<PAGE>
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 September 30, 2000
|_| 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 850460639
-------------------------------------------------------------------------------
(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)
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 October 31, 2000 was as follows: 103,219,722 shares of
Common Stock, 245,165 shares of Series B Preferred Stock, and 14,000 shares of
Series C Preferred Stock.
Transitional Small Business Disclosure Format: YES /_/ NO /X/
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARY
(a development stage enterprise)
Consolidated Balance Sheet
(UNAUDITED)
September 30, 2000
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 508,000
Accounts receivable 75,000
Miscellaneous receivable 11,000
Prepaid expenses 26,000
---------------
Total current assets 620,000
---------------
Property and equipment, net 116,000
Patents, net 1,972,000
Security deposit 7,000
---------------
$ 2,715,000
---------------
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses $ 117,000
Note payable to stockholder 275,000
Note payable - other 302,000
---------------
Total current liabilities 694,000
---------------
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; 245,165 shares issued and
outstanding Series C convertible, redeemable, authorized 14,000 shares; 14,000
shares issued and outstanding
Common, authorized 150,000,000 shares, 102,414,972 shares issued,
And outstanding, 153,750 shares issuable 102,000
Additional paid-in capital 31,279,000
Deficit accumulated during the development stage (29,360,000)
--------------
Total stockholders' equity 2,021,000
---------------
$ 2,715,000
===============
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARY
(a development stage enterprise)
Consolidated Statements of Operations
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Nine Months Ended
Ended September 30, Ended September 30,
2000 1999 2000 1999
---------------- ---------------- ---------------- ------------
<S> <C> <C> <C> <C>
Revenues $ 75,000 $ 0 $ 75,000 $ 0
---------------- ---------------- ------------ -------------
Operating costs and expenses:
Salaries and employee benefits
Consulting fees 1,198,000 1,198,000
Materials and supplies
General and administrative 538,000 466,000 1,149,000 6,941,000
Rent and utilities 4,000 (1,000) 23,000 9,000
Research and development 799,000 474,000 2,218,000 835,000
----------------- ---------------- ------------ ---------------
Total operating costs and expenses 1,341,000 2,137,000 3,390,000 8,983,000
----------------- ---------------- ------------ ---------------
Loss from operations before other income and expenses (1,266,000) (2,137,000) (3,315,000) (8,983,000)
Other income and expenses:
Contract revenue 0 21,700 0 21,700
Interest and other expense (7,000) (7,700) (15,000) (7,700)
Interest income 10,000 4,000 32,000 14,000
Loss of equity investee 0 (11,000) 0 (11,000)
----------------- ---------------- ------------ ---------------
Net loss/comprehensive loss $(1,263,000) $(2,130,000) $(3,298,000) $(8,966,000)
================= ================ ============ ==============
Dividends on Series C preferred stock
beneficial conversion feature (1,400,000)
-------------
Net loss attributable to common shareholders $(4,698,000)
=============
Basic and diluted loss per share:
Weighted average number of common shares outstanding 102,221,000 98,417,000 102,221,000 98,417,000
================= ================ ================ ==============
Basic and diluted loss per share $(.01) $(.02) $(.05) $(.09)
====== ====== ====== ======
<CAPTION>
Inception
(July 31,1992)
Through
September 30, 2000
--------------------
<S> <C>
Revenues $ 75,000
-----------------
Operating costs and expenses:
Salaries and employee benefits 4,429,000
Consulting fees 6,197,000
Materials and supplies 987,000
General and administrative 11,490,000
Rent and utilities 565,000
Research and development 3,841,000
----------------
Total operating costs and expenses 27,509,000
----------------
Loss from operations before other income and expenses (27,434,000)
Other income and expenses:
Contract revenue 3,602,000
Interest and other expense (557,000)
Interest income 135,000
Loss of equity investee (100,000)
----------------
Dividends on Series C preferred stock
beneficial conversion feature
Net loss attributable to common shareholders
Basic and diluted loss per share:
Weighted average number of common shares outstanding
Basic and diluted loss per share
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARY
(a development stage enterprise)
Consolidated Statement of Stockholders' Equity (Capital Deficiency)
(UNAUDITED)
(Notes A and F)
For the Cumulative Period From July 31, 1992 (Inception) Through September 30,
2000
<TABLE>
<CAPTION>
$.001 Par Value
------------------ Common Stock
Series A Series B $.001 Par Value
Preferred ------------------ ----------------------
Stock Shares Amount Shares Amount
--------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
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
<CAPTION>
Deficit
Amounts Accumulated
Additional Receivable During the
Paid-in From Development
Capital Stockholders Stage
---------- ------------ -----------
<S> <C> <C> <C>
Initial issuance of shares to founders on contribution
of intangible assets at historic cost basis $ 500
Additional founders' contribution 40,000 $ (40,000)
Issuance of 1,037,000 shares of Series A preferred
Stock, net of issuance costs 1,020,000 (286,000)
Net loss $ (543,000)
---------------- ---------------- -------------------
Balance, March 31, 1993 1,060,500 (326,000) (543,000)
Issuance of shares to investor at approximately
$.21 per share 2,985,500
Issuance of shares on exercise of options 49,000
Services performed in exchange for Series A
Preferred stock issued in fiscal 1993 127,000
Net loss (2,292,000)
----------------- --------------- ------------------
Balance, March 31, 1994 4,095,000 (199,000) (2,835,000)
Services performed for Series A preferred stock
issued in fiscal 1993 159,000
Issuance of shares at approximately $.52 per share 182,000
Net loss (2,250,000)
----------------- --------------- ------------------
Balance, December 31, 1994 4,277,000 (40,000) (5,085,000)
Issuance of 163,000 shares of Series A
Preferred stock 161,000
Write-off of amounts receivable from stockholders (40,000) 40,000
Net loss (972,000)
----------------- --------------- ------------------
Balance, December 31, 1995 4,398,000 0 (6,057,000)
Issuance of shares upon exercise of option for
$15,000 1,000
Net loss (284,000)
----------------- --------------- ------------------
Balance, December 31, 1996 4,399,000 0 (6,341,000)
Purchase and retirement of 1,200,000 shares of
Series A preferred stock (58,000)
Purchase of 7,195,814 treasury shares of common
stock for $15,000
Net loss/comprehensive loss (335,000)
----------------- --------------- ------------------
Balance, December 31, 1997 (carried forward) 4,341,000 0 (6,676,000)
<CAPTION>
Treasury
Stock Total
-------- -------
<S> <C> <C>
Initial issuance of shares to founders on contribution
of intangible assets at historic cost basis $ 15,000
Additional founders' contribution 0
Issuance of 1,037,000 shares of Series A preferred
Stock, net of issuance costs 744,000
Net loss (543,000)
-------------
Balance, March 31, 1993 216,000
Issuance of shares to investor at approximately
$.21 per share 3,000,000
Issuance of shares on exercise of options 50,000
Services performed in exchange for Series A
Preferred stock issued in fiscal 1993 127,000
Net loss (2,292,000)
------------
Balance, March 31, 1994 1,101,000
Services performed for Series A preferred stock
issued in fiscal 1993 159,000
Issuance of shares at approximately $.52 per share 182,000
Net loss (2,250,000)
------------
Balance, December 31, 1994 (808,000)
Issuance of 163,000 shares of Series A
Preferred stock 163,000
Write-off of amounts receivable from stockholders 0
Net loss (972,000)
------------
Balance, December 31, 1995 (1,617,000)
Issuance of shares upon exercise of option for
$15,000 15,000
Net loss (284,000)
------------
Balance, December 31, 1996 (1,886,000)
Purchase and retirement of 1,200,000 shares of
Series A preferred stock (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)
-------------- ------------
Balance, December 31, 1997 (carried forward) (15,000) (2,306,000)
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARY
(a development stage enterprise)
Consolidated Statements of Stockholders' Equity (Capital Deficiency) (continued)
(UNAUDITED)
(Notes A and F)
For the Cumulative Period From July 31, 1992 (Inception) Through
September 30, 2000
(continued)
<TABLE>
<CAPTION>
Preferred Stock
$.001 Par Value
--------------- Common Stock
Series A Series B $.001 Par Value
Preferred -------------- ------------------
Stock Shares Amount Shares Amount
--------- ------ ------ -------- --------
<S> <C> <C> <C> <C> <C>
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 7,200,000 7,000
assets
Issuance of shares at $.58 per share for
Consulting services 1,000,000 1,000
Issuance of warrants to purchase 2,000,000 shares
of common stock exercisable at $.75 per share
at fair value for services
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
<CAPTION>
Deficit
Amounts Accumulated
Additional Receivable During the
Paid-in From Development Treasury
Capital Stockholders Stage Stock Total
---------- ------------ ------------- --------- --------
<S> <C> <C> <C> <C> <C>
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 1,433,000 1,440,000
assets
Issuance of shares at $.58 per share for
Consulting services 579,000 580,000
Issuance of warrants to purchase 2,000,000 shares
of common stock exercisable at $.75 per share
at fair value for services 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
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARY
(a development stage enterprise)
Consolidated Statements of Stockholders' Equity (Capital Deficiency)(continued)
(UNAUDITED)
(Notes A and F)
For the Cumulative Period From July 31, 1992 (Inception) Through September 30,
2000
(continued)
<TABLE>
<CAPTION>
Preferred Stock
$.001 Par Value
--------------- Common Stock Amount
Series A Series B $.001 Par Value Additional Receivable
Preferred --------------- ------------------- Paid-in from
Stock Shares Amount Shares Amount Capital Stockholders
---------- ------ ------ ------ ------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998
(brought forward) 0 0 $ 0 98,250,405 $ 98,000 14,370,000 $ 0
Issuance of shares in
satisfaction
Of accrued expenses 78,000 15,000
Issuance of shares at $.49 per
Share for consulting services 10,000 5,000
Issuance of shares at $.49 per
Share to purchase furniture
And fixtures 100,000 49,000
Issuance of shares at market
Prices as consulting
services were performed 17,269 15,000
Issuance of shares to purchase
Intangible assets 1,000,000 1,000 999,000
Issuance of shares at $1.25 per
Share for services 1,600 2,000
Issuance of stock options
Immediately exercisable
At fair value for services 6,572,000
Issuance of warrants to purchase
2,000,000 shares of common
Stock exercisable at $.75 per
Share for consulting services 1,090,000
Shares issuable at $1.27 per
Share in connection with note
Payable 191,000
Issuance of shares on exercise
Of 100,000 options at $.20
per Share 100,000 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 245,165 2,942,000
Issuance of shares at $.75
Per share 533,000 1,000 399,000
Net loss/comprehensive loss
----------- ---------- ---------- ------------ ---------- ------------ --------------
Balance, December 31, 1999 0 245,165 0 100,090,274 100,000 26,669,000 0
<CAPTION>
Deficit
Accumulated
During the
Development Treasury
State stock Total
-------------- --------- -----
Balance, December 31, 1998
(brought forward) $(12,276,000) $ 0 $ 2,192,000
Issuance of shares in
satisfaction
Of accrued expenses 15,000
Issuance of shares at $.49 per
Share for consulting services 5,000
Issuance of shares at $.49 per
Share to purchase furniture
And fixtures 49,000
Issuance of shares at market
Prices as consulting
services were performed 15,000
Issuance of shares to purchase
Intangible assets 1,000,000
Issuance of shares at $1.25 per
Share for services 2,000
Issuance of stock options
Immediately exercisable
At fair value for services 6,572,000
Issuance of warrants to purchase
2,000,000 shares of common
Stock exercisable at $.75 per
Share for consulting services 1,090,000
Shares issuable at $1.27 per
Share in connection with note
Payable 191,000
Issuance of shares on exercise
Of 100,000 options at $.20
per Share 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 (1,471,000) 1,471,000
Issuance of shares at $.75
Per share 400,000
Net loss/comprehensive loss (9,800,000) (9,800,000)
------------- ----------- -----------
Balance, December 31, 1999 (23,547,000) $ 0 3,222,000
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity (Capital Deficiency) (Continued)
(UNAUDITED)
(Notes A and F)
For the Cumulative Period From July 31, 1992 (Inception) Through September 30
2000
(continued)
<TABLE>
<CAPTION>
Preferred Stock Preferred Stock
$.001 Par Value $.001 Par Value
--------------- ----------------
Series A Series B Series C
Preferred --------------- ----------------
Stock Shares Amount Shares Amount
---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1999
(brought forward) 0 245,165 $ 0 $ 0 $ 0
Issuance of shares at $.75 per share
Issuance of shares at market price for service
Issuance of common stock to Equilink LLC on
exercise of cashless warrants
Shares issuable of Series C convertible preferred
shares at $100.00 per share including deemed
dividend in connection with beneficial conversion
feature of preferred stock
Issuance of shares in connection with Series C
preferred stock private placement
Shares issuable at $2.23 per share in connection
with research and development and license
agreement
Issuance of shares at market price for services
Shares issued at market price for services
Issuance of options at market value for services
Issuance of shares to purchase furniture and fixtures
Shares issuable at market for services
Issuance of shares for market price for services
Issuance of shares in connection with Series C
preferred stock private placement
Net loss/comprehensive loss
---------- -------- -------- -------- --------
Balance, September 30, 2000 0 245,165 $ 0 $ 0 $ 0
========== ======== ======== ======== ========
<CAPTION>
Deficit
Common Stock Amounts Accumulate
$.001 Par Value Additional Receivable During the
--------------- Paid-in From Development
Shares Amount Capital Stockholders Stage
-------- -------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1999
(brought forward) 100,090,274 $100,000 $26,669,000 $ 0 $(23,547,000)
Issuance of shares at $.75 per share 515,000 1,000 385,000
Issuance of shares at market price for service 4,942 8,000
Issuance of common stock to Equilink LLC on
exercise of cashless warrants 1,076,923
Shares issuable of Series C convertible preferred
shares at $100.00 per share including deemed
dividend in connection with beneficial conversion
feature of preferred stock 2,199,000 (1,400,000)
Issuance of shares in connection with Series C
preferred stock private placement 700,000 1,000 600,000
Shares issuable at $2.23 per share in connection
with research and development and license
agreement 1,115,000 (1,115,000)
Issuance of shares at market price for services 1,500
Shares issued at market price for services 8,000
Issuance of options at market value for services 247,000
Issuance of shares to purchase furniture and fixtures 10,500 40,000
Shares issuable at market for services 8,000
Issuance of shares for market price for services 5,833
Issuance of shares in connection with Series C
preferred stock private placement 10,000
Net loss/comprehensive loss (3,298,000)
----------- -------- ------------ ------------ ------------
Balance, September 30, 2000 102,414,972 $102,000 $31,279,000 $ 0 $(29,360,000)
=========== ======== ============ ============ =============
<CAPTION>
Treasury
Stock Total
--------- -------
<S> <C> <C
Balance, December 31, 1999
(brought forward) $ 0 $3,222,000
Issuance of shares at $.75 per share 386,000
Issuance of shares at market price for service 8,000
Issuance of common stock to Equilink LLC on
exercise of cashless warrants
Shares issuable of Series C convertible preferred
shares at $100.00 per share including deemed
dividend in connection with beneficial conversion
feature of preferred stock 799,000
Issuance of shares in connection with Series C
preferred stock private placement 601,000
Shares issuable at $2.23 per share in connection
with research and development and license
agreement
Issuance of shares at market price for services
Shares issued at market price for services 8,000
Issuance of options at market value for services 247,000
Issuance of shares to purchase furniture and fixtures 40,000
Shares issuable at market for services 8,000
Issuance of shares for market price for services
Issuance of shares in connection with Series C
preferred stock private placement
Net loss/comprehensive loss (3,298,000)
---------- -------------
Balance, September 30, 2000 $ 0 $2,021,000
========== =============
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARY
(a development stage enterprise)
(Consolidated Statements of Cash Flows)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Nine Months
September 30, September 30,
2000 1999 2000 1999
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $(1,263,000) $(2,130,000) $(3,298,000) $(8,966,000)
Adjustments to reconcile net loss to net
Cash used in operating activities:
Common stock issued for services 8,000 24,000
Preferred stock issued for services
Stock options issued for services 247,000 412,000 247,000 6,572,000
Warrants issued for services 1,090,000 1,090,000
Financing costs payable with common stock
Loss of equity investee 11,000 11,000
Depreciation and amortization 69,000 6,000 200,000 85,000
Changes in:
Prepaid expenses 14,000 (26,000) (1,000)
Accounts payable and accrued expenses 9,000 (5,000) (117,000) 28,000
Note receivable 10,000 10,000
Accounts and miscellaneous receivables (86,000) (6,000) (86,000)
----------- ----------- ----------- ----------
Net cash used in operating activities (992,000) (622,000) (3,046,000) (1,181,000)
------------ ------------ ------------ -----------
Cash flows from investing activities:
Purchase of equipment (5,000) (27,000)
Purchase of investment (30,000) (100,000)
Proceeds from sale of equipment
----------- ----------- ----------- ----------
Net cash used in investing activities (5,000) (30,000) (27,000) (100,000)
------------ ------------ ------------ -----------
Cash flows from financing activities:
Purchase of treasury stock
Proceeds from note payable to stockholders 775,000 775,000
Proceeds from note payable - other 302,000 302,000
Net proceeds from issuance of preferred stock 500,000 1,400,000
Net proceeds from issuance of common stock 10,000 711,000 260,000
Loan repayment to preferred stockholder
Capital lease payments
Security deposit paid
----------- ----------- ----------- ----------
Net cash provided by financing activities 802,000 785,000 2,413,000 1,035,000
----------- ----------- ----------- ----------
Net increase (decrease) in cash and cash equivalents (195,000) 133,000 (660,000) (246,000)
Cash and cash equivalents, beginning of period 703,000 286,000 1,168,000 665,000
----------- ----------- ----------- ----------
Cash and cash equivalents, end of period $ 508,000 $ 419,000 $ 508,000 $ 419,000
=========== =========== =========== ==========
<CAPTION>
Period From
Inception
(July 31, 1992)
Through
Sept. 30, 2000
--------------
<S> <C>
Cash flows from operating activities:
Net loss (24,354,000)
Adjustments to reconcile net loss to net
Cash used in operating activities:
Common stock issued for services 626,000
Preferred stock issued for services 598,000
Stock options issued for services 8,984,000
Warrants issued for services 1,750,000
Financing costs payable with common stock 191,000
Loss of equity investee 100,000
Depreciation and amortization 875,000
Changes in:
Prepaid expenses (26,000)
Accounts payable and accrued expenses 471,000
Note receivable 0
Accounts and miscellaneous receivables (86,000)
-------------
Net cash used in operating activities (10,871,000)
=============
Cash flows from investing activities:
Purchase of equipment (382,000)
Purchase of investment (100,000)
Proceeds from sale of equipment 14,000
-------------
Net cash used in investing activities (468,000)
=============
Cash flows from financing activities:
Purchase of treasury stock (100,000)
Proceeds from note payable to stockholders 2,149,000
Proceeds from note payable - other 302,000
Net proceeds from issuance of preferred stock 3,569,000
Net proceeds from issuance of common stock 6,095,000
Loan repayment to preferred stockholder (148,000)
Capital lease payments (13,000)
Security deposit paid (7,000)
-------------
Net cash provided by financing activities 11,847,000
-------------
Net increase (decrease) in cash and cash equivalents 508,000
Cash and cash equivalents, beginning of period
-------------
Cash and cash equivalents, end of period $ 508,000
=============
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARY
(a development stage enterprise)
Cash and cash equivalents, end of period
(Consolidated Statements of Cash Flows)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Nine Months
September 30, September 30,
2000 1999 2000 1999
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Supplemental disclosure of cash flow information:
Interest paid
Supplemental disclosures of noncash investing and
Financing activities:
Fixed assets contributed to the Company in exchange for
Series A preferred stock
Issuance of 14,391,627 common shares to
acquire intangible assets
Special distribution of 14,391,627 shares of common stock to
stockholder in settlement of stockholder advances
Issuance of 7,200,000 common shares to acquire
intangible assets
Issuance of Series A preferred stock and warrants in settlement
of note payable and accrued interest
Issuance of 1,000,000 common shares to acquire intangible assets
Issuance of 100,000 common shares to acquire furniture and
fixtures
Issuance of 78,000 common shares in satisfaction of accrued
expenses
Issuance of 10,500 shares to acquire furniture and
fixtures $ 41,000 $ 41,000
=========== ===========
<CAPTION>
Period From
Inception
(July 31, 1992)
Through
Sept. 30, 2000
--------------
<S> <C>
Supplemental disclosure of cash flow information:
Interest paid $ 7,000
=============
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 $ 41,000
=============
</TABLE>
<PAGE>
--------------------------------------------------------------------------------
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARY
(a development stage enterprise)
(UNAUDITED)
NOTE A - ORGANIZATION AND OPERATIONS
Manhattan Scientifics, Inc. (formerly Grand Enterprises, Inc. ("Grand")), and
its wholly-owned subsidiary Tamarack Storage Devices, Inc. (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 in fields with an emphasis in the area of consumer and commercial
electronics. At September 30, 2000, the Lauer Entities claim beneficial
ownership of approximately 45 percent of the Company's common stock (see Note
F).
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 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.
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, (see Note F).
Since its inception, Tamarack, and more recently the Company, has been engaged
primarily in directing, supervising and coordinating research and development
efforts in the continuing development of its products and raising funds. The
Company conducts its operations primarily in the United States.
There is no assurance that the Company's research and development and marketing
efforts will be successful, that the Company will ever have commercially
accepted products, or that the Company will achieve significant sales of any
such products. 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
bring its technologies to commercialization, it is unlikely that the Company
could continue its business. The Company has obtained a commitment from a major
stockholder to provide sufficient funds if needed to support the Company's
normal operations through December 15, 2001.
<PAGE>
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARY
(a development stage enterprise)
(UNAUDITED)
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 wholly-owned subsidiary. 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.
[4] Patents:
Patents 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.
[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, $9,000, and $30,000 for the nine months ended
September 30, 2000, 1999 and for the cumulative period July 31, 1992
(inception) through September 30, 2000.
<PAGE>
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARY
(a development stage enterprise)
(UNAUDITED)
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RELATED MATTERS
(CONTINUED)
[9] Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles 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] Investment - NMXS.com, Inc.:
The Company initially recorded its investment in NMXS.com, Inc. at cost
and uses the equity method of accounting to record its share of income or
loss.
[11] Revenue recognition:
Revenue is recognized upon delivery of order. Contract revenues represent
primarily reimbursed expenditures incurred 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.
[12] Interim financial statements:
Financial statements as of September 30, 2000 and the nine months ended
September 30, 2000 and 1999 and 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.
NOTE C - PROPERTY AND EQUIPMENT
Property and equipment as of September 30, 2000 consists of the following:
Useful Lives
In Years
Furniture and fixtures 5 $ 98,000
Computers 5 49,000
Equipment 5 129,000
--------
276,000
Less accumulated depreciation 160,000
--------
$116,000
========
NOTE D - INVESTMENT - NMXS.COM, INC.
On June 3, 1999, the Company entered into an agreement with NMXS.com, Inc.
(formerly New Mexico Software, Inc., a public company) and invested $100,000
($70,000 June 1999, $30,000 July 1999) for 5,416,300 shares of common stock. As
a result of this investment, the Company owns approximately 28% of NMXS.com,
Inc. As a
<PAGE>
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARY
(a development stage enterprise)
(UNAUDITED)
NOTE D - INVESTMENT - NMXS.COM, INC. (CONTINUED)
result of losses incurred by NMXS through September 30, 2000, the Company
reduced its investment cost in NMXS to zero. The Company will not record any of
the future earnings associated with NMXS.com, Inc. until such, all the
cumulative losses have been recovered. The cumulative losses in excess of the
amount invested amounted to $637,000 as of September 30, 2000. In addition, per
the stock purchase agreement with NMXS.com, Manhattan Scientifics provided
NMXS.com with business and management advice through August 1999 without
remuneration. Also, our CEO received a salary of $60,000 and a leased car from
NMXS.com, Inc. as consideration for his services provided to NMXS.com, Inc.
On June 24, 2000 in connection with a private placement offering, the Company
issued 100,000 shares of NMXS.com to the stockholder. In addition, the Company
delivered an option to purchase an additional 100,000 shares of the Company's
shareholdings in NMXS.com for a purchase price of $1 per share.
On July 27, 2000 the Company issued 5,000 shares of NMXS.com for the purchase of
furniture & fixtures.
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%. The line of credit
will mature on July 31, 2001. As of the Financial Statement date the Company was
indebted in the amount of $302,000 which includes interest for the month of
September 2000. This line of credit is guaranteed by the CEO of the Company.
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. The loan may be prepaid at any time. 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.
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 Peters Corporation
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
deliverable with a corresponding credit to additional paid-in capital.
NOTE F - CAPITAL TRANSACTIONS
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.
<PAGE>
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARY
(a development stage enterprise)
(UNAUDITED)
NOTE F - CAPITAL TRANSACTIONS (CONTINUED)
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.
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 "Lauer Entities". 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.
<PAGE>
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARY
(a development stage enterprise)
(UNAUDITED)
NOTE F - CAPITAL TRANSACTIONS (CONTINUED)
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.
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 September 2000 issued 5,500 shares of its common stock to acquire
furniture and fixtures.
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.
<PAGE>
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARY
(a development stage enterprise)
(UNAUDITED)
NOTE F - CAPITAL TRANSACTIONS (CONTINUED)
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.
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
<PAGE>
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARY
(a development stage enterprise)
(UNAUDITED)
NOTE F - CAPITAL TRANSACTIONS (CONTINUED)
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.
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 non employees, for goods or services, the fair
value of these options are included in operating results as an expense.
A summary of the Company's stock option activity and related information is as
follows:
<TABLE>
<CAPTION>
Weighted Number of
Number of Exercise Average Common
Common Price Per Exercise Shares
Shares Share Price Exercisable
---------------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Outstanding as of December 31, 1997 0 0
Granted 21,325,000 $.20 $.20 21,325,000
Canceled (15,000,000) $.20 $.20 (15,000,000)
----------------- -------------
Outstanding as of December 31, 1998 6,325,000 $.20 $.20 6,325,000
Granted 16,250,000 $.05 and $.20 $.05 16,250,000
Exercised (100,000) (100,000)
Canceled 0 0
----------------- ------------
Outstanding as of December 31, 1999 22,475,000 22,475,000
Granted 210,000 $.40 and $2.25 $1.37 210,000
Canceled 0 0
----------------- ------------
Outstanding as of September 30, 2000 22,685,000 22,685,000
================= =============
</TABLE>
All options issued during 2000, 1999 and 1998 vested immediately and expire at
various dates during 2008 and 2010.
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.
On January 8, 1998, the Company adopted its 1998 Stock Option Plan (the "Plan").
Under the Plan, incentive and non-qualified stock options 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
<PAGE>
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARY
(a development stage enterprise)
(UNAUDITED)
NOTE F - CAPITAL TRANSACTIONS (CONTINUED)
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 non-qualified 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.
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.
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.
Exercise prices and weighted-average contractual lives of stock options
outstanding as of September 30, 2000 are as follows:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------- ---------------------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Price Outstanding Life Price Exercisable Price
-------- ----------- ----------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$ .05 16,200,000 8.4 $ .05 16,200,000 $ .05
$ .20 6,275,000 7.7 $ .20 6,275,000 $ .20
$ 2.25 110,000 9.8 $ 2.25 110,000 $2.25
$ .40 100,000 9.9 $ .40 100,000 $ .40
</TABLE>
The following table summarizes the pro forma operating results of the Company
had compensation costs for the stock options and warrants granted to employees
been determined in accordance with the fair market based method of accounting
for stock based compensation as prescribed by SFAS No. 123.
Pro forma net loss available to common shareholders $(5,001,000)
============
Pro forma basic and diluted loss per share $(.05)
======
<PAGE>
MANHATTAN SCIENTIFICS, INC. AND SUB SIDIARY
(a development stage enterprise)
(UNAUDITED)
NOTE F - CAPITAL TRANSACTIONS (CONTINUED)
Warrants:
The Company issued the following warrants as of September 30, 2000:
<TABLE>
<CAPTION>
Number of Exercise Contractual Number of Shares
Date Warrants Price Life Exercisable
--------------- ------------- --------- ------------ ----------------
<S> <C> <C> <C> <C>
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
============ =================
</TABLE>
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.
On May 6, 1999, 2,500,000 warrants held by the Chief Executive Officer were
converted into 2,500,000 options.
NOTE G - INCOME TAXES
There is no provision for federal, state or local income taxes for the periods
ended September 30, 2000 and 1999, since the Company has incurred net operating
losses.
The Company's deferred tax asset as of September 30, 2000 represents benefits
from equity related compensation charges and net operating loss carryforwards of
approximately $3,000,553 and $2,258,000, respectively which is reduced by a
valuation allowance of approximately $5,811,000 since the future realization of
such tax benefit is not presently determinable.
As of September 30, 2000, the Company has a net operating loss carryforward of
$15,373,000 expiring in 2008 through 2020 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
$5,724,000 in the aggregate.
The difference between the statutory federal income tax rate applied to the
Company's net loss and the Company's effective income tax rate for the nine
months ended September 30, 2000 and 1999 is summarized as follows:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
September 30, September 30,
-------------------- ------------------
2000 1999 2000 1999
------- ------- -------- -----
<S> <C> <C> <C> <C>
Statutory federal income tax rate 34.0 % 34.0 % 34.0 34.0 %
Increase in valuation allowance (34.0)% (34.0)% (34.0)% (34.0)%
------- ----- ------ -------
0.0 % 0.0 % 0.0 % 0.0 %
======= ===== ====== =====
</TABLE>
<PAGE>
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARY
(a development stage enterprise)
(UNAUDITED)
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 nine months ended
September 30, 2000 and 1999 and for the cumulative period July 31, 1992
through September 30, 2000 amounted to $0, $29,000 and $83,000,
respectively.
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
September 30, 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. As of September 30, 2000, the Company has funded an additional
$525,000.
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. Upon exercise of the
agreement, the Company paid to the University a fee of $10,000. On
February 28, 2000 the agreement was extended to a second term and the
Company paid an additional $10,000 fee.
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.
In June 2000, the Company entered into agreements with a third party to
exclusively and perpetually license a development stage computer software
technology on a worldwide basis, to fund the continuing research and
development of such technology, and to exchange certain securities
(subject to return provisions), among other things. As of September 30,
the Company has funded $500,000 of an initial commitment of $1.5 million
toward research and development of the technology, pursuant to a
milestone timetable. It is intended that additional research and
development not covered by the initial $1.5 million commitment, if any,
will be funded primarily out of certain royalties payable by the Company
to the third party, or, to the extent that such royalties are
insufficient, from additional financings by the Company. The Company
believes that it is premature to offer any assessment as to the ultimate
commercial viability of any products that might be derived from this
technology should it be successfully developed.
<PAGE>
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARY
(a development enterprise)
(UNAUDITED)
NOTE H - COMMITMENTS (CONTINUED)
[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.
[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. The agreement allows for two 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 is eligible to receive stock
options to purchase 500,000 shares of common stock at $.40 per share.
[4] Intangible asset acquisition:
On August 6, 1999, the Company entered into an agreement with Novars
Gesellschaft Furneve Technologies mbh ("Novars") to acquire all of the
intellectual property rights of Novars. As compensation, the Company
issued 1,000,000 shares of its common stock. 500,000 of such shares were
treated as if issuable and will be held in escrow pending administrative
issuance of certain patents as defined in the agreement. The initial
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. However, the eventual purchase price can not be determined
until such time the shares held in escrow have been released to the third
party. 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, $150,000 January
2000 and $150,000 March 2000. The Company has amended the research and
development agreement to provide for additional funding based on a
milestone timetable, as of September 30, 2000 the Company has funded an
additional $580,000.
<PAGE>
MANHATTAN SCIENTIFICS, INC. AND SUBSIDIARY
(a development stage enterprise)
(UNAUDITED)
NOTE H - COMMITMENTS (CONTINUED)
[5] Leases:
The Company is obligated under two separate operating leases for office
space located in Los Alamos, New Mexico and New York City. Both leases
expire in 2001. The Company received reimbursement of $66,000 against
rent charges for the nine months ended September 30, 2000 from related
parties. Rent expense charged to operations was approximately $22,000 for
the nine months ended September 30, 2000 and $9,000 for the nine months
ended September 30, 1999.
Minimum future rental payments under these leases are as follows:
Twelve Months
Ending
September 30,
--------------
2001 $105,000
NOTE I - RELATED PARTY TRANSACTIONS
The law firm of one director received $121,000 compensation for legal services
rendered to the Company during the nine months ended September 30, 2000.
The accounting firm of one of our directors received $93,000 compensation for
accounting services rendered to the Company during the nine months ended
September 30, 2000.
The partners of one director received an aggregate of 200,000 options to
purchase Company common stock at $.05 per share as consideration for the
director's reduced availability which options were valued at $330,000 and
expensed to attend to partnership duties as a result of his activities on behalf
of the Company.
NMXS.com, Inc. pays our CEO a yearly salary of $60,000 and leases a car for our
CEO as consideration for his services.
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]).
NOTE J- SUBSEQUENT EVENTS
On October 2, 2000 the Company sold 800,000 shares of common stock to five
accredited investors at $1.25 per share for a total of $1,000,000.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Certain statements in this Report constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause our actual results, performance
or achievements to be materially different from any future results, performance
or achievements expressed or implied by such forward-looking statements. Factors
that might cause such a difference include, among others, uncertainties relating
to general economic and business conditions; industry trends; announcements or
changes in our pricing policies or those of our competitors; unanticipated
delays in the development, market acceptance or installation of products;
availability of management and other key personnel; availability, terms and
deployment of capital; relationships with third-parties; and worldwide political
stability and economic growth. The words "believe", "expect", "anticipate",
"intend" and "plan" and similar expressions identify forward-looking statements.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date the statement was made.
The following discussion and analysis should be read in conjunction
with our financial statements and accompanying notes appearing elsewhere in this
Report.
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
our common stock, including approximately 43,120,000 shares issued to
Projectavision, Inc., a public company, which gave the stockholders of Tamarack
actual control of the combined company. In connection with that transaction, we
issued 182,525 shares of Series A preferred stock and a warrant to purchase
750,000 shares of our 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. As a result, Tamarack became our
wholly-owned subsidiary. 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". All financial statements
prior to January 1998 are those of Tamarack. Tamarack, a development stage
corporation, was formed in Texas 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.
Since the reverse merger, we have been acquiring and licensing
technologies from third parties; directing, supervising and coordinating our
research and development efforts; raising capital; and initiating marketing
activities and dialogue with potential customers.
At September 30, 2000, we had an accumulated loss since inception
(July 1992) of $24,354,000. Of this accumulated loss, approximately $10,050,000
was derived from non-cash charges that were required by generally accepted
accounting principles and approximately $6,800,000 from Tamarack prior to our
acquisition of that company. We expect operating losses to continue for the
foreseeable future because we will continue to fund research and development
efforts and incur general and administrative expenses prior to receiving any
revenues from our technologies.
<PAGE>
We do not know if our research and development or 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 commercialize our technologies we would likely have to
significantly alter our business plan and may cease operations.
Results of Operations
Comparison of three months ended September 30, 2000 to three months
ended September 30, 1999.
Net Loss. We reported a net loss of $1,263,000, or $.01 per common
share, basic and diluted, for operations for the three months ended September
30, 2000 versus a net loss of $2,130,000, or $0.02 per common share, basic and
diluted, for the three months ended September 30, 1999. The decrease of
$867,000, or 41%, is primarily a result of our recording, in 1999, of a charge
of $1,502,000 for the issuance of stock options with an exercise price below
fair market value on the date of grant. In the 2000 period, we recorded a charge
of $247,500 for the issuance of stock options.
Revenues. We had revenues of $75,000, which were derived from a
contract we entered into with the U.S. Army, for the three months ended
September 30, 2000 and no revenues during the three months ended September 30,
1999.
Operating Costs and Expenses. Operating costs and expenses for the
three months ended September 30, 2000 totaled $1,341,000, a decrease of
$796,000, or 37%, versus costs and expenses of $2,137,000 for the three months
ended September 30, 1999. These costs and expenses are detailed below.
Salaries and Employee Benefits. Salaries related to research and
development and employee benefits were approximately $34,000 for the three
months ended September 30, 2000 consisting of salary to our Chief Polymer
Scientist, which is included in research and development for such period, versus
salaries and employee benefits of $9,000 for the three months ended September
30, 1999. We anticipate an increase in these costs as we intend to enter into an
employment agreement with our currently uncompensated executive officer and
implement certain employee benefit plans, including a healthcare plan.
General and Administrative. General and administrative expenses were
$538,000 for the three months ended September 30, 2000, which consisted of
accounting, travel, legal, rent, telephone and other day to day operating
expenses, versus general and administrative expenses of $466,000 for the three
months ended September 30, 1999. This increase of $72,000, or 16%, was primarily
a result of an issuance of stock options for services. We anticipate no
significant change in general and administrative expenses in the near future.
Research and Development. Research and development expenses were
$799,000 for the three months ended September 30, 2000, which consisted of
payments under research and development agreements with various contractors,
amortization of patents, nanoporous polymer license option payments, and salary
to our Chief Polymer Scientist. Research and development expenses amounted to
$474,000 for the three months ended September 30, 1999. This increase of
$325,000, or 69%, resulted from increased research and development payments to
various third party contractors.
<PAGE>
We expect research and development costs to increase as we develop our
existing technologies and acquire or license new technologies. In June 2000, we
entered into agreements with a third party to exclusively and perpetually
license a development stage computer software technology on a worldwide basis,
to fund the continuing research and development of such technology, and to
exchange certain securities (subject to return provisions), among other things.
To date, we funded $700,000 of an initial commitment of $1.5 million toward
research and development of the technology, pursuant to a milestone timetable.
It is intended that additional research and development costs not covered by the
initial $1.5 million commitment, if any, will be funded primarily out of certain
royalties we anticipate paying to the third party, or, to the extent that such
royalties are insufficient, from additional financings we consummate. We believe
that it is premature to offer any assessment as to the ultimate commercial
viability of any products that might be derived from this technology should it
be successfully developed.
Comparison of nine months ended September 30, 2000 to nine months
ended September 30, 1999.
Net Loss. We reported a net loss of $3,298,000, or $.05 per common
share, basic and diluted, for the nine months ended September 30, 2000, versus a
net loss of $8,966,000, or $0.09 per common share, basic and diluted, for the
nine months ended September 30, 1999. This decrease of $5,668,000, or 63%, is
primarily a result of our recording, in 1999, of a charge of $6,352,000, for the
issuance of stock options with an exercise price below fair market value on the
date of grant. In fiscal 2000, we recorded a charge of $247,500 for the issuance
of stock options.
Revenues. We had revenues of $75,000, which were derived from a
contract we entered into with the U.S. Army for the nine months ended September
30, 2000 and no revenues for the nine months ended September 30, 1999.
Operating Costs and Expenses. Operating costs and expenses for the
nine months ended September 30, 2000 totaled $3,390,000, a decrease of
$5,593,000, or 62%, versus costs and expenses of $8,983,000 for the nine months
ended September 30, 1999. These costs and expenses are detailed below.
Salaries and Employee Benefits. Salaries related to research and
development and employee benefits were approximately $93,000 for the nine months
ended September 30, 2000 consisting of salary to our Chief Polymer
Scientist that was included in research and development for such period, versus
salaries and employee benefits of $9,000 for the nine months ended September 30,
1999. We anticipate an increase in these costs as we intend to enter into an
employment agreement with our currently uncompensated executive officer and
implement certain employee benefit plans, including a healthcare plan.
General and Administrative. General and administrative expenses were
$1,149,000 for the nine months ended September 30, 2000, which consisted of
accounting, legal, travel, rent, telephone and other day to day operating
expenses, versus general and administrative expenses of $6,941,000 for the nine
months ended September 30, 1999. This decrease of $5,792,000, or 83%, was
primarily a result of our recording, in 1999, of a charge of $6,352,000 for the
issuance of stock options with an exercise price below fair market value on the
date of grant. In the 2000 period, we recorded a charge of $247,500 for the
issuance of stock options. We anticipate no significant change in general and
administrative expenses in the near future.
Research and Development. Research and development expenses were
$2,218,000 for the nine months ended September 30, 2000, which consisted of
payments on research and development agreements with various contractors,
amortization of patents, nanoporous polymer license option payments, and salary
to our Chief Polymer Scientist. Research and development expenses amounted to
$835,000 for the nine months ended September 30, 1999. This increase of
$1,383,000, or 166%, resulted from increased research and development payments
to various third party contractors. We expect research
<PAGE>
and development costs to increase as we develop our existing technologies and
acquire or license new technologies.
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 non-traditional lenders who are
also shareholders of ours. Until we generate revenue from sales and licensing of
our 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 5.2 million shares of common stock in NMXS.Com, 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 $2,021,000 on September 30, 2000 and
we had a working capital deficit of $74,000 on such date.
In October 2000, we raised $1,000,000 through the sale of 800,000
shares of common stock to five accredited investors at $1.25 per share. In
addition to the foregoing private placement, we received $20,000 through the
exercise of options by one of our option holders.
In August 2000, we 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,
which is guaranteed by Marvin Maslow, our Chief Executive Officer, will mature
on July 31, 2001. At September 30, 2000, we were indebted in the amount of
$302,000 under this line of credit.
We do not expect any significant change in our 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 consist 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. At September 30, 2000,
we had $508,000 in cash. As of December 31, 1999, we had $1,168,000 in cash. We
intend to satisfy our capital requirements for the next 12 months by our cash on
hand, continuing to pursue private placements to raise capital, using our
common stock as payment for services in lieu of cash where appropriate, and
borrowing as appropriate. However, we do not know if these resources will be
adequate to cover our capital requirements.
Recently Issued Accounting Standards
We do not believe any recently issued accounting standards have had
or will have a material impact on our operations.
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
On October 2, 2000, the Company sold 800,000 shares of common stock
to five accredited investors at $1.25 per share for a total of $1,000,000 in a
private placement offering. The proceeds of the private placement are being used
for working capital purposes.
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
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None.
<PAGE>
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: November 14, 2000 By: /s/ Marvin Maslow
-------------------------- -------------------------------
Marvin Maslow
President, Chief Executive
Officer, and Chairman of
the Board
