UNITED
STATES SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C.
20549




FORM
10-KSB




[X]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE




SECURITIES
EXCHANGE ACT OF 1934




For the
fiscal year ended December 31, 2006




[
] 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:





Common Stock, $0.001 par
value


(Title
of Class)




Check
whether the issuer is not required to file reports pursuant to Section
13




or 15(d)
of the Exchange Act [   ]




Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 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 [   ] No
[X]




Check if
no disclosure of delinquent filers in response to Item 405 of Regulation S-B is
contained in this form, and no disclosure is contained, to the best of the
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [  ]




State
issuer's revenues for its most recent fiscal year: $0





The
aggregate market value of the voting and non-voting common equity held by
non-affiliates of the issuer as of December 31, 2006 was
$1,792,913.  For purposes of this computation, all executive officers,
directors and 10% shareholders were deemed affiliates. Such a determination
should not be construed as an admission that such 10% shareholders are
affiliates.





As of
March 31, 2007 there were 200,449,577 shares of common stock of the issuer
issued and outstanding.




Transitional
Small Business Disclosure Format (check one) Yes [ ] No [X]


Table of Contents


TABLEOF
CONTENTS







PART
      I
              PAGEITEM
      1.
              DESCRIPTION OF BUSINESS
              1ITEM
      2.
              DESCRIPTION OF PROPERTIES
              9ITEM
      3.
              LEGAL PROCEEDINGS
              9ITEM
      4.
              SUBMISSION OF MATTERS TO A VOTE OF SECURITY
      HOLDERS
              9PART
      IIITEM
      5.
              MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
      STOCKHOLDER MATTERS
              10ITEM
      6
              MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
      AND RESULTS OF OPERATIONS
              14ITEM
      7.
              CONSOLIDATED FINANCIAL STATEMENTS
              F-1ITEM
      8.
              CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
      AND FINANCIAL DISCLOSURE
              17ITEM
      8A.
              CONTROLS AND PROCEDURES
              17ITEM
      8B.
              OTHER INFORMATION
              17PART
      IIIITEM
      9.
              DIRECTORS, EXECUTIVE OFFICERS, PROMOTORS AND CONTROL
      PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
    ACT
              18ITEM
      10.
              EXECUTIVE COMPENSATION
              20ITEM
      11.
              SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
      MANAGEMENT
              21ITEM
      12.
              CERTAIN RELATIONSHIPS AND RELATED
      TRANSACTIONS
              22ITEM
      13.
              EXHIBITS
              23ITEM
      14.
              PRINCIPAL ACCOUNTANT FEES AND SERVICES
              24SIGNATURES
              25EXHIBIT
      INDEX








Table of Contents


PART
I




Forward
Looking Statements




This Form
10-KSB contains "forward-looking" statements including statements regarding our
expectations of our future operations. For this purpose, any statements
contained in this Form 10-KSB 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 Internet 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.




ITEM
1. DESCRIPTION OF BUSINESS




COMPANY
HISTORY




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,emergencyhomegenerators,militaryfieldcommunicationsandlaptopcomputers.


-1-
 Table of Contents




·
            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-KSB.




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.




Presently,
our business model is concentrated in the area of commercialization of our
technologies in the alternative energy field, with emphasis on potential
opportunities in Asia, and we have essentially become a single purpose company
in this regard.




In
addition to technology commercialization, we have sought to develop appropriate
corporate opportunities from time to time for the benefit of the Company and its
stockholders.




Since our
technologies are still in their development phase, we have generated only
limited revenues. As such, the need for operating and acquisition capital is a
continuous concern requiring the ongoing efforts of our management. The Company
is not a large capital-user and has raised approximately $9.7 million capital
since 1998.  During the year ended December 31, 2006, the Company sold
or distributed 310,335 shares of Novint Technologies, Inc. (“Novint”) for cash
and in settlement of an outstanding note payable totaling $266,000. Nevertheless
there is need to continue to raise capital on an as needed basis through private
placements, registered public offerings, debt, and/or other financing vehicles.
Raising capital remained difficult for us in 2006 as the general economic
climate, beginning in 2001, remains difficult for small technology concept
companies, without significant revenues or earnings to raise capital. Our
management intends to work diligently to continue to raise capital for the
Company.




We
utilize the intellectual property sale/licensing model, and not a production
model, though management is opportunistic and is open to explore all methods
leading to commercializing our technologies. We intend to consider all
appropriate avenues for the commercialization of our technologies.




OUR
TECHNOLOGIES




1.
FUEL CELL TECHNOLOGIES




We have
conducted research to develop both micro and mid-range fuel cell technologies. A
micro fuel cell is a high-energy miniature power source that converts alcohol or
hydrogen into electricity. A mid-range fuel cell is a high power density medium
sized power source that converts hydrogen into electricity. Fuel cells create
electricity not by burning fuel, but by the process of electrochemically
arranging the fuel's atoms to produce an electric current. Water or water vapor
and in some cases carbon dioxide are the only emissions. In addition to
producing harmless emissions, certain fuel cells have the potential to be an
alternative to traditional energy sources because they use methanol and other
sources of hydrogen as fuels. Methanol can be produced inexpensively from a
variety of plant sources and is considered a renewable resource. Generally,
methanol is regarded to be stable and safe although it is considered to be toxic
in certain countries.






-2-
 Table of Contents




MICRO
FUEL CELL TECHNOLOGY




We
believe that micro fuel cell-based power sources have the potential to replace
and/or supplement conventional batteries as a charger to provide portable power
sources. If perfected, we believe micro fuel cell technology could supply energy
to consumer electronic products such as cellular phones, pagers, and other
microelectronic devices more efficiently than conventional batteries. We believe
micro fuel cells would be re-fuelable with insignificant amounts of methanol and
water or other fuels and would significantly increase available energy over
current state-of-the-art battery technology which has a fixed fuel supply. Until
recently, fuel cell technology had not been practical for consumer electronics
because of the size of the devices necessary to produce electrical energy. We
believe that new materials and miniaturization technology have the potential to
make micro fuel cell technology commercially feasible.




We have
not kept pace with the steady growth of the solar photovoltaic industry during
the past six years as we have chosen to focus our limited resources on the fuel
cell inventions and patents which we are pursuing. As a result of the shortage
of available capital, no additional investment or further resulting progress was
made in the micro fuel cell technology during 2006.




MID RANGE
FUEL CELL TECHNOLOGY




In
addition to micro fuel cells, we have made significant progress in our
continuing efforts to develop and commercialize mid-range fuel cell
technologies. Mid-range fuel cell technologies are directed toward higher power
applications, including consumer electronics (such as laptop computers),
personal transportation devices (such as bicycles and scooters), power tools and
appliances (such as vacuum cleaners and lawnmowers), and portable military
electronics (such as military field radios). In contrast, micro fuel cell
technologies address lower power applications such as cellular phones, pagers
and other microelectronics devices.





In
January 2004, the Company licensed its mid-range fuel cell technology to a
Singapore company with manufacturing in China as part of its efforts to provide
low cost fuel cell systems to Asian and other worldwide markets. Among other
things, the contract gave the licensee non-exclusive rights to produce and sell
fuel cell engines based on the NovArs technology. The agreement included an up
front payment of $150,000, royalties and 17.5% equity interest in the Singapore
Company.  In December 2005, the Company sold its equity interest in
the licensee back to the licensee for $885,000.




In 2005,
we shifted our focus from licensing our mid range fuel cell technology to trying
to find a joint venture partner to build product in China. As of December 31,
2006, these efforts have not resulted in our obtaining a joint venture partner
for this technology although we will continue to utilize this
strategy.  We intend to explore other potential applications for the
mid-range fuel cell technology, as well as potential strategic relationships
with third parties relating to investment, mass manufacturing, and mass
marketing of the technology.




2.
HAPTICS "TOUCH AND FEEL" INTERNET APPLICATIONS AND INVESTMENT IN NOVINT
TECHNOLOGIES, INC.




Haptics
is an emerging technology that allows computer users to have the physical
sensation of manipulating and touching objects on a computer screen as if they
were three-dimensional, using a special mouse. Detailed texture and viscosity
can be sensed, among many other aspects of touch.  We believe that
haptics technology has the potential to significantly change the way computers
are utilized, and that there are many promising applications. These include
3-dimensional, touch-enabled online shopping and computer gaming.




During
2000, we acquired exclusive licenses and sublicenses to certain haptics Internet
applications from Novint.  We also acquired 36,606 shares of Novint
common stock, and contracted with the developer of the licensed technology to
perform research and development of the licensed applications for contract
payments of $1,500,000. In May 2001, we acquired Teneo Computing, Inc., a
private corporation with rights to certain haptics applications for dental
simulation and oil and gas exploration. We licensed these rights exclusively to
Novint in exchange for various enhanced and amended license rights with Novint
in the areas of Internet applications and interactive applications. We also
acquired an additional 4,066 shares of Novint common stock, increasing our
ownership in Novint to 40,672 shares, subsequently split into 4,067,200 shares.
For accounting purposes, we have treated the acquisition of the Novint common
stock as one transaction.


-3-
 Table of Contents




During
the year ended December 31, 2006, the Company sold or distributed 310,335 shares
of Novint for cash and in settlement of an outstanding note payable totaling
$266,000.  As of December 31, 2006, the Company owned 1,751,075 shares
of Novint common stock.  Novint’s common stock is traded on the
over-the-counter market on the OTC Bulletin Board under the symbol
NVNT.




We
believe that our ownership of Novint stock will benefit our shareholders as
Novint develops these and other promising haptics applications. We intend to
work with Novint in the future to explore available opportunities to develop and
exploit this technology.




3.
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.




COMPETITION




The
markets in which we compete are highly competitive and constantly evolving. We
face competition from leading researchers and manufacturers
worldwide.   Many of our competitors have longer operating
histories and significantly greater financial, marketing and other resources
than we have. Furthermore, our competitors may introduce new products that
address our potential markets. Competition could have a material adverse effect
on our business, financial condition and results of our operations.




We
believe that the principal competitive factors in our technology markets include
without limitation:




·
            capitalization;




·
            cost of
      product;




·
            type of fuel (hydrogen,
      methanol);




·
            first to market with product in
      market segment;




·
            strong intellectual
      portfolio;




·
            product
      life/reliability;




·
            strong customer
      base;




·
            strong manufacturing and supplier
      relationships; and




·
            benchmark power density and
      energy efficiency.




-4-
 Table of Contents








In the
last few years there has been a much greater interest in using fuel cells as an
energy source for practical, lower powered applications such as automobiles and
portable electronic devices. In addition, Ford Motor Company has indicated it
will contribute several hundred million dollars as part of a global alliance
with other entities to develop automotive engines powered by fuel cells.By reason of the
innovative nature of the technologies we are developing, and the yet unproven
markets for such technologies, the markets in which we compete may have barriers
to entry. These include the perception of fuel cell technologies in general by
the investment community, the costs associated with creating the infrastructure
necessary for delivery of hydrogen and other fuels, and the general condition of
the economy. There are others working toward similar objectives in order to
penetrate these markets and we anticipate additional companies will pursue the
same goals. Those whose efforts we are aware of include, without limitation,
Medis El, Inc., MTI, Samsung, Toshiba, and Smart Fuel Cells in the area of micro
fuel cells; and Ballard (now our licensee), Prononex Technologies, Plug Power,
Inc., Palcan, Inc., and MTI, Inc. in the area of mid-range fuel
cells.




HAPTICS
"TOUCH AND FEEL" INTERNET APPLICATIONS





With
respect to touch-enabled products, we are aware of several companies that claim
to possess touch and feel technology. In addition, we are aware of several
companies that currently market unlicensed touch and feel
products.  Many potential competitors, including Microsoft, LG
Electronics, Logitech, Nokia, Samsung, Intel and others have greater financial
and technical resources upon which to draw in attempting to develop
products.




INTELLECTUAL
PROPERTY / RESEARCH AND DEVELOPMENT




Our
ability to compete depends in part on the protection of and our ability to
defend our proprietary technology and on the goodwill associated with our trade
names, service marks and other proprietary rights. However, we do not know if
current laws will provide us with sufficient enough protection that others will
not develop technologies similar or superior to ours, or that third parties will
not copy or otherwise obtain or use our technologies without our
authorization.




The
success of our business will depend, in part, to identify technology, obtain
patents, protect and enforce patents once issued and operate without infringing
on the proprietary rights of others. Our success will also depend on our ability
to maintain exclusive rights to trade secrets and proprietary technology we own,
are currently developing and will develop. We can give no assurance that any
issued patents will provide us with competitive advantages or will not be
challenged by others, or that the patents of others will not restrict our
ability to conduct business.




In
addition, we rely on certain technology licensed from third parties, including
Sandia National Laboratory and may be required to license additional
technologies in the future. We do not know if these third-party licenses will be
available or will continue to be available to us on acceptable commercial terms
or at all. The inability to enter into and maintain any of these licenses could
have a material adverse effect on our business, financial condition or results
of our operations.




Policing
unauthorized use of our proprietary technology and other intellectual property
rights could entail significant expense. In addition, we do not know if third
parties will bring claims of copyright or trademark infringement against us or
claim that our use of certain technologies violates a patent or other
intellectual property. Any claims of infringement, with or without merit, could
be time consuming and expensive to defend, result in costly litigation, divert
management attention, require us to enter into costly royalty or licensing
arrangements or prevent us from using important technologies or methods, any of
which could have a material adverse effect on our business, financial condition
or results of our operations.





The
Company reviewed its patents and technology licenses for impairment and
determined that its solar fuel cell patents became impaired during 2002 and
recorded a charge of approximately $189,000 in the fourth quarter of 2002 to
reduce the carrying value of these patents to zero. For the years ended December
31, 2006 and 2005, there were no impairment charges related to the Company’s
patents and technology licenses.  The patents will be fully amortized
by the end of thefiscal year
ending December 31, 2008.




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 expenses were $208,000 for each of the years
ended December 31, 2006 and 2005 and approximately $1,678,000 for the period
from July 31, 1992 (inception) through December 31,
2006.  Amortization Expense recorded for Company patents is shown as
Research and Development Expense within the Consolidated Statement of
Operations.






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SALES
AND MARKETING




Although
our technologies presently are in the development stage, we are engaged in an
early commercialization program intended to facilitate the transition from
development to licensing, manufacturing and/or sale. This program consists of
preliminary dialogues with potential strategic partners, investors,
manufacturers, potential licensees and/or purchasers.




EMPLOYEES




As of December 31, 2006, we had one
full-time employee in general management. We do not expect any significant
change in the total number of employees in the near future. Most of our research
and development work has been performed by employees of our various research and
development independent contractors (see below). We have historically indirectly
funded the salaries of these individuals through our contract research and
development payments to their employers. Although not technically our employees,
we have considered these individuals to be an integral part of our research and
development team.  None of our employees or contractors
are members of any union or collective bargaining organization. We consider our
relationships with our employee and our independent contractor employees to be
good.




As noted
above, a significant portion of our research and development has been performed
by independent contractors from whom we acquired or licensed certain
technologies, and their various employees.  Our independent
contractors utilize a number of their own various employees to satisfy their
research and development obligations to us, and their employees are considered
to be part of our research and development team.




RISK
FACTORS




An
investment in the Common Stock involves a high degree of risk. In addition to
the other information in this Report, the following risk factors should be
considered carefully in evaluating the Company and its business. If you decide
to buy our securities, you should be able to afford a complete loss of your
investment.




BECAUSE
WE HAVE EARNED VERY LITTLE IN REVENUES, THE SUCCESS OF OUR BUSINESS REQUIRES
CONTINUED FUNDING. IF WE CANNONT RAISE THE MONEY WE NEED TO SUPPORT OUR
OPERATIONS UNTIL WE EARN SIGNIFICANT REVENUES, WE MAY BE REQUIRED TO CURTAIL OR
TO CEASE OUR OPERATIONS AND YOU COULD LOSE YOUR ENTIRE INVESTMENT.




Our
ability to develop our business depends upon our receipt of money to continue
our operations while we introduce our products and a market for them develops.
If this funding is not received as needed, it is unlikely that we could continue
our business, in which case you would lose your entire investment. Our ability
to access the capital markets has been hindered generally by the general
difficult economic climate, beginning in 2001, for small technology concept
companies, without significant revenues or earnings.




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




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




Our
future performance will depend to a substantial degree upon our ability to
effectuate and generate revenues from our licensing and royalty business model.
In this regard, we have licensed technology and have to generate royalty
payments from the sale of products utilizing such technology. However, there is
no assurance of our ability to effectively license our technologies or that a
market for our technologies will develop to generate sustainable revenues
through royalty payments.




WE
MAY FACE STRONG COMPETITION FROM LARGER, ESTABLISHED COMPANIES.




We likely
will face intense competition from other companies, both globally and within the
United States, in the development of haptics and fuel cell technologies,
virtually all of which can be expected to have longer operating histories,
greater name recognition, larger installed customer bases and significantly more
financial resources and research and development facilities than Manhattan
Scientifics. There can be no assurance that developments by our current or
potential competitors will not render our proposed products
obsolete.


-6-
 Table of Contents


WE
CANNOT ASSURE YOU THAT WE WILL BE SUCCESSFUL IN DEVELOPING AND COMMERCIALIZING
ADDITIONAL PRODUCTS.




Our
ability to successfully develop any additional products is uncertain. Potential
new products may require additional research, development, testing, regulatory
approval and additional investment prior to their commercialization, which may
not be successful. There can be no assurance that we can develop commercially
successful products in the future.




WE
MAY NOT BE ABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY OR WE COULD
BECOME INVOLVED IN LITIGATION WITH OTHERS REGARDING OUR INTELLECTUAL PROPERTY.
EITHER OF THESE EVENTS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR
BUSINESS.




We rely
on a combination of intellectual property law, nondisclosure, trade secret and
other contractual and technical measures to protect our proprietary right.
However, we cannot assure you that these provisions will be adequate to protect
our intellectual property. In addition, the laws of certain foreign countries do
not protect intellectual property rights to the same extent as the laws of the
United States.




Although
we believe that our intellectual property does not infringe upon the proprietary
rights of third parties, competitors may claim that we have infringed on their
products.




If we
were to become involved in disputes regarding the use or ownership of
intellectual property rights, we could incur substantial costs in defending or
prosecuting any such action and the defense or prosecution of the action would
likely result in a diversion of management resources. Any dispute relating to
our intellectual property could have a material adverse effect on our
business.




OUR
MANAGEMENT IS ABLE TO EXERCISE SIGNIFICANT INFLUENCE OVER ALL MATTERS REQUIRING
SHAREHOLDER APPROVAL.




Our
existing directors, executive officers, and their respective affiliates are the
beneficial owners of over 20% of the outstanding shares of common stock,
excluding stock options. As a result, our existing directors, executive
officers, principal shareholders and their respective affiliates, if acting
together, would be able to exercise significant influence over all matters
requiring shareholder approval, including the election of directors and the
approval of significant corporate transactions. Such concentration of ownership
may also have the effect of delaying or preventing a change in control of our
company.




THE
TRADING PRICE OF OUR COMMON STOCK MAY DECREASE DUE TO FACTORS BEYOND OUR
CONTROL.




The
trading price of our common stock is subject to significant fluctuations in
response to numerous factors, including without limitation:




·
            variations in anticipated or
      actual results of
operations;




·
            announcements of new products or
      technological innovations by us or our
  competitors;




·
            changes in earnings estimates of
      operational results by
analysts;




·
            inability of market makers to
      combat short positions on the
stock;




·
            an overall downturn in the
      financial markets and stock
markets;




·
            the use of stock to pay employees
      and consultants if sufficient working capital is not
      available;




·
            inability of the market to absorb
      large blocks of stock sold into the market;
  and




·
            developments or disputes
      concerning our intellectual
property.




Moreover,
the stock market from time-to-time has experienced extreme price and volume
fluctuations, which have particularly affected the market prices for small
technology companies without significant revenues. These broad market
fluctuations may adversely affect the market price of our Common Stock. If our
shareholders sell substantial amounts of their common stock in the public
market, the price of our common stock could fall. These sales also might make it
more difficult for us to sell equity or equity-related securities in the future
at a price we deem appropriate.


-7-
 Table of Contents


WE
HAVE NOT PAID CASH DIVIDENDS AND IT IS UNLIKELY THAT WE WILL PAY CASH DIVIDENDS
IN THE FORESEEABLE FUTURE.




We plan
to use all of our earnings, to the extent we have significant earnings, to fund
our operations. We do not plan to pay any cash dividends in the foreseeable
future. We cannot guarantee that we will, at any time, generate sufficient
surplus cash that would be available for distribution as a dividend to the
holders of our Common Stock. You should not expect to receive cash dividends on
our Common Stock.




WE
MAY NOT HAVE SUFFICIENT CAPITAL TO RUN OUR OPERATIONS.





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




WE
HAVE THE ABILITY TO ISSUE ADDITIONAL SHARES OF OUR COMMON STOCK WITHOUT ASKING
FOR SHAREHOLDER APPROVAL, WHICH COULD CAUSE YOUR INVESTMENT TO BE
DILUTED.




Our
Certificate of Incorporation currently authorizes the Board of Directors to
issue up to 500,000,000 shares of Common Stock and 1,000,000 shares of Preferred
Stock. The power of the Board of Directors to issue shares of Common Stock or
warrants or options to purchase shares of Common Stock is generally not subject
to shareholder approval. Accordingly, any additional issuance of our Common
Stock may have the effect of further diluting your investment.




We
require substantial working capital to fund our business. If we raise additional
funds through the issuance of equity, equity-related or convertible debt
securities, those securities may have rights, preferences or privileges senior
to those of the holders of our Common Stock. The issuance of additional Common
Stock or securities convertible into Common Stock by our management will also
have the effect of further diluting the proportionate equity interest and voting
power of holders of our Common Stock.




WE
MAY RUN OUT OF AUTHORIZED CAPITAL PRIOR TO RECEIVING SHAREHOLDER APPROVAL TO
AMEND OUR CERTIFICATE OF INCORPORATION TO INCREASE OUR AUTHORIZED
CAPITAL.




As of
December 31, 2006, we have 200,449,577 shares of common stock outstanding. Our
certificate of incorporation, as amended, authorizes us to issue 500,000,000
shares of common stock. If we are not able to increase our authorized capital,
we may not be able to raise additional funds or pay service providers which
could be harmful to our business or cause us to cease operations
altogether.




LIMITED
PUBLIC MARKET FOR OUR COMMON STOCK MAY AFFECT OUR SHAREHOLDERS' ABILITY TO SELL
OUR COMMON STOCK.




Our
Common Stock currently was traded on NASDAQ's Over-The-Counter Bulletin Board
through May 2007.  Our Common Stock is currently traded on the Over
the Counter Pink Sheets, which is generally considered to be a less efficient
market than national exchanges. Consequently, the liquidity of our securities
could be impaired, not only in the number of securities which could be bought
and sold, but also through delays in the timing of transactions, difficulties in
obtaining price quotations, reduction in security analysts' and the new media's
coverage of us, if any, and lower prices for our securities than might otherwise
be attained. This circumstance could have an adverse effect on the ability of an
investor to sell any shares of our common stock as well as on the selling price
for such shares. In addition, the market price of our common stock may be
significantly affected by various additional factors, including, but not limited
to, our business performance, industry dynamics or changes in general economic
conditions.




APPLICABILITY
OF "PENNY STOCK RULES" TO BROKER-DEALER SALES OF OUR COMMON STOCK COULD HAVE A
NEGATIVE EFFECT ON THE LIQUIDITY AND MAREKT PRICE OF OUR COMMON
STOCK.




Our
common stock is subject to the "penny stock rules" adopted pursuant to Rule
15g-9 of the Securities and Exchange Act of 1934, as amended, which apply to
non-NASDAQ companies whose common stock trades at less than $5.00 per share or
which has a tangible net worth of less than $5,000,000 or $2,000,000 if we have
been operating for three or more years. The penny stock rules impose additional
sales practice requirements on broker-dealers which sell such securities to
persons other than established customers and institutional accredited investors.
For transactions covered by this rule, a broker-dealer must make a special
suitability determination for the purchase and have received the purchaser's
written consent to the transaction prior to sale. Consequently, the penny stock
rules affect the ability of broker-dealers to sell shares of our common stock
and may affect the ability of shareholders to sell their shares in the secondary
market if such a market should ever develop, as compliance with such rules may
delay and/or preclude certain trading transactions. The penny stock rules could
have an adverse effect on the liquidity and/or market price of our common
stock.


-8-
 Table of Contents





ITEM 2. DESCRIPTION OF PROPERTY




Our
principal executive office is at 405 Lexington Avenue, 32nd Floor,
New York, New York, 10174. We lease approximately 300 square feet of office
space on a month-to-month basis. The aggregate annual rent for this office space
was $6,000 in 2006.  We believe our facilities are adequate for our
current and planned business operations.




ITEM
3. LEGAL PROCEEDINGS




We are
subject from time to time to litigation, claims and suits arising in the
ordinary course of business. As of December 31, 2006, 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.





In 2004,
we commenced an action against NMXS.Com, Inc. and its CEO based on their failure
to honor our exercise of certain warrants. The case caption of that action is
Manhattan Scientifics, Inc. v. NMXS.Com, Inc. and Richard Govatski, Supreme
Court, New York Country, Index No. 601793/04. Counterclaims to set aside the
warrants have been asserted against us in this action. In January 2006, we
settled the litigation with NMXS.Com, Inc. with NMXS.Com, Inc. agreeing to pay
us $50,000.




ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS




None.


-9-
 Table of Contents


PART II




ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS




As of
December 31, 2006, our Common Stock traded on NASDAQ's Over-The-Counter Bulletin
Board under the symbol "MHTX.OB".  Starting on May 8, 2007, our
company began trading and, currently trades, on the Over the Counter Pink Sheets
under the symbol “MHTX.PK”.  The following table sets forth for the
periods indicated, the high and low per share bid information for our common
stock for quarter ended March 31, 2007 and the fiscal years ended December 31,
2006 and 2005, as reported by www.nasdaq.com. Such high and low bid information
reflects inter-dealer quotes, without retail mark-up, mark down or commissions
and may not represent actual transactions.




Bid
Prices {need to changed to high and low bid info}










2007
            
            High
            
            LowFirst
      Quarter
            $
            0.039
            $
            0.0142006
            
            High
            
            LowFirst
    Quarter
            $
            0.065
            $
            0.050Second
      Quarter
            
            0.075
            
            0.047Third
    Quarter
            
            0.060
            
            0.027Fourth
    Quarter
            
            0.044
            
            0.0122005
            
            High
            
            LowFirst
    Quarter
            $
            0.080
            $
            0.055Second
      Quarter
            
            0.066
            
            0.045Third
    Quarter
            
            0.079
            
            0.036Fourth
    Quarter
            
            0.090
            
            0.056




As of
December 31, 2006, we had 597 registered shareholders and 200,449,577 shares of
Common Stock issued and outstanding.




DIVIDENDS




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




RECENT
SALES OF UNREGISTERED SECURITIES




During
the past three years, we have issued unregistered securities in the following
transactions:




2006




In
September 2006, the Company issued 400,000 shares of common stock for consulting
and legal services rendered at $.044 per share or approximately
$18,000.




In August
2006, the Company issued 1,184,220 shares of common stock for settlement of
accrued legal services previously rendered of approximately
$59,000.




In July
2006, the Company issued 585,000 shares of common stock for consulting services
rendered at $.06 per share or approximately $35,000.




In May
2006, the Company issued 13,000,000 shares for services rendered by its Board of
Directors valued at $.06 per share or $780,000.




In March
2006 the Company issued 150,000 shares for services rendered valued at $.058 per
share or approximately $9,000.


-10-
 Table of Contents




In
February 2006, the Company issued 505,000 shares for services rendered by
consultants and our single employee valued at $.051 per share or approximately
$26,000.  In February 2006, the Company issued 795,324 shares in
satisfaction of note payable of approximately $43,000 and interest of
approximately $2,000.




2005




In March
2005, the Company issued 250,000 shares for consulting services valued at
$16,750. This transaction was exempt from registration pursuant to Section 4(2)
of the Securities Act of 1933.




In
January 2005, the Company issued 100,000 shares for consulting services valued
at $6,200. This transaction was exempt from registration pursuant to Section
4(2) of the Securities Act of 1933.




In
January 2005, the Company issued 500,000 shares for legal services valued at
$31,000. This transaction was exempt from registration pursuant to Section 4(2)
of the Securities Act of 1933.




2004




In
December 2004, the Company issued 165,000 shares for professional services
valued $10,230. This transaction was exempt from registration pursuant to
Section 4(2) of the Securities Act of 1933.




In
December 2004, the Company issued 250,000 shares for consulting services valued
$15,500. This transaction was exempt from registration pursuant to Section 4(2)
of the Securities Act of 1933.




In
November 2004, the Company issued 1,000,000 shares for legal services valued at
$62,000. This transaction was exempt from registration pursuant to Section 4(2)
of the Securities Act of 1933.




In
November 2004, the Company issued 500,000 shares for consulting services valued
at $31,000. This transaction was exempt from registration pursuant to Section
4(2) of the Securities Act of 1933.




In
November 2004, the Company issued 350,000 shares for consulting services valued
at $19,600. This transaction was exempt from registration pursuant to Section
4(2) of the Securities Act of 1933.




In
November 2004, the Company issued 641,274 shares for repayment of a promissory
note with a conversion price of $0.056 per share. This transaction was exempt
from registration pursuant to Regulation D promulgated under the Securities Act
of 1933.




In
November 2004, the Company issued a four year warrant to purchase 4,000,000
shares with an exercise price of $0.05 per share and a two year 8% promissory
note in the amount of $200,000 to an accredited investor. This transaction was
exempt from registration pursuant to Regulation D promulgated under the
Securities Act of 1933.




In August
2004, the Company issued 500,000 shares for professional services valued at
$40,000. This transaction was exempt from registration pursuant to Section 4(2)
of the Securities Act of 1933.




In May
2004, the Company issued 400,000 shares to a consultant for consulting services
values at $58,000. This transaction was exempt from registration pursuant to
Section 4(2) of the Securities Act of 1933.




In May
2004, the Company issued 866,000 shares upon the cashless exercise of a stock
option with an exercise price of $0.02. This transaction was exempt from
registration pursuant to Section 4(2) of the Securities Act of
1933.




In March
2004, the Company issued 1,500,000 shares to outside counsel for legal services
valued at $240,000. This transaction was exempt from registration pursuant to
Section 4(2) of the Securities Act of 1933.




In March
2004, the Company issued 100,000 shares to a consultant for accounting services
valued at $16,000. This transaction was exempt from registration pursuant to
Section 4(2) of the Securities Act of 1933.


-11-
 Table of Contents




In March
2004, the Company issued a total of 68,000 shares to four consultants for
secretarial and administrative services valued collectively at $10,880. This
transaction was exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933.




Securities
Authorized for Issuance under Equity Incentive Plans





Our 1998
Stock Option Plan (the "1998 Plan"), authorizes the issuance of options and
Common Stock to officers, employees and directors. We reserved 30,000,000 shares
of our Common Stock for awards to be made under the 1998 Plan. The 1998 Plan
allows for the issuance of either incentive stock options (which, pursuant to
Section 422 of the Internal Revenue Code, can only be granted to employees) or
non-qualified stock options. The 1998 Plan is administered by a committee of two
or more members of the Board of Directors or, if no committee is appointed, then
by the Board of Directors. The committee, or the Board of Directors if there is
no committee, determines the type of option granted, the exercise price, the
option term, which may be no more than ten years, terms and conditions of
exercisability and methods of exercise. Options must vest within ten years.
Under the 1998 Plan, the exercise price may not be less than fair market value
on the date of grant for both incentive stock options and non-qualified stock
options. The number of options under the 1998 Plan available for grant at
December 31, 2006 was 30,000,000.




In 2000,
our Board of Directors adopted the 2000 Equity Incentive Plan (the "2000 Plan").
The 2000 Plan authorizes the issuance of options, right to purchase Common Stock
and stock bonuses to officers, employees, directors and consultants. We reserved
30,000,000 shares of our Common Stock for awards to be made under the 2000 Plan.
On September 14, 2001, we filed a registration statement on Form S-8 to register
900,000 of these shares. On November 19, 2001, we registered an additional
550,000 shares of our common stock for issuance under the 2000 Plan. On January
30, 2002, we registered an additional 975,000 shares of our common stock for
issuance under the 2000 Plan. On March 22, 2002, we registered an additional
925,000 shares of our common stock for issuance under the 2000 Plan. On July 12,
2002, we registered an additional 990,000 shares of our common stock for
issuance under the 2000 Plan. On January 17, 2003, we registered an additional
8,000,000 of our common stock for issuance under the 2000 Plan. The 2000 Plan is
administered by a committee of two or more members of the Board of Directors or,
if no committee is appointed, then by the Board of Directors. The 2000 Plan
allows for the issuance of incentive stock options (which, pursuant to Section
422 of the Internal Revenue Code, can only be granted to employees),
non-qualified stock options, stock appreciation rights, stock awards, or stock
bonuses. The committee, or the Board of Directors if there is no committee,
determines the type of option granted, the exercise price, the option term,
which may be no more than ten years, terms and conditions of exercisability and
methods of exercise. Options must vest within ten-years. Under the 2000 Plan,
the exercise price may not be less than fair market value on the date of grant
for the incentive stock options. The 2000 Plan also allows for the granting of
Stock Appreciation Rights. No Stock Appreciation Rights have been granted. The
number of shares under the 2000 Plan available for grant at December 31, 2006
was 25,281,000.




In
November 2004, our Board of Directors adopted the 2004 Consultant Stock Plan
(the "2004 Plan"). The purpose of this 2004 Consultant Stock Plan is to advance
the interests of the Company by helping the Company obtain and retain the
services of persons providing consulting services upon whose judgment,
initiative, efforts and/or services the Company is substantially dependent, by
offering to or providing those persons with incentives or inducements affording
such persons an opportunity to become owners of capital stock of the Company. We
reserved 2,000,000 shares of our Common Stock for awards to be made under the
2004 Plan. We filed a registration statement of Form S-8 with the SEC on
November 26, 2004 to register the shares underlying the 2004 plan. The 2004 Plan
is administered by a committee of two or more members of the Board of Directors
or, if no committee is appointed, then by the Board of Directors. The committee,
or the Board of Directors if there is no committee, determines who is eligible
to receive awards under the plan, grant awards and interpret the 2004 Plan. The
number of shares under the 2004 Plan available for grant at December 31, 2006
was 500,000.




On May 9,
2005, our Board of Directors adopted the 2005 Equity Compensation Plan (the
"2005 Plan"). The purpose of this Plan is to provide incentives to attract,
retain and motivate eligible persons whose present and potential contributions
are important to our success, by offering them an opportunity to participate in
the our future performance through awards of Options, the right to purchase
Common Stock and Stock Bonuses. We reserved 10,000,000 shares of our Common
Stock for awards to be made under the 2005 Plan. The 2005 Plan is administered
by a committee of two or more members of the Board of Directors or, if no
committee is appointed, then by the Board of Directors. The committee, or the
Board of Directors if there is no committee, determines who is eligible to
receive awards under the plan, grant awards and interpret the 2005 Plan. We
filed a registration statement of Form S-8 with the SEC on June 8, 2005 to
register the shares underlying the 2005 plan. The number of shares under the
2005 Plan available for grant at December 31, 2006 was
4,868,763.


-12-
 Table of Contents




Set forth
in the table below is information regarding awards made through compensation
plans or arrangements through December 31, 2006, the most recently completed
fiscal year.





Equity
      Compensation Plan InformationPlan
      category
            Number
      of securities to be issued upon exercise of outstanding options, warrants
      and rights
              (a)
            Weighted-average
      exercise price of outstanding options, warrants and rights
            Number
      of securities remaining available for future issuance under equity
      compensation plans (excluding securitiesreflectedincolumn(a))Equity
      compensation plans approved by security holders
            -
            -
            -Equity
      compensation plans not approved by security holders
            –
            –
            60,649,763Total
            -
            -
            60,649,763





Exercise
prices and weighted-average contractual lives of stock options outstanding as of
December 31, 2006 are as follows:





Options Outstanding
                
                
                Options
      ExercisableExercise
      Price
                
                
                Number
      Outstanding
                
                
                Weighted
                  Average
      Remaining
                  Contractual
      Life
                
                
                Weighted
                  Average
                  Exercise
      Price
                
                
                Number
      Exercisable
                
                
                Weighted
                  Average
                  Exercise
      Price$
                0.02
                
                
                
                1,800,000
                
                
                
                6.58
                
                
                
                0.02
                
                
                
                1,800,000
                
                
                
                0.020.05
                
                
                
                18,625,000
                
                
                
                3.65
                
                
                
                0.05
                
                
                
                18,625,000
                
                
                
                0.050.20
                
                
                
                5,760,000
                
                
                
                2.71
                
                
                
                0.20
                
                
                
                5,760,000
                
                
                
                0.200.39
                
                
                
                250,000
                
                
                
                5.98
                
                
                
                0.39
                
                
                
                250,000
                
                
                
                0.391.25
                
                
                
                200,000
                
                
                
                5.98
                
                
                
                1.25
                
                
                
                200,000
                
                
                
                1.252.25
                
                
                
                110,000
                
                
                
                4.46
                
                
                
                2.25
                
                
                
                110,000
                
                
                
                2.252.40
                
                
                
                500,000
                
                
                
                4.33
                
                
                
                2.40
                
                
                
                500,000
                
                
                
                2.40$
                0.055
                
                
                
                1,000,000
                
                
                
                8.58
                
                
                
                0.055
                
                
                
                1,000,000
                
                
                
                0.055





All
options issued through December 31, 2006 vested within ninety days from the date
of grant and expire at various dates during 2008 through 2013.  Of the
5,000,000 options issued in April 2003, 3,000,000 vested in 30 days and
2,000,000 vested one year from date of issuance.  These options will
expire through June 2013.





On
December 31, 2005 and December 31, 2006, the Company had 19,250,000 warrants
outstanding.  The Company issued the following warrants at the
corresponding weighted average exercise price as of December 31,
2006.







Date
                            
                            Number
      of Warrants
                            
                            
                            Exercise
      Price
                            
                            Contractual
      Life
                            
                            Number
      of Shares ExercisableJanuary
      8, 1998
                            
                            
                            750,000
                            
                            
                            $
                            .10
                            
                            10
      years
                            
                            750,000July
      28, 1998
                            
                            
                            12,500,000
                            
                            
                            
                            .05
                            
                            10
      years
                            
                            12,500,000February
      10, 1998
                            
                            
                            2,000,000
                            
                            
                            
                            .75
                            
                            10
      years
                            
                            2,000,000November
      9, 2004
                            
                            
                            4,000,000
                            
                            
                            
                            .05
                            
                            4
      years
                            
                            4,000,00019,250,000
                            
                            
                            
                            
                            
                            
                            
                            19,250,000










-13-
 Table of Contents


ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
 
 The
following discussion and analysis should be read in conjunction with our
financial statements and accompanying notes appearing elsewhere in this Form
10-KSB.









We have
been acquiring and licensing technologies, directing, supervising and
coordinating our research and development efforts, raising capital, and
initiating commercialization activities and dialogue with potential
customers.





As of
December 31, 2006, we had an accumulated loss since inception, 1992, of
$47,487,000. Included in this accumulated loss are charges amounting to
approximately $20,215,000 relating to the issuance of equity instruments for
services and approximately $6,700,000 from Tamarack prior to our acquisition of
Tamarack. We expect operating losses to continue for the foreseeable future
because we will be continuing to fund research and development efforts as well
as general and administrative expenses.





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





COMPARISON
OF YEAR ENDED DECEMBER 31, 2006 TO YEAR ENDED DECEMBER 31, 2005.





NET LOSS.
We reported a net loss of $1,694,000, or $(0.01) per common share, basic and
diluted, for the year ended December 31, 2006, versus a net loss of $219,000, or
$(0.00) per common share, basic and diluted, for the year ended December 31,
2005.  The increase of our net loss of $1,475,000 or 674% resulted
from our sale of equity interest in the licensee for the mid-range fuel cell
technology for approximately $900,000 in 2005 and no corresponding sale in 2006
and decreased gain from the sale of Novint common stock of $346,000 in 2006
compared to 2005.





REVENUES.
We had no revenues for the years ended December 31, 2006 and 2005.





OPERATING
COSTS AND EXPENSES. Operating costs and expenses for the year ended December 31,
2006 totaled $1,938,000, an increase of $320,000, or 20%, versus costs and
expenses of $1,618,000 for the year ended December 31, 2005.  These
costs and expenses are detailed below.





GENERAL
AND ADMINISTRATIVE. General and administrative expenses were $1,717,000 for the
year ended December 31, 2006, which consisted of consultants, contractors,
accounting, legal, travel, rent, telephone and other day to day operating
expenses, versus general and administrative expenses of $1,391,000 for the year
ended December 31, 2005. This increase of $326,000, or 23%, is primarily a
result of increased charges for the issuance of stock and stock options for
services by approximately $515,000 compared to the prior year.





RESEARCH
AND DEVELOPMENT. Research and development expenses were $221,000 for year ended
December 31, 2006 compared to $227,000 for the year ended December 31, 2005, a
marginal decrease of $6,000.





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 two of the Company’s former senior officers, Marvin Maslow
and Jack Harrod, and through a bank guarantee made by Mr. Maslow of a
traditional loan which we recently retired. 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 these 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.





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 1,751,075 shares of
common stock of Novint Technologies, Inc.; our cash on hand; and our strategic
alliances with various scientific laboratories, educational institutions,
scientists and leaders in industry and government.





Stockholders'
equity totaled a deficit of $2,384,000 on December 31, 2006 and the working
capital was a deficit of $2,820,000 on such date.


-14-
 Table of Contents


In 2008,
the Company purchased, in exchange for common stock of the Company, Metallicum,
Inc. and its licensed patented technology.  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, other than
the agreement to acquire Metallicum, Inc., 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 December 31, 2006, we had
$149,000 in cash and cash equivalents. 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.   Accordingly, the Company’s management will seek
to raise capital financing either through debt or equity
financing.  Subsequent to December 31, 2006, the Company issued
$1,060,000 of convertible debt during fiscal year 2007 which was then converted
in 2007 for a total of 106,000,000 shares of the Company’s common
stock.  See the footnotes to the financial statement for a further
discussion.





RECENTLY
ISSUED ACCOUNTING STANDARDS





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.  Management does not believe the adoption of SFAS
NO. 155 will have any impact on its 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.
Management does not believe the adoption of SFAS No. 156 will have any impact on
its 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.  Management is currently evaluating the effect of
this pronouncement on financial statements.





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
our 2007 fiscal year. Management does not expect the adoption of SAB 108 to have
a significant impact on our 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 is 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.  Management is currently evaluating the effect of this
pronouncement on financial statements.


-15-
 Table of Contents





In
December 2006, the FASB issued FSP EITF 00-19-2, “Accounting for
Registration Payment Arrangements.” This FASB Staff Position (“FSP”) addresses
an issuer’s accounting for registration payment arrangements. This FSP specifies
that the contingent obligation to make future payments or otherwise transfer
consideration under a registration payment arrangement, whether issued as a
separate agreement or included as a provision of a financial instrument or other
agreement, should be separately recognized and measured in accordance with FASB
Statement No. 5, Accounting for Contingencies. The guidance in this FSP amends FASB Statements No. 133, Accounting for Derivative
Instruments and Hedging Activities, and No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity, and
FASB Interpretation No. 45, Guarantor’s Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others, to include scope exceptions for registration
payment arrangements. This FSP further clarifies that a financial instrument
subject to a registration payment arrangement should be accounted for in
accordance with other applicable generally accepted accounting principles
(“GAAP”) without regard to the contingent obligation to transfer consideration
pursuant to the registration payment arrangement. This FSP is effective
immediately for registration payment arrangements and the financial instruments
subject to those arrangements that are entered into or modified subsequent to
the date of issuance of this FSP. For registration payment arrangements and
financial instruments subject to those arrangements that were entered into prior
to the issuance of this FSP, this guidance shall be effective for financial
statements issued for fiscal years beginning after December 15, 2006, and
interim periods within those fiscal years. Early adoption of this FSP for
interim or annual periods for which financial statements or interim reports have
not been issued is permitted. Management is currently evaluating the effect of
this pronouncement on financial statements.





GOING
CONCERN





Our
independent registered public accounting firm has stated in their audit report
on the Company's December 31, 2006 consolidated financial statements, that we
have experienced recurring losses and have working capital deficit. The
conditions, among others, raise substantial doubt about our ability to continue
as a going concern.





CRITICAL
ACCOUNTING POLICIES AND ESTIMATES





Our
discussion and analysis of our financial condition and results of operations are
based upon our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United
States


of
America. The preparation of these consolidated financial statements requires us
to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses and related disclosures of contingent
assets


and
liabilities. On an ongoing basis, we evaluate our estimates, including those
related to reserves, impairment of long-lived assets, value of out stock issued
to consultants for services and estimates of costs to complete contracts. We
base our estimates on historical experience and on various other assumptions
that we believe to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying value assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions;
however,  we believe that our estimates, including those for the
above-described items, are reasonable.





OFF
BALANCE SHEET ARRANGEMENTS





We have
not entered into any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations liquidity,
capital expenditures or capital resources and would be considered material to
investors.


-16-
 Table of Contents







ITEM 7. FINANCIAL STATEMENTS.









FINANCIAL
STATEMENTS







REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
              F-2CONSOLIDATED
      BALANCE SHEET AS OF DECEMBER 31, 2006
              F-3CONSOLIDATED
      STATEMENTS OF OPERATIONS FOR THE YEARS ENDED
                DECEMBER
      31, 2006 AND 2005 AND FOR THE PERIOD FROM
                JULY
      31, 1992 (INCEPTION) THROUGH DECEMBER 31, 2006
              F-4CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS’ EQUITY (CAPITAL DEFICIT)
                FOR
      THE PERIODS FROM JULY  31, 1992 (INCEPTION) THROUGH DECEMBER 31,
      2006
              F-5CONSOLIDATED
      STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED
                DECEMBER
      31, 2006 AND 2005 AND FOR THE PERIOD FROM
                JULY
      31, 1992 (INCEPTION) THROUGH DECEMBER 31, 2006
              F-13NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS
              F-15







F-1
 Table of Contents










AJ. ROBBINS, P.C.


CERTIFIED
PUBLIC ACCOUNTANTS


216
SIXTEENTH STREET


SUITE
600


DENVER,
COLORADO 80202








REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To the
Board of Directors and Stockholders


Manhattan
Scientifics, Inc.


New York,
New York




We have
audited the accompanying consolidated balance sheet of Manhattan Scientifics,
Inc. (a development stage enterprise) (the “Company”) as of December 31, 2006,
and the related consolidated statements of operations, changes in stockholders'
equity (capital deficit), and cash flows for each of the years in the two year
period then ended. The financial statements for the period from inception (July
31, 1992) to December 31, 2003, were audited by other auditors whose report
included an explanatory paragraph that expressed substantial doubt about the
Company’s ability to continue as a going concern.  The financial
statements for the period from inception (July 31, 1992) to December 31, 2003
include total revenues and net loss of $706,000 and $39,052,000,
respectively.  Our opinion on the statements of operations,
stockholders’ equity (deficit) and cash flows for the period from inception
(July 31, 1992) to December 31, 2006, insofar as it relates to amounts for prior
periods through December 31, 2003, is based solely on the report of the other
auditors.  These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.




We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting. Accordingly, we express no such opinion.  An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.




In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Manhattan Scientifics, Inc.
as of December 31, 2006, and the results of its operations and its cash flows
for each of the years in the two year period then ended and for the period from
inception (July 31, 1992) to December 31, 2006, in conformity with generally
accepted accounting principles in the United States of America.




The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note B to the financial
statements, the Company has experienced recurring losses and negative cash flows
from operations and has both a working capital and a capital deficit at December
31, 2006, that raise substantial doubt about its ability to continue as a going
concern. Management's plans in regard to these matters are also described in
Note B. The financial statements do not include any adjustments that might
results from the outcome of this uncertainty.




AJ.
ROBBINS, P.C.




CERTIFIED
PUBLIC ACCOUNTANTS





Denver,
Colorado


September
17, 2008


F-2
 Table of Contents





MANHATTAN
      SCIENTIFICS, INC. AND SUBSIDIARIES(a
      development stage enterprise)CONSOLIDATED
      BALANCE SHEET





ASSETS
                
                
                December
      31, 2006Current
      assets:Cash
      and cash equivalents
                
                
                $
                149,000Prepaid
      expenses and other assets
                
                
                
                9,000Total
      current assets
                
                
                
                158,000Property
      and equipment, net
                
                
                
                30,000Investments
                
                
                
                2,000Patents,
      net of accumulated amortization of $1,678,000
                
                
                
                402,000Other
      asset
                
                
                
                2,000Total
      assets
                
                
                $
                594,000LIABILITIESCurrent
      liabilitiesAccounts
      payable and accrued expenses
                
                
                $
                1,522,000Accrued
      interest and expenses - related parties
                
                
                
                324,000Note
      payable to officers
                
                
                
                1,100,000Note
      payable - other
                
                
                
                32,000Total
      current liabilities
                
                
                
                2,978,000Commitments
      and Contingencies:CAPITAL
      DEFICITCapital
      stock $.001 par valuePreferred,
      authorized 1,000,000 sharesSeries
      A convertible, redeemable, 10 percent cumulative, authorized182,525,
      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 250,000,000 shares, 200,449,577 shares issued,and
      outstanding
                
                
                
                201,000Additional
      paid-in-capital
                
                
                
                44,902,000Deficit
      accumulated during the development stage
                
                
                
                (47,487,000
                )Total
      capital deficit
                
                
                
                (2,384,000
                )$
                594,000





See notes
to consolidated financial statements
 F-3
 Table of Contents


MANHATTAN
      SCIENTIFICS, INC. AND SUBSIDIARIES(a
      development stage enterprise)CONSOLIDATED
      STATEMENTS OF OPERATIONS





PERIOD
      FROMJULY
      31, 1992YEAR
      ENDED
                
                
                (INCEPTION)DECEMBER
      31,
                
                
                THROUGH2006
                
                
                2005
                
                
                December
      31, 2006Revenue
                
                $
                -
                
                
                $
                -
                
                
                $
                856,000Operating
      costs and expenses:General
      and administrative
                
                
                1,717,000
                
                
                
                1,391,000
                
                
                
                39,502,000Research
      and development
                
                
                221,000
                
                
                
                227,000
                
                
                
                8,612,000Impairment
      charge of certain patents
                
                
                -
                
                
                
                -
                
                
                
                189,000Total
      operating costs and expenses
                
                
                1,938,000
                
                
                
                1,618,000
                
                
                
                48,303,000Loss
      from operations before other income and expenses
                
                
                (1,938,000
                )
                
                
                (1,618,000
                )
                
                
                (47,447,000
                )Other
      income and expenses:Gain
      from sale of equity interest
                
                
                -
                
                
                
                885,000
                
                
                
                885,000Gain
      on settlement of NMXS.com option
                
                
                50,000
                
                
                
                -
                
                
                
                50,000Proceeds
      from sale of NMX.com common stock
                
                
                -
                
                
                
                -
                
                
                
                393,000Gain
      from sale of Novint Technologies Inc. common stock
                
                
                270,000
                
                
                
                616,000
                
                
                
                1,464,000Gain
      on issuance of investor common stock
                
                
                -
                
                
                
                -
                
                
                
                531,000Contract
      revenue
                
                
                -
                
                
                
                -
                
                
                
                3,741,000Interest
      and other expenses
                
                
                (80,000
                )
                
                
                (105,000
                )
                
                
                (1,021,000
                )Interest
      income
                
                
                6,000
                
                
                
                3,000
                
                
                
                178,000Equity
      in losses of investees
                
                
                -
                
                
                
                -
                
                
                
                (1,243,000
                )Gain
      / (Loss) on disposal of equipment
                
                
                (2,000
                )
                
                
                -
                
                
                
                (13,000
                )NET
      LOSS
                
                $
                (1,694,000
                )
                
                $
                (219,000
                )
                
                $
                (42,482,000
                )BASIC
      AND DILUTED LOSS PER COMMON SHARE:Weighted
      average number of common shares outstanding
                
                
                194,582,629
                
                
                
                181,011,431Basic
      and diluted loss per common share
                
                $
                (0.01
                )
                
                $
                (0.00
                )


See notes
to consolidated financial statements
 F-4
 Table of Contents
 MANHATTAN
SCIENTIFICS, INC. AND SUBSIDARIES
 (a
development stage enterprise)
 
 Consolidated
Statements of Stockholders’ Equity (Capital Deficit)
 (Notes
A and F)
 For
the Cumulative Period from July 31, 1992 (Inception) Through December 31,
2006


Series
      A Preferred Stock
                                                                                                              Preferred
      Stock
                                                                                                                $.001
      Par Value
                                                                                                                Series
      B
                                                                                                                Shares        Amount
                                                                                                              Preferred
      Stock
                                                                                                                $.001
      Par Value
                                                                                                                Series
      C
                                                                                                                Shares        
      Amount
                                                                                                              Common
      Stock
                                                                                                                $.001
      Par Value
                                                                                                                Shares         Amount
                                                                                                              Additional
      Paid-in
                                                                                                                Capital
                                                                                                              Deferred
                                                                                                                Comp.
                                                                                                              Amounts
      Receivable From
                                                                                                                Stockholders
                                                                                                              Deficit
      Accumulated
                                                                                                                During
      the Develop.
                                                                                                                Stage
                                                                                                              Treasury
                                                                                                                Stock
                                                                                                              TotalInitial
      issuance of shares to founders on contribution of intangible assets at
      historic cost basis
                                                                                                              $
                                                                                                              -
                                                                                                              -
                                                                                                              $
                                                                                                              -
                                                                                                              -
                                                                                                              $
                                                                                                              -
                                                                                                              14,391,627
                                                                                                              $
                                                                                                              14,500
                                                                                                              $
                                                                                                              500
                                                                                                              $
                                                                                                              -
                                                                                                              $
                                                                                                              -
                                                                                                              $
                                                                                                              -
                                                                                                              $
                                                                                                              -
                                                                                                              $
                                                                                                              15,000Additional
      founders' contribution
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              40,000
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              (40,000)
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              -Issuance
      of 1,037,000 shares of Series A preferred stock, net of issuance
      costs
                                                                                                              
                                                                                                              10,000
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              1,020,000
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              (286,000)
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              744,000Net
      loss
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              $
                                                                                                              (543,000)
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              (543,000)Balance,
      March 31, 1993
                                                                                                              
                                                                                                              10,000
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              14,391,627
                                                                                                              
                                                                                                              14,500
                                                                                                              
                                                                                                              1,060,500
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              (326,000)
                                                                                                              
                                                                                                              (543,000)
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              216,000Issuance
      of shares to investor at approximately $.21 per share
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              14,391,627
                                                                                                              
                                                                                                              14,500
                                                                                                              
                                                                                                              2,985,500
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              3,000,000Issuance
      of shares on exercise of options
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              479,720
                                                                                                              
                                                                                                              1,000
                                                                                                              
                                                                                                              49,000
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              50,000Services
      performed in exchange for Series A preferred stock issued in fiscal
      1993
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              127,000
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              127,000Net
      loss
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              (2,292,000)
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              (2,292,000)Balance,
      March 31, 1994
                                                                                                              
                                                                                                              10,000
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              29,262,974
                                                                                                              
                                                                                                              30,000
                                                                                                              
                                                                                                              4,095,000
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              (199,000)
                                                                                                              
                                                                                                              (2,835,000)
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              1,101,000Services
      performed for Series A preferred stock issued in fiscal
    1993
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              159,000
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              159,000Issuance
      of shares at approximately $.52 per share
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              345,399
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              182,000
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              182,000Net
      loss
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              (2,250,000)
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              (2,250,000)Balance,
      December 31, 1994
                                                                                                              
                                                                                                              10,000
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              29,608,373
                                                                                                              
                                                                                                              30,000
                                                                                                              
                                                                                                              4,277,000
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              (40,000)
                                                                                                              
                                                                                                              (5,085,000)
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              (808,000)Issuance
      of 163,000 shares of Series A preferred stock
                                                                                                              
                                                                                                              2,000
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              161,000
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              163,000Write-off
      of amounts receivable from stockholders
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              (40,000)
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              40,000
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              -Net
      loss
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              (972,000)
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              (972,000)Balance,
      December 31, 1995
                                                                                                              
                                                                                                              12,000
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              29,608,373
                                                                                                              
                                                                                                              30,000
                                                                                                              
                                                                                                              4,398,000
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              -
                                                                                                              
                                                                                                              (6,057,000)
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              (1,617,000)Issuance
      of shares upon exercise of option for $15,000
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              14,391,627
                                                                                                              
                                                                                                              14,000
                                                                                                              
                                                                                                              1,000
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              15,000Net
      loss
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              (284,000)
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              (284,000)Balance,
      December 31, 1996
                                                                                                              
                                                                                                              12,000
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              44,000,000
                                                                                                              
                                                                                                              44,000
                                                                                                              
                                                                                                              4,399,000
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              -
                                                                                                              
                                                                                                              (6,341,000)
                                                                                                              
                                                                                                              
                                                                                                              
                                                                                                              (1,886,000)


See notes
to consolidated financial statements
 F-5
 Table of Contents
 MANHATTAN
SCIENTIFICS, INC. AND SUBSIDARIES
 (a
development stage enterprise)
 
 Consolidated
Statements of Stockholders’ Equity (Capital Deficit)
 (Notes
A and F)
 For
the Cumulative Period from July 31, 1992 (Inception) Through December 31,
2006





Series
      A Preferred Stock
                                                                                                                                                        Preferred
      Stock
                                                                                                                                                          $.001
      Par Value
                                                                                                                                                          Series
      B
                                                                                                                                                          Shares      
         Amount
                                                                                                                                                        Preferred
      Stock
                                                                                                                                                          $.001
      Par Value
                                                                                                                                                          Series
      C
                                                                                                                                                          Shares   
      Amount
                                                                                                                                                        Common
      Stock
                                                                                                                                                          $.001
      Par Value
                                                                                                                                                          Shares     
        Amount
                                                                                                                                                        Additional
      Paid-in
                                                                                                                                                          Capital
                                                                                                                                                        Deferred
                                                                                                                                                          Comp.
                                                                                                                                                        Amounts
      Receivable From
                                                                                                                                                          Stockholders
                                                                                                                                                        Deficit
      Accumulated
                                                                                                                                                          During
      the Develop.
                                                                                                                                                          Stage
                                                                                                                                                        Treasury
                                                                                                                                                          Stock
                                                                                                                                                        
                                                                                                                                                        TotalBalance,
      December 31, 1996
                                                                                                                                                        12,000
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        44,000,000
                                                                                                                                                        44,000
                                                                                                                                                        4,399,000
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        (6,341,000)
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        (1,886,000
                                                                                                                                                        )Purchase
      and retirement of 1,200,000 shares of Series A preferred
    stock
                                                                                                                                                        (12,000)
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        (58,000)
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        (70,000
                                                                                                                                                        )Purchase
      of 7,195,814 treasury shares of common stock for $15,000
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        (15,000
                                                                                                                                                        )
                                                                                                                                                        (15,000
                                                                                                                                                        )Net
      loss/comprehensive loss
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        (335,000)
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        (335,000
                                                                                                                                                        )Balance,
      December 31, 1997
                                                                                                                                                        -
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        44,000,000
                                                                                                                                                        44,000
                                                                                                                                                        4,341,000
                                                                                                                                                        
                                                                                                                                                        -
                                                                                                                                                        (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
                                                                                                                                                        
                                                                                                                                                        376,000Shares
      deemed issued in connection with reverse merger
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        11,000,000
                                                                                                                                                        11,000
                                                                                                                                                        (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
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        2,850,000
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        (1,020,000)
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        1,830,000Issuance
      of shares at $.20 per share, net of issuance costs
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        5,000,000
                                                                                                                                                        5,000
                                                                                                                                                        970,000
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        975,000Issuance
      of shares to purchase intangible assets
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        7,200,000
                                                                                                                                                        7,000
                                                                                                                                                        1,433,000
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        1,440,000Issuance
      of shares at $.58 per share for consulting services
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        1,000,000
                                                                                                                                                        1,000
                                                                                                                                                        579,000
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        580,000Issuance
      of warrants on February 10, 1998 to purchase 2,000,000 shares of common
      stock exercisable at $.75 per share at fair value for services resulting
      from cashless exercise feature
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        660,000
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        660,000Issuance
      of shares at $.18 per share
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        275,000
                                                                                                                                                        
                                                                                                                                                        50,000
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        50,000Issuance
      of shares on conversion of 182,525 shares of Series A preferred
      stock
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        9,435,405
                                                                                                                                                        10,000
                                                                                                                                                        (10,000)Issuance
      of shares at $.05 per share
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        20,340,000
                                                                                                                                                        20,000
                                                                                                                                                        997,000
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        1,017,000Issuance
      of stock options and warrants at fair value for services
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        2,165,000
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        2,165,000Net
      loss/comprehensive loss
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        (4,580,000)
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        (4,580,000
                                                                                                                                                        )Balance,
      December 31, 1998
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        98,250,405
                                                                                                                                                        98,000
                                                                                                                                                        14,370,000
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        (12,276,000)
                                                                                                                                                        -
                                                                                                                                                        
                                                                                                                                                        2,192,000


See notes
to consolidated financial statements
 F-6
 Table of Contents
 MANHATTAN
SCIENTIFICS, INC. AND SUBSIDARIES
 (a
development stage enterprise)
 
 Consolidated
Statements of Stockholders’ Equity (Capital Deficit)
 (Notes
A and F)
 For
the Cumulative Period from July 31, 1992 (Inception) Through December 31,
2006




Series
      A Preferred Stock
                                                                      Preferred
      Stock
                                                                        $.001
      Par Value
                                                                        Series
      B
                                                                        Shares   Amount
                                                                      Preferred
      Stock
                                                                        $.001
      Par Value
                                                                        Series
      C
                                                                        Shares   
       Amount
                                                                      Common
      Stock
                                                                        $.001
      Par Value
                                                                        Shares     Amount
                                                                      Additional
      Paid-in
                                                                        Capital
                                                                      Deferred
                                                                        Comp.
                                                                      Amounts
      Receivable From
                                                                        Stockholders
                                                                      Deficit
      Accumulated
                                                                        During
      the Develop.
                                                                        Stage
                                                                      Treasury
                                                                        Stock
                                                                      TotalBalance,
      December 31, 1998
                                                                      
                                                                      
                                                                      
                                                                      98,250,405
                                                                      $
      98,000
                                                                      $
      14,370,000
                                                                      
                                                                      
                                                                      $
      (12,276,000)
                                                                      
                                                                      $2,192,000Issuance
      of shares in satisfaction of accrued expenses
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      78,000
                                                                      
                                                                      15,000
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      15,000Issuance
      of shares at $.49 per share for consulting services
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      10,000
                                                                      
                                                                      5,000
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      5,000Issuance
      of shares at $.49 per share to purchase furniture and
    fixtures
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      100,000
                                                                      
                                                                      49,000
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      49,000Issuance
      of shares at market prices as consulting services were
      performed
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      17,269
                                                                      
                                                                      15,000
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      15,000Issuance
      of shares to purchase intangible assets
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      1,000,000
                                                                      1,000
                                                                      999,000
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      1,000,000Issuance
      of shares at $1.25 per share for services
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      1,600
                                                                      
                                                                      2,000
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      2,000Issuance
      of stock options Immediately exercisable at fair value for
      services
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      6,572,000
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      6,572,000Issuance
      of warrants on February 10, 1998 to purchase 2,000,000 shares of
      common stock exercisable at $.75 per share for consulting services
      resulting from notification of warrant holder of intent to
      exercise
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      1,090,000
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      1,090,000Shares
      issuable at $1.27 per share in connection with note
payable
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      191,000
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      191,000Issuance
      of shares on exercise of 100,000 options at $.20 per share
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      100,000
                                                                      
                                                                      20,000
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      20,000Issuance
      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
                                                                      
                                                                      
                                                                      (1,471,000)
                                                                      
                                                                      1,471,000Issuance
      of shares at $.75 per share
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      533,000
                                                                      1,000
                                                                      399,000
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      400,000Issuance
      of shares at $.75 per share
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      515,000
                                                                      1,000
                                                                      385,000
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      386,000Issuance
      of shares at market price for service
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      4,942Issuance
      of common stock to Equilink, LLC on exercise of cashless
      warrants
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      1,076,923
                                                                      1,000
                                                                      (1,000)Net
      loss/comprehensive loss
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      (9,800,000)
                                                                      
                                                                      (9,800,000)Balance,
      December 31, 1999
                                                                      
                                                                      245,165
                                                                      
                                                                      
                                                                      101,687,139
                                                                      102,000
                                                                      27,053,000
                                                                      
                                                                      
                                                                      (23,547,000)
                                                                      
                                                                      3,608,000


See notes
to consolidated financial statements
 F-7
 Table of Contents
 MANHATTAN
SCIENTIFICS, INC. AND SUBSIDARIES
 (a
development stage enterprise)
 
 Consolidated
Statements of Stockholders’ Equity (Capital Deficit)
 (Notes
A and F)
 For
the Cumulative Period from July 31, 1992 (Inception) Through December 31,
2006





Series
      A Preferred Stock
                                                                                                                                                                                                              Preferred
      Stock $.001 Par Value Series B
                                                                                                                                                                                                              Preferred
      Stock $.001 Par Value Series C
                                                                                                                                                                                                              Common
      Stock $.001 Par Value
                                                                                                                                                                                                              Additional
      Paid-in Capital
                                                                                                                                                                                                              Deferred
      Comp.
                                                                                                                                                                                                              Amounts Receivable From
      Stockholders
                                                                                                                                                                                                              Deficit
      Accumulated
                                                                                                                                                                                                                During the Develop  Stage
                                                                                                                                                                                                              Treasury
                                                                                                                                                                                                                Stock
                                                                                                                                                                                                              TotalShares
                                                                                                                                                                                                              Amount
                                                                                                                                                                                                              Shares
                                                                                                                                                                                                              Amount
                                                                                                                                                                                                              Shares
                                                                                                                                                                                                              AmountBalance,
      December 31, 1999
                                                                                                                                                                                                              
                                                                                                                                                                                                              245,165
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              101,687,139
                                                                                                                                                                                                              $     
      102,000
                                                                                                                                                                                                              $ 
      27,053,000
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              $(23,547,000)
                                                                                                                                                                                                              
                                                                                                                                                                                                              $ 
      3,608,000Shares
      issued of Series preferred shares at $100.00 per share including deemed
      dividend in connection with beneficial conversion feature of preferred
      stock
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              14,000
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              2,199,000
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              (1,400,000)
                                                                                                                                                                                                              
                                                                                                                                                                                                              799,000Issuance
      of shares in connection with Series C preferred stock private placement
      investment
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              700,000
                                                                                                                                                                                                              1,000
                                                                                                                                                                                                              600,000
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              601,000Shares
      issuable at $2.23 per share in connection with research and development
      license agreement
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              1,115,000
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              (1,115,000)Issuance
      of shares at market price for services
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              11,083
                                                                                                                                                                                                              
                                                                                                                                                                                                              24,000
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              24,000Issuance
      of options at market value for services
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              229,000
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              229,000Issuance
      of options for 100,000 shares @$.40 per share for services/amortization of
      deferred comp.
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              113,000
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              113,000Issuance
      of stock options in connection with deferred compensation
      agreement
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              425,000
                                                                                                                                                                                                              (425,000)Issuance
      shares to purchase furniture and fixtures
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              10,500
                                                                                                                                                                                                              
                                                                                                                                                                                                              40,000
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              40,000Issuance
      of shares in connection with Series C preferred stock private
      placement
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              10,000Issuance
      of shares at $1.25 per share
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              1,600,050
                                                                                                                                                                                                              2,000
                                                                                                                                                                                                              1,998,000
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              2,000,000Conversion
      of Series B preferred stock to common
                                                                                                                                                                                                              
                                                                                                                                                                                                              (60,000)
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              600,000Issuance
      of shares at market price for services
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              51,000
                                                                                                                                                                                                              
                                                                                                                                                                                                              102,000
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              102,000Shares
      issuable at market price for services
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              88,000
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              88,000Net
      loss/comprehensive loss
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              (4,736,000)
                                                                                                                                                                                                              
                                                                                                                                                                                                              (4,736,000)Balance,
      December 31, 2000
                                                                                                                                                                                                              
                                                                                                                                                                                                              185,165
                                                                                                                                                                                                              
                                                                                                                                                                                                              14,000
                                                                                                                                                                                                              
                                                                                                                                                                                                              104,669,772
                                                                                                                                                                                                              105,000
                                                                                                                                                                                                              33,873,000
                                                                                                                                                                                                              (312,000)
                                                                                                                                                                                                              
                                                                                                                                                                                                              (30,798,000)
                                                                                                                                                                                                              
                                                                                                                                                                                                              2,868,000Issuance
      of shares in connection with private placement offerings
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              1,097,500
                                                                                                                                                                                                              1,098
                                                                                                                                                                                                              694,000
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              695,098Issuance
      of shares upon conversion of Series B preferred stock
                                                                                                                                                                                                              
                                                                                                                                                                                                              (100,166)
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              1,001,660
                                                                                                                                                                                                              1,002
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              1,002Issuance
      of shares upon conversion of Series C preferred stock
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              (14,000)
                                                                                                                                                                                                              
                                                                                                                                                                                                              2,800,000
                                                                                                                                                                                                              2,800
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              2,800Issuance
      of shares upon exercise of stock options
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              15,000
                                                                                                                                                                                                              15
                                                                                                                                                                                                              3,000
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              3,015Issuance
      of shares to acquire Teneo Computing Inc.
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              1,400,000
                                                                                                                                                                                                              1,400
                                                                                                                                                                                                              784,000
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              785,400Issuance
      of shares to purchase 42% of Novint Technologies, Inc.
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              1,000,000
                                                                                                                                                                                                              1,000
                                                                                                                                                                                                              560,000
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              561,000Issuance
      of shares for services at fair market value
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              3,388,097
                                                                                                                                                                                                              1,743
                                                                                                                                                                                                              2,138,000
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              2,139,743Exercise
      of warrants issued for services
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              942,281
                                                                                                                                                                                                              942
                                                                                                                                                                                                              782,000
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              782,942Issuance
      of stock options for services
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              250,000
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              250,000Amortization
      of deferred compensation
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              85,000
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              85,000Net
      loss/comprehensive loss
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              (6,662,000)
                                                                                                                                                                                                              
                                                                                                                                                                                                              (6,662,000)Balance,
      December 31, 2001
                                                                                                                                                                                                              
                                                                                                                                                                                                              84,999
                                                                                                                                                                                                              -
                                                                                                                                                                                                              
                                                                                                                                                                                                              
                                                                                                                                                                                                              116,314,310
                                                                                                                                                                                                              115,000
                                                                                                                                                                                                              39,084,000
                                                                                                                                                                                                              (227,000)
                                                                                                                                                                                                              
                                                                                                                                                                                                              (37,460,000)
                                                                                                                                                                                                              
                                                                                                                                                                                                              1,512,000




See notes
to consolidated financial statements
 F-8
 Table of Contents
 MANHATTAN
SCIENTIFICS, INC. AND SUBSIDARIES
 (a
development stage enterprise)
 
 Consolidated
Statements of Stockholders’ Equity (Capital Deficit)
 (Notes
A and F)
 For
the Cumulative Period from July 31, 1992 (Inception) Through December 31,
2006


Series
      A Preferred Stock
                                                                                                                                                                        Preferred
      Stock $.001 Par Value Series B
                                                                                                                                                                        Preferred
      Stock $.001 Par Value Series C
                                                                                                                                                                        Common
      Stock $.001 Par Value
                                                                                                                                                                        Additional
      Paid-in Capital
                                                                                                                                                                        Deferred
      Comp.
                                                                                                                                                                        Accounts
      Receivable From Stockholders
                                                                                                                                                                        Deficit
      Accumulated During the Develop. Stage
                                                                                                                                                                        Treasury
      Stock
                                                                                                                                                                        TotalShares
                                                                                                                                                                        Amount
                                                                                                                                                                        Shares
                                                                                                                                                                        Amount
                                                                                                                                                                        Shares
                                                                                                                                                                        AmountBalance,
      December 31, 2001
                                                                                                                                                                        
                                                                                                                                                                        84,999
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        116,314,310
                                                                                                                                                                        $115,000
                                                                                                                                                                        $39,084,000
                                                                                                                                                                        (227,000)
                                                                                                                                                                        
                                                                                                                                                                        $(37,460,000)
                                                                                                                                                                        
                                                                                                                                                                        $1,520,000Issuance
      of shares in connection with private placement offering
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        850,000
                                                                                                                                                                        1,000
                                                                                                                                                                        253,000
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        254,000Issuance
      of shares for the payment of research and development
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        75,000
                                                                                                                                                                        
                                                                                                                                                                        30,000
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        30,000Issuance
      of shares at market for services rendered
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        5,000
                                                                                                                                                                        
                                                                                                                                                                        2,000
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        2,000Issuance
      of shares in connection with private placement offering
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        285,700
                                                                                                                                                                        
                                                                                                                                                                        100,000
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        100,000Issuance
      of shares for the payment of research and development
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        975,000
                                                                                                                                                                        1,000
                                                                                                                                                                        360,000
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        361,000Issuance
      of shares at market for services rendered
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        620,000
                                                                                                                                                                        1,000
                                                                                                                                                                        203,000
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        204,000Issuance
      of shares in connection with private placement offering
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        400,000
                                                                                                                                                                        
                                                                                                                                                                        100,000
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        100,000Issuance
      of shares upon conversion of Series B preferred stock
                                                                                                                                                                        
                                                                                                                                                                        (10,000)
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        100,000Issuance
      of shares  at  market for services
      rendered
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        500,000
                                                                                                                                                                        1,000
                                                                                                                                                                        135,000
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        136,000Issuance
      of shares for the payment of research and development
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        150,000
                                                                                                                                                                        
                                                                                                                                                                        40,000
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        40,000Issuance
      of shares in connection with private placement offering
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        600,000
                                                                                                                                                                        1,000
                                                                                                                                                                        149,000
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        150,000Issuance
      of shares at market for services rendered
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        25,277
                                                                                                                                                                        
                                                                                                                                                                        8,000
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        8,000Issuance
      of shares in connection with private placement offering
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        1,000,000
                                                                                                                                                                        1,000
                                                                                                                                                                        99,000
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        100,000Issuance
      of shares in connection with private placement offering
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        300,000
                                                                                                                                                                        
                                                                                                                                                                        30,000
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        30,000Issuance
      of shares at market for services rendered
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        247,934
                                                                                                                                                                        
                                                                                                                                                                        59,000
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        59,000Issuance
      of shares at market for services rendered
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        1,285,301
                                                                                                                                                                        1,000
                                                                                                                                                                        169,000
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        170,000Issuance
      of shares at market for services rendered
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        394,000
                                                                                                                                                                        
                                                                                                                                                                        39,000
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        39,000Issuance
      of shares at market for services rendered
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        60,000
                                                                                                                                                                        
                                                                                                                                                                        8,000
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        8,000Issuance
      of shares at market for services rendered
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        75,000
                                                                                                                                                                        
                                                                                                                                                                        7,000
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        7,000Amortization
      of deferred compensation
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        85,000
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        85,000Net
      loss/comprehensive loss
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        (4,028,000)
                                                                                                                                                                        
                                                                                                                                                                        (4,028,000)Balance,
      December 31, 2002
                                                                                                                                                                        
                                                                                                                                                                        74,999
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        
                                                                                                                                                                        124,262,522
                                                                                                                                                                        122,000
                                                                                                                                                                        40,875,000
                                                                                                                                                                        (142,000)
                                                                                                                                                                        
                                                                                                                                                                        (41,488,000)
                                                                                                                                                                        
                                                                                                                                                                        (633,000)




See notes
to consolidated financial statements
 F-9
 Table of Contents
 MANHATTAN
SCIENTIFICS, INC. AND SUBSIDARIES
 (a
development stage enterprise)
 
 Consolidated
Statements of Stockholders’ Equity (Capital Deficit)
 (Notes
A and F)
 For
the Cumulative Period from July 31, 1992 (Inception) Through December 31,
2006




Series
      A Preferred Stock
                                                                                                                                                                                                                                                                      Preferred
      Stock $.001
                                                                                                                                                                                                                                                                        Par
      Value
                                                                                                                                                                                                                                                                        Series
      B
                                                                                                                                                                                                                                                                      Preferred
      Stock $.001 Par Value Series C
                                                                                                                                                                                                                                                                      Common
      Stock $.001
                                                                                                                                                                                                                                                                        Par
      Value
                                                                                                                                                                                                                                                                      Additional
                                                                                                                                                                                                                                                                        Paid-in
      Capital
                                                                                                                                                                                                                                                                      Deferred
      Comp.
                                                                                                                                                                                                                                                                      Accounts
      Receivable From Stockholders
                                                                                                                                                                                                                                                                      Deficit
      Accumulated During the Develop. Stage
                                                                                                                                                                                                                                                                      Treasury
      Stock
                                                                                                                                                                                                                                                                      TotalShares
                                                                                                                                                                                                                                                                      Amount
                                                                                                                                                                                                                                                                      Shares
                                                                                                                                                                                                                                                                      Amount
                                                                                                                                                                                                                                                                      Shares
                                                                                                                                                                                                                                                                      AmountBalance,
      December 31, 2002
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      74,999
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      124,262,522
                                                                                                                                                                                                                                                                      122,000
                                                                                                                                                                                                                                                                      40,875,000
                                                                                                                                                                                                                                                                      (142,000)
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      (41,488,000)
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      (633,000)Issuance
      of shares at market for services rendered
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      1,000,000
                                                                                                                                                                                                                                                                      1,000
                                                                                                                                                                                                                                                                      70,000
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      71,000Issuance
      of shares in connection with private placement offering
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      1,000,000
                                                                                                                                                                                                                                                                      1,000
                                                                                                                                                                                                                                                                      40,000
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      41,000Issuance
      of shares at market for services rendered
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      125,000
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      1,000
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      1,000Issuance
      of shares at market for services rendered
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      1,000,000
                                                                                                                                                                                                                                                                      1,000
                                                                                                                                                                                                                                                                      50,000
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      51,000Issuance
      of shares at market for services rendered
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      300,000
                                                                                                                                                                                                                                                                      1,000
                                                                                                                                                                                                                                                                      20,000
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      21,000Issuance
      of shares at market for services rendered
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      2,000,000
                                                                                                                                                                                                                                                                      2,000
                                                                                                                                                                                                                                                                      100,000
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      102,000Issuance
      of shares at market for services rendered
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      2,000,000
                                                                                                                                                                                                                                                                      2,000
                                                                                                                                                                                                                                                                      79,000
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      81,000Issuance
      of shares at market for services rendered
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      1,000,000
                                                                                                                                                                                                                                                                      1,000
                                                                                                                                                                                                                                                                      49,000
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      50,000Issuance
      of shares at market for services rendered
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      400,000
                                                                                                                                                                                                                                                                      1,000
                                                                                                                                                                                                                                                                      20,000
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      21,000Issuance
      of shares at market for services rendered
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      20,000
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      1,000
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      1,000Issuance
      of shares at market for services rendered
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      20,000
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      1,000
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      1,000Issuance
      of shares at market for services rendered
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      20,000
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      1,000
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      1,000Issuance
      of shares at market for services rendered
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      400,000
                                                                                                                                                                                                                                                                      1,000
                                                                                                                                                                                                                                                                      16,000
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      17,000Issuance
      of shares at market for services rendered
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      500,000
                                                                                                                                                                                                                                                                      1,000
                                                                                                                                                                                                                                                                      25,000
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      26,000Issuance
      of shares at market for services rendered
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      1,011,000
                                                                                                                                                                                                                                                                      1,000
                                                                                                                                                                                                                                                                      40,000
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      41,000Issuance
      of shares at market for services rendered
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      250,000
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      10,000
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      10,000Issuance
      of shares at market for services rendered
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      260,000
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      10,000
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      10,000Issuance
      of shares at market for services rendered
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      250,000
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      10,000
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      10,000Issuance
      of shares at market for services rendered
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      125,000
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      5,000
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      5,000Issuance
      of shares at market for services rendered
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      600,000
                                                                                                                                                                                                                                                                      1,000
                                                                                                                                                                                                                                                                      25,000
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      26,000Issuance
      of shares at market for services rendered
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      500,000
                                                                                                                                                                                                                                                                      1,000
                                                                                                                                                                                                                                                                      20,000
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      21,000Issuance
      of shares at market for services rendered
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      100,000
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      4,000
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      4,000Issuance
      of shares at market for director/officer services rendered
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      13,500,000
                                                                                                                                                                                                                                                                      14,000
                                                                                                                                                                                                                                                                      392,000
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      406,000Issuance
      of shares at market for director/officer services rendered
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      5,250,000
                                                                                                                                                                                                                                                                      5,000
                                                                                                                                                                                                                                                                      153,000
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      158,000Issuance
      of shares upon cancelation of stock options
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      2,750,000
                                                                                                                                                                                                                                                                      3,000
                                                                                                                                                                                                                                                                      82,000
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      85,000Issuance
      of shares at market for director/officer services rendered
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      1,750,000
                                                                                                                                                                                                                                                                      2,000
                                                                                                                                                                                                                                                                      52,000
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      54,000Issuance
      of shares upon cancelation of stock options
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      990,000
                                                                                                                                                                                                                                                                      1,000
                                                                                                                                                                                                                                                                      30,000
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      31,000Issuance
      of shares at market for director/officer services rendered
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      2,250,000
                                                                                                                                                                                                                                                                      2,000
                                                                                                                                                                                                                                                                      65,000
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      67,000Issuance
      of shares at market for director/officer services rendered
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      1,000,000
                                                                                                                                                                                                                                                                      1,000
                                                                                                                                                                                                                                                                      49,000
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                      50,000




See notes
to consolidated financial statements
 F-10
 Table of Contents
 MANHATTAN
SCIENTIFICS, INC. AND SUBSIDARIES
 (a
development stage enterprise)
 
 Consolidated
Statements of Stockholders’ Equity (Capital Deficit)
 (Notes
A and F)
 For
the Cumulative Period from July 31, 1992 (Inception) Through December 31,
2006
  Series
      A Preferred Stock
                                                                                                                  Preferred
      Stock $.001
                                                                                                                    Par
      Value
                                                                                                                    Series
      B
                                                                                                                  Preferred
      Stock
                                                                                                                    $.001
      Par Value
                                                                                                                    Series
      C
                                                                                                                  Common
      Stock $.001
                                                                                                                    Par
      Value
                                                                                                                  Additional
      Paid-in Capital
                                                                                                                  Deferred
      Comp.
                                                                                                                  Accounts
      Receivable From Stockholders
                                                                                                                  Deficit
      Accumulated During the Develop. Stage
                                                                                                                  Treasury
      Stock
                                                                                                                  TotalShares
                                                                                                                  Amount
                                                                                                                  Shares
                                                                                                                  Amount
                                                                                                                  Shares
                                                                                                                  AmountYear
      ended December 31, 2003 (continued)Issuance
      of shares at market for director/officer services rendered
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  250,000
                                                                                                                  
                                                                                                                  12,000
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  12,000Issuance
      of shares at market for director/officer services rendered
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  250,000
                                                                                                                  
                                                                                                                  12,000
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  12,000Issuance
      of shares at market for director/officer services rendered
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  1,000,000
                                                                                                                  1,000
                                                                                                                  50,000
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  51,000Issuance
      of shares at market for director/officer services rendered
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  250,000
                                                                                                                  
                                                                                                                  12,000
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  12,000Issuance
      of shares at market for director/officer services rendered
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  250,000
                                                                                                                  
                                                                                                                  12,000
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  12,000Issuance
      of shares upon cancelation of stock options
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  500,000
                                                                                                                  1,000
                                                                                                                  30,000
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  31,000Issuance
      of shares at market for services rendered
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  50,000
                                                                                                                  
                                                                                                                  2,000
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  2,000Issuance
      of shares at market for services rendered
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  1,000,000
                                                                                                                  1,000
                                                                                                                  50,000
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  51,000Issuance
      of shares at market for services rendered
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  35,000
                                                                                                                  
                                                                                                                  2,000
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  2,000Issuance
      of shares at market for services rendered
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  500,000
                                                                                                                  1,000
                                                                                                                  25,000
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  26,000Issuance
      of shares upon cancelation of stock options
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  500,000
                                                                                                                  1,000
                                                                                                                  30,000
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  31,000Issuance
      of shares upon cancelation of stock options
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  675,000
                                                                                                                  1,000
                                                                                                                  40,000
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  41,000Issuance
      of shares for options exchanged
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  200,000Issuance
      of shares for options exchanged
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  100,000Issuance
      of shares for options exchanged
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  200,000Issuance
      of shares for options exchanged
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  250,000Issuance
      of shares for options exchanged
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  130,000Issuance
      of shares for options exchanged
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  100,000Issuance
      of shares for options exchanged
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  200,000Issuance
      of shares for options exchanged
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  100,000Conversion
      of series B preferred stock to common
                                                                                                                  
                                                                                                                  (25,000)
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  250,000Issuance
      of shares at market for services rendered
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  250,000
                                                                                                                  
                                                                                                                  21,000
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  21,000Issuance
      of shares at market for services rendered
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  335,000
                                                                                                                  1,000
                                                                                                                  20,000
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  21,000Stock
      options issued for services
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  113,000
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  113,000Amortization
      of deferred compensation
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  142,000
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  142,000Net
      loss/comprehensive loss
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  (2,569,000)
                                                                                                                  
                                                                                                                  (2,569,000)Balance,
      December 31, 2003
                                                                                                                  
                                                                                                                  49,999
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  172,008,522
                                                                                                                  172,000
                                                                                                                  42,726,000
                                                                                                                  -
                                                                                                                  
                                                                                                                  (44,057,000)
                                                                                                                  
                                                                                                                  (1,159,000)
   See notes
to consolidated financial statements
 F-11
 Table of Contents
  MANHATTAN
SCIENTIFICS, INC. AND SUBSIDARIES
 (a
development stage enterprise)
 
 Consolidated
Statements of Stockholders’ Equity (Capital Deficit)
 (Notes
A and F)
 For
the Cumulative Period from July 31, 1992 (Inception) Through December 31,
2006
 
 Series
      A Preferred Stock
                                                                                                                                                    
                                                                                                                                                    Preferred
      Stock $.001 Par Value Series B
                                                                                                                                                    Preferred
      Stock $.001 Par Value Series C
                                                                                                                                                    
                                                                                                                                                    Common
      Stock $.001 Par Value
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    Additional
      Paid-in Capital
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    Deferred
      Comp.
                                                                                                                                                    
                                                                                                                                                    Accounts
      Receivable From Stockholders
                                                                                                                                                    
                                                                                                                                                    Deficit
      Accumulated During the Develop. Stage
                                                                                                                                                    
                                                                                                                                                    Treasury
      Stock
                                                                                                                                                    
                                                                                                                                                    TotalShares
                                                                                                                                                    
                                                                                                                                                    Amount
                                                                                                                                                    Shares
                                                                                                                                                    Amount
                                                                                                                                                    
                                                                                                                                                    Shares
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    AmountBalance,
      December 31, 2003
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    49,999
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    172,008,522
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    $
                                                                                                                                                    172,000
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    $
                                                                                                                                                    42,726,000
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    -
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    $
                                                                                                                                                    (44,057,000
                                                                                                                                                    )
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    $
                                                                                                                                                    (1,159,000
                                                                                                                                                    )Issuance
      of shares at market for services rendered
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    4,833,000
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    5,000
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    487,000
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    492,000Issuance
      of shares on exercise of options
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    866,000
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    126,000
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    126,000Issuance
      of shares for the payment of notes payable
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    641,274
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    1,000
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    47,000
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    48,000Issuance of warrants in connection with note payable
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    214,000
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    214,000Net
      loss/comprehensive loss
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    (1,517,000
                                                                                                                                                    )
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    (1,517,000
                                                                                                                                                    )Balance
      December 31, 2004
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    49,999
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    178,348,796
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    178,000
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    43,600,000
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    (45,574,000
                                                                                                                                                    )
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    (1,796,000
                                                                                                                                                    )Stock
      options issued in exchange for previously issued options
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    46,000
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    46,000Issuance
      of shares at market for services rendered
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    1,023,000
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    1,000
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    64,000
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    65,000Issuance
      of shares in satisfaction of accrued expenses
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    4,458,237
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    4,000
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    238,000
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    242,000Net
      loss/comprehensive loss
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    (219,000
                                                                                                                                                    )
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    (219,000
                                                                                                                                                    )Balance
      December 31, 2005
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    49,999
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    183,830,033
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    183,000
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    43,948,000
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    (45,793,000
                                                                                                                                                    )
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    (1,662,000
                                                                                                                                                    )Issuance
      of shares at market for services rendered
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    1,640,000
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    2,000
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    86,000
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    88,000Issuance
      of shares in satisfaction of note payable
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    795,324
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    1,000
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    44,000
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    45,000Issuance
      of shares for services rendered by Board of Directors
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    13,000,000
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    13,800
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    766,200
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    780,000Issuance
      of shares in satisfaction of accrued expenses
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    1,184,220
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    1,200
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    57,800
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    59,000Net
      loss/comprehensive loss
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    (1,694,000
                                                                                                                                                    )
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    (1,694,000
                                                                                                                                                    )Balance
      December 31, 2006
                                                                                                                                                    -
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    49,999
                                                                                                                                                    
                                                                                                                                                    $      
      -
                                                                                                                                                    -
                                                                                                                                                    $    -
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    200,449,577
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    $
                                                                                                                                                    201,000
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    $
                                                                                                                                                    44,902,000
                                                                                                                                                    
                                                                                                                                                    
                                                                                                                                                    $
                                                                                                                                                    -
                                                                                                                                                    
                                                                                                                                                    $             -
                                                                                                                                                    
                                                                                                                                                    $
                                                                                                                                                    (47,487,000
                                                                                                                                                    )
                                                                                                                                                    $      
      -
                                                                                                                                                    
                                                                                                                                                    $
                                                                                                                                                    (2,384,000
                                                                                                                                                    )
      See notes
to consolidated financial statements
 F-12
 Table of
Contents


MANHATTAN
      SCIENTIFICS, INC. AND SUBSIDIARIES(a
      development stage enterprise)CONSOLIDATED
      STATEMENTS OF CASH FLOWSPERIOD
      FROMJULY
      31, 1992YEAR
      ENDED DECEMBER 31,
                  
                  (INCEPTION)
      THROUGH2006
                  
                  
                  2005
                  
                  December
      31, 2006CASH
      FLOWS FROM (TO) OPERATING ACTIVITIES:Net
      loss
                  
                  $
                  (1,694,000
                  )
                  
                  $
                  (219,000
                  )
                  $
                  (42,482,000
                  )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Gain
      on sale of investments
                  
                  
                  (270,000
                  )
                  
                  
                  (616,000
                  )
                  
                  (1,853,000
                  )Gain
      on settlement of NMXS.com option
                  
                  
                  (50,000
                  )
                  
                  
                  -
                  
                  
                  (50,000
                  )Gain
      from sale of equity interest in Horizon
                  
                  
                  -
                  
                  
                  
                  (885,000
                  )
                  
                  (885,000
                  )Gain
      on issuance of investee common stock
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  (531,000
                  )Common
      stock issued for services
                  
                  
                  868,000
                  
                  
                  
                  307,000
                  
                  
                  7,113,000Preferred
      stock issued for services
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  598,000Stock
      options issued for services
                  
                  
                  -
                  
                  
                  
                  46,000
                  
                  
                  9,841,000Cashless
      stock option exercise
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  126,000Warrants
      issued for services
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  2,556,000Convertible
      note issued for services
                  
                  
                  15,000
                  
                  
                  
                  -
                  
                  
                  107,000Financing
      costs payable with common stock
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  191,000Loss
      of equity investee
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  1,207,000Amortization
      of technology license
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  537,000Amortization
      of patents
                  
                  
                  208,000
                  
                  
                  
                  208,000
                  
                  
                  1,678,000Loss
      on disposal of equipment
                  
                  
                  2,000
                  
                  
                  
                  -
                  
                  
                  28,000Impairment
      charge of certain patents
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  189,000Impairment
      charge on property and equipment
                  
                  
                  8,000
                  
                  
                  
                  -
                  
                  
                  8,000Depreciation
                  
                  
                  3,000
                  
                  
                  
                  3,000
                  
                  
                  1,125,000Changes
      in:Prepaid
      expenses and other assets
                  
                  
                  140,000
                  
                  
                  
                  166,000
                  
                  
                  193,000Accounts
      payable and accrued expenses
                  
                  
                  370,000
                  
                  
                  
                  272,000
                  
                  
                  3,075,000Accrued
      interest and expenses - related parties
                  
                  
                  69,000
                  
                  
                  
                  (33,000
                  )
                  
                  324,000Net
      cash provided by (used in) operating activities;
                  
                  
                  (331,000
                  )
                  
                  
                  (751,000
                  )
                  
                  (16,905,000
                  )CASH
      FLOWS FROM (TO) INVESTING ACTIVITIES:Purchase
      of equipment
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (432,000
                  )Purchase
      of investment
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  (100,000
                  )Proceeds
      from sale of equipment
                  
                  
                  -
                  
                  
                  
                  4,000
                  
                  
                  18,000Proceeds
      from sale of equity interest
                  
                  
                  -
                  
                  
                  
                  885,000
                  
                  
                  885,000Proceeds
      from settlement of NMXS.com
                  
                  
                  50,000
                  
                  
                  
                  -
                  
                  
                  50,000Proceeds
      received from sale of investment
                  
                  
                  66,000
                  
                  
                  
                  616,000
                  
                  
                  1,690,000Net
      cash provided by (used in) investing activities
                  
                  
                  116,000
                  
                  
                  
                  1,505,000
                  
                  
                  2,111,000


See notes
to consolidated financial statements
 F-13
 Table of Contents





MANHATTAN
      SCIENTIFICS, INC. AND SUBSIDIARIES(a
      development stage enterprise)CONSOLIDATED
      STATEMENTS OF CASH FLOWS (Continued)PERIOD
      FROMJULY
      31, 1992YEAR
      ENDED DECEMBER 31,
                  
                  (INCEPTION)
      THROUGH2006
                  
                  
                  2005
                  
                  December
      31, 2006CASH
      FLOWS FROM (TO) FINANCING ACTIVITIES:Purchase
      of treasury stock
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  (100,000
                  )Note
      payable to stockholders
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  2,374,000Proceeds
      from note payable - other
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  634,000Repayment
      of note payable - other
                  
                  
                  -
                  
                  
                  
                  19,000
                  
                  
                  (435,000
                  )Repayment
      of note payable to officers
                  
                  
                  -
                  
                  
                  
                  (525,000
                  )
                  
                  (525,000
                  )Net
      proceeds from issuance of preferred stock
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  3,569,000Net
      proceeds from issuance of common stock
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  9,571,000Loan
      repayment to preferred stockholder
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  (148,000
                  )Capital
      lease payments
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  (13,000
                  )Return
      of security deposit
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  16,000Net
      cash provided by (used in) financing activities
                  
                  
                  -
                  
                  
                  
                  (506,000
                  )
                  
                  14,943,000NET
      (DECREASE)INCREASEINCASHANDCASHEQUIVALENTS
                  
                  
                  (215,000
                  )
                  
                  
                  248,000
                  
                  
                  149,000Cash
      and cash equivalents, beginning of period
                  
                  
                  364,000
                  
                  
                  
                  116,000
                  
                  
                  -CASH
      AND CASH EQUIVALENTS, END OF PERIOD
                  
                  $
                  149,000
                  
                  
                  $
                  364,000
                  
                  $
                  149,000SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION:Interest
      paid
                  
                  $
                  -
                  
                  
                  $
                  97,000
                  
                  $
                  111,000SUPPLEMENTAL
      DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:Fixed
      assets contributed to the company in exchange forSeries
      A preferred stock
                  
                  
                  -
                  
                  
                  
                  -
                  
                  $
                  45,000Issuance
      of 14,391,627 common shares to acquire intangible assets
                  
                  
                  -
                  
                  
                  
                  -
                  
                  $
                  15,000Special
      distribution of 14,391,627 shares of common stock tostockholder
      in settlement of stockholder advances
                  
                  
                  -
                  
                  
                  
                  -
                  
                  $
                  376,000Issuance
      of 7,200,000 common shares to acquire intangible assets
                  
                  
                  -
                  
                  
                  
                  -
                  
                  $
                  1,440,000Issuance
      of Series A preferred stock and warrants in settlementof
      note payable and accrued interest
                  
                  
                  -
                  
                  
                  
                  -
                  
                  $
                  1,830,000Issuance
      of 1,000,000 common shares to acquire intangible assets
                  
                  
                  -
                  
                  
                  
                  -
                  
                  $
                  1,000,000Issuance
      of 100,000 common shares to acquire furniture and fixtures
                  
                  
                  -
                  
                  
                  
                  -
                  
                  $
                  49,000Issuance
      of 78,000 common shares in satisfaction of accrued
expenses
                  
                  
                  -
                  
                  
                  
                  -
                  
                  $
                  15,000Issuance
      of 10,500 shares to acquire furniture and fixtures
                  
                  
                  -
                  
                  
                  
                  -
                  
                  $
                  40,000Issuance
      of 1,400,00 of common shares to acquire Teneo Computing
                  
                  
                  -
                  
                  
                  
                  -
                  
                  $
                  785,000Issuance
      of 1,000,000 of common shares to purchase 42% of NovintTechnologies
                  
                  
                  -
                  
                  
                  
                  -
                  
                  $
                  561,000Issuanceof 641,274sharesofcommonstockinsettlementofnotepayable
                  
                  
                  -
                  
                  
                  
                  -
                  
                  $
                  48,000Issuance
      of 3,180,552 common shares in satisfaction of accrued
    expenses
                  
                  
                  -
                  
                  
                  $
                  159,000
                  
                  $
                  159,000Issuance
      of 1,277,685 common shares in satisfaction of accrued
    expenses
                  
                  
                  -
                  
                  
                  $
                  83,000
                  
                  $
                  83,000Issuance
      of 795,324 of common shares in settlement of note payable
                  
                  $
                  45,000
                  
                  
                  
                  -
                  
                  $
                  45,000Issuance
      of 1,184,220 common shares in satisfaction of accrued
    expenses
                  
                  $
                  59,000
                  
                  
                  
                  -
                  
                  $
                  59,000


See notes
to consolidated financial statements
 F-14
 Table of Contents
 MANHATTAN
SCIENTIFICS, INC. AND SUBSIDIARIES
 (A
Development Stage Enterprise)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2006 AND 2005


NOTE A –
ORGANIZATION AND OPERATIONS





Manhattan
Scientifics, Inc. (formerly Grand Enterprises, Inc. (“Grand”), and its
wholly-owned subsidiaries Tamarack Storage Devices, Inc. and Teneo Computing,
Inc. (“Teneo”) (collectively “the Company”), a development stage enterprise,
operates in a single business segment that seeks to commercialize technologies
with an emphasis on consumer and commercial electronics. The Company is in the
development stage as defined in Financial Accounting Standards Board Statement
No. 7. The fiscal year end is December 31.





The
Company has been engaged primarily in the commercialization of its
technology.  The Company conducts its operations primarily in the
Asia.





NOTE B -
GOING CONCERN UNCERTAINTY





These
financial statements have been prepared on a going concern basis, which
contemplated the realization of assets and the satisfaction of liabilities in
the normal course of business. The Company has incurred recurring losses and at
December 31, 2006, had an accumulated capital deficit of $47,487,000. For the
year ended December 31, 2006, the Company sustained a net loss of $1,694,000.
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.  Subsequent to December 31, 2006, the Company issued
$1,060,000 of convertible debt during fiscal year 2007 which was then converted
in 2007 for a total of 106,000,000 shares of the Company’s common stock, see
Note K for further discussions.




NOTE C -
SUMMARY OF SIGNIFICANT ACCOUNTING 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]
PROPERTY AND EQUIPMENT





Property
and equipment consists of Artwork ($29,000) and office equipment ($3,000) and is
recorded at cost less accumulated depreciation.  Depreciation is
provided for office equipment on the straight-line method over the estimated
useful lives of the assets, generally three years.  Total depreciation
expense was $3,000 and $3,000 for the years ended December 31, 2006 and 2005,
respectively.  As of December 31, 2006, accumulated depreciation was
$2,000.  During the year ended December 31, 2006, the Company recorded
an impairment charge as general and administrative expense on its property and
equipment of $8,000 and loss on disposal of equipment of
$2,000.


F-15
 Table of Contents
 MANHATTAN
SCIENTIFICS, INC. AND SUBSIDIARIES
 (A
Development Stage Enterprise)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2006 AND 2005





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





[3]
INTANGIBLE ASSETS:





Patents
are recorded at cost of $2,080,000. Amortization is charged against results of
operations, as research and development expense, 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 expenses were $208,000 for each
of the years ended December 31, 2006 and 2005 and $1,678,000 for the period from
July 31, 1992 (inception) through December 31, 2006.





Annual
amortization of intangible assets remaining at December 31, 2006, are as
follows:




Year
      ended December 31,2007
                    
                    $
                    208,0002008
                    
                    
                    194,000Total
                    
                    $
                    402,000





[4]
INCOME TAXES:





In
accordance with SFAS 109, Accounting for Income Taxes, the Company accounts for
income taxes under the asset and liability method. Deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax basis and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.  The Company
has provided a full valuation allowance on its deferred tax assets as the
Company feels that it is more likely than not that it will not realize the
benefits of these assets.





[5] 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 have been excluded from the computations since they would be
antidilutive.





[6]
RESEARCH AND DEVELOPMENT:





Research
and development costs are expensed as incurred and amounted to $13,000 and
$19,000 for the years ended December 31, 2006 and 2005, respectively and
$6,934,000 for the period from July 31, 1992 (inception) through December 31,
2006.





F-16
 Table of Contents
 MANHATTAN
SCIENTIFICS, INC. AND SUBSIDIARIES
 (A
Development Stage Enterprise)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2006 AND 2005





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





[7]
ADVERTISING EXPENSES:





The
Company expenses advertising costs which consist primarily of promotional items
and print media, as incurred. Advertising expenses amounted to $0, $1,000, and
approximately $88,000 for the years ended December 31, 2006 and 2005 and for the
cumulative period July 31, 1992 (inception) through December 31, 2006,
respectively.





[8] 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. Actual results could differ from those estimates.  Significant
estimates includes the carrying value of the Company's patents, fair value of
the Company’s common stock, accounting for income taxes and uncertainty in
income taxes and depreciation and amortization.





[9]
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 years ended
December 31, 2006 and 2005.  The Company’s share of loss not recorded
amounted to approximately $379,000 and $514,000, respectively for the years
ended December 31, 2006 and 2005. 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 years ended December 31, 2006 and 2005,
the Company sold certain shares in Novint and has recorded a gain on sale of
those shares of $270,000 and $616,000, respectively.  As of December
31, 2006, the Company owned 1,751,055 shares of Novint common stock or
9%.  The Company continued to account for its investment in Novint
using the equity method since the Company exercises significant influence over
Novint.








F-17
 Table of Contents
 MANHATTAN
SCIENTIFICS, INC. AND SUBSIDIARIES
 (A
Development Stage Enterprise)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2006 AND 2005





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





In
October of 2002 the Company's ownership interest in NMXS.com Inc. fell below 20%
and as a result the Company discontinued the equity method of accounting. The
Company has divested itself of all NMXS.com, Inc. common stock and as of
December 31, 2003 the Company no longer has any direct investment in NMXS.com,
Inc.





In 2004,
the Company commenced an action against NMXS.Com, Inc. and its CEO based on
their failure to honor exercise of certain warrants.  In March 2006,
the Company received $50,000 as settlement to the litigation with the NMXS.COM,
Inc.





[10]
REVENUE RECOGNITION:





When the
Company earns revenues from the sale of 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.





In
January 2004, the Company licensed its mid-range fuel cell technology to a
Singapore company with manufacturing in China as part of its efforts to provide
low cost fuel cell systems to Asian and other worldwide markets. Among other
things, the contract gave the licensee non-exclusive rights to produce and sell
fuel cell engines based on the NovArs technology. The agreement included an up
front payment of $150,000, royalties and 17.5% equity interest in the Singapore
Company.  In December 2005, the Company sold its equity interest in
the licensee back to the licensee for $885,000.





In April
2003, the Company entered into a nonexclusive license agreement with a third
party for rights to its mid-range fuel cell technology. The Company received
$300,000 upon signing of the agreement and is entitled to receive an additional
$200,000 upon commercial launch (as defined) by the third
party.   To date, the licensee has not commenced its commercial
launch.








F-18
 Table of Contents
 MANHATTAN
SCIENTIFICS, INC. AND SUBSIDIARIES
 (A
Development Stage Enterprise)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2006 AND 2005





NOTE C -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RELATED MATTERS


(CONTINUED)





[11]
IMPAIRMENT OF LONG-LIVED ASSETS:





Long-lived
assets, including patents and technology licenses to be held and used are
reviewed for impairment whenever events or changes in circumstances indicate
that the related carrying amounts may not be recoverable using expected future
undiscounted cash flows. When required, impairment losses on assets to be held
and used are recognized based on the excess of the asset's carrying amount over
its fair value as determined by selling prices for similar assets or application
of other appropriate valuation techniques. Long-lived assets to be disposed of
are reported at the lower of their carrying amount or fair value less disposal
costs. The Company reviewed its patents and technology licenses for impairment
and determined that its solar fuel cell patents became impaired during 2002 and
recorded a charge of approximately $189,000 in the fourth quarter of 2002 to
reduce the carrying value of these patents to zero. For the years ended December
31, 2006 and 2005, there were no impairment charges related to the Company’s
patents and technology licenses.





[12]
STOCK-BASED COMPENSATION:





On
January 1, 2006, the Company adopted SFAS No. 123 (R) “Share-Based
Payment” which requires the measurement and recognition of compensation expense
for all share-based payment awards made to employees and directors including
employee stock options and employee stock purchases related to a Employee Stock
Purchase Plan based on the estimated fair values.





The
Company adopted SFAS No. 123(R) using the modified prospective transition
method, which required the application of the accounting standard as of
January 1, 2006. The accompanying consolidated financial statements as of
and for the year ended December 31, 2006 reflect the impact of SFAS
No. 123(R). In accordance with the modified prospective transition method,
the Company’s accompanying consolidated financial statements for the prior
periods have not been restated, and do not include the impact of SFAS
No. 123(R). Stock based compensation expense recognized under SFAS
No. 123(R) for the year ended December 31, 2006 totaled
$0.





[13] CASH
EQUIVALENTS:





For
purposes of reporting cash flows, the Company considers all short term, interest
bearing deposits with original maturities of three months or less to be cash
equivalents.





[14]  FAIR
VALUE OF FINANCIAL INSTRUMENTS:





The
carrying amounts of cash, accounts payable, accrued expenses and notes payable
approximate fair value because of the short maturity of these
items.














F-19
 Table of Contents
 MANHATTAN
SCIENTIFICS, INC. AND SUBSIDIARIES
 (A
Development Stage Enterprise)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2006 AND 2005





NOTE C -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RELATED MATTERS


(CONTINUED)





[15]  CONCENTRATION
OF CREDIT RISK:





The
Company maintains all cash in bank accounts, which at times may exceed federally
insured limits.  The Company has not experienced a loss in such
accounts.





[16]  RECLASSIFICATION





Certain
reclassifications have been made to the 2005 balances to conform to the 2006
presentation.





[17]  RECENTLY
ISSUED ACCOUNTING PRONOUNCEMENTS:





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 Company is currently evaluating the effect of
this pronouncement on its financial statements.





F-20
 Table of Contents
 MANHATTAN
SCIENTIFICS, INC. AND SUBSIDIARIES
 (A
Development Stage Enterprise)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2006 AND 2005





NOTE C -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RELATED MATTERS


(CONTINUED)





[17]  RECENTLY
ISSUED ACCOUNTING PRONOUNCEMENTS (Continued):





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
our 2007 fiscal year. The Company does not expect the adoption of SAB 108 to
have a significant impact on its 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 is 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 the 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 its financial statements.


F-21
 Table of Contents
 MANHATTAN
SCIENTIFICS, INC. AND SUBSIDIARIES
 (A
Development Stage Enterprise)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2006 AND 2005





NOTE C -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RELATED MATTERS


(CONTINUED)





[17]  RECENTLY
ISSUED ACCOUNTING PRONOUNCEMENTS (Continued):





In
December 2006, the FASB issued FSP EITF 00-19-2, “Accounting for
Registration Payment Arrangements.” This FASB Staff Position (“FSP”) addresses
an issuer’s accounting for registration payment arrangements. This FSP specifies
that the contingent obligation to make future payments or otherwise transfer
consideration under a registration payment arrangement, whether issued as a
separate agreement or included as a provision of a financial instrument or other
agreement, should be separately recognized and measured in accordance with FASB
Statement No. 5, Accounting for Contingencies.
The guidance in this FSP amends FASB Statements No. 133, Accounting for Derivative
Instruments and Hedging Activities, and No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity, and
FASB Interpretation No. 45, Guarantor’s Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others, to include scope exceptions for registration
payment arrangements. This FSP further clarifies that a financial instrument
subject to a registration payment arrangement should be accounted for in
accordance with other applicable generally accepted accounting principles
(“GAAP”) without regard to the contingent obligation to transfer consideration
pursuant to the registration payment arrangement. This FSP is effective
immediately for registration payment arrangements and the financial instruments
subject to those arrangements that are entered into or modified subsequent to
the date of issuance of this FSP. For registration payment arrangements and
financial instruments subject to those arrangements that were entered into prior
to the issuance of this FSP, this guidance shall be effective for financial
statements issued for fiscal years beginning after December 15, 2006, and
interim periods within those fiscal years. Early adoption of this FSP for
interim or annual periods for which financial statements or interim reports have
not been issued is permitted. The Company is currently evaluating the effect of
this pronouncement on its financial statements.


F-22
 Table of Contents
 MANHATTAN
SCIENTIFICS, INC. AND SUBSIDIARIES
 (A
Development Stage Enterprise)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2006 AND 2005





NOTE D -
INVESTMENTS IN NOVINT





At
December 31, 2006, the Company owns approximately 9% of Novint. The following is
a summary of financial data regarding financial position and results of
operations derived from the December 31, 2006 financial statements of Novint as
of December 31, 2006.









Current assets
      (including cash of $255,000)
              
              $
              687,000Property and
      equipment
              
              
              288,000Other
      assets
              
              
              401,000$
              1,376,000Liabilities
              
              $
              1,206,000Equity
              
              
              170,000$
              1,376,000Revenue
              
              $
              90,000Net/Loss
              
              $
              (4,310,000
              )






During
the year ended December 31, 2006 the Company sold 100,000 shares of Novint and
issued 210,335 shares in lieu of payment of a note payable for
$270,000.





During
2005 Novint filed a Form SB-2 registration statement for its initial public
offering.  The registration statement was declared effective on
February 6, 2006.





In
connection with a financing transaction of Novint the Company agreed to not sell
their shares of Novint stock for a period of 1 year after the first day on which
shares of Novint common stock is quoted or listed on a trading market, which was
June 9, 2006.  The lock up, however, does not apply to 300,000 shares
of Novint stock held by the Company.  Further the Company may sell up
to an additional 200,000 shares subject to share price and volume
limitations.


F-23
 Table of Contents
 MANHATTAN
SCIENTIFICS, INC. AND SUBSIDIARIES
 (A
Development Stage Enterprise)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2006 AND 2005





NOTE E -
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 year ended December 31, 2006 and 2005 does not assume any exercise
of options or warrants or shares issuable upon conversion of the series B
preferred stock, which totaled, for both the year ended December 31, 2006 and
2005,  28,245,000, 19,250,000 and 499,990, respectively, as their
effect is antidilutive.





NOTE F –
NOTES PAYABLE – OFFICER





As of
December 31, 2006, the Company has loans payable of $500,000 and $600,000
payable to its former Chief Operating Officer and Chief Executive
Officer.  The loans bear interest at 5.5% per annum and were initially
due December 31, 2002 and have been mutually extended and
settled.  Under the terms of the settlement dated December 12, 2007,
the Company has recorded interest expense of approximately $61,000 and $89,000
for the years ended December 31, 2006 and 2005, respectively.





NOTE G –
NOTES PAYABLE – OTHER





During
2004 the Company issued a number of convertible promissory notes totaling
$91,000 for services performed.  The notes have a one year maturity
date, are noninterest bearing and upon maturity will convert into shares of the
Company’s common stock at the then current per share price, unless the Company
prepays the outstanding amount.  In December 2004, the Company issued
641,274 shares of its common stock on the conversion of one of the
notes.  The remaining balance of these notes were $43,000 as of
December 31, 2004.  During 2005, the Company issued $19,000 of
additional convertible notes to the same third party under the same
terms.  In February 2006, the Company issued 795,324 shares of its
common stock on the conversion of the notes for $43,000 and interest of
$2,000.  During the year ended December 31, 2006 the Company issued a
$4,000 convertible note to the same third party.  As of December 31,
2006, the Company owed $32,000 under these notes.





In
November 2004, the Company obtained a loan from a third party in the amount of
$200,000.  The loan bears interest at a rate of 8% per annum and
matures in November of 2006.  The Company prepaid the two years of
interest using its shares of Novint Technologies, Inc. shares.  As
part of the debt agreement, the Company agreed to allow Oro Valley to hold
250,000 shares of Novint stock in escrow until the due date and to sell the
shares to pay off the note beginning when the note became due in November
2006.  In December 2006 the note was paid in full by selling 210,335
Novint Technologies shares.  The remaining 39,665 shares were returned
to the Company.  In addition, the Company issued a warrant to purchase
4,000,000 shares of its common stock on a cashless basis with a $0.05 cent
strike price expiring November 8, 2008.  The warrant was valued at
$224,000 using the Black Scholes model for American options, with volatility of
108% and a risk free interest rate of 4.5%.  The market price of the
common stock on the date of the grant was $0.071.  The value of the
warrant is being amortized over the life of the note.  Amortization of
the value of the warrants amounted to $98,000 and $112,000 for the years ended
December 31, 2006 and December 31, 2005, respectively.





NOTE H –
CAPITAL TRANSACTIONS





Series B
preferred shares are convertible at a rate of 1 Series B preferred
share


to 10
common shares.





In
February 2006, the Company issued 505,000 shares of common stock for services
rendered valued at $.051 per share or $26,000.





In
February 2006, the Company issued 795,324 shares of common stock in satisfaction
of note payable of $43,000 and interest of $2,000.





In March
2006 the Company issued 150,000 shares of common stock for services rendered
valued at $.058 per share or $9,000.





In May
2006, the Company issued 13,000,000 shares of common stock for services rendered
by its Board of Directors valued at $.06 per share or $780,000.





In July
2006, the Company issued 585,000 shares of common stock for consulting services
rendered at $.06 per share or $35,000.





In August
2006, the Company issued 1,184,220 shares of common stock for settlement of
accrued legal services previously rendered at $0.05 per share or
$59,000.








F-24
 Table of Contents
 MANHATTAN
SCIENTIFICS, INC. AND SUBSIDIARIES
 (A
Development Stage Enterprise)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2006 AND 2005


NOTE H –
CAPITAL TRANSACTIONS (Continued)





In
September 2006, the Company issued 400,000 shares of common stock for consulting
and legal services rendered at $.044 per share or $18,000.





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





Number
      of Options
                    
                    
                    Exercise
      Price Per Share
                    
                    
                    Weighted
      Average Exercise Price
                    
                    
                    Number
      of Options ExercisableOutstanding
      as of December 31, 2004
                    
                    
                    27,245,000
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    25,245,000Granted/Vested
                    
                    
                    1,200,000
                    
                    
                    
                    0.055
                    
                    
                    
                    0.055
                    
                    
                    
                    2,200,000Canceled
                    
                    
                    (200,000
                    )
                    
                    
                    0.055
                    
                    
                    
                    0.055
                    
                    
                    
                    (200,000
                    )Outstanding
      as of December 31, 2005
                    
                    
                    28,245,000
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    27,245,000Granted/Vested
                    
                    
                    0
                    
                    
                    
                    0.05
                    
                    
                    
                    0.05
                    
                    
                    
                    1,000,000Canceled
                    
                    
                    0
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    0Outstanding
      as of December 31, 2006
                    
                    
                    28,245,000
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    28,245,000














F-25
 Table of Contents
 MANHATTAN
SCIENTIFICS, INC. AND SUBSIDIARIES
 (A
Development Stage Enterprise)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2006 AND 2005





NOTE H –
CAPITAL TRANSACTIONS (Continued)





All
options issued through December 31, 2006 vested within ninety days from the date
of grant and expire at various dates during 2008 through 2013.





Exercise
prices and weighted-average contractual lives of stock options outstanding as of
December 31, 2006 are as follows:








Options
      Outstanding
                        
                        
                        Options
      ExercisableExercise
      Price
                        
                        
                        Number
      Outstanding
                        
                        
                        WeightedAverage
      RemainingContractual
      Life
                        
                        
                        Weighted
                          Average
      ExercisePrice
                        
                        
                        Number
      Exercisable
                        
                        
                        Weighted
                          Average
      Exercise Price$
                        0.02
                        
                        
                        
                        1,800,000
                        
                        
                        
                        6.58
                        
                        
                        
                        0.02
                        
                        
                        
                        1,800,000
                        
                        
                        
                        0.020.05
                        
                        
                        
                        18,625,000
                        
                        
                        
                        3.65
                        
                        
                        
                        0.05
                        
                        
                        
                        18,625,000
                        
                        
                        
                        0.050.20
                        
                        
                        
                        5,760,000
                        
                        
                        
                        2.71
                        
                        
                        
                        0.20
                        
                        
                        
                        5,760,000
                        
                        
                        
                        0.200.39
                        
                        
                        
                        250,000
                        
                        
                        
                        5.98
                        
                        
                        
                        0.39
                        
                        
                        
                        250,000
                        
                        
                        
                        0.391.25
                        
                        
                        
                        200,000
                        
                        
                        
                        5.98
                        
                        
                        
                        1.25
                        
                        
                        
                        200,000
                        
                        
                        
                        1.252.25
                        
                        
                        
                        110,000
                        
                        
                        
                        4.46
                        
                        
                        
                        2.25
                        
                        
                        
                        110,000
                        
                        
                        
                        2.252.40
                        
                        
                        
                        500,000
                        
                        
                        
                        4.33
                        
                        
                        
                        2.40
                        
                        
                        
                        500,000
                        
                        
                        
                        2.40$
                        0.055
                        
                        
                        
                        1,000,000
                        
                        
                        
                        8.58
                        
                        
                        
                        0.055
                        
                        
                        
                        1,000,000
                        
                        
                        
                        0.055


F-26
 Table of Contents
 MANHATTAN
SCIENTIFICS, INC. AND SUBSIDIARIES
 (A
Development Stage Enterprise)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2006 AND 2005







NOTE H –
CAPITAL TRANSACTIONS (Continued)





Warrants:





On
December 31, 2004, December 31, 2005 and December 31, 2006, the Company had
19,250,000 warrants outstanding.  The Company issued the following
warrants at the corresponding weighted average exercise price as of December 31,
2006.











Date
                            Number
      of Warrants
                            Exercise
      Price
                            Contractual
      Life
                            Number
      of Shares ExercisableJanuary
      8, 1998
                            750,000
                            $.10
                            10
      years
                            750,000July
      28, 1998
                            12,500,000
                            .05
                            10
      years
                            12,500,000February
      10, 1998
                            2,000,000
                            .75
                            10
      years
                            2,000,000November
      9, 2004
                            4,000,000
                            .05
                            4
      years
                            4,000,00019,250,000
                            
                            
                            19,250,000








F-27
 Table of Contents
 MANHATTAN
SCIENTIFICS, INC. AND SUBSIDIARIES
 (A
Development Stage Enterprise)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2006 AND 2005





NOTE I
–INCOME TAXES





There is
no provision for federal, state or local income taxes for the periods ended
December 31, 2006 and 2005 since the Company has incurred net operating
losses.





The
Company’s deferred tax asset as of December 31, 2006 represents benefits from
equity related compensation charges and net operating loss carryforwards of
approximately $4,362,000 and $7,657,000, respectively, which is reduced by a
valuation allowance of approximately $12,019,000 since the future realization of
such tax benefit is not presently determinable.  During 2006 the
Company recorded an increase to the valuation allowance of approximately
$533,000.





As of
December 31, 2006, the Company has a net operating loss carryforward of
approximately $30,061,000 expiring in 2007 through 2028 for federal income tax
purposes and through 2016 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 $19,250,000 in the aggregate.





The
difference between the statutory federal income tax (rate) benefit applied to
the Company’s net loss and the Company’s effective income tax rate for the years
ended December 31, 2006 and 2005 is summarized as follows:





For
      the Year Ended December 31,2006
                    
                    
                    2005Statutory
      federal income tax rate
                    
                    
                    (35
                    )
      %
                    
                    
                    (35
                    )
      %Increase
      in valuation allowance
                    
                    
                    35
                    %
                    
                    
                    35
                    %0.00
                    %
                    
                    
                    0.00
                    %








NOTE
J  – RELATED PARTY TANSACTIONS





The
accounting firm of one of the Company’s directors received approximately $20,000
and $40,000 of compensation for accounting services rendered to the Company
during the years ended December 31, 2006 and 2005, respectively.  In
addition, in February 2005, the accounting firm received 100,000 shares of
Novint Technologies, Inc. common stock valued at $66,000 as payment for services
previously rendered.





The
accounting firm of one of the Company’s former directors received approximately
$30,000 and $30,000 of compensation for accounting services rendered to the
Company during the year ended December 31, 2006 and 2005.


F-28
 Table of Contents
 MANHATTAN
SCIENTIFICS, INC. AND SUBSIDIARIES
 (A
Development Stage Enterprise)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2006 AND 2005





NOTE K –
SUBSEQUENT EVENTS





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.





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 were 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
                      
                      
                      0.00
                      %Volatility
      factor
                      
                      
                      107
                      %Weighted
      average expected
      life
                      
                      5
      years





From
April through October 2007, the Company issued $1,060,000 in convertible debts
with a conversion price of $.01 into shares of common stock.  The
convertible debts were 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
530,000 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
530,000 shares of common stock in Novint Technologies, Inc. of $625,725 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
$1,060,000 was proportionately allocated to the debenture and the shares of
common stock in Novint Technologies, Inc. in the amount of $666,538 and
$393,462, respectively. The debts were convertible upon a future occurrence,
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 warrant 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 May
2007, the Company issued 35,350,317 shares of common stock to various
individuals for services with values totaling $707,006 based upon the fair value
of the shares issued.





In May
2007, the Company issued 14,200,106 shares of common stock for settlement of
debts totaling $71,000.





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 were valued using the Black-Scholes option
pricing model.


F-29
 Table of Contents
 MANHATTAN
SCIENTIFICS, INC. AND SUBSIDIARIES
 (A
Development Stage Enterprise)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2006 AND 2005





NOTE K –
SUBSEQUENT EVENTS (Continued)





In
October 2007, the Company issued 106,000,000 shares of common stock related to
the conversion of convertible debts previously issued throughout
2007.  The convertible debts 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.





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 were 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.


F-30
 Table of Contents
 MANHATTAN
SCIENTIFICS, INC. AND SUBSIDIARIES
 (A
Development Stage Enterprise)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2006 AND 2005





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 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.





The
unaudited balance sheets for Metallicum for December 31, 2007 and December 31,
2006 are as follows:





ASSETS
                                                                                                                                                                                            
                                                                                                                                                                                            December
      31, 2007
                                                                                                                                                                                            
                                                                                                                                                                                            
                                                                                                                                                                                            December
      31, 2006Current
      asset:Cash
                                                                                                                                                                                            
                                                                                                                                                                                            $
                                                                                                                                                                                            1,282
                                                                                                                                                                                            
                                                                                                                                                                                            
                                                                                                                                                                                            $
                                                                                                                                                                                            1,318Property
      and equipment,
                                                                                                                                                                                            
                                                                                                                                                                                            
                                                                                                                                                                                            600
                                                                                                                                                                                            
                                                                                                                                                                                            
                                                                                                                                                                                            
                                                                                                                                                                                            1,680net
      of accumulated depreciation of $4,320 and $5,400Total
      assets
                                                                                                                                                                                            
                                                                                                                                                                                            $
                                                                                                                                                                                            1,882
                                                                                                                                                                                            
                                                                                                                                                                                            
                                                                                                                                                                                            $
                                                                                                                                                                                            2,998LIABILITIESAccounts
      payable
                                                                                                                                                                                            
                                                                                                                                                                                            $
                                                                                                                                                                                            2,861
                                                                                                                                                                                            
                                                                                                                                                                                            
                                                                                                                                                                                            $
                                                                                                                                                                                            1,763Notes
      payable to officers
                                                                                                                                                                                            
                                                                                                                                                                                            
                                                                                                                                                                                            822
                                                                                                                                                                                            
                                                                                                                                                                                            
                                                                                                                                                                                            
                                                                                                                                                                                            822Total
      liabilities
                                                                                                                                                                                            
                                                                                                                                                                                            
                                                                                                                                                                                            3,683
                                                                                                                                                                                            
                                                                                                                                                                                            
                                                                                                                                                                                            
                                                                                                                                                                                            2,585STOCKHOLDERS'
      EQUITYCommon
      stock: no par value; authorized 2,000 shares,2,000
      shares issued and outstanding
                                                                                                                                                                                            
                                                                                                                                                                                            
                                                                                                                                                                                            -Additional
      paid-in capital
                                                                                                                                                                                            
                                                                                                                                                                                            
                                                                                                                                                                                            159,633
                                                                                                                                                                                            
                                                                                                                                                                                            
                                                                                                                                                                                            
                                                                                                                                                                                            159,633Deficit
      accumulated during the development stage
                                                                                                                                                                                            
                                                                                                                                                                                            
                                                                                                                                                                                            (161,434
                                                                                                                                                                                            )
                                                                                                                                                                                            
                                                                                                                                                                                            
                                                                                                                                                                                            (159,220
                                                                                                                                                                                            )Total
      stockholders' equity  / (Capital Deficit)
                                                                                                                                                                                            
                                                                                                                                                                                            
                                                                                                                                                                                            (1,801)
                                                                                                                                                                                            
                                                                                                                                                                                            
                                                                                                                                                                                            
                                                                                                                                                                                            413Total
      liabilities and stockholders' equity
                                                                                                                                                                                            
                                                                                                                                                                                            $
                                                                                                                                                                                            1,882
                                                                                                                                                                                            
                                                                                                                                                                                            
                                                                                                                                                                                            $
                                                                                                                                                                                            2,998





F-31
 Table of Contents
 MANHATTAN
SCIENTIFICS, INC. AND SUBSIDIARIES
 (A
Development Stage Enterprise)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2006 AND 2005


The
unaudited statements of operations for Metallicum for the years ended December
31, 2007 and December 31, 2006 are:





YEAR
      ENDED DECEMBER 31,2007
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                2006Revenue
                                                                                                                                                                
                                                                                                                                                                $
                                                                                                                                                                4,433
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                $
                                                                                                                                                                5,406Operating
      costs and expenses:General and
      administrative
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                1,676
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                3,849Research and development
      costs
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                2,625
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                4,685Depreciation
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                1,080
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                1,080Total
      operating costs and expenses
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                5,381
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                9,614Loss
      from operations before other expenses
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                (948
                                                                                                                                                                )
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                (4,208
                                                                                                                                                                )Other
      expenses:Interest
      and other expenses
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                (1,266
                                                                                                                                                                )
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                (1,480
                                                                                                                                                                )NET
      LOSS
                                                                                                                                                                
                                                                                                                                                                $
                                                                                                                                                                (2,214
                                                                                                                                                                )
                                                                                                                                                                
                                                                                                                                                                $
                                                                                                                                                                (5,688
                                                                                                                                                                )BASIC
      AND DILUTED LOSS PER COMMON SHARE:Weighted
      average number of common shares
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                2,000
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                2,000Net
      loss per share
                                                                                                                                                                
                                                                                                                                                                $
                                                                                                                                                                (1.11
                                                                                                                                                                )
                                                                                                                                                                
                                                                                                                                                                $
                                                                                                                                                                (2.84
                                                                                                                                                                )The
      unaudited statements of cash flows for Metallicum for the years ended
      December 31, 2007 and December 31, 2006 are:CASH
      FLOWS FROM OPERATING ACTIVITIES:
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                (2,214)
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                (5,688)Net
      lossAdjustments
      to reconcile net loss to cashused
      in operating activities:Changes
      in operating assets and liabilities:Property
      and equipment
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                1,080
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                1,080Accounts
      Receivable
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                3,330Accounts
      payable
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                1,754Notes
      payable to officers
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                1,098
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                (1,000)Net
      cash used in operating activities
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                (36)
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                (524)NET
      DECREASEINCASH
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                (36)
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                (524)Cash,
      beginning of year
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                1,318
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                1,842CASH,
      END OF YEAR
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                1,282
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                1,318SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION:Interest
      paid
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                204
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                
                                                                                                                                                                233




F-32
 Table of Contents


ITEM 8. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS





Not
Applicable.





ITEM 8A.CONTROLS AND PROCEDURES





(a)
Evaluation of Disclosure Controls and Procedures





Our
principal executive and principal financial officers have evaluated the
effectiveness of our disclosure controls and procedures, as defined in Rules 13a
– 15(e) and 15d – 15(e) under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), as of the end of the period covered by this annual 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 as defined in Rules 13a-15(f) and 15d-15(f)
refers to the process designed by, or under the supervision of, our principal
executive officer and principal financial officer, and effected by our board of
directors, management and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles.





Management
is responsible for establishing and maintaining adequate internal control over
financial reporting.


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.





Management
is committed to improving its internal controls and will (1) continue to use
third party specialists to address shortfalls in staffing and to assist the
Company with accounting and finance responsibilities, (2) increase the frequency
of independent reconciliations of significant accounts which will mitigate the
lack of segregation of duties until there are sufficient personnel and (3)
prepare and implement sufficient written policies and checklists for financial
reporting and closing processes and (4) may consider appointing an audit
committee comprised of both management and outside board members in the
future.





Based
upon this evaluation, our CEO has concluded that, 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. Management’s report is not subject to
attestation by our registered public accounting firm pursuant to temporary rules
of the SEC that permit us to provide only management’s report in this Annual
Report.





(b)
Changes in Internal Controls





There
were no significant changes in our internal controls or, to our knowledge, in
other factors that could significantly affect our internal controls subsequent
to the evaluation date.





ITEM 8B. OTHER INFORMATION




None.




-17-
 Table of Contents




PART
III
  ITEM
9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH
SECTION 16(a) OF THE EXCHANGE ACT




The
names, ages and biographical information of each of our directors and executive
officers as of December 31, 2006 are set forth below. There are no existing
family relationships between or among any of our executive officers or
directors.





NAME
              
              AGE
              
              POSITIONMarvin
      Maslow*
              
              69
              
              Chairman
      of the Board, President and Chief Executive OfficerJack
      Harrod **
              
              64
              
              Chief
      Operating OfficerDavid
      A. Teich
              
              50
              
              Treasurer
      and DirectorRalph
      Anderson***
              
              48
              
              Director




*         
Emmanuel Tsoupanarias was appointed Chairman of tbe Board and Chief Executive
Officer of Manhattan Scientifics, Inc. on November 1, 2007 replacing Marvin
Maslow.  Mr. Tsoupanarias was 55 years old as of the


date of this filing.




**        Jack
Harrod’s employment with the Company ended effective on April 1,
2006.




***      Mr.
Anderson resigned effective December 31, 2006.




There are
no family relationships among any of our directors or officers.




As of
December 31, 2006, the size of our Board of Directors is currently fixed at four
members. Members of the Board serve until the next annual meeting of
stockholders and until their successors are elected and qualified. Officers are
appointed by and serve at the discretion of the Board.




None of
our directors or executive officers has, during the past five
years:




·
            been convicted in a criminal
      proceeding and none of our directors or executive officers is subject to a
      pending criminal proceeding,




·
            been subject to any order,
      judgment, or decree not subsequently reversed, suspended or vacated of any
      court of competent jurisdiction, permanently or temporarily enjoining,
      barring, suspending or otherwise limiting his involvement in any type of
      business, securities, futures, commodities or banking activities,
      or




·
            been found by a court of
      competent jurisdiction (in a civil action), the Securities and Exchange
      Commission or the Commodity Futures Trading Commission to have violated a
      federal or state securities or commodities law, and the judgment has not
      been reversed, suspended, or
vacated.




EMMANUEL
TSOUPANARIAShas served as our chief executive officer and chairman of
the Board since November 1, 2007.  Mr. Tsoupanarias is the president,
founder and editor of FuelCellsWorks.com, a weekly trade publication that has
become the voice of the fuel cell industry. He is internationally recognized as
an expert in fuel cell development.  Prior to his tenure at
FuelCellsWorks.com. Mr. Tsoupanarias was an executive in the power generation
manufacturing sector. From 1992 to 2007 Mr. Tsoupanarias has served as a Project
Manager in the power generation sector and from 2000 has served as a consultant
in the fuel cell industry.




JACK HARROD has served as our
chief operating officer since August 1998. From November 1966 to March 1998, Mr.
Harrod held a variety of executive positions at Texas Instruments, including
executive vice president. Mr. Harrod received a B.S. in Electrical Engineering
from the College of Engineering, University of Arkansas in 1964.Mr. Harrod’s employment with the Company ended
effective April 1, 2006.




DAVID A. TEICH has served as
our director since May 1999 and Treasurer since December 2000. Mr. Teich is the
managing partner of Teich, Beim & Moro, P.C. Since January 1999, Mr. Teich's
accounting firm has acted as our internal controller. Mr. Teich graduated with a
B.B.A. degree from Pace University in 1979, became a certified public accountant
in 1982, and has been employed by his firm in various capacities, including
accountant, manager, partner and managing partner since 1977.





MARVIN MASLOW served as the
CEO of Manhattan Scientifics from January 1998 until November 2007. From
June 1990 through September 1996, Mr. Maslow served as chief
executive officer of Projectavision, Inc., a company he co-founded to develop
and market video projection technology. Since November 1996,
Mr. Maslow has served as chief executive officer and chairman of the board
of Tamarack Storage Devices, Inc. From 1999 through 2002, Mr. Maslow served
as a director of NMXS.com, Inc. For more than 20 years, Mr. Maslow has
been President of Normandie Capital Corp., a private investment and consulting
company. Mr. Maslow is credited with the starting up and financing of more
than 20 enterprises during his career. Mr. Maslow received an A.A.S. degree
from the Rochester Institute of Technology in 1957 and an honorable discharge
from the U.S. Army Signal Corps in 1963. Mr. Maslow is the special advisor
to the Board of Directors of Manhattan Scientifics, Inc., a publicly traded
company which is also one of our shareholders.  Mr. Maslow resigned in
October 2007.  He now serves the company as a non-executive
chairman.


-18-
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RALPH ANDERSONserved as our
director from June 2003 through December 2006.  Mr. Anderson became a
senior partner of Grant Thornton in August 2006 and, as a result, resigned from
our board of directors effective December 31, 2006.




SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE




Section
16(a) of the Securities Exchange Act of 1934 requires our executive officers and
directors, and persons who own more than ten percent of our common stock to file
reports of ownership and change in ownership with the Securities and Exchange
Commission and the exchange on which the common stock is listed for trading.
Executive officers, directors and more than ten percent stockholders are
required by regulations promulgated under the Exchange Act to furnish us with
copies of all Section 16(a) reports filed. Based solely on our review of copies
of the Section 16(a) reports filed for the fiscal year ended December, 2006, we
believe that our executive officers, directors and ten percent stockholders
complied with all reporting requirements applicable to them.




CODE
OF ETHICS




On March
31, 2005, we adopted a code of ethics that applies to our principal executive
officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions.


-19-
 Table of Contents


ITEM
10. EXECUTIVE COMPENSATION




The
following tables set forth all compensation awarded by us to our executive
officers for the fiscal years ended December 31, 2004, 2005 and 2006.We do not have employment agreements
with any of our officers.




Name
                                          Year
                                          
                                          Salary
      ($)
                                          
                                          
                                          Bonus
      ($)
                                          
                                          
                                          Stock
      Awards ($)
                                          
                                          
                                          Option
      Awards ($)
                                          
                                          
                                          Non-Equity
      Incentive Plan Compensation ($)
                                          
                                          
                                          Changes
      in Pension Value and Nonqualified Deferred Compensation Earnings
      ($)
                                          
                                          
                                          All
      Other Compensation ($)
                                          
                                          
                                          Total
      ($)Marvin
      Maslow CEO, Chairman
                                          2004
                                          
                                          
                                          (1)300,000
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          22,500
                                          
                                          
                                          
                                          322,5002005
                                          
                                          
                                          (1)300,000
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          71,500
                                          
                                          
                                          
                                          371,5002006
                                          
                                          
                                          (1)225,000
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (2)600,000
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          48,000
                                          
                                          
                                          
                                          873,000Jack Harrod,
      COO
                                          2004
                                          
                                          
                                          (1)250,000
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          22,500
                                          
                                          
                                          
                                          272,5002005
                                          
                                          
                                          (1)250,000
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          71,500
                                          
                                          
                                          
                                          321,5002006
                                          
                                          
                                          (1)62,500
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          24,000
                                          
                                          
                                          
                                          86,500David
      Teich Treasurer
                                          2004
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -2005
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (3)
      200,000
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          200,0002006
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (2)90,000
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          90,000






(1)
Salary has been deferred and accrued as of December 31, 200




(2) Stock
award of 10,000,000 shares to Marvin Maslow and 1,500,000 shares to David
Teich.




(3)
Includes stock options to purchase 200,000 shares of common stock at an exercise
price of $0.055 for accounting services.




COMPENSATION
OF DIRECTORS AND OFFICERS




Our
officers and directors do not presently receive any cash compensation from us
for their service as officers and/or directors, except for equity in the form of
stock options in lieu of cash, at the discretion of our Board of Directors. Our
former officers and/or directors who were uncompensated full time employees of
ours, Messrs. Maslow and Harrod, have previously received a $2,000 to $4,000 per
month non-accountable expense allowance from time to time.




BOARD
OF DIRECTORS INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS




None.





OUTSTANDING
EQUITY AWARDS





Option
      AwardsName
                Grant
      Date
                
                Number
      of Securities Underlying Unexercised Options (#)
    Exercisable
                
                
                Equity
      Incentive Plan Awards: Number of Securities Underlying Unexercised
      Unearned Options (#)
                
                
                Number
      of Securities Underlying Unexercised Options (#) Unexercisable
      (1)
                
                
                Option
      Exercise Price
                  ($)
                
                Option
      Expiration DateMarvin
      Maslow, Chairman
                5/6/1999
                  9/15/1999
                
                
                12,500,000
                  2,500,000
                
                
                
                -
                  -
                
                
                
                -
                  -
                
                
                $
                  $
                0.05
                  0.05
                
                5/6/1999
                  9/15/1999Jack
      Harrod, COO
                8/8/1998
                  5/20/2005
                
                
                2,750,000
                  1,000,000
                
                
                
                -
                  -
                
                
                
                -
                  -
                
                
                $
                  $
                0.200
                  0.055
                
                8/8/2008
                  5/20/2015David
      Teich, Treasurer
                5/6/1999
                  4/30/2003
                  5/20/2005
                
                
                425,000
                  1,000,000
                  200,000
                
                
                
                -
                  -
                  -
                
                
                
                -
                  -
                  -
                
                
                $
                  $
                  $
                0.050
                  0.020
                  0.055
                
                5/6/2009
                  4/30/2013
                  5/20/2015Ralph
      Anderson, Director
                6/1/2003
                
                
                1,000,000
                
                
                
                -
                
                
                
                
                
                
                $
                0.020
                
                6/1/2013




There are
no stock awards outstanding at December 31, 2006






-20-
 Table of Contents




ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT




The
following table sets forth, as of December 31, 2006, the names, addresses and
number of shares of common stock beneficially owned by (i) all persons known to
us to be the beneficial owners of more than 5% of the outstanding shares of
common stock, (ii) each of our directors, (iii) each of our executive officers,
and (iv) all of our directors and executive officers as a group. Except as
indicated, each beneficial owner listed exercises sole voting power and sole
dispositive power over the shares beneficially owned. Share ownership in each
case includes shares issuable upon exercise of options exercisable within 60
days of the date of this Annual Report that would be required to be reported
pursuant to Rule 13d-3 of the Securities Exchange Act of 1934 for purposes of
computing the percentage of common stock owned by such person but not for
purposes of computing the percentage owned by any other person.Unless otherwise indicated, the address of the
below-listed persons is the Company’s address, 11781 405 Lexington Avenue,
32nd
Floor, New York, New York 10174.





Name
      and Address of Beneficial Owner
              
              Number
      of Shares Beneficially Owned
              
              
              Percent
      of Class(1)Lancer
      Funds (2)
                375
      Park Avenue, Suite 2006
                New
      York, New York    10152
              
              
              53,655,000
              
              
              
              25.5
              %Jack
      Harrod (3)
                375
      Park Avenue, Suite 2006
                New
      York, New York    10152
              
              
              13,750,000
              
              
              
              6.76
              %Marvin
      Maslow (4)
              
              
              36,517,500
              
              
              
              16.89
              %David
      A. Teich (5)
                Teich,
      Beim & Moro, P.C.
                Two
      Executive Boulevard, Suite 103
                Suffern,
      New York 10901
              
              
              5,375,000
              
              
              
              2.66
              %Ralph
      Anderson (6)
              
              
              3,750,000
              
              
              
              1.86
              %Directors
      and Executive Officers as a group (3 persons) (4)(5)(6)
              
              
              45,642,500
              
              
              
              20.40
              %Total
      Shares Issued
              
              
              200,449,577
              
              
              
              100.00
              %





(1)
              Percentage
      is based on 200,449,577 shares.
 
 (2)
              Includes
      (i) 2,150,000 shares held by Lancer Offshore Fund, (ii) 28,500,000 shares
      held directly by Lancer Offshore, Inc., (iii) 12,000,000 shares held
      directly by Lancer Partners LP, (iv) 500,000 shares held directly by the
      Orbiter Fund Ltd., and (v) 755,000 shares held directly by the Viator
      Fund Ltd (collectively, (i) through (v) are the “Lancer Funds”) and
      10,000,000 warrants held by the Lancer Funds. The Lancer Funds filed for
      bankruptcy in April 2003. Mr. Marty Steinberg is the bankruptcy trustee of
      the Lancer Funds. As trustee, Mr. Steinberg has the voting and dispositive
      power over the shares held by the Lancer Funds.  In December
      2007, we purchased for $215,000 from Lancer Funds and retired 43,655,000
      shares of this common stock and warrants for 10,000,000 shares of our
      common stock for a total of
$215,000.
 
 (3)
              Includes
      10,000,000 shares of Common Stock, options to purchase 2,750,000 shares of
      Common Stock at a price of $0.20 per share and options to purchase
      1,000,000 shares of Common Stock at a price of $0.055 per
      share.
 
 (4)
              Includes
      19,647,500 shares of Common Stock, options to purchase 15,000,000 shares
      of Common Stock at a price of $0.05 per share, a warrant to purchase
      750,000 shares of Common Stock at a price of $0.10 per share and 1,120,000
      shares of Common Stock owned by Mr. Maslow's wife and
  son.
 
 (5)
              Includes
      3,750,000 shares of Common Stock, options to purchase 425,000 shares of
      Common Stock at a price of $0.05 per share, options to purchase 1,000,000
      shares of Common Stock at a price of $0.02 per share and options to
      purchase 200,000 shares of Common Stock at a price of $0.055 per
      share.
 
 (6)
              Includes
      2,750,000 shares of Common Stock and options to purchase 1,000,000 shares
      of Common Stock at a price of $0.02 per
share.









-21-
 Table of Contents




ITEM 12. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS





As of
December 31, 2006, the Company has loans payable of $500,000 and $600,000
payable to its former Chief Operating Officer and Chief Executive
Officer.  The loans bear interest at 5.5% per annum and were initially
due December 31, 2002 and have been mutually extended and
settled.  Under the terms of the settlement dated December 12, 2007,
the Company has recorded interest expense of approximately $61,000 and $89,000
for the years ended December 31, 2006 and 2005, respectively.




Bach
& Associates, a law firm of which Mr. Bach, our former secretary and our
former director, is the sole proprietor, received $20,000 in 2003, $37,000 in
2004, $49,000 in 2005 and $4,300 in 2006 as compensation for legal services
rendered to us. In 2003, Mr. Bach also received 1,000,000 shares of our stock
valued at $0.04 per share, pursuant to an S-8 registration, in lieu of payment
in funds, for additional legal fees owed.




Teich,
Beim & Moro, P.C., an accounting firm in which Mr. Teich, our treasurer and
a director, is a principal, received $70,000, $40,000 and $20,000 in 2004, 2005
and 2006, respectively, as compensation for accounting services rendered to
us.




Grubman,
Indursky and Schindler, P.C., a law firm in which Mr. Schatz, a former director,
is a partner, received $10,000 for legal services rendered in 2003. Grubman,
Indursky and Schnidler, P.C. did not receive any compensation from the Company
in 2004.




Weisner
LLP, an accounting, professional services firm in which Mr. Anderson, our former
director, is a partner, received 500,000 shares of our common stock in December
2004 as payment for services rendered, $30,000 in 2005 and $30,000 in 2006 for
services rendered.






-22-
 Table of Contents




ITEM 13. EXHIBITS





(a)
EXHIBITS




Exhibit
      Number
                            Description
      of Exhibit2.1
                            Agreement
      and Plan of Reorganization (1)2.2
                            Agreement
      and Plan of Merger (1)3.1
                            Certificate
      of Incorporation (1)3.2
                            Amendment
      to Certificate of Incorporation (1)3.3
                            Bylaws
      (1)4.1
                            Amended
      Certificate of Designation, Preferences and Rights of Series C Preferred
      Stock (2)10.1
                            License/Assignment
      Agreement with Robert Glenn Hockaday, and DKY, Inc. (1)10.2
                            Research
      and Development Agreement with Energy Related Devices, Inc.
      (1)10.3
                            Letter
      Agreement with Energy Related Devices, Inc. and Robert Glenn Hockaday
      (1)10.4
                            Intellectual
      Property Assignment and Research and Development Agreement
      withNovars
      Gesellschaft fur neue Technologien GmbH (1)10.5
                            License
      Option Agreement with The Regents of the University of California
      (1)10.6
                            Manhattan
      Scientifics, Inc. 1998 Stock Option Plan (1)10.7
                            Employment
      Agreement with Robert Hermes (1)10.8
                            Agreement
      with Stanton Crenshaw Communications (1)10.9
                            Agreement
      with Equilink (1)10.1
                            Stock
      Purchase Agreement between Manhattan Scientifics, Inc., Projectavision,
      Inc., and Lancer Partners, L.P. (3)10.11
                            License
      Option Agreement with Mr. Edward Vanzo (4)10.12
                            Manhattan
      Scientifics, Inc. 2000 Equity Incentive Plan (5)10.13
                            2004
      Consultant Stock Plan (6)10.14
                            Loan
      Agreement with Oro Valley Associates, LLC (7)10.16
                            Manhattan
      Scientifics 2005 Equity Incentive Plan  (8)10.15
                            Warrant
      Agreement with Oro Valley Associates, LLC (7)14.1
                            Code
      of Ethics (7)21.1
                            List
      of Subsidiaries (3)23.1
                            Consent
      of AJ Robbins, PC(9)31.1
                            Certification
      of Principal Executive Officer Pursuant to Rule 13a-14(a) and 15d-
      14(a)(9)31.2
                            Certification
      of Principal Financial Officer Pursuant to Rule 13a-14(a) and 15d-
      14(a)(9)32.1
                            Certification
      Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of
      2002(9)




---------------


(1)           Incorporated
by reference to the registrant's Form 10-SB filed with the Commission on December 8, 1999.


(2)
            Incorporated
      by reference to the registrant's Form 10-QSB filed with the Commission on
      August 14, 2000 for the period ended June 30,
  2000.


(3)
            Incorporated
      by reference as Amendment No. 2 to the registrant's Form 10-SB filed with
      Commission on February 9, 2000.


(4)
            Incorporated
      by reference to Amendment No. 3 to the registrant's Form 10-SB filed with
      the Commission on March 29, 2000.


(5)
            Incorporated
      by reference to the registrant's registration statement filed on Form S-8
      filed with the Commission on September 14,
2001.


(6)
            Incorporated
      by reference to the registrant's registration statement filed on Form S-8
      filed with the Commission on November 26,
2004.


(7)           Incorporated
by reference to the registrant's Form 10-KSB filed with the Commission on April
15, 2005.


(8)
            Incorporated
      by reference to the registrant's registration statement filed on Form S-8
      filed with the Commission on June 8,
2005.


(9)           Filed
herewith.


-23-
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ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES





INDEPENDENT
AUDITOR FEES




The
following is a summary of the fees billed to us by AJ Robbins PC for the fiscal
year ended December 31, 2006:




Fee
      Category
                          
                          Fiscal
      2006
                          
                          
                          Fiscal
      2005Audit
      fees
                          
                          $
                          53,000
                          
                          
                          $
                          51,000Tax
      fees
                          
                          
                          0
                          
                          
                          
                          0Other
      fees
                          
                          
                          0
                          
                          
                          
                          0Total
      fees
                          
                          $
                          53,000
                          
                          
                          $
                          51,000




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




Tax Fees. Consists of aggregate fees billed for
professional services for tax compliance, tax advice and tax planning. These
services include assistance regarding federal and state tax
compliance.





Other
Fees. Consists of fees for products and services other than the services
reported above. There were no management consulting services provided in fiscal
2006 or 2005.





We do not
currently have an Audit Committee. Our full Board of Directors considers whether
the provision of these services is compatible with maintaining the auditor's
independence, and has determined such services for fiscal 2005 and 2006 were
compatible.





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





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








-24-
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SIGNATURES





In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized on this 21st day of November, 2008.




MANHATTAN
      SCIENTIFIC, INC.By:
                      /s/ Emmanuel
      TsoupanariasEmmanuel
      TsoupanariasChief
      Executive Officer




In
accordance with the Exchange Act, this report has been signed below by the
following persons on November 21, 2008, on behalf of the registrant and in the
capacities Indicated.








Signature
                      Title/s/
      Emmanuel
      Tsoupanarias
                      Chief
      Executive Officer,Emmanuel
      Tsoupanarias
                      President,
      Chairman of the Board and Director/s/
      David A.
      Teich
                      Director
      and TreasurerDavid
      A. Teich