MANHATTAN SCIENTIFICS INC - Quarter Report: 2007 September (Form 10-Q)
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 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, 2007
o
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE
SECURITIES
EXCHANGE ACT OF 1934
For the
transition period from _______ to _______.
MANHATTAN
SCIENTIFICS, INC.
(Name
of small business issuer in its charter)
|
Delaware
|
000-28411
|
85-0460639
|
|
(State
of Incorporation)
|
(Commission
File Number)
|
(IRS
Employer Identification No.)
|
405
Lexington Avenue, 32nd Floor, New York, New York,
10174
(Address
of principal executive offices) (Zip code)
Issuer's
telephone number: (212) 551-0577
Securities
registered under Section 12(g) of the Exchange Act:
Check
whether the issuer is not required to file reports pursuant to Section
13
or 15(d) of the Exchange Act o
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for
such shorter period that
the registrant was required to
file such reports), and (2)
has been subject to such filing
requirements for the past 90 days. x
Yes o
No
Indicate by check mark whether the registrant is a shell
company (as defined in the Exchange Act) o
Yes x
No
The
number of shares outstanding of registrant's $0.001 par value common stock, as
of the close of business on October
31, 2007: 250,000,000 shares.
Transitional Small
Business Disclosure Format (check one) Yes o No
x
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MANHATTAN
SCIENTIFICS, INC. AND SUBSIDIARIES
|
|
(a
development stage enterprise)
|
|
|
September
30, 2007
(unaudited)
|
December
31,
2006
|
||||||
| ASSETS | ||||||||
|
Current
assets:
|
||||||||
|
Cash
and cash equivalents
|
$ | 872,000 | $ | 149,000 | ||||
|
Prepaid
expenses and other assets
|
43,000 | 9,000 | ||||||
|
Total
current assets
|
915,000 | 158,000 | ||||||
|
Property
and equipment, net
|
29,000 | 30,000 | ||||||
|
Investments
|
2,000 | 2,000 | ||||||
|
Patents,
net of accumulated amortization of $1,834,000 and
$1,678,000
|
246,000 | 402,000 | ||||||
|
Other
asset
|
2,000 | 2,000 | ||||||
|
Total
assets
|
$ | 1,194,000 | $ | 594,000 | ||||
|
LIABILITIES
|
||||||||
|
Current
liabilities
|
||||||||
|
Accounts
payable and accrued expenses
|
$ | 1,863,000 | $ | 1,522,000 | ||||
|
Accrued
interest and expenses - related parties
|
261,000 | 324,000 | ||||||
|
Convertible
promissory notes, net of discount of $149,000
|
899,000 | - | ||||||
|
Note
payable to officers
|
1,029,000 | 1,100,000 | ||||||
|
Note
payable - other
|
34,000 | 32,000 | ||||||
|
Total
current liabilities
|
4,086,000 | 2,978,000 | ||||||
|
Commitments
and Contingencies:
|
||||||||
|
CAPITAL
DEFICIT
|
||||||||
|
Capital
stock $.001 par value
|
||||||||
|
Preferred,
authorized 1,000,000 shares
|
||||||||
|
Series
A convertible, redeemable, 10 percent cumulative, authorized 182,525,
shares; issued and outstanding - none
|
- | - | ||||||
|
Series
B convertible, authorized 250,000 shares; 49,999 shares issued
and outstanding
|
- | - | ||||||
|
Series
C convertible, redeemable, authorized 14,000 shares; issued and
outstanding - none
|
- | - | ||||||
|
Common,
authorized 500,000,000 and 250,000,000 shares, 250,000,000 and
200,449,577 shares issued, and outstanding
|
250,000 | 201,000 | ||||||
|
Additional
paid-in-capital
|
45,741,000 | 44,902,000 | ||||||
|
Deficit
accumulated during the development stage
|
(48,883,000 | ) | (47,487,000 | ) | ||||
|
Total
capital deficit
|
(2,892,000 | ) | (2,384,000 | ) | ||||
| $ | 1,194,000 | $ | 594,000 | |||||
See notes to unaudited
consolidated financial statements
|
MANHATTAN
SCIENTIFICS, INC. AND SUBSIDIARIES
|
|
(a
development stage enterprise)
|
|
PERIOD
FROM
|
||||||||||||||||||||
|
JULY
31, 1992
|
||||||||||||||||||||
|
THREE
MONTHS ENDED
|
NINE
MONTHS ENDED
|
(INCEPTION)
|
||||||||||||||||||
|
SEPTEMBER
30,
|
SEPTEMBER
30,
|
THROUGH
|
||||||||||||||||||
|
2007
|
2006
|
2007
|
2006
|
SEPTEMBER
30, 2007
|
||||||||||||||||
|
Revenue
|
$ | - | $ | - | $ | - | $ | - | $ | 856,000 | ||||||||||
|
Operating
costs and expenses:
|
||||||||||||||||||||
|
General
and administrative
|
340,000 | 257,000 | 1,662,000 | 1,583,000 | 41,164,000 | |||||||||||||||
|
Research
and development
|
54,000 | 53,000 | 159,000 | 160,000 | 8,771,000 | |||||||||||||||
|
Impairment
charge of certain patents
|
- | - | - | - | 189,000 | |||||||||||||||
|
Total
operating costs and expenses
|
394,000 | 310,000 | 1,821,000 | 1,743,0000 | 50,124,000 | |||||||||||||||
|
Loss
from operations before other income and expenses
|
(394,000 | ) | (310,000 | ) | (1,821,000 | ) | (1,743,000 | ) | (49,268,000 | ) | ||||||||||
|
Other
income and expenses:
|
||||||||||||||||||||
|
Gain from sale of equity interest
|
- | - | - | - | 885,000 | |||||||||||||||
|
Gain on settlement of NMXS.com option
|
- | - | - | 50,000 | 50,000 | |||||||||||||||
|
Gain on legal settlement
|
- | - | - | - | 393,000 | |||||||||||||||
|
Gain from sale of Novint Technologies Inc. common stock
|
20,000 | 66,000 | 466,000 | 66,000 | 1,930,000 | |||||||||||||||
|
Gain
on issuance of investor common stock
|
- | - | - | - | 531,000 | |||||||||||||||
|
Contract
revenue
|
- | - | - | - | 3,741,000 | |||||||||||||||
|
Interest
and other expenses
|
(15,000 | ) | (19,000 | ) | (45,000 | ) | (60,000 | ) | (1,066,000 | ) | ||||||||||
|
Interest
income
|
2,000 | 1,000 | 4,000 | 5,000 | 182,000 | |||||||||||||||
|
Equity
in losses of investees
|
- | - | - | - | (1,243,000 | ) | ||||||||||||||
|
Gain
/ (Loss) on disposal of equipment
|
- | - | - | - | (13,000 | ) | ||||||||||||||
|
NET
LOSS
|
$ | (387,000 | ) | $ | (262,000 | ) | $ | (1,396,000 | ) | $ | (1,682,000 | ) | $ | (43,878,000 | ) | |||||
|
BASIC
AND DILUTED LOSS PER COMMON SHARE:
|
||||||||||||||||||||
|
Weighted
average number of common shares outstanding
|
250,000,000 | 199,610,500 | 226,490,675 | 192,557,869 | ||||||||||||||||
|
Basic
and diluted loss per common share
|
$ | (0.00 | ) | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.01 | ) | ||||||||
MANHATTAN
SCIENTIFICS, INC. AND SUBSIDIARIES
(a
development stage enterprise)
|
NINE
MONTHS ENDED
SEPTEMBER
30,
|
PERIOD
FROM
JULY
31, 1992
(INCEPTION)
THROUGH
|
|||||||||||
|
2007
|
2006
|
SEPTEMBER
30, 2007
|
||||||||||
|
CASH
FLOWS FROM OPERATING
ACTIVITIES:
|
||||||||||||
|
Net
loss
|
$ | (1,396,000 | ) | $ | (1,682,000 | ) | $ | (43,878,000 | ) | |||
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||||||
|
Gain
on sale of investments
|
(466,000 | ) | (66,000 | ) | (2,319,000 | ) | ||||||
|
Gain
on settlement of NMXS.com
option
|
- | (50,000 | ) | (50,000 | ) | |||||||
|
Gain
from sale of equity interest in
Horizon
|
- | - | (885,000 | ) | ||||||||
|
Gain
on issuance of investee common
stock
|
- | - | (531,000 | ) | ||||||||
|
Common
stock issued for services
|
707,000 | 927,000 | 7,820,000 | |||||||||
|
Preferred
stock issued for services
|
- | - | 598,000 | |||||||||
|
Stock
options issued for services
|
110,000 | - | 9,951,000 | |||||||||
|
Cashless
stock option exercise
|
126,000 | |||||||||||
|
Warrants
issued for services
|
2,556,000 | |||||||||||
|
Convertible
note issued for services
|
2,000 | 5,000 | 109,000 | |||||||||
|
Financing
costs payable with common
stock
|
- | - | 191,000 | |||||||||
|
Amortization
of financing costs related to beneficial conversion feature of
convertible notes
|
240,000 | - | 240,000 | |||||||||
|
Loss
of equity investee
|
1,207,000 | |||||||||||
|
Amortization
of technology license
|
- | - | 537,000 | |||||||||
|
Amortization
of patents
|
156,000 | 156,000 | 1,834,000 | |||||||||
|
Loss
on disposal of equipment
|
- | - | 28,000 | |||||||||
|
Impairment
charge of certain patents
|
- | - | 189,000 | |||||||||
|
Impairment
charge on property and
equipment
|
- | - | 8,000 | |||||||||
|
Depreciation
|
1,000 | 2,000 | 1,126,000 | |||||||||
|
Changes
in:
|
||||||||||||
|
Prepaid
expenses and other assets
|
(11,000 | ) | 136,000 | 182,000 | ||||||||
|
Accounts
payable and accrued expenses
|
395,000 | 262,000 | 3,470,000 | |||||||||
|
Accrued
interest and expenses - related
parties
|
(63,000 | ) | 44,000 | 261,000 | ||||||||
|
Net
cash provided by operating
activities;
|
(325,000 | ) | (266,000 | ) | (17,230,000 | ) | ||||||
|
CASH
FLOWS FROM INVESTING
ACTIVITIES:
|
||||||||||||
|
Purchase
of equipment
|
(432,000 | ) | ||||||||||
|
Purchase
of investment
|
- | - | (100,000 | ) | ||||||||
|
Proceeds
from sale of equipment
|
- | - | 18,000 | |||||||||
|
Proceeds
from sale of equity interest
|
885,000 | |||||||||||
|
Proceeds
from settlement of NMXS.com
|
- | 50,000 | 50,000 | |||||||||
|
Proceeds
received from sale of
investment
|
- | 66,000 | 1,690,000 | |||||||||
|
Net
cash provided by (used in) investing
activities
|
- | 116,000 | 2,111,000 | |||||||||
See notes to unaudited
consolidated financial statements
MANHATTAN
SCIENTIFICS, INC. AND SUBSIDIARIES
(a
development stage enterprise)
CONSOLIDATED
STATEMENTS OF CASH FLOWS (UNAUDITED)
|
NINE
MONTHS ENDED
SEPTEMBER
30,
|
PERIOD
FROM
JULY
31,
1992
(INCEPTION)
THROUGH
|
|||||||||||
|
2007
|
|
2006 |
SEPTEMBER
30,
2007
|
|||||||||
|
CASH
FLOWS FROM FINANCING
ACTIVITIES:
|
||||||||||||
|
Purchase
of treasury stock for
retirement
|
- | - | (100,000 | ) | ||||||||
|
Note
payable to stockholders
|
2,374,000 | |||||||||||
|
Proceeds
from convertible promissory
notes
|
1,048,000 | - | 1,048,000 | |||||||||
|
Proceeds
from note payable - other
|
- | - | 634,000 | |||||||||
|
Repayment
of note payable - other
|
- | - | (435,000 | ) | ||||||||
|
Repayment
of note payable to officers
|
- | (525,000 | ) | |||||||||
|
Net
proceeds from issuance of preferred
stock
|
- | - | 3,569,000 | |||||||||
|
Net
proceeds from issuance of common
stock
|
- | - | 9,571,000 | |||||||||
|
Loan
repayment to preferred
stockholder
|
- | - | (148,000 | ) | ||||||||
|
Capital
lease payments
|
- | - | (13,000 | ) | ||||||||
|
Return
of security deposit
|
16,000 | |||||||||||
|
Net
cash provided by (used in) financing
activities
|
1,048,000 | - | 15,991,000 | |||||||||
|
NET
(DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS
|
723,000 | (150,000 | ) | 872,000 | ||||||||
|
Cash
and cash equivalents, beginning of
period
|
149,000 | 364,000 | - | |||||||||
|
CASH
AND CASH EQUIVALENTS, END OF
PERIOD
|
$ | 872,000 | $ | 214,000 | $ | 872,000 | ||||||
|
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW
INFORMATION:
|
||||||||||||
|
Interest
paid
|
$ | - | $ | 60,000 | $ | 111,000 | ||||||
|
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 1,400,00 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 | |||||||||||
| Issuance of 641,274 shares of common stock in settlement of note payable | 48,000 | |||||||||||
|
Issuance
of 3,180,552 common shares in satisfaction of accrued
expenses
|
159,000 | |||||||||||
|
Issuance
of 1,277,685 common shares in satisfaction of accrued
expenses
|
83,000 | |||||||||||
|
Issuance
of 795,324 of common shares in settlement of note
payable
|
45,000 | 45,000 | ||||||||||
|
Issuance
of 1,184,220 common shares in satisfaction of accrued
expenses
|
59,000 | |||||||||||
MANHATTAN
SCIENTIFICS, INC.
(A
Development Stage Enterprise)
(unaudited)
SEPTEMBER
30,
2007
NOTE A –
BASIS OF PRESENTATION
The
foregoing unaudited interim financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions for Form 10-QSB and Regulation S-B as
promulgated by the Securities and Exchange Commission ("SEC"). Accordingly,
these financial statements do not include all of the disclosures required by
generally accepted accounting principles in the United States of America for
complete financial statements. These unaudited interim financial statements
should be read in conjunction with the audited financial statements and the
notes thereto included on Form 10-KSB for the period ended December 31, 2006. In
the opinion of management, the unaudited interim financial statements furnished
herein include all adjustments, all of which are of a normal recurring nature,
necessary for a fair statement of the results for the interim period presented.
The
preparation of financial statements in accordance with generally accepted
accounting principles in the United States of America requires the use of
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities known to exist as
of the date the financial statements are published, and the reported amounts of
revenues and expenses during the reporting period. Uncertainties with respect to
such estimates and assumption are inherent in the preparation of the Company's
financial statements; accordingly, it is possible that the actual results could
differ from these estimates and assumptions that could have a material effect on
the reported amounts of the Company's financial position and results of
operations.
Operating
results for the three and nine month period ended September 30, 2007 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2007.
NOTE B -
GOING CONCERN UNCERTAINTY
These
financial statements have been prepared on a going concern basis, which
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. The Company has incurred recurring losses and at
September 30, 2007, had an accumulated deficit of $48,883,000. For the three
months and nine months ended September 30, 2007, the Company sustained a net
loss of $387,000 and $1,396,000, respectively. These factors, among others,
indicate that the Company may be unable to continue as a going concern for a
reasonable period of time. These financial statements do not include any
adjustments relating to the recoverability and classification of recorded asset
amounts or the amounts and classification of liabilities that may be necessary
should the Company be unable to continue as a going concern. The Company's
continuation as a going concern is contingent upon its ability to obtain
additional financing, and to generate revenue and cash flow to meet its
obligations on a timely basis. Accordingly, the Company’s management
will seek to raise capital financing either through debt or equity
financing. During 2007, the Company issued a number of convertible
promissory notes totaling $1,060,000 through a private placement. In
October 2007, $1,060,000 of convertible debt was converted in for 106,000,000
shares of the Company’s common stock.
MANHATTAN
SCIENTIFICS, INC.
(A
Development Stage Enterprise)
NOTES TO
FINANCIAL STATEMENTS
(unaudited)
SEPTEMBER
30, 2007
NOTE C -
SUMMARY OF SIGNIFICANT ACCOUTING POLICIES AND RELATED MATTERS
[1]
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.
[2]
INTANGIBLE ASSETS:
Patents
are recorded at cost of $2,080,000. 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 and the micro fuel cell
technologies are estimated to have an economic useful life of 10
years. Amortization expense was $52,000 and $156,000 for the three
and nine months ended September 30, 2007, respectively, and $1,834,000 for the
period from July 31, 1992 (inception) through September 30,
2007. Amortization expense was $52,000 and $156,000 for the three and
nine months ended September 30, 2006.
[3] USE
OF ESTIMATES:
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the amount of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. A significant estimate includes the carrying value of the Company's
patents, fair value of the Company’s common stock, assumptions used in
calculating the value of stock options, depreciation and
amortization.
[4] BASIC
AND DILUTED LOSS PER SHARE
Basic and
diluted net loss per common share is presented in accordance with SFAS 128,
"Earnings Per Share". Basic net loss per share is computed by dividing net loss
by the weighted average number of common shares outstanding during the
applicable reporting periods. The Company’s computation of dilutive net loss per
share for the quarters ended September 30, 2007 and 2006 does not assume any
exercise of options or warrants or shares issuable upon conversion of the series
B preferred stock and common shares, respectively, as their effect is
antidulutive.
[5]
INVESTMENTS:
The Company records its investment in Novint
Technologies, Inc. (“Novint”) at cost and uses the equity method of accounting
to record its proportionate share of Novint's net income or loss. During 2003,
the Company recorded an impairment of the investment to $0 due to Novint’s
inactivity. Subsequently, during 2004, Novint issued common stock pursuant to a
private placement. As a result, the Company has recorded a gain on
issuance of investee common stock of $531,000. In addition for the year ended
December 31, 2004, the Company has recorded an equity in loss of investee of
$492,000, representing the Company’s share of Novint’s current losses. The loss
exceeded the Company’s basis in Novint during the year ended December 31, 2004
and the investment balance is carried at $0. As a result of this, the Company
did not record its proportionate share of equity in loss of investee for the
three and nine months ended September 30, 2007 and 2006. The
Company’s share of loss not recorded amounted to approximately $68,236 and
$197,296, respectively for the three and nine months ended September 30, 2007
and
$109,069 and $263,509, respectively for the three and nine months ended
September 30, 2006. The Company will continue to account for its
investment under the equity method of accounting; however, it will record its
proportionate share of net income only after it has recovered all losses in
excess of its basis. For the
three month periods ending September 30, 2007 and 2006, the Company recorded a
gain of $20,000 and $66,000 on the sale and distribution of Novint common
stock. For the nine month periods ending September 30, 2007 and 2006, the
Company recorded a gain of $466,000 and $66,000 on the sale and distribution of
Novint common stock. During the nine months ended September 30, 2007, the
Company recorded gains of $77,000 from the distribution of 92,216 shares
and recoded gains of $389,000 from the distribution of 523,750 shares as
additional consideration in connection with the convertible debt financing,
including a $20,000 gain on 30,000 shares in the third quarter of 2007. In
2006, the Company s recorded gains of $66,000 from the distribution of 100,000
shares in the third quarter of 2006. As of September 30, 2007, the
Company owned 1,135,109 shares of Novint common stock or approximately 4% of
Novint’s common stock. The Company continued to account for its investment in
Novint using the equity method since the Company exercises significant influence
over Novint.
MANHATTAN
SCIENTIFICS, INC.
(A
Development Stage Enterprise)
NOTES TO
FINANCIAL STATEMENTS
(unaudited)
SEPTEMBER
30,
2007
[6]
RECENT ACCOUNTING PRONOUNCEMENTS:
The
Company has adopted all accounting pronouncements issued before September 30,
2007, which are applicable to the Company.
In
June 2006, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an
interpretation of FASB Statement No. 109” (FIN 48), which clarifies the
accounting for uncertainty in tax positions. This Interpretation requires that
we recognize in our financial statements the benefit of a tax position if that
position is more likely than not of being sustained on audit, based on the
technical merits of the position. The provisions of FIN 48 become effective as
of the beginning of the 2007 fiscal year, with the cumulative effect of the
change in accounting principle recorded as an adjustment to opening retained
earnings. The adoption of the provisions of FIN 48 did not have an impact on its
financial condition or results of operations.
In
September 2006, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 108, “Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial
Statements” (SAB 108), which addresses how to quantify the effect of financial
statement errors. The provisions of SAB 108 become effective as of the end of
its 2007 fiscal year. The adoption of the provisions of SAB 108 did not have an
impact on its financial condition or results of operations.
In
February 2006, the Financial Accounting standard Board (“FASB”) issued SFAS No.
155, “Accounting for Certain Hybrid Financial Instruments – an amendment of FASB
Statements No. 133 and 140” (“SFAS No. 155”). SFAS No. 155 allows
financial instruments that contain an embedded derivative and that otherwise
would require bifurcation to be accounted for as a whole on a fair value basis,
at the holders’ election. SFAS NO. 155 also clarifies and amends certain other
financial instruments acquired or issued in fiscal years beginning after
September 15, 2006. The Company does not believe the adoption of SFAS
NO. 155 will have any impact on the Company’s financial position or results of
operations.
In March
2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial
Assets – an amendment of FASB Statement No. 140” (“SFAS No.
156”). SFAS No. 156 provides guidance on the accounting for servicing
assets and liabilities when an entity undertakes an obligation to service a
financial asset by entering into a servicing contract. This statement
is effective for the first fiscal year beginning after September 15,
2006. The Company does not believe the adoption of SFAS No. 156 will
have any impact on the Company’s financial position or results of
operations.
MANHATTAN
SCIENTIFICS, INC.
(A
Development Stage Enterprise)
NOTES TO
FINANCIAL STATEMENTS
(unaudited)
SEPTEMBER
30, 2007
In
September 2006, FASB issued SFAS 157 ‘Fair Value Measurements’. This
Statement defined fair value, establishes a framework for measuring fair value
in generally accepted accounting principles (GAAP), and expands disclosures
about fair value measurements. This Statement applies under other
accounting pronouncements that require or permit fair value measurements, the
Board having previously concluded in those accounting pronouncements that fair
value is the relevant measurement attribute. Accordingly, this
Statement does not require any new fair value measurements. However,
for some entities, the application of this Statement will change current
practice. This Statement is effective for financial statements issued
for fiscal years beginning after November 15, 2007, and interim periods within
those fiscal years. The Company is currently evaluating the effect of
this pronouncement on financial statements.
In
September 2006, FASB issued SFAS 158 ‘Employers’ Accounting for defined benefit
Pension and Other Postretirement Plans-an amendment of FASB Statements No. 87,
88, 106, and 132(R).This Statement improves financial reporting by requiring an
employer to recognize the overfunded or underfunded status of a defined benefit
postretirement plan (other than a multiemployer plan) as an asset or liability
in its statement of financial position and to recognize changes in that funded
status in the year in which the changes occur through comprehensive income of a
business entity or changes in unrestricted net assets of a not-for-profit
organization. This Statement also improves financial reporting by
requiring an employer to measure the funded status of a plan as of the date of
its year-end statement of financial position, with limited
exceptions. An employer with publicly traded equity securities is
required to initially recognize the funded status of a defined benefit
postretirement plan and to provide the required disclosures as of the end of the
fiscal year ending after December 15, 2006. An employer without
publicly traded equity securities is required to recognize the funded status of
a defined benefit postretirement plan and to provide the required disclosures as
of the end of the fiscal year ending after June 15, 2007. However, an
employer without publicly traded equity securities is required to disclose the
following information in the notes to financial statements for a fiscal year
ending after December 15, 2006, but before June 16, 2007, unless it has applied
the recognition provisions of this Statement in preparing those financial
statements. The requirement to measure plan assets and benefit
obligations as of the date of the employer’s fiscal year-end statement of
financial position is effective for fiscal years ending after December 15,
2008. The Company is currently evaluating the effect of this
pronouncement on financial statements.
MANHATTAN
SCIENTIFICS, INC.
(A
Development Stage Enterprise)
NOTES TO
FINANCIAL STATEMENTS
(unaudited)
SEPTEMBER
30,
2007
NOTE D
- CONVERTIBLE PROMISSORY NOTES
During
April 2007 through September 2007, the Company issued a number of
convertible promissory notes totaling $1,047,500 through a private
placement. The notes have a maturity date of December 2007, are
noninterest bearing and convertible into shares of the Company’s common stock at
a conversion price of $0.01 per share. The convertible debt was also
entitled to half a share of stock the Company held in Novint Technologies, Inc.
for every $1 of principal debt held for a total of 523,750
shares. The Company has determined the convertible debenture contains
a beneficial conversion feature and qualifies for treatment under Emerging
Issues Task Force No. 00-27 and 00-19. The estimated fair value of the 523,750
shares of common stock in Novint Technologies, Inc. of $620,000 has been
determined based on the closing stock price of such stock on the date of each
respective note. The face amount of the convertible debenture of
$1,048,000 was proportionately allocated to the debenture and the shares of
common stock in Novint Technologies, Inc. in the amount of $659,000 and
$389,000, respectively. The proportionate value of the Novint common stock of
$389,000 as of September 30, 2007, has been accounted for as a debt discount and
is being expensed over the maturity period of these promissory
notes. For the three and nine months ended September 30, 2007, the
Company expensed approximately $140,000 and $240,000, respectively, of the debt
discount which has been recorded within general and administrative
expenses. The convertible notes are not convertible until a future
event. This event has not occurred as of September 30, 2007 and
therefore no beneficial conversion feature has been recorded.
NOTE E –
CAPITAL TRANSACTIONS
In March
2007, the Company granted options for 10,000,000 shares of common stock at an
exercise price of $0.014 to the Company’s former CEO and chairman for services
previously provided. The value of these options totaled $109,982
which was valued using the Black-Scholes option pricing model.
The fair
value of the options was estimated at the date of grant using the Black-Scholes
option-pricing model with the following assumptions:
|
Discount Rate - Bond
Equivalent Yield
|
4.5 | % | ||
| Dividend yield | 0.0 | % | ||
| Volatility factor | 107.0 | % | ||
| Weighted average expected life |
5
years
|
|||
In May
2007, the Company issued 35,350,317 shares of common stock to various
individuals for services with valuestotaling $707,006 based upon the fair value
of the shares issued.
In May
2007, the Company issued 14,200,106 shares of common stock to its former Chief
Executive Officer for settlement of debts totaling $71,000.
NOTE F –
NOTES PAYABLE – OFFICER
As of
September 30, 2007, the Company has loans payable of $500,000 and $529,000
payable to its former Chief Operating Officer and Chief Executive Officer,
respectively. The loans bear interest at 5.5% per annum and were initially due
December 31, 2002 and have been mutually extended and settled. In May
2007, the Company issued 14,200,106 shares of common stock to its former Chief
Executive Officer for settlement of debt totaling $71,000.
MANHATTAN
SCIENTIFICS, INC.
(A
Development Stage Enterprise)
NOTES TO
FINANCIAL STATEMENTS
(unaudited)
SEPTEMBER
30, 2007
NOTE G –
AUTHORIZED COMMON STOCK
Beginning
in the second quarter of 2007, the Company did not have any shares authorized to
issue to option holders, warrant holders or the convertible promissory note
holders upon the conversion of these instruments into shares of the Company’s
common stock. In July 2007, the Company amended its Certificate of
Incorporation to increase the authorized common stock from 250,000,000 shares to
500,000,000 shares (the “Authorized Shares Amendment”). A majority of the
stockholders entitled to vote on the Authorized Shares Amendment voted in favor
of the Amendment.
NOTE H –
SUBSEQUENT EVENTS
In
October 2007, the Company issued an additional $12,000 in convertible notes with
a conversion price of $.01 into shares of common stock bringing the total
convertible notes issued during 2007 to $1,060,000, see Note D. As
discussed in Note D, the Company has determined the convertible notes contain a
beneficial conversion feature however, it was contingent upon the conversion of
the notes subject to board approval which occurred on October 31, 2007, at which
point all outstanding debt was automatically converted. As of October 31,
2007, the remaining discounted convertible debentures’ value of $975,221 was
then further allocated between the debenture and the beneficial conversion
feature, and the entire remaining discounted value of $967,851 was allocated to
the beneficial conversion feature. The combined total value of the Novint stock
and beneficial conversion feature of $1,361,313 has been accounted for as a debt
discount that is being amortized and treated as interest expense over the term
of the convertible debenture under the effective interest method.
In
October 2007, the Company issued 4,200,000 shares of common stock for services
to a board member with a value of $60,900 based upon the fair value of the
shares issued.
In
October 2007, the Company granted warrants for 3,200,000 shares of common stock
to members of its board of directors for past services. The value of
these options totaled $36,444 which was valued using the Black-Scholes option
pricing model.
In
October 2007, the Company issued 106,000,000 shares of common stock related to
the conversion of convertible debt previously issued throughout
2007. The convertible debt converted totaled $1,060,000 at which time
the remaining debt discount was expensed.
In
November 2007, Marvin Maslow, Chief Executive Officer, resigned and Emmanuel
Tsoupanarias was appointed as the new Chief Executive Officer.
In
November 2007, the Company issued 1,000,000 shares of common stock to an
individual for services to be provided with a value of $31,000 based upon the
fair value of the shares issued.
In
November 2007, the Company issued 1,000,000 shares of common stock to an
individual for services with a value of $31,000 based upon the fair value of the
shares issued.
In
December 2007, the Company granted an officer options for 800,000 shares of
common stock for services provided as a member of the Company’s board of
directors. The value of this option totaled $49,768 which was valued
using the Black Scholes option pricing model using the following assumptions:
exercise price of $0.015, discount rate of 4.5%; volatility rate of 142%; term
of 5 years; and stock price grant date of $0.065.
MANHATTAN
SCIENTIFICS, INC.
(A
Development Stage Enterprise)
NOTES TO
FINANCIAL STATEMENTS
(unaudited)
SEPTEMBER
30, 2007
NOTE H –
SUBSEQUENT EVENTS (CONTINUED)
In
December 2007, the Company purchased and retired 43,655,000 shares of its common
stock and warrants for 10,000,000 shares of Company common stock for a total of
$215,000.
During
2007, debts held by two shareholders/former officers and directors totaling
$1,416,500 were forgiven and accounted for as contributed
capital. The new balances will bear interest at 5% and will be paid
under a variety of circumstances, i.e. if the company raises sufficient capital
for operations and for repayment of this debt; and/or upon the sale of corporate
assets including upon the sale of Novint stock pursuant to a formula described
in the agreement.
In
January 2008, the Company issued 200,000 shares of common stock for past
services to consultants for a total value of $12,000 or $0.06 per
share.
In
January 2008, the Company issued 925,926 shares of common stock, $50,000 in
cash, and 53,191 shares of Novint Technologies, Inc. common stock in
satisfaction of past legal fees totaling $100,000.
In
January 2008, the Company cancelled previously granted options for 16,000,000
shares of common stock with an exercise price of $0.05 per share and replaced
them with new options for 18,000,000 shares of common stock with an exercise
price of $0.013 per share. The value of these options totaled
$921,246 which was valued using the Black Scholes option pricing model using the
following assumptions: discount rate of 4.5%; volatility rate of 144%; term of 5
years; and stock price of $0.06.
In April
2008, the Company issued 700,000 shares of common stock to various consultants
for services for a total value of $35,000 or $0.05 per share.
In July
2008, the Company issued 300,000 shares of common stock to a consultant for
services for a total value of $21,000 or $0.07 per share.
In August
2008, the Company issued 250,000 shares of common stock for legal services for a
total value of $15,000 or $0.06 per share.
In
September 2008, the Company issued 750,000 shares of common stock for legal
services for a total value of $30,000 or $0.04 per share.
In
October 2008, the Company issued 400,000 shares of common stock to a consultant
for services for a total value of $14,000 or $0.035 per share.
In June
2008, the Company entered into stock purchase agreement with Metallicum, Inc. to
acquire all of the outstanding capital in exchange for 15,000,000 shares of the
Company’s common stock. An additional 15,000,000 shares of the
Company’s common stock will be payable to Metallicum in the event of meeting
certain milestones. The stock purchase agreement with Metallicum,
Inc. will be accounted for as a purchase under SFAS No. 141 Business
Combinations. The 15,000,000 shares of the Company’s common stock
valued at $562,500 will be allocated between the purchase price and
goodwill. The additional 15,000,000 shares payable to Metallicum will
be accounted for as a performance based incentive which will be revalued at the
end of each reporting period.
MANHATTAN
SCIENTIFICS, INC.
(A
Development Stage Enterprise)
NOTES TO
FINANCIAL STATEMENTS
(unaudited)
SEPTEMBER
30,
2007
Forward
Looking Statements
This Form
10-QSB contains "forward-looking" statements including statements regarding our
expectations of our future operations. For this purpose, any statements
contained in this Form 10-QSB that are not statements of historical fact may be
deemed to be forward-looking statements. Without limiting the foregoing, words
such as "may," "will," "expect," "believe," "anticipate," "estimate," or
"continue" or comparable terminology are intended to identify forward-looking
statements. These statements by their nature involve substantial risks and
uncertainties, and actual results may differ materially depending on a variety
of factors, many of which are not within our control. These factors include, but
are not limited to, economic conditions generally and in the industries in which
we may participate, competition within our chosen industry, including
competition from much larger competitors, technological advances, and the
failure by us to successfully develop business relationships. In addition, these
forward-looking statements are subject, among other things, to our successful
completion of the research and development of our technologies; successful
commercialization and mass production of, among other things, the micro fuel
cell, mid-range fuel cell, and haptics applications; successful protection of
our patents; and effective significant industry competition from various
entities whose research and development, financial, sales and marketing and
other capabilities far exceeds ours. In light of these risks and uncertainties,
you are cautioned not to place undue reliance on these forward-looking
statements. Except as required by law, we undertake no obligation to announce
publicly revisions we make to these forward-looking statements to reflect the
effect of events or circumstances that may arise after the date of this report.
All written and oral forward-looking statements made subsequent to the date of
this report and attributable to us or persons acting on our behalf are expressly
qualified in their entirety by this section.
OVERVIEW
Manhattan
Scientifics, Inc., a Delaware corporation, was formed through a reverse merger
involving a public company in January 1998. The public company was incorporated
in Delaware on August 1, 1995 under the name Grand Enterprises, Inc. ("Grand").
Grand was initially organized to market an unrelated patented product, but
subsequently determined that its business plan was not feasible. In January
1998, Grand effected the reverse merger in a transaction involving
Projectavision, Inc., another public company that was founded by Marvin Maslow,
our former Chief Executive Officer. Projectavision was the owner of
approximately 98% of Tamarack Storage Devices, Inc., a privately-held Texas
corporation formed in 1992 to develop and market products based on the
holographic data storage technology. We are no longer engaged in
development and commercialization of Holographic data storage technologies
(technologies for the storage and retrieval of data in the form of
holographically stored light patterns, rather than magnetic). The Company sold
its portfolio of approximately 21 patents surrounding these inventions during
2002. In January 1998, Grand formed a wholly-owned subsidiary named
Grand Subsidiary, Inc. Grand Subsidiary and Tamarack merged, Tamarack being the
surviving corporation, and via the merger, Tamarack became a subsidiary of
Grand. As consideration for merging Tamarack with Grand Subsidiary, Grand gave
Projectavision and the other stockholders of Tamarack 44,000,000 shares of our
common stock. In addition, in exchange for a note payable of $1.5 million plus
accrued interest of $330,000 due to Projectavision from Tamarack, Grand gave
Projectavision 182,525 shares of its Series A Preferred Stock and a warrant to
purchase 750,000 shares of our common stock at an exercise price of $0.10 per
share, which expired on January 7, 2008. Mr. Maslow, our former Chief
Executive Officer, purchased the warrant from Projectavision for $25,000. The
Series A Preferred Stock was subsequently converted into 9,435,405 shares of our
common stock. In connection with this transaction, new personnel assumed the
management of Grand, former management resigned, and Grand changed its name to
Manhattan Scientifics, Inc.
Manhattan
Scientifics, Inc., a development stage company, previously operated as a
technology incubator that sought to acquire, develop and commercialize
life-enhancing technologies in various fields, with emphasis in the areas of
alternative energy, and consumer and commercial electronics. In that capacity,
we have previously identified emerging technologies through strategic alliances
with scientific laboratories, educational institutions, and scientists and
leaders in industry and government.
We have
worked to develop and commercialize three technologies:
|
· |
Micro fuel cell technology, which is designed to become an ultra efficient miniature electricity generator that converts hydrogen into electricity by chemical means, for portable electronic devices, including cellular telephones, as a substitute for lithium ion and other batteries in common use today. |
|
· |
Mid-range fuel cell technology, which is an ultra efficient medium-size electricity generating device that converts hydrogen into electricity, with potential applications including personal transportation, cordless appliances, power tools, wheelchairs, bicycles, boats, emergency home generators, military field communications and laptop computers. |
|
·
|
Haptics
"Touch and Feel" computer applications, which is a technology that allows
computer users to be able to touch and feel any objects they see on their
computer screen with the aid of special "mouse." Detailed texture,
object-weight, stickiness, viscosity and object density can be "felt" or
sensed. Management believes this haptics technology may positively impact
the way computers are used everywhere by introducing the ability to
"touch." (Please see Haptics "Touch and Feel" Internet Applications and
Investment in Novint Technologies,
Inc.”
|
In 2008,
the Company purchased, in exchange for common stock of the Company, Metallicum,
Inc. and its licensed patented technology. Through Metallicum, the
Company hopes to take advantage of a unique processing methodology for producing
nanostructures in a wide range of ductile metals and alloys and is now
attempting to commercialize this new and revolutionary
technology. Nanostructured metals and alloys possess significantly
enhanced mechanical properties that include, for example, increased strength
without concurrent losses in ductility, and significantly increased resistance
to fatigue fracture. Nanostructured commercially pure grades of titanium have
proven to also possess excellent machinability as well as high toughness and
strength.
We are
also seeking to develop corporate opportunities to benefit our shareholders;
however, other than as set forth in this document, we have not executed
agreements or finalized arrangements for any other technologies or opportunities
as of the date of this Form 10-QSB.
OUR
DEVELOPMENT MODEL
Our goal
has been to influence the future through the development of potentially
disruptive or sea-change technologies. Our business model has previously been
to: (i) identify significant technologies, (ii) acquire them or the rights to
them, (iii) secure the services of inventors, engineers or other staff who were
instrumental in their creation, (iv) provide or contract for suitable work
facilities, laboratories, and other aids where appropriate, (v) prototype the
technologies to demonstrate "proof of principle" feasibility, (vi) secure patent
and or other intellectual property protection, (vii) secure early customers for
product trials where feasible and appropriate, and (viii) commercialize through
licenses, sales or cooperative efforts with other manufacturing and distribution
firms.
NANO-STRUCTURED
METALS (METALLICUM, INC.)
In June
2008, the Company acquired Metallicum, Inc. and its licensed patented
technology. The Company entered into a stock purchase agreement with
Metallicum, Inc. to acquire all of the outstanding capital in exchange for
15,000,000 shares of the Company’s common stock. An additional
15,000,000 shares of the Company’s common stock will be payable to Metallicum in
the event of meeting certain milestones.
The
transaction includes all of Metallicum's licensed intellectual property related
to the design and high-volume nano-fabrication of nano-structuring metals for
medical components as well as for transportation applications. The Company
intends to establish manufacturing partner relationships with major Fortune 500
metals companies. The Company’s business plan includes strategic
partnering with significant customers in the medical device & prosthetics
industries as well as in auto, truck, and aircraft manufacturing
industries
The
Metallicum division will produce and license the super strong metals using
nano-technology developed by scientists at Los Alamos National Laboratory in
conjunction with their colleagues in Russia. The technology is
expected to trim thousands of pounds from airplanes and hundreds of pounds from
cars without sacrificing structural strength or adding significant
cost.
The
nanostructured metals have wide implications for use in the medical device and
prosthetics industries including dental implants, replacements for hips,
shoulders, knees and cardio vascular stents. Clinical studies have already shown
that bone integrates with these new metals up to 20 times faster.
RESULTS
OF OPERATIONS
THREE AND NINE
MONTHS ENDED SEPTEMBER
30, 2007 COMPARED TO THREE AND NINE
MONTHS ENDED SEPTEMBER
30, 2006.
REVENUES.
We had no revenues for the three and nine months ended September 30, 2007 and
2006.
GENERAL
AND ADMINISTRATIVE. General and administrative expenses were $340,000 and
$1,662,000 for the three and nine months ended September 30, 2007, which
consisted primarily of consultants, contractors, accounting, legal, travel,
rent, telephone and other day to day operating expenses, versus general and
administrative expenses of $257,000 and $1,583,000 for the three and nine months
ended September 30, 2006. Included in general and administrative
expenses for both the three and nine months ended September 30, 2007 was the
financing cost associated with the convertible debt equal to $140,000 and
$240,000 for the three and nine months ended September 30,
2007. Excluding the financing costs associated with the convertible
debt, general and administrative expenses decreased $58,000 and $162,000 in the
three and nine month periods ended September 30, 2007, a decrease of 23% and 10%
from the comparable periods in 2006, primarily from lower professional
expenses.
RESEARCH
AND DEVELOPMENT. Research and development expenses of $54,000 and $159,000 for
three and nine months ended September 30, 2007 remained constant compared to
$53,000 and $160,000 for the three and nine months ended September 30,
2006.
NET LOSS.
We reported a net loss of $387,000 and $1,396,000 for the three and nine months
ended September 30, 2007, respectively, versus a net loss of $262,000 and
$1,682,000 for the three and nine months ended September 30, 2006,
respectively.
The
greater net loss of $125,000 for the three months ended September 30, 2007
compared to the same period in 2006 principally resulted from higher general and
administrative expenses in 2007 and a larger gain of $46,000 on distribution of
common stock held in Novint Technologies, Inc. during the three months ended
September 30, 2006. The $286,000 lower net loss for the nine months
ended September 30, 2007 compared to the same period in 2006 principally
resulted from a higher gain on distribution of common stock held in Novint
Technologies, Inc. totaling $400,000 during the nine months ended September 30,
2007
For the
three month periods ending September 30, 2007 and 2006, the Company recorded a
gain of $20,000 and $66,000 on the sale and distribution of Novint common
stock. For the nine month periods ending September 30, 2007 and 2006, the
Company recorded a gain of $466,000 and $66,000 on the sale and distribution of
Novint common stock. During the nine months ended September 30, 2007, the
Company recorded gains of $77,000 from the distribution of 92,216
shares and recoded gains of $389,000 from the distribution of 523,750 shares as
additional consideration in connection with the convertible debt financing,
including a $20,000 gain on 30,000 shares in the third quarter of 2007. In
2006, the Company s recorded gains of $66,000 from the distribution of 100,000
shares in the third quarter of 2006.
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, we have also relied upon borrowing from the
Company's officers. Until we generate revenue from sales and
licensing of technology, or receive a large infusion of cash from a potential
strategic partner or through the efforts of an investment banker, we intend to
continue to rely upon this methods and the limited sales of our shares or other
assets, which has become increasingly difficult with our low share price, to
fund operations during the next year.
At
September 30, 2007, our significant assets include our portfolio of intellectual
property relating to the various technologies, our contracts with third parties
pertaining to technology development, acquisition, and licensing, and 1,135,109
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.
The
Company had an increase of $723,000 in cash and cash equivalents for the nine
months ended September 30, 2007, as a result of proceeds of $1,048,000 from
financing activities from the issuance of convertible promissory notes, compared
to a decrease in cash and cash equivalents equal to $150,000 for the comparable
period in 2006. For the nine months ended September 30, 2007, cash
used by operating activities was $325,000 compared to $266,000 used by operating
activities for the nine months ended September 30, 2006. Common stock
and options issued for services equaled $817,000 for the nine months ended
September 30, 2007 and common stock issued for services valued at $927,000 for
the nine months ended September 30, 2006.
Stockholders'
equity totaled a deficit of $2,892,000 on September 30, 2007 and the working
capital was a deficit of $3,171,000 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 September 30, 2007, we had
$872,000 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
In
June 2006, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an
interpretation of FASB Statement No. 109” (FIN 48), which clarifies the
accounting for uncertainty in tax positions. This Interpretation requires that
we recognize in our financial statements the benefit of a tax position if that
position is more likely than not of being sustained on audit, based on the
technical merits of the position. The provisions of FIN 48 become effective as
of the beginning of the 2007 fiscal year, with the cumulative effect of the
change in accounting principle recorded as an adjustment to opening retained
earnings. The adoption of the provisions of FIN 48 did not have an impact on its
financial condition or results of operations.
In
September 2006, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 108, “Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial
Statements” (SAB 108), which addresses how to quantify the effect of financial
statement errors. The provisions of SAB 108 become effective as of the end of
its 2007 fiscal year. The adoption of the provisions of SAB 108 did not have an
impact on its financial condition or results of operations.
In
February 2006, the Financial Accounting standard Board (“FASB”) issued SFAS No.
155, “Accounting for Certain Hybrid Financial Instruments – an amendment of FASB
Statements No. 133 and 140” (“SFAS No. 155”). SFAS No. 155 allows
financial instruments that contain an embedded derivative and that otherwise
would require bifurcation to be accounted for as a whole on a fair value basis,
at the holders’ election. SFAS No. 155 also clarifies and amends certain other
financial instruments acquired or issued in fiscal years beginning after
September 15, 2006. The Company does not believe the adoption of SFAS
NO. 155 will have any impact on the Company’s financial position or results of
operations.
In March
2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial
Assets – an amendment of FASB Statement No. 140” (“SFAS No.
156”). SFAS No. 156 provides guidance on the accounting for servicing
assets and liabilities when an entity undertakes an obligation to service a
financial asset by entering into a servicing contract. This statement
is effective for the first fiscal year beginning after September 15,
2006. The Company does not believe the adoption of SFAS No. 156 will
have any impact on the Company’s financial position or results of
operations.
In
September 2006, FASB issued SFAS 157 ‘Fair Value Measurements’. This
Statement defined fair value, establishes a framework for measuring fair value
in generally accepted accounting principles (GAAP), and expands disclosures
about fair value measurements. This Statement applies under other
accounting pronouncements that require or permit fair value measurements, the
Board having previously concluded in those accounting pronouncements that fair
value is the relevant measurement attribute. Accordingly, this
Statement does not require any new fair value measurements. However,
for some entities, the application of this Statement will change current
practice. This Statement is effective for financial statements issued
for fiscal years beginning after November 15, 2007, and interim periods within
those fiscal years. The management is currently evaluating the effect
of this pronouncement on financial statements.
In
September 2006, FASB issued SFAS 158 ‘Employers’ Accounting for defined benefit
Pension and Other Postretirement Plans-an amendment of FASB Statements No. 87,
88, 106, and 132(R).This Statement improves financial reporting by requiring an
employer to recognize the overfunded or underfunded status of a defined benefit
postretirement plan (other than a multiemployer plan) as an asset or liability
in its statement of financial position and to recognize changes in that funded
status in the year in which the changes occur through comprehensive income of a
business entity or changes in unrestricted net assets of a not-for-profit
organization. This Statement also improves financial reporting by
requiring an employer to measure the funded status of a plan as of the date of
its year-end statement of financial position, with limited
exceptions. An employer with publicly traded equity securities is
required to initially recognize the funded status of a defined benefit
postretirement plan and to provide the required disclosures as of the end of the
fiscal year ending after December 15, 2006. An employer without
publicly traded equity securities is required to recognize the funded status of
a defined benefit postretirement plan and to provide the required disclosures as
of the end of the fiscal year ending after June 15, 2007. However, an
employer without publicly traded equity securities is required to disclose the
following information in the notes to financial statements for a fiscal year
ending after December 15, 2006, but before June 16, 2007, unless it has applied
the recognition provisions of this Statement in preparing those financial
statements. The requirement to measure plan assets and benefit
obligations as of the date of the employer’s fiscal year-end statement of
financial position is effective for fiscal years ending after December 15,
2008. The management is currently evaluating the effect of this
pronouncement on financial statements.
Our
principal executive and principal financial officers have evaluated the
effectiveness of our disclosure controls and procedures, as of the end of the
period covered by this quarterly report. Without third-party specialists, our
current disclosure controls and procedures are not effective to provide
reasonable assurance that material information required to be included in our
periodic SEC reports is recorded, processed, summarized and reported within the
time periods specified in the SEC rules and forms, and accumulated and
communicated to our senior management, including our CEO, to allow timely
decisions regarding required disclosures.
Internal
control over financial reporting cannot provide absolute assurance of achieving
financial reporting objectives because of its inherent
limitations. Internal control over financial reporting is a process that
involves human diligence and compliance and is subject to lapses in judgment and
breakdowns resulting from human failures. Internal control over financial
reporting also can be circumvented by collusion or improper management
override. Because of such limitations, there is a risk that material
misstatements may not be prevented or detected on a timely basis by internal
control over financial reporting. However, these inherent limitations are
known features of the financial reporting process. Therefore, it is
possible to design into the process safeguards to reduce, though not eliminate,
this risk.
During
the most recent quarter ended September 30, 2007, there has been no change in
our internal control over financial reporting that has materially affected, or
is reasonably likely to materially affect, our internal control over financial
reporting.
We are
subject from time to time to litigation, claims and suits arising in the
ordinary course of business. As of September 30, 2007, we were not a party to
any material litigation, claim or suit whose outcome could have a material
effect on our financial statements other than the litigation described above
which was subsequently settled.
None.
Not
Applicable
None.
Not
Applicable.
Index
to Exhibits
|
31.1
|
Certification
of Chief Executive Officer under Rule 13(a) - 14(a) of the Exchange
Act.
|
|
31.2
|
Certification
of Chief Financial Officer under Rule 13(a) - 14(a) of the Exchange
Act.
|
|
32
|
Certification
of CEO and CFO under 18 U.S.C. Section
1350
|
In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized on this 19th day of December, 2008.
|
MANHATTAN
SCIENTIFIC, INC.
|
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|
By:
|
/s/ Emmanuel
Tsoupanarias
|
||
|
Emmanuel
Tsoupanarias
|
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|
Chief
Executive Officer
|
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