Regulation D and were exempt from Registration pursuant
to Section 4(2) of the Securities Act.
In January 2002, issued 24,110 shares of common stock at the
market price for services rendered. The shares were issued to
accredited investor(s) as defined under Regulation D and were
exempt from Registration pursuant to Section 4(2) of the
Securities Act.
In January 2002, issued 285,700 shares of common stock at
$0.35 per share in a private placement offering. The shares
were issued to accredited investor(s) as defined under
Regulation D and were exempt from Registration pursuant to
Section 4(2) of the Securities Act.
In February 2002, issued 975,000 shares of common stock a
market price for research and development costs. The shares
were issued to accredited investor(s) as defined under
Regulation D and were exempt from Registration pursuant to
Section 4(2) of the Securities Act.
In February 2002, issued 620,000 shares of common stock at
market price For services rendered. The shares were issued to
accredited investor(s) as defined under Regulation D and were
exempt from Registration pursuant to Section 4(2) of the
Securities Act.
In March 2002, issued 400,000 shares of common stock at $0.25
per share in a private placement offering. The shares were
issued to accredited investor(s) as defined under Regulation D
and were exempt from Registration pursuant to Section 4(2) of
the Securities Act.
In March 2002, issued 100,000 shares of common stock in
connection with the conversion of series B preferred shares at
a rate of 1 series B preferred share to 10 common shares. The
shares were issued to accredited investor(s) as defined under
Regulation D and were exempt from Registration pursuant to
Section 4(2) of the Securities Act.
In March 2002, issued 500,000 shares of common stock at market
price for services rendered. The shares were issued to
accredited investor(s) as defined under Regulation D and were
exempt from Registration pursuant to Section 4(2) of the
Securities Act.
In March 2002, issued 150,000 shares of common stock at the
market price for research and development costs. The shares
were issued to accredited investor(s) as defined under
Regulation D and were exempt from Registration pursuant to
Section 4(2) of the Securities Act.
36
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
None
(b) Reports on Form 8-K
None.
37
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MANHATTAN SCIENTIFICS, INC.
Dated: May 14, 2002 By: /s/ Marvin Maslow
---------------------
Marvin Maslow
President, Chief Executive
Officer, and Chairman of
the Board
38