UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  FORM 10-KSB

                                   (Mark One)

            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2003

             [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

               For the transition period from _______ to _______.
                        Commission File Number 000-28411

                           MANHATTAN SCIENTIFICS, INC.
                           ---------------------------
                 (Name of small business issuer in its charter)
                Delaware                                  850460639
                --------                                  ---------
   (State or other jurisdiction of            I.R.S. Employer Identification No.
    incorporation or organization)

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, $.001 par value
                          -----------------------------
                                (Title of Class)

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. [X]

State issuer's revenues for its most recent fiscal year: $300,000.

State the number of shares outstanding of each of the issuer's classes of common
equity, as of April 12, 2004: 173,676,522 shares of common stock.

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days: As of April 12, 2003: $14,930,018

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

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                                TABLE OF CONTENTS

PART I                                                                      Page

Item 1.   Description of Business                                             3

Item 2.   Description of Properties                                          12

Item 3.   Legal Proceedings                                                  12

Item 4.   Submission of Matters to a Vote of Security Holders                12

PART II

Item 5.   Market Price of and Dividends of our Common Equity
                        and Related Stockholder Matters                      12

Item 6.   Management's Discussion and Analysis of Financial Condition
                        and Results of Operations                            16

Item 7.   Financial Statements                                               19

Item 8.   Changes and Disagreements with Accountants on Accounting and
                        Financial Disclosure                                 20

Item 8A.  Disclosure Controls and Procedures                                 20

PART III

Item 9.   Directors, Executive Officers, Promoters and Control Persons;
             Compliance with Section 16(a) of the Exchange Act               20

Item 10.  Executive Compensation                                             22

Item 11.  Security Ownership of Certain Beneficial Owners and Management     24

Item 12.  Certain Relationships and Related Transactions                     25

Item 13.  Exhibits and Reports on Form 8-K                                   26

Item 14.  Principal Accountant Fees and Services                             28


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                           Forward Looking Statements

      This Form 10-KSB contains "forward-looking" statements within the meaning
of Section 27A of the Securities Act of 1933, Section 21E of the Securities
Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995,
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 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. We note that the safe harbor contained in
the Private Securities Litigation Reform Act of 1995 is not applicable to the
disclosure in this Form 10-KSB. 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.

                                        2
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                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

      Manhattan Scientifics, Inc., a development stage company, is a technology
incubator that seeks to acquire, develop and commercialize life-enhancing
technologies in various fields, with emphasis in the areas of alternative
energy, consumer and commercial electronics. We identify emerging technologies
through strategic alliances with scientific laboratories, educational
institutions, and scientists and leaders in industry and government.

      We have been working to develop and commercialize three technologies:

      o     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
            batteries in common use today. We believe this technology has the
            potential to significantly increase product use life over the
            current state-of-the-art battery technologies.

      o     Mid-range fuel cell technology, which is an ultra efficient
            medium-size electricity generating device that converts hydrogen
            into electricity, with potential applications for personal
            transportation cordless appliances, power tools, wheelchairs,
            bicycles, boats, emergency home generators, military field
            communications and laptop computers.

      o     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 become disruptive and may
            positively impact the way computers are used everywhere by
            introducing the ability to "touch".

            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 for cash and a warrant to purchase
238,998 shares of the buyer's junior preferred stock. Additionally, for a period
of two years from the date of sale, we are eligible to receive additional junior
preferred stock warrants valued at approximately $200,000 and not to exceed
$200,000 if the buyer receives certain levels of licensing fees related to the
holographic data storage intellectual property.


                                        3
<PAGE>

      In addition, at December 31, 2003, we owned 0 shares, and warrants to
purchase 1,500,000 shares exercisable at $0.50 per share, of common stock of
NMXS.com, Inc.(f/k/a New Mexico Software, Inc.), a public company that owns,
develops and markets what it believes to be fast and efficient Internet
technologies for the management of digital images. In January 2003, we exchanged
1,500,000 shares of NMXS.com common stock to a third party lender in full
satisfaction of a $100,000 loan bearing an interest rate of 24% per annum.
Please see Item 3, "Legal Proceedings" for additional information.

      We are also working to identify potential new technologies for possible
acquisition, licensing, and development, as well as to develop corporate
opportunities to benefit our shareholders; however, 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 is to influence the future through the development of potentially
disruptive or sea-change technologies. Our business model is to: (i) identify
significant technologies, (ii) acquire 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 appropriate,
and (viii) commercialize through licenses, sales or cooperative efforts with
other manufacturing and distribution firms.

      In addition to technology development, we seek to develop appropriate
corporate opportunities from time to time for the benefit of the Company and its
shareholders.

      By fostering the simultaneous development of multiple technologies, we
believe we increase our likelihood of success while decreasing our risk through
diversification.

      We have assembled a team of management and professionals who work to
achieve our corporate mission. In the highly competitive environment of emerging
technologies, we believe swiftness of identification, evaluation and acquisition
is essential to success. Subject to our ability to raise capital, we believe we
have the ability to act and react rapidly as well as comprehensively, and we
believe this has enabled us to acquire technologies notwithstanding competition
from larger companies and government entities.

      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. 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 was more
difficult in 2002 and 2003 than in the past due to the general economic downturn
of 2001 and 2002 and the effects of the September 11 terrorist attacks on the
World Trade Center buildings in New York and the Pentagon in Washington D.C. and
the subsequent military actions. The economic downturn made it 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.

                                       4
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      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 its technologies. Our plan is to establish
and maintain research and development which typically requires seed-level
funding in early stages. We intend to consider all appropriate avenues for the
commercialization of our technologies.

      We currently consider ourselves to operate in one business segment:
technology incubation.

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, which have no moving parts, 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 its considered to be toxic in certain countries.

      We have acquired technologies in the fields of both micro fuel cell and
mid-range fuel cells.

MICRO FUEL CELL TECHNOLOGY

      We believe that micro fuel cell-based power sources have the potential to
replace conventional batteries to provide portable power sources. If perfected,
we believe micro fuel cell technology could supply power 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. 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.

                                        5
<PAGE>

      We believe we have achieved encouraging results through our research to
date. In 1998, we demonstrated a pre-prototype of our micro fuel cell technology
by completing a fuel-cell driven cellular telephone call. In 1999, we
demonstrated that an eight cell array, which is approximately the size of a
credit card, running on methanol and water, was able to run a pager. We were
also selected by Industry Week Magazine that year to receive a Technology of the
Year Award in recognition of our work on the micro fuel cell. During 2000, we
developed a test micro fuel cell that achieved a specific energy output three
times greater than standard lithium ion batteries then in use for cellular
telephones. We also introduced a working prototype of a portable cell phone
charging system at an international fuel cell symposium. We have pursued the
development of safe and convenient fueling ampoules (patents pending) with fuels
such as methanol and hydrogen. Hydrogen supplied from a packaged chemical
hydride device has been demonstrated as a way of obtaining higher power
performances from miniature portable fuel cells. We have demonstrated a working
16-cell array of fuel cells, the size of a business card, built on a single
plastic substrate with vacuum and spray depositions, as a prototype of
mass-produced fuel cells. During 2001, we had six new patents issued in various
countries, including the U.S., continued and expanded our scope of research and
development of this technology, and demonstrated various fuel cells arrays,
including a hydrogen-powered portable cell-phone charger holster. During 2002
and 2003, notwithstanding scarcity of funding as a result of general economic
conditions, we made incremental improvements in power density using both
methanol and hydrogen as fuel sources, and were able to operate fuel cells at
higher temperatures. We also were issued two new U.S. patents, six international
patents, and we attended various fuel cell conferences. During 2002, we
determined one of solar patents we had acquired from the inventor of the micro
fuel cell was impaired and we expensed approximately $189,000 because of such
impairment. This impairment was a result of the patent only having approximately
nine years of protection remaining which diminishes the present value to the
Company. Additionally, 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.
In 2003, we updated our contractual arrangement with the inventor of the micro
fuel cell. The new arrangement replaces previous agreements and provides for the
cross-licensing of new micro fuel cell technology with the inventor, the
non-exclusive licensing of existing micro fuel cell technology to the inventor,
rights of first refusal by the inventor to repurchase its technologies in the
event we decide to sell those technologies, provision of ongoing services to us
by the inventor, and clearance of amounts owed, among other things. We
anticipate that we will attempt to secure licensing, sale, and/or manufacturing
and distribution arrangements with third parties in the future. Since the
beginning of our development of the micro fuel cell technology, significant,
well-capitalized competitors in Japan, Europe, Canada and the United States have
entered this field.

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 2003, we granted a non-exclusive worldwide license of the mid range
fuel cell technology to Ballard Power Systems where we received an initial
payment of $300,000 upon execution of the license agreement. We will receive an
additional $200,000 upon commercial launch by Ballard Power Systems of a product
using the technology. We were also awarded two competitive contracts for the
manufacture and delivery of prototype military evaluation fuel cells: one to the
U.S. Department of Defense, and the other to the U.S. Army. We also engaged in
discussions in connection with a non-exclusive license for a Singapore company
with manufacturing in China covering applications in scooters, bicycles, other
two-wheeled vehicles, and fixed power applications for businesses and housing.
We are continuing to develop licensing and financing opportunities for this
technology.

      In 2002, notwithstanding scarcity of funding as a result of general
economic conditions, we built a 3 KW evaluation prototype fuel cell in
cooperation with the Aprilia company to demonstrate a fuel cell powered scooter,
which was shown at the Paris International Fair and the Bologna Motor Show in
Bologna, Italy, as well as to European Union officials. We also scaled down
operations in Germany as a cost-saving measure, and entered into a new
consulting arrangement with the inventor of the mid-range fuel cell.

      In 2001, we announced the testing of a small, ultra light, and
significantly more powerful (3KW capability) prototype of the mid-range fuel
cell. We also announced the testing of a scooter powered by the more powerful
fuel cell. Late in 2001, a prototype bicycle powered by our mid range fuel cell
received an Invention of the Year 2001 citation from Time Magazine.

      During 2000, we were hired by the U.S. Army to develop a mid-range fuel
cell evaluation prototype suitable for powering military field radios. The
Army's evaluation tests were completed in December, 2000 and were generally
favorable. Further action will depend upon funding of Army projects and our
state of manufacturing readiness.


                                        6
<PAGE>

      During 2000 we also completed delivery of the concept prototype fuel cell
powered bicycle described above, in collaboration with the Aprilia company, an
Italian motorcycle, scooter, and bicycle manufacturer. The bicycle was exhibited
to the public at the Bologna Motor Show in December, 2000.

      We also contracted with the Electrolux Corporation to develop a fuel cell
evaluation prototype suitable to power a portable vacuum cleaner. Evaluation
tests were successfully completed and further action will depend upon our state
of manufacturing readiness.

      In addition to the foregoing specific contracts, 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 (NOVINT TECHNOLOGIES, INC.)

                                        7
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      During 2000, we acquired exclusive licenses and sublicenses to certain
haptics Internet applications from 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 also acquired 36,606 shares of
Novint Technologies, Inc. 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. During 2001, Novint worked to
develop and begin commercialization of the dental simulation and oil and gas
exploration applications, among other things. The Company sold 694,538 shares of
Novint common stock in a private transaction receiving proceeds of approximately
$459,000.

      In 2002 and 2003, Novint continued to grow its professional applications,
and became self-sustaining through several research contracts which Novint is
working to expand. Novint also launched two new products -- e-Touch sono
BabyLight Mementos, and a front end to an Atomic Force Microscope (AFM). The
BabyLight Mementos are glass blocks with the image of an unborn baby's etched
into it, created from Novint's 3D ultrasound technology. In the Atomic Force
Microscope, Novint utilizes its software and hardware to improve control of the
way AFM devices scan molecular and atomic levels.

      We believe that haptics technology has the potential to significantly
change the way computers are utilized, and that there are other very promising
applications. These include 3-dimensional, touch-enabled online shopping and
computer gaming. 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. Many other large companies including
Microsoft, are developing haptic technology.

3. HOLOGRAPHIC DATA STORAGE TECHNOLOGY

      Our wholly owned subsidiary, Tamarack Storage Devices, Inc. (a/k/a
Holostor (TM)), previously conducted research and development activities
relating to holographic data storage technology since approximately 1992.
Holographic data storage technology relates to the storage and retrieval of data
in the form of light patterns. In 2002, we sold our portfolio of patents
relating to this technology to a third party, based on our assessment that it
was unlikely that this technology would be commercializable in the near future.


4. DIGITAL IMAGE MANAGEMENT TECHNOLOGY (INVESTMENT IN NMXS.COM, INC.)

      At December 31, 2003, we owned 0 shares, and warrants to acquire 1,500,000
shares at an exercise price of $0.50 per share, of the common stock of NMXS.com,
Inc., a public company located in Albuquerque, New Mexico. The options were
acquired in 2001. NMXS.com markets Internet technology-based software for the
high-speed transmission of high-resolution graphic images, video clips and audio
recordings, among other things. NMXS.com's proprietary software provides image
archiving, asset packaging, data mining and secure commerce over the Internet
transaction capabilities.

      We believe NMXS.com is positioned to capitalize on the growing trend of
businesses converting their photographs, drawings, artwork and other visual
images into formats that can be stored and retrieved electronically. The company
provides solutions particularly suited to companies seeking to develop a
presence on the Internet or become involved in conducting business over the
Internet.


                                       8
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      Our original acquisition of approximately 5 million shares in NMXS.com was
effected in 1999 through a transaction with its predecessor, New Mexico
Software, Inc., a privately held New Mexico corporation. New Mexico Software
became public pursuant to a reverse merger transaction. Prior to the reverse
merger, we invested $100,000 in New Mexico Software and agreed to provide New
Mexico Software with business and management consulting services in return for
equity. At December 31, 2003, we had either sold or pledged all of the shares
originally acquired. Specifically, in January 2003, we exchanged 1,500,000
shares of NMXS.com common stock to a third party lender in full satisfaction of
a $100,000 loan bearing an interest rate of 24% per annum. Please see Item 3,
"Legal Proceedings" for additional information.

COMPETITION

      The markets in which we compete are highly competitive and constantly
evolving. We face competition from leading researchers and manufacturers
worldwide. For example, in the last few years there has been a much greater
interest in using fuel cells as an energy source for practical 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 hyrdrogen 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., Micro Fuel Cell Technology
Inc., Samsung, Poly Fuels, Inc., and Motorola, Inc. in the area of micro fuel
cells; and Ballard (now our licensee), Plug Power, Inc., Palcan, Inc., and MTI,
Inc. in the area of mid-range fuel cells.

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

      o     proprietary technology;

      o     product quality;

      o     the ability to customize technology to a customer's particular use;

      o     manufacturing capabilities through related party relationships;

      o     financing capability;

      o     consumer brand recognition; and

      o     power density for midrange fuel cells; and

      o     cost of manufacturing low enough to compete with existing protocols.

      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.

INTELLECTUAL PROPERTY

      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.

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      The success of our business will depend, in part, on our ability to secure
the issuance of our pending patents, obtain related 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.

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.

                                       10
<PAGE>

EMPLOYEES

      As of December 31, 2003, we had two full-time employees (salaried
employees in general management who have agreed to defer their salaries). 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 is a member of any union or collective bargaining
organization. We consider our relationships with employees to be good.

      As noted above, a significant portion of our research and development is
performed by independent contractors from whom we acquired or licensed certain
technologies, and their various employees. As of December 31, 2003, we had three
independent contractors available to conduct research and development for us.
Robert Hockaday, the inventor of the micro fuel cell, has performed research and
development under contract through his company Energy Related Devices, Inc. The
inventor of the mid-range fuel cell technology we acquired, Dr. Arthur Koschany,
also performs research and development under contract. Thomas Anderson, one of
the developers of haptics "touch and feel" Novint technologies, also has
performed research and development under contract through his company, Novint
Technologies, Inc. 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.

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 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 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 described above. 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 shareholders 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, exercisable at any time prior to January
7, 2008, which warrant as of the date of this Form 10-KSB, remains unexercised
and outstanding. 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.


                                       11
<PAGE>

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.

WE MAY NOT HAVE SUFFICIENT CAPITAL TO RUN OUR OPERATIONS.

We have partially financed ourselves through loans from our officers and loans
guaranteed by our officers which have totaled in principal approximately
$825,000 (excludes conversion of deferred salaries to notes payable). The loans
are secured by the assets of the Company. In 2004, the Company repaid a $300,000
note payable to a third party. 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.

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 overall economic downturn in recent years and specifically by
the capital markets waning interest in small technology concept companies with
insignificant revenues.

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 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.

WE ARE DEPENDENT FOR OUR SUCCESS ON A FEW EMPLOYEES. THE LOSS OF ONE OR MORE OF
THESE EMPLOYEES COULD HAVE AN ADVERSE EFFECT ON OUR OPERATIONS.

Our future success will depend, to a significant degree, on the continued
services of our Chief Executive Officer, Marvin Maslow, our Chief Operating
Officer, Jack Harrod and on our ability to attract, motivate and retain highly
qualified and talent personnel as the need arises. Loss of the service of Mr.
Maslow or Mr. Harrod would have a material adverse effect on our business and
operations.

                                       12
<PAGE>

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

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 26.0% of the outstanding shares of common stock and
common stock equivalents, including convertible 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 COMPANY'S LARGEST SHAREHOLDER RECENTLY FILED FOR BANKRUPTCY WHICH COULD HAVE
A NEGATIVE EFFECT ON OUR SHARE PRICE AND INHIBIT OUR ABILITY TO OPERATE.

Lancer Partners, an institutional hedge fund, filed for Chapter 11 bankruptcy
protection in June 2003. Lancer Partners, through its affiliate funds, owns
45,000,000 shares of our Common Stock as well as an option to purchase
10,000,000 shares of our common stock at a price of $0.05 per share. These
shares are now controlled by the bankruptcy trustee.

The control by the bankruptcy trustee of such a large block of stock could
adversely effect our share price if they decide to sell the shares on the
market. The effect of such a large concentration of shares on the market even
over a period of time could reduce our share price and hinder the liquidity of
other shareholders. In turn, a further reduction in our share price would hinder
our access to capital or negatively effect the terms upon which we are to
receive such capital. While we are seeking a solution with the bankruptcy
trustee as to the disposition of such shares, there is no guarantee that we will
come to a resolution that is favorable to 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:

      o     variations in anticipated or actual results of operations;

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

      o     changes in earnings estimates of operational results by analysts;

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

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

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

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

      o     developments or disputes concerning our intellectual property

Moreover, the stock market from time-to-time has experienced extreme price an
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 and volume we deem appropriate.

                                       13
<PAGE>

WE HAVE NO 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 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 authorize the Board of Directors to
issue up to 250,000,000 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 MAY RAISE ADDITIONAL CAPITAL THROUGH A SECURITIES OFFERING THAT COULD DILUTE
YOUR OWNERSHIP INTEREST.

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.

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

Our Common Stock currently is trade on the 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 Acto 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.

ITEM 2. DESCRIPTION OF PROPERTY

      In the first quarter of 2003, as a cost saving measure, our principal
executive office relocated to 405 Lexington Avenue, New York, New York. We lease
approximately 300 square feet of office space. The aggregate rental cost for
this office space is $12,000 in 2003.

      In the first quarter of 2003, as a cost saving measure, we relinquished
our space at 127 Eastgate Industrial Park, Los Alamos, New Mexico. During 2002,
we leased that space at the annual rate of $3,660. We will still have a presence
in New Mexico, as the inventor of the micro fuel cell has agreed to provide us
with space in our updated contractual arrangement with him.

      We believe our facilities are adequate for our current and planned
business operations.

ITEM 3. LEGAL PROCEEDINGS

      We are not currently subject to any legal proceedings. We intend to
vigorously pursue claims against NMXS.Com, Inc. and others for their refusal to
honor the exercise of warrants that were issued to us in 2001. The warrants were
issued pursuant to a written agreement following the Company's performance of
its obligations thereunder, and the issuance was reported several times in the
public filings of both companies, without contention. We believe the refusal to
honor the warrants to be completely without merit.


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

         None.

                                     PART II

ITEM 5. MARKET PRICE OF AND DIVIDENDS OF OUR COMMON EQUITY AND RELATED
        STOCKHOLDER MATTERS.

      Our Common Stock trades on the 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 the last two fiscal years as reported
by Yahoo Finance. Such high and low bid information reflects inter-dealer
quotes, without retail mark-up, mark down or commissions and may not represent
actual transactions.

                                       14
<PAGE>

                                   Bid Prices

2003                                                             High      Low
                                                                ------    ------
First Quarter.......................................            $ .08     $ .03
Second Quarter......................................              .25       .02
Third Quarter.......................................              .07       .06
Fourth Quarter......................................              .11       .06

2002                                                             High      Low
                                                                ------    ------
First Quarter.......................................            $ .53     $ .25
Second Quarter......................................              .34       .14
Third Quarter.......................................              .16       .06
Fourth Quarter......................................              .11       .05

      As of December 31, 2003, we had 551 registered shareholders (however, this
amount does not include shareholders who hold shares in street name, which can
be significant) and 172,008,522 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 four years, we have issued unregistered securities in the
following transactions:

            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.

            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.

            In October 2003, the Company issued 250,000 shares to outside
counsel for legal services valued at $20,000. This transaction was exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933.

            In October 2003, the Company issued 335,000 shares to outside
counsel for legal services valued at $21,775. This transaction was exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933.

            In August 2003, the Company issued 250,000 shares of common stock in
connection with the conversion of Series B preferred shares at the rate of 1
Series B preferred share to 10 common shares. This transaction was exempt from
registration pursuant to SEC Rule 504 promulgated under Regulation D of the
Securities Act of 1933. The value of the common stock was $17,500.

            From April through June 2003, the Company granted a total of
6,695,000 shares in exchange for options to purchase shares of the Company's
common stock. The shares had a value of $267,800 at the time of the exchange.
This transaction was exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933.


                                       15
<PAGE>

            In June 2003, the Company granted a total of 2,000,000 options to
purchase common stock to two of the Company's directors as compensation with a
total value of $130,000. 50% of the options vest upon issuance and 50% vest in
June 2004 if the directors are still members of the board. This transaction was
exempt from registration pursuant to Section 4(2) of the Securities Act of 1933.

            In June 2003, the Company issued 2,000,000 shares of common stock
with a total value of $100,000 as director compensation. This transaction was
exempt from registration pursuant to Section 4(2) of the Securities Act of 1933.

            In June 2003, the Company issued 1,585,000 shares to three
consultants for services valued at $76,750. This transaction was exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933.

            In March and April 2003, the Company granted a total of 22,750,000
shares and 3,000,000 options to purchase common stock to the Company's officers
and directors as compensation with a total value of $892,000. This transaction
was exempt from registration pursuant to Section 4(2) of the Securities Act of
1933.

            In March 2003, the Company issued 1,600,000 to four consultants for
services related to legal issues and public relations valued at $64,000. This
transaction was exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933.

            In March 2003, the Company issued 2,000,000 shares to outside
securities counsel for providing legal services valued at $80,000. This
transaction was exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933.

            In March 2003, the Company issued 20,000 shares to each of three
consultants (60,000 shares total) for providing secretarial and administrative
services valued at $2,700 to the Company. This transaction was exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933.

            In February 2003, we sold 1,000,000 shares of our common stock to
one accredited investor for $40,000. This transaction was exempt from
registration pursuant to Regulation D promulgated under the Securities Act of
1933.

            In October 2002, the Company issued 75,000 shares of common stock
valued at $6,150 to a consultant for providing services to the Company. This
transaction was exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933.

            From July to September 2002, the Company issued a total of 795,301
shares of common stock valued at $89,530 to consultants for providing services
to the Company. These transactions were exempt from registration pursuant to
Section 4(2) of the Securities Act of 1933.

            In May 2002, the Company issued 273,216 shares of common stock
valued at $65,067 to two service providers for services rendered to the Company.
This transaction was exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933.

            In May 2002, the Company issued 1,000,000 shares of common stock for
$100,000 to one accredited investor. This transaction was exempt from
registration pursuant to Regulation D promulgated under the Securities Act of
1933.

            In May 2002, the Company issued 200,000 shares of common stock for
$30,000 to one accredited investor. This transaction was exempt from
registration pursuant to Regulation D promulgated under the Securities Act of
1933.

            In April 2002, the Company contracted to sell 400,000 shares of
common stock to one accredited investor for $100,000. This transaction was
exempt from registration pursuant to Regulation D promulgated under the
Securities Act of 1933.

            In April 2002, the Company sold 600,000 shares of common stock to
one accredited investor for $150,000. This transaction was exempt from
registration pursuant to Regulation D promulgated under the Securities Act of
1933. In March 2002, the Company issued 100,000 shares of common stock in
connection with the conversion of Series B preferred shares at a rate of 1
Series B preferred share to 10 common shares. This transaction was exempt from
registration pursuant to Regulation D promulgated under the Securities Act of
1933.

            In February 2002, the Company issued 620,000 shares of common stock
valued at $206,300 to consultants for services rendered. This transaction was
exempt from registration pursuant to Section 4(2) of the Securities Act of 1933.

            In February 2002, the Company issued 975,000 shares of common stock
to a consultant for research and development costs. This transaction was exempt
from registration pursuant to Section 4(2) of the Securities Act of 1933.

            In January 2002, the Company sold 285,700 shares of common stock to
one accredited investor for $100,000. This transaction was exempt from
registration pursuant to Regulation D promulgated under the Securities Act of
1933.

                                       16
<PAGE>

            In January 2002, the Company sold 850,000 shares of common stock to
one accredited investor for $255,000. This transaction was exempt from
registration pursuant to Regulation D promulgated under the Securities Act of
1933.

            In January 2002, the Company issued 19,110 shares of common stock
valued at $7,644 to a consultant for services rendered. This transaction was
exempt from registration pursuant to Section 4(2) of the Securities Act of 1933.

            In September 2001, the Company issued 335,000 shares of common stock
in connection with the conversion of Series B preferred shares at a rate of 1
Series B preferred share to 10 common shares. This transaction was exempt from
registration pursuant to Regulation D promulgated under the Securities Act of
1933.

            In September 2001, the Company issued 150,000 shares of common stock
at market price of $.45 per share to two consultants for providing legal and
public relations services rendered. This transaction was exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933.

            In August 2001, the Company issued 3,000 shares of common stock
valued at $2,250 to a consultant for services rendered. This transaction was
exempt from registration pursuant to Section 4(2) of the Securities Act of 1933.


            In July 2001, the Company issued 2,000,000 shares of common stock in
connection with the conversion of Series C preferred shares at a rate of 1
Series C preferred share to 200 common shares. This transaction was exempt from
registration pursuant to Regulation D promulgated under the Securities Act of
1933.

            In July 2001, the Company issued 234,257 shares of common stock at
market prices of $.84 and $.50 per share to two consultants for marketing and
media services rendered. This transaction was exempt from registration pursuant
to Section 4(2) of the Securities Act of 1933.

            In July 2001, the Company sold 200,000 shares of common stock to one
accredited investor for $100,000. This transaction was exempt from registration
pursuant to Regulation D promulgated under the Securities Act of 1933.

            In June 2001, the Company sold 135,000 shares of common stock to one
accredited investor for $97,200. This transaction was exempt from registration
pursuant to Regulation D promulgated under the Securities Act of 1933.

            In May 2001, the Company sold 100,000 shares of common stock to one
accredited investor for $80,000. This transaction was exempt from registration
pursuant to Regulation D promulgated under the Securities Act of 1933.

            In April 2001, the Company sold 200,000 shares of common stock to
one accredited investor for $120,000. This transaction was exempt from
registration pursuant to Regulation D promulgated under the Securities Act of
1933.

            In April 2001, the Company sold 112,500 shares of common stock to
one accredited investor for $69,750. This transaction was exempt from
registration pursuant to Regulation D promulgated under the Securities Act of
1933.

            In March 2001, the Company sold 200,000 shares of common stock to
one accredited investor for $144,000. This transaction was exempt from
registration pursuant to Regulation D promulgated under the Securities Act of
1933.

            In March 2001, the Company sold 150,000 shares of common stock to
one accredited investor for $100,000. This transaction was exempt from
registration pursuant to Regulation D promulgated under the Securities Act of
1933.

                                       17
<PAGE>

            From March 2001 through December, 2001, the Company issued an
aggregate of 811,250 shares of common stock to a consulting company, in lieu of
cash, as compensation for services rendered and to be rendered. The Company also
issued 15,000 shares of common stock to this company in March 2001 for
additional fees owed. This transaction was exempt from registration pursuant to
Section 4(2) of the Securities Act of 1933.

            In March 2001, the Company issued 6,000 shares of common stock to
three individuals (2,000 shares each), as compensation for services rendered.
This transaction was exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933.

            In February 2001, the Company agreed to issue 150,000 shares of
common stock to NMXS.com, Inc. (of whom we were an affiliate) in exchange for
NMXS.com, Inc.'s agreement to issue warrants to the Company to purchase
1,500,000 shares of NMXS.com, Inc.'s common stock. This transaction was exempt
from registration pursuant to Regulation D promulgated under the Securities Act
of 1933.

            In January, 2001, the Company issued 44,012 shares of common stock
to an individual, in lieu of cash, as compensation for legal patent services
rendered. This transaction was exempt from registration pursuant to Section 4(2)
of the Securities Act of 1933.

            In December 2000, the Company sold 800,000 shares of common stock to
one accredited investor for $1,000,000. In connection with this transaction, the
Company also issued to this investor a warrant certificate to purchase a
variable quantity of common shares (between 200,000 and 1,000,000 shares) at a
variable strike price (between $.01 and $1.25), based upon the market share
price at time of exercise. This transaction was exempt from registration
pursuant to Regulation D promulgated under the Securities Act of 1933.

            In December 2000, the Company issued 50,000 shares of common stock
to an individual, in lieu of cash, as compensation for services rendered. This
transaction was exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933.

                                       18
<PAGE>

            In November, 2000, the Company sold 800,050 shares of common stock
to five accredited investors for an aggregate of $1,000,063. This transaction
was exempt from registration pursuant to Regulation D promulgated under the
Securities Act of 1933.

            In October 2000, the Company issued 1,000 shares of common stock to
an individual, in lieu of cash, as partial compensation for services rendered.
This transaction was exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933.

            In September 2000, the Company issued 5,500 shares of common stock
to an individual, in lieu of cash, as compensation for office furnishings and
fixtures. This transaction was exempt from registration pursuant to Section 4(2)
of the Securities Act of 1933.

            In July 2000, the Company issued options to purchase 110,000 shares
of common stock at $2.25 per share to an individual, in lieu of cash, as
compensation for providing investor relations services. This transaction was
exempt from registration pursuant to Section 4(2) of the Securities Act of 1933.

            In July 2000, the Company issued 5,000 shares of common stock to an
individual, in lieu of cash, as compensation for office furnishings and
fixtures. This transaction was exempt from registration pursuant to Section 4(2)
of the Securities Act of 1933.

            In June 2000, the Company sold 14,000 shares of Series C Preferred
Stock to two accredited investors for an aggregate of $1,400,000. The Company
also issued 710,000 shares of common stock to these investors in connection with
this transaction. This transaction was exempt from registration pursuant to
Regulation D promulgated under the Securities Act of 1933.

            In the fourth quarter of 1999, the Company sold 1,048,000 shares of
common stock to nine accredited investors for $786,000. This transaction was
exempt from registration pursuant to Regulation D promulgated under the
Securities Act of 1933.

            In the fourth quarter of 1999, the Company sold 245,165 shares of
Series B Preferred Stock to ten accredited investors for $1,470,990. This
transaction was exempt from registration pursuant to Regulation D promulgated
under the Securities Act of 1933.

            On October 15, 1999, the Company sold 1,600 shares of common stock
to an individual as compensation in lieu of cash for computer repair and crash
recovery services rendered. This transaction was exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933.

            On August 5, 1999, the Company sold 1,000,000 shares of common stock
to Novars Gesellschaft fur neu Technologien GmbH for the acquisition of certain
mid-range fuel cell technologies. This transaction was exempt from registration
pursuant to Regulation D promulgated under the Securities Act of 1933.

            On May 6, 1999, the Company sold 10,000 shares of common stock to
McKee Wallwork, in lieu of cash for conducting a market survey in connection
with NMXS.com, Inc. prior to the Company's investment in that company. This
transaction was exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933.

            On May 6, 1999, the Company sold 100,000 shares of common stock to
the Peters Corporation or its designee, in lieu of cash as compensation for
corporate furnishings. This transaction was exempt from registration pursuant to
Section 4(2) of the Securities Act of 1933.

                                       19
<PAGE>

            As of January 4, 1999, the Company sold options to Stanton Crenshaw
Communications to purchase 350,000 shares of common stock at an exercise price
of $0.20 per share in exchange for public relations services. In addition, the
Company agreed to issue to Stanton Crenshaw $2,500 worth of common stock per
month, commencing as of April 1, 1999, also in exchange for ongoing public
relations services. The shares accrue monthly based upon the closing price of
the Company's stock on the last day of each month, and are to be issued
quarterly. As of October 24, 2002, the Company has issued Stanton Crenshaw
Communications, Inc. 214,696 shares of common stock. 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

Set forth in the table below is information regarding awards made through
compensation plans or arrangements through December 31, 2003, the most recently
completed fiscal year.

<TABLE>
<CAPTION>
--------------------------------------- ----------------------------------- ------------------------ -------------------------------
                                                                                                     Number of securities
                                                                                                     remaining available for
                                                                            Weighted average         future issuance under equity
                                        Number of securities to be issued   exercise price of        compensation plans (excluding
                                        upon exercise of outstanding        outstanding options,     securities reflected in
Plan Category                           options, warrants and rights        warrants and rights      column 2)
--------------------------------------- ----------------------------------- ------------------------ -------------------------------
<S>                                                    <C>                           <C>                      <C>
Equity Compensation Plans Approved by
Security Holders                                       N/A                           N/A                      N/A
--------------------------------------- ----------------------------------- ------------------------ -------------------------------
Equity Compensation Plans Not
Approved by Security Holders                            0                            N/A                      55,281,000
--------------------------------------- ----------------------------------- ------------------------ -------------------------------
</TABLE>


            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, 2003 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, 2003 was 25,281,000.


                                       20
<PAGE>


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-QSB.

OVERVIEW

      In January 1998, Manhattan Scientifics, Inc. then a non-operating public
corporation with nominal net assets acquired all of the outstanding common stock
of Tamarack Storage Devices, Inc. by issuing 44 million shares of its common
stock including approximately 43,120,000 shares issued to Projectavision, a
public company which gave the stockholders of Tamarack actual control of the
combined company. In addition, Manhattan Scientifics, Inc. issued 182,525 shares
Series A preferred stock and a warrant to purchase 750,000 shares of its common
stock at an exercise price of 10 cents per share in exchange for a note payable
of $1.5 million plus accrued interest of $330,000 due to Projectavision from
Tamarack. In connection with the legal form of this transaction, Tamarack became
a wholly-owned subsidiary of Manhattan Scientifics, Inc. For accounting
purposes, the acquisition was treated as a recapitalization of Tamarack rather
than a business combination. Tamarack as the accounting acquiror of the public
shell did not record goodwill or any other intangible asset for this "Reverse
Acquisition". The historical financial statements are those of Tamarack.
Tamarack, a development stage enterprise, was a Texas corporation formed in July
1992. Since inception, Tamarack has been, and continues to be, involved in the
research and development of products based on holographic data storage
technology. Loss per share has been restated for all periods prior to the
acquisition to include the number of equivalent shares received by Tamarack's
stockholders in the Reverse Acquisition.

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

                                       21
<PAGE>


      As of December 31, 2003, we had an accumulated loss since inception, 1992,
of $39,051,000. Included in this accumulated loss are charges amounting to
approximately $18,588,000 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 generate general and administrative expenses, although the commercialization
process has begun on three of the Company's four technology investments.

      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.




                                       22
<PAGE>


COMPARISON OF YEAR ENDED DECEMBER 31, 2003 TO YEAR ENDED DECEMBER 31, 2002.

      NET LOSS. We reported a net loss of $2,569,000, or $.02 per common share,
basic and diluted, for the year ended December 31, 2003, versus a net loss of
$4,028,000, or $.03 per common share, basic and diluted, for the year ended
December 31, 2002. The decrease of $1,459,000, or 36%, resulted from our reduced
spending commitments for research and development. In addition, we received
income from the sale of our common stock in NMXS.Com of $315,000.

      REVENUES. We had revenues of $300,000 for the year ended December 31, 2003
compared to revenues of $156,000 for the year ended December 31, 2002.

      OPERATING COSTS AND EXPENSES. Operating costs and expenses for the year
ended December 31, 2003 totaled $3,069,000, a decrease of $771,000, or 21%,
versus costs and expenses of $3,840,000 for the year ended December 31, 2002.
These costs and expenses are detailed below.

      GENERAL AND ADMINISTRATIVE. General and administrative expenses were
$2,783,000 for the year ended December 31, 2003, which consisted of consultants,
contractors, accounting, legal, travel, rent, telephone and other day to day
operating expenses, versus general and administrative expenses of $2,786,000 for
the year ended December 31, 2002, a decrease of $3,000, or 0%.

      RESEARCH AND DEVELOPMENT. Research and development expenses were $186,000
for the year ended December 31, 2003, which consisted of payments on research
and development agreements with various contractors, amortization of patents.
Research and development expenses amounted to $865,000 for the year ended
December 31, 2002. This decrease of $501,000, or 58% resulted from our reduced
spending commitments for research and development. We expect research and
development costs to increase as we develop our existing technologies and
acquire or license new ones.

LIQUIDITY AND PLAN OF OPERATIONS

      We are a development stage company and are in the technology acquisition
and development phase of our operations. Accordingly, we have relied primarily
upon private placements and subscription sales of stock to fund our continuing
activities and acquisitions. To a limited extent, and as described below, we
have also relied upon borrowing from the Company's two senior officers, CEO
Maslow and COO Harrod, and through a bank guarantee made by Mr. Maslow of a
traditional loan. Until we generate revenue from sales and licensing of
technology, or receive a large infusion of cash from a potential strategic
partner, we intend to continue to rely upon these methods of funding our
operations during the next year.

      Our significant assets include our portfolio of intellectual property
relating to the various technologies, our contracts with third parties
pertaining to technology development, acquisition, and licensing, and 4,067,200
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 $1,159,000 on December 31, 2003
and the working capital was a deficit of $2,252,000 on such date.

      We do not expect any significant change in the total number of employees
in the near future. We intend to continue to identify and target appropriate
technologies for possible acquisition or licensing over the next 12 months,
although we have no agreements regarding any such technologies as of the date of
this Report.

      Based upon current projections, our principal cash requirements for the
next 12 months consists of (1) fixed expenses, including rent, payroll, investor
relations services, public relations services, bookkeeping services, graphic
design services, consultant services, and reimbursed expenses; and (2) variable
expenses, including technology research and development, milestone payments,
intellectual property protection, utilities and telephone, office supplies,
additional consultants, legal and accounting. As of December 31, 2003, we had
$56,000 in cash. As of December 31, 2002, we had $68,000 in cash. We intend to
satisfy our capital requirements for the next 12 months by continuing to pursue
private placements to raise capital, using our common stock as payment for
services in lieu of cash where appropriate, borrowing as appropriate, and our
cash on hand. However, we do not know if those resources will be adequate to
cover our capital requirements.


                                       23
<PAGE>

RECENTLY ISSUED ACCOUNTING STANDARDS


In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." The Company's adoption of SFAS No. 146 on
January 1, 2003 did not have any material effect on the financial statements of
the Company.

In December 2003, the FASB issued Interpretation No. 46R, "Consolidation of
Variable Interest Entities" in an effort to expand upon and strengthen existing
accounting guidance that addresses when a company should include in its
financial statements the assets, liabilities and activities of variable interest
entities, including special-purpose entities or off-balance sheet structures.
The consolidation requirements of FIN No. 46R have a variety of implementation
dates. The Company believes the impact of FIN No. 46R on its financial position
and results of operations will not be material, but the Company will continue to
evaluate the impact of FIN No. 46R during the first quarter of 2004.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." This statement
affects the issuer's accounting for three types of freestanding financial
statements: mandatorily redeemable shares, put and forward purchase contracts
that require the issuer to buy back some of its shares in exchange for cash or
other assets, and certain obligations that can be settled in shares. This
statement is effective for all financial instruments entered into or modified
after May 31, 2003, and otherwise effective at the beginning of the first
interim period beginning after June 15, 2003. The impact of adopting FASB No.
150 was not material to the Company's financial position and results of
operations.

In December 2003, the Securities and Exchange Commission (SEC), published Staff
Accounting Bulletin (SAB) No. 104, "Revenue Recognition." This SAB updates
portions of the Securities and Exchange Commission (SEC) staff's interpretive
guidance provided in SAB 101 and included in Topic 13 of the Codification of
Staff Accounting Bulletins. SAB 104 deletes interpretative material no longer
necessary, and conforms the interpretive material retained, because of
pronouncements issued by the FASB's Emerging Issues Task Force (EITF) on various
revenue recognition topics, including EITF 00-21, "Revenue Arrangements with
Multiple Deliverables." SAB No. 104 also incorporates into the SAB Codification
certain sections of the SEC staff's "Revenue Recognition in Financial Statements
- Frequently Asked Questions and Answers." SAB No. 104 does not have a material
impact on the Company's financial position and results of operations since the
Company's revenue recognition practices previously conformed to the
interpretations codified by SAB No. 104.



                                       24
<PAGE>


ITEM 7. FINANCIAL STATEMENTS


CONTENTS

<TABLE>
<CAPTION>
                                                                                  PAGE
                                                                                  ----
CONSOLIDATED FINANCIAL STATEMENTS

<S>                                                                              <C>
    Independent auditors' report                                                   F-2

    Balance sheet as of December 31, 2003                                          F-3

    Statements of operations for the years ended December 31, 2003, 2002 and the
        period from July 31, 1992 (inception) through December 31, 2003            F-4

    Statements of stockholders' equity (capital deficit) for the years ended
        December 31, 2003 and for the periods from July 31, 1992 (inception)
        through December 31, 2003                                                  F-5

    Statements of cash flows for the years ended December 31, 2003, 2002 and for
        the period from July 31, 1992 (inception) through December 31, 2003        F-10

    Notes to consolidated financial statements                                     F-11
</TABLE>



                                       25
<PAGE>


INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders
Manhattan Scientifics, Inc.

We have audited the accompanying consolidated balance sheet of Manhattan
Scientifics, Inc. (a development stage enterprise) and subsidiaries ("the
Company") as of December 31, 2003 and the related consolidated statements of
operations, stockholders' equity (capital deficit), and cash flows for the years
ended December 31, 2003 and 2002 and for the period from July 31, 1992
(inception) through December 31, 2003. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements enumerated above present fairly, in all
material respects, the consolidated financial position of Manhattan Scientifics
Inc. and subsidiaries as of December 31, 2003 and the consolidated results of
their operations and their consolidated cash flows for the years ended December
31, 2003 and 2002 and for the period from July 31, 1992 (inception) through
December 31, 2003 in conformity with accounting principles generally accepted 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 A to the
financial statements, the Company has experienced recurring losses from
operations, negative cash flows from operations and has both a working capital
and a capital deficit at December 31, 2003 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 A. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.


                                      /s/ Eisner LLP
                                      ------------------------------------------
Florham Park, New Jersey
April 13, 2004


                                      F-2

<PAGE>


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

CONSOLIDATED BALANCE SHEET

                                                                 December 31,
ASSETS                                                               2003
                                                               ---------------
Current assets:
   Cash and cash equivalents                                   $      56,000
   Prepaid expenses and other assets                                  76,000
                                                               ---------------
     Total current assets                                            132,000

Property and equipment, net                                           41,000
Patents, net of accumulated amoritization of 1,054,000             1,026,000
Security deposit                                                      26,000
                                                               ---------------
        Total assets                                            $  1,225,000
                                                               ===============
LIABILITIES
Current liabilities
   Accounts payable and accrued expenses                       $     434,000
   Note payable to officers                                        1,650,000
   Note payable - other                                              300,000
                                                               ---------------
     Total current liabilities                                     2,384,000
                                                               ---------------
Commitments and Contingencies

CAPITAL DEFICIT
Capital stock $.001 par value
Preferred, authorized 1,000,000 shares
   Series A convertible, redeemable, 10 percent cumulative,
     authorized 182,525 shares; issued and outstanding - none
   Series B convertible,  authorized 250,000 shares;
     49,999 shares issued and outstanding
   Series C convertible, redeemable, authorized 14,000 shares;
     issued and outstanding - none
Common, authorized 250,000,000 shares, 172,008,522 shares
     issued, and outstanding                                         172,000
Additional paid-in-capital                                        42,726,000
Deficit accumulated during the development stage                 (44,057,000)
                                                               ---------------
Total capital deficit                                             (1,159,000)
                                                               ---------------
                                                                 $ 1,225,000
                                                               ===============

See notes to financial statements


                                      F-3
<PAGE>


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

CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                                                               PERIOD FROM
                                                                                              JULY 31, 1992
                                                                    YEAR ENDED                 (INCEPTION)
                                                                    DECEMBER 31,                 THROUGH
                                                                2003             2002       December 31, 2003
                                                          ---------------  ---------------   ---------------
<S>                                                            <C>              <C>              <C>
Revenue                                                        $ 300,000        $ 156,000        $  706,000

Operating costs and expenses:
   General and administrative                                  2,783,000        2,786,000        34,448,000
   Research and development                                      286,000          865,000         7,831,000
   Impairment charge of certain patents                                           189,000           189,000
                                                          ---------------  ---------------   ---------------
Total operating costs and expenses                             3,069,000        3,840,000        42,468,000
                                                          ---------------  ---------------   ---------------
Loss from operations before other income and expenses         (2,769,000)      (3,684,000)      (41,762,000)

Other income and expenses:
    Gain on dispostion of investment                             315,000           78,000           393,000
    Contract revenue                                              49,000                          3,651,000
    Interest and other expenses                                  (80,000)         (51,000)         (741,000)
    Interest income                                                1,000            1,000           169,000
    Equity in losses of investees                               (100,000)        (346,000)         (751,000)
   Gain / (Loss) on disposal of equipment                         15,000          (26,000)          (11,000)
                                                          ---------------  ---------------   ---------------
NET LOSS / COMPREHENSIVE LOSS                                 (2,569,000)      (4,028,000)      (39,052,000)
                                                          ===============  ===============   ===============
NET LOSS
BASIC AND DILUTED LOSS PER COMMON SHARE:                      (2,569,000)      (4,028,000)
                                                          ===============  ===============
    Weighted average number of common shares outstanding     156,145,585      122,007,937
                                                          ===============  ===============
Basic and diluted loss per common share                           $(0.02)          $(0.03)
                                                          ===============  ===============
</TABLE>


See notes to financial statements


                                      F-4
<PAGE>


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

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY)
(Notes A and F)
For the Cumulative Period From July 31, 1992 (Inception) Through December 31,
2003

<TABLE>
<CAPTION>
                                                                             Preferred Stock        Preferred Stock
                                                                            $.001 Par Value         $.001 Par Value
                                                                            -------------------   -------------------
                                                                                 Series B              Series c
                                                                            -------------------   -------------------
                                                            Series A
                                                        Preferred  Stock     Shares     Amount     Shares     Amount
                                                       ------------------   --------   --------   --------   --------

BALANCE, DECEMBER 31, 2002                                                   74,999         -          -          -
                                                                            --------   --------   --------   --------

<S>                                                                         <C>        <C>          <C>      <C>
Issuance of shares at market price for services rendered
Issuance of shares in connection with private placement offering
Issuance of shares at market price for services rendered
Issuance of shares at market price for services rendered
Issuance of shares at market price for services rendered
Issuance of shares at market price for services rendered
Issuance of shares at market price for services rendered
Issuance of shares at market price for services rendered
Issuance of shares at market price for services rendered
Issuance of shares at market price for services rendered
Issuance of shares at market price for services rendered
Issuance of shares at market price for services rendered
Issuance of shares at market price for services rendered
Issuance of shares at market price for services rendered
Issuance of shares at market price for services rendered
Issuance of shares at market price for services rendered
Issuance of shares at market price for services rendered
Issuance of shares at market price for services rendered
Issuance of shares at market price for services rendered
Issuance of shares at market price for services rendered
Issuance of shares at market price for services rendered
Issuance of shares at market price for services rendered
Issuance of shares at market price for director/officer services rendered
Issuance of shares at market price for director/officer services rendered
Issuance of shares upon cancelation of stock options
Issuance of shares at market price for director/officer services rendered
Issuance of shares upon cancelation of stock options
Issuance of shares at market price for director/officer services rendered
Issuance of shares at market price for director/officer services rendered
Issuance of shares at market price for director/officer services rendered
Issuance of shares at market price for director/officer services rendered
Issuance of shares at market price for director/officer services rendered
Issuance of shares at market price for director/officer services rendered
Issuance of shares at market price for director/officer services rendered
Issuance of shares upon cancelation of stock options
Issuance of shares at market price for services rendered
Issuance of shares at market price for services rendered
Issuance of shares at market price for services rendered
Issuance of shares at market price for services rendered
Issuance of shares upon cancelation of stock options
Issuance of shares upon cancelation of stock options
Issuance of shares for options exchanged
Issuance of shares for options exchanged
Issuance of shares for options exchanged
Issuance of shares for options exchanged
Issuance of shares for options exchanged
Issuance of shares for options exchanged
Issuance of shares for options exchanged
Issuance of shares for options exchanged
Conversion of series B preferred stock to common                            (25,000)
Issuance of shares at market price for services rendered
Issuance of shares at market price for services rendered
Stock options issued for services
Amortization of deferred compensation
Net loss/comprehensive loss
                                                                            --------------------------------------------

BALANCE DECEMBER 31, 2003                                                    49,999         -          -          -
</TABLE>

<TABLE>
<CAPTION>
                                                                                 Common Stock
                                                                               $.001 Par Value
                                                                             -------------------
                                                                                                         Additional
                                                                                                           Paid-in     Deferred
                                                                              Shares         Amount         Capital    Compensation
                                                                             -----------   -----------  ------------  -------------
<S>                                                                            <C>               <C>          <C>      <C>
BALANCE, DECEMBER 31, 2002                                                   124,262,522       122,000    40,875,000      (142,000)
                                                                             -----------   -----------  ------------  -------------

Issuance of shares at market price for services rendered                       1,000,000         1,000        70,000
Issuance of shares in connection with private placement offering               1,000,000         1,000        40,000
Issuance of shares at market price for services rendered                         125,000             -         1,000
Issuance of shares at market price for services rendered                       1,000,000         1,000        50,000
Issuance of shares at market price for services rendered                         300,000         1,000        20,000
Issuance of shares at market price for services rendered                       2,000,000         2,000       100,000
Issuance of shares at market price for services rendered                       2,000,000         2,000        79,000
Issuance of shares at market price for services rendered                       1,000,000         1,000        49,000
Issuance of shares at market price for services rendered                         400,000         1,000        20,000
Issuance of shares at market price for services rendered                          20,000             -         1,000
Issuance of shares at market price for services rendered                          20,000             -         1,000
Issuance of shares at market price for services rendered                          20,000             -         1,000
Issuance of shares at market price for services rendered                         400,000         1,000        16,000
Issuance of shares at market price for services rendered                         500,000         1,000        25,000
Issuance of shares at market price for services rendered                       1,011,000         1,000        40,000
Issuance of shares at market price for services rendered                         250,000             -        10,000
Issuance of shares at market price for services rendered                         260,000             -        10,000
Issuance of shares at market price for services rendered                         250,000             -        10,000
Issuance of shares at market price for services rendered                         125,000             -         5,000
Issuance of shares at market price for services rendered                         600,000         1,000        25,000
Issuance of shares at market price for services rendered                         500,000         1,000        20,000
Issuance of shares at market price for services rendered                         100,000             -         4,000
Issuance of shares at market price for director/officer services rendered     13,500,000        14,000       392,000
Issuance of shares at market price for director/officer services rendered      5,250,000         5,000       153,000
Issuance of shares upon cancelation of stock options                           2,750,000         3,000        82,000
Issuance of shares at market price for director/officer services rendered      1,750,000         2,000        52,000
Issuance of shares upon cancelation of stock options                             990,000         1,000        30,000
Issuance of shares at market price for director/officer services rendered      2,250,000         2,000        65,000
Issuance of shares at market price for director/officer services rendered      1,000,000         1,000        49,000
Issuance of shares at market price for director/officer services rendered        250,000             -        12,000
Issuance of shares at market price for director/officer services rendered        250,000             -        12,000
Issuance of shares at market price for director/officer services rendered      1,000,000         1,000        50,000
Issuance of shares at market price for director/officer services rendered        250,000             -        12,000
Issuance of shares at market price for director/officer services rendered        250,000             -        12,000
Issuance of shares upon cancelation of stock options                             500,000         1,000        30,000
Issuance of shares at market price for services rendered                          50,000             -         2,000
Issuance of shares at market price for services rendered                       1,000,000         1,000        50,000
Issuance of shares at market price for services rendered                          35,000             -         2,000
Issuance of shares at market price for services rendered                         500,000         1,000        25,000
Issuance of shares upon cancelation of stock options                             500,000         1,000        30,000
Issuance of shares upon cancelation of stock options                             675,000         1,000        40,000
Issuance of shares for options exchanged                                         200,000             -
Issuance of shares for options exchanged                                         100,000             -
Issuance of shares for options exchanged                                         200,000             -
Issuance of shares for options exchanged                                         250,000             -
Issuance of shares for options exchanged                                         130,000             -
Issuance of shares for options exchanged                                         100,000             -
Issuance of shares for options exchanged                                         200,000             -
Issuance of shares for options exchanged                                         100,000             -
Conversion of series B preferred stock to common                                 250,000             -
Issuance of shares at market price for services rendered                         250,000                      21,000
Issuance of shares at market price for services rendered                         335,000         1,000        20,000
Stock options issued for services                                                                            113,000
Amortization of deferred compensation                                                                                      142,000
Net loss/comprehensive loss
                                                                            --------------------------------------------------------

BALANCE DECEMBER 31, 2003                                                    172,008,522       172,000    42,726,000            -
</TABLE>

<TABLE>
<CAPTION>
                                                                                             Deficit
                                                                           Amounts         Accumulated
                                                                           Receivable       During the
                                                                              From         Developmental    Treasury
                                                                           Stockholders     Stage            Stock          Total
                                                                         -------------    --------------   ----------   ----------

<S>                                                                       <C>              <C>             <C>           <C>
BALANCE, DECEMBER 31, 2002                                                                  (41,488,000)                  (633,000)
                                                                         -------------    --------------   ----------   ----------

Issuance of shares at market price for services rendered                                                                    71,000
Issuance of shares in connection with private placement offering                                                            41,000
Issuance of shares at market price for services rendered                                                                     1,000
Issuance of shares at market price for services rendered                                                                    51,000
Issuance of shares at market price for services rendered                                                                    21,000
Issuance of shares at market price for services rendered                                                                   102,000
Issuance of shares at market price for services rendered                                                                    81,000
Issuance of shares at market price for services rendered                                                                    50,000
Issuance of shares at market price for services rendered                                                                    21,000
Issuance of shares at market price for services rendered                                                                     1,000
Issuance of shares at market price for services rendered                                                                     1,000
Issuance of shares at market price for services rendered                                                                     1,000
Issuance of shares at market price for services rendered                                                                    17,000
Issuance of shares at market price for services rendered                                                                    26,000
Issuance of shares at market price for services rendered                                                                    41,000
Issuance of shares at market price for services rendered                                                                    10,000
Issuance of shares at market price for services rendered                                                                    10,000
Issuance of shares at market price for services rendered                                                                    10,000
Issuance of shares at market price for services rendered                                                                     5,000
Issuance of shares at market price for services rendered                                                                    26,000
Issuance of shares at market price for services rendered                                                                    21,000
Issuance of shares at market price for services rendered                                                                     4,000
Issuance of shares at market price for director/officer services rendered                                                  406,000
Issuance of shares at market price for director/officer services rendered                                                  158,000
Issuance of shares upon cancelation of stock options                                                                        85,000
Issuance of shares at market price for director/officer services rendered                                                   54,000
Issuance of shares upon cancelation of stock options                                                                        31,000
Issuance of shares at market price for director/officer services rendered                                                   67,000
Issuance of shares at market price for director/officer services rendered                                                   50,000
Issuance of shares at market price for director/officer services rendered                                                   12,000
Issuance of shares at market price for director/officer services rendered                                                   12,000
Issuance of shares at market price for director/officer services rendered                                                   51,000
Issuance of shares at market price for director/officer services rendered                                                   12,000
Issuance of shares at market price for director/officer services rendered                                                   12,000
Issuance of shares upon cancelation of stock options                                                                        31,000
Issuance of shares at market price for services rendered                                                                     2,000
Issuance of shares at market price for services rendered                                                                    51,000
Issuance of shares at market price for services rendered                                                                     2,000
Issuance of shares at market price for services rendered                                                                    26,000
Issuance of shares upon cancelation of stock options                                                                        31,000
Issuance of shares upon cancelation of stock options                                                                        41,000
Issuance of shares for options exchanged                                                                                         -
Issuance of shares for options exchanged                                                                                         -
Issuance of shares for options exchanged                                                                                         -
Issuance of shares for options exchanged                                                                                         -
Issuance of shares for options exchanged                                                                                         -
Issuance of shares for options exchanged                                                                                         -
Issuance of shares for options exchanged                                                                                         -
Issuance of shares for options exchanged                                                                                         -
Conversion of series B preferred stock to common                                                                                 -
Issuance of shares at market price for services rendered                                                                    21,000
Issuance of shares at market price for services rendered                                                                    21,000
Stock options issued for services                                                                                          113,000
Amortization of deferred compensation                                                                                      142,000
Net loss/comprehensive loss                                                                                             (2,569,000)
                                                                         ----------------------------------------------------------

BALANCE DECEMBER 31, 2003                                                         -         (44,057,000)          -     (1,159,000)
</TABLE>

                                      F-5

<PAGE>

Consolidated Statements of Stockholders' Equity (Capital Deficit)
(Notes A and F)
For the Periods From July 31, 1992 (Inception) Through December 31, 2003

<TABLE>
<CAPTION>

                                                                                 PREFERRED STOCK             PREFERRED STOCK
                                                            SERIES A             $.001 PAR VALUE             $.001 PAR VALUE
                                                           PREFERRED                SERIES B                    SERIES C
                                                            STOCK              SHARES       AMOUNT        SHARES        AMOUNT
<S>                                                     <C>                    <C>           <C>            <C>          <C>
Initial issuance of shares to founders on contribution
of intangible assets at historic cost basis
Additional founders' contribution
Issuance of 1,037,000 shares of Series A preferred
stock, net of issuance costs                             $    10,000
NET LOSS

Balance, March 31, 1993
ISSUANCE OF SHARES TO INVESTOR AT APPROXIMATELY
$.21 per share
Issuance of shares on exercise of options
Services performed in exchange for Series A
preferred stock issued in fiscal 1993
Net loss

BALANCE, MARCH 31, 1994                                       10,000
Services performed for Series A preferred stock
issued in fiscal 1993
Issuance of shares at approximately $.52 per share
Net loss

BALANCE, DECEMBER 31, 1994                                    10,000
Issuance of 163,000 shares of Series A preferred stock         2,000
Write-off of amounts receivable from stockholders
Net loss

BALANCE, DECEMBER 31, 1995                                    12,000
Issuance of shares upon exercise of option for $15,000
Net loss

Balance, December 31, 1996                                    12,000
Purchase and retirement of 1,200,000 shares of
Series A preferred stock                                     -12,000
Purchase of 7,195,814 treasury shares of common
stock for $15,000
Net loss/comprehensive loss

BALANCE, DECEMBER 31, 1997 (CARRIED FORWARD)                       0
</TABLE>

<TABLE>
<CAPTION>

                                                                                                                   AMOUNTS
                                                               COMMON STOCK           ADDITIONAL                  RECEIVABLE
                                                             $.001 PAR VALUE           PAID-IN       DEFERRED        FROM
                                                            SHARES        AMOUNT       CAPITAL     COMPENSATION  STOCKHOLDERS
<S>                                                      <C>           <C>           <C>           <C>            <C>
Initial issuance of shares to founders on contribution
of intangible assets at historic cost basis               14,391,627   $    14,500   $       500
Additional founders' contribution                                                         40,000
Issuance of 1,037,000 shares of Series A preferred
stock, net of issuance costs                                                           1,020,000                    -286,000
NET LOSS

Balance, March 31, 1993                                                     10,000    14,391,627        14,500     1,060,500
ISSUANCE OF SHARES TO INVESTOR AT APPROXIMATELY
$.21 per share                                            14,391,627        14,500     2,985,500
Issuance of shares on exercise of options                    479,720         1,000        49,000
Services performed in exchange for Series A
preferred stock issued in fiscal 1993                                                                                127,000
Net loss

BALANCE, MARCH 31, 1994                                   29,262,974        30,000     4,095,000                    -199,000
Services performed for Series A preferred stock
issued in fiscal 1993                                                                                                159,000
Issuance of shares at approximately $.52 per share           345,399                     182,000
Net loss

BALANCE, DECEMBER 31, 1994                                29,608,373        30,000     4,277,000                     -40,000
Issuance of 163,000 shares of Series A preferred stock                                   161,000
Write-off of amounts receivable from stockholders                                        -40,000                      40,000
Net loss

BALANCE, DECEMBER 31, 1995                                29,608,373        30,000     4,398,000                           0
Issuance of shares upon exercise of option for $15,000    14,391,627        14,000         1,000
Net loss

Balance, December 31, 1996                                44,000,000        44,000     4,399,000                           0
Purchase and retirement of 1,200,000 shares of
Series A preferred stock                                                                 -58,000
Purchase of 7,195,814 treasury shares of common
stock for $15,000
Net loss/comprehensive loss

BALANCE, DECEMBER 31, 1997 (CARRIED FORWARD)              44,000,000        44,000     4,341,000                           0
</TABLE>

<TABLE>
<CAPTION>
                                                            DEFICIT
                                                          ACCUMULATED
                                                          DURING THE
                                                          DEVELOPMENT      TREASURY
                                                             STAGE          STOCK        TOTAL
<S>                                                        <C>           <C>          <C>
Initial issuance of shares to founders on contribution
of intangible assets at historic cost basis                                           $    15,000
Additional founders' contribution                                                               0
Issuance of 1,037,000 shares of Series A preferred
stock, net of issuance costs                                                              744,000
NET LOSS                                                  ($  543,000)                   -543,000

Balance, March 31, 1993                                      -326,000      -543,000       216,000
ISSUANCE OF SHARES TO INVESTOR AT APPROXIMATELY
$.21 per share                                                                          3,000,000
Issuance of shares on exercise of options                                                  50,000
Services performed in exchange for Series A
preferred stock issued in fiscal 1993                                                     127,000
Net loss                                                   -2,292,000                  -2,292,000

BALANCE, MARCH 31, 1994                                    -2,835,000                   1,101,000
Services performed for Series A preferred stock
issued in fiscal 1993                                                                     159,000
Issuance of shares at approximately $.52 per share                                        182,000
Net loss                                                   -2,250,000                  -2,250,000

BALANCE, DECEMBER 31, 1994                                 -5,085,000                    -808,000
Issuance of 163,000 shares of Series A preferred stock                                    163,000
Write-off of amounts receivable from stockholders                                               0
Net loss                                                     -972,000                    -972,000

BALANCE, DECEMBER 31, 1995                                 -6,057,000                  -1,617,000
Issuance of shares upon exercise of option for $15,000                                     15,000
Net loss                                                     -284,000                    -284,000

Balance, December 31, 1996                                 -6,341,000                  -1,886,000
Purchase and retirement of 1,200,000 shares of
Series A preferred stock                                                                  -70,000
Purchase of 7,195,814 treasury shares of common
stock for $15,000                                                       ($   15,000)      -15,000
Net loss/comprehensive loss                                  -335,000                    -335,000

BALANCE, DECEMBER 31, 1997 (CARRIED FORWARD)               -6,676,000       -15,000    -2,306,000
</TABLE>

                                      F-6

<PAGE>

Consolidated Statements of Stockholders' Equity (Capital Deficiency)
(Notes A and F)
For the Cumulative Period From July 31, 1992 (Inception)
Through December 31, 2003 (continued)

<TABLE>
<CAPTION>

                                                                                 PREFERRED STOCK             PREFERRED STOCK
                                                            SERIES A             $.001 PAR VALUE             $.001 PAR VALUE
                                                           PREFERRED                SERIES B                    SERIES C
                                                            STOCK              SHARES       AMOUNT        SHARES        AMOUNT
<S>                                                     <C>               <C>           <C>            <C>          <C>
BALANCE, DECEMBER 31, 1997 (BROUGHT FORWARD)                $      0
Purchase of 7,195,813 treasury shares of common
stock for $15,000
Special distribution of 14,391,627 shares of
common stock to Projectavision, Inc.
Shares deemed issued in connection with reverse
Merger
Issuance of 182,525 shares of Series A preferred stock
and warrants exercisable into 750,000 shares of
common stock at an exercise price of $.10 per
share in exchange for note payable of $1,500,000
and accrued interest of $330,000 including deemed
dividend in connection with beneficial conversion
feature of preferred stock
Issuance of shares at $.20 per share, net of
issuance costs
Issuance of shares to purchase intangible assets
Issuance of shares at $.58 per share for
consulting services
Issuance of warrants on February 10, 1998 to
purchase 2,000,000 shares of common stock
exercisable at $.75 per share at fair value for
services resulting from cashless exercise feature
Issuance of shares at $.18 per share
Issuance of shares on conversion of 182,525 shares
of Series A preferred stock
Issuance of shares at $.05 per share
Issuance of stock options and warrants at fair value
for services
Net loss/comprehensive loss

Balance, December 31, 1998 (carried forward)                       0
</TABLE>

<TABLE>
<CAPTION>

                                                               COMMON STOCK          ADDITIONAL
                                                             $.001 PAR VALUE          PAID-IN       DEFERRED
                                                           SHARES        AMOUNT       CAPITAL     COMPENSATION
<S>                                                     <C>           <C>           <C>           <C>
BALANCE, DECEMBER 31, 1997 (BROUGHT FORWARD)             44,000,000   $    44,000   $ 4,341,000
Purchase of 7,195,813 treasury shares of common
stock for $15,000
Special distribution of 14,391,627 shares of
common stock to Projectavision, Inc.                                                    346,000
Shares 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
Issuance of shares at $.20 per share, net of
issuance costs                                            5,000,000         5,000       970,000
Issuance of shares to purchase intangible assets          7,200,000         7,000     1,433,000
Issuance of shares at $.58 per share for
consulting services                                       1,000,000         1,000       579,000
Issuance of warrants on February 10, 1998 to
purchase 2,000,000 shares of common stock
exercisable at $.75 per share at fair value for
services resulting from cashless exercise feature                                       660,000
Issuance of shares at $.18 per share                        275,000                      50,000
Issuance 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
Issuance of stock options and warrants at fair value
for services                                                                          2,165,000
Net loss/comprehensive loss

Balance, December 31, 1998 (carried forward)             98,250,405        98,000    14,370,000
</TABLE>

<TABLE>
<CAPTION>
                                                            DEFICIT
                                                            AMOUNTS       ACCUMULATED
                                                           RECEIVABLE     DURING THE
                                                              FROM        DEVELOPMENT     TREASURY
                                                          STOCKHOLDERS        STAGE         STOCK
<S>                                                        <C>             <C>             <C>
BALANCE, DECEMBER 31, 1997 (BROUGHT FORWARD)              $         0     ($6,676,000)    ($15,000)
Purchase of 7,195,813 treasury shares of common
stock for $15,000                                                                          -15,000
Special distribution of 14,391,627 shares of
common stock to Projectavision, Inc.                                                        30,000
Shares deemed issued in connection with reverse
Merger
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                                                 -1,020,000
Issuance of shares at $.20 per share, net of
issuance costs
Issuance of shares to purchase intangible assets
Issuance of shares at $.58 per share for
consulting services
Issuance of warrants on February 10, 1998 to
purchase 2,000,000 shares of common stock
exercisable at $.75 per share at fair value for
services resulting from cashless exercise feature
Issuance of shares at $.18 per share
Issuance of shares on conversion of 182,525 shares
of Series A preferred stock
Issuance of shares at $.05 per share
Issuance of stock options and warrants at fair value
for services
Net loss/comprehensive loss                                                -4,580,000

Balance, December 31, 1998 (carried forward)                        0     -12,276,000
</TABLE>

                                      F-7

<PAGE>

Consolidated Statements of Stockholders' Equity (Capital Deficiency)
(Notes A and F)
For the Cumulative Period From July 31, 1992 (Inception)
Through December 31, 2003 (continued)


<TABLE>
<CAPTION>

                                                                                 PREFERRED STOCK             PREFERRED STOCK
                                                            SERIES A             $.001 PAR VALUE             $.001 PAR VALUE
                                                           PREFERRED                SERIES B                    SERIES C
                                                            STOCK              SHARES       AMOUNT        SHARES        AMOUNT
<S>                                                     <C>               <C>           <C>            <C>          <C>
Balance, December 31, 1998 (brought forward)               $     0                                                  98,250,405
Issuance of shares in satisfaction of accrued
expenses                                                                                                                78,000
Issuance of shares at $.49 per share for consulting
services                                                                                                                10,000
Issuance of shares at $.49 per share to purchase
furniture and fixtures                                                                                                 100,000
Issuance of shares at market prices as consulting
  services were performed                                                                                               17,269
Issuance of shares to purchase intangible assets                                                                     1,000,000
Issuance of shares at $1.25 per share for services                                                                       1,600
Issuance of stock options Immediately exercisable
at fair value for services
Issuance of warrants on February 10, 1998 to
purchase 2,000,000 shares of common stock
exercisable at $.75 per share for consulting
services resulting from notification of warrant
holder of intent to exercise
Shares issuable at $1.27 per share in connection
with note payable
Issuance of shares on exercise of 100,000 options
at $.20 per share                                                                                                      100,000
Issuance of Series B convertible preferred shares
at $6.00 per share including deemed dividend
in connection with beneficial conversion
feature of preferred stock                                                245,165
Issuance of shares at $.75 per share                                                                                   533,000
Net loss/comprehensive loss
Issuance of shares at $.75 per share                                                                                   515,000
Issuance of shares at market price for service                                                                           4,942
Issuance of common stock to Equilink, LLC on
exercise of cashless warrants                                                                                        1,076,923

BALANCE, DECEMBER 31, 1999 (CARRIED FORWARD)                     0        245,165              0                   101,687,139
</TABLE>

<TABLE>
<CAPTION>
                                                                                                                        AMOUNTS
                                                                COMMON STOCK              ADDITIONAL                    RECEIVABLE
                                                              $.001 PAR VALUE              PAID-IN       DEFERRED         FROM
                                                            SHARES        AMOUNT           CAPITAL     COMPENSATION   STOCKHOLDERS
<S>                                                     <C>            <C>             <C>            <C>            <C>
Balance, December 31, 1998 (brought forward)            $     98,000   $ 14,370,000                                  $          0
Issuance of shares in satisfaction of accrued
expenses                                                                     15,000
Issuance of shares at $.49 per share for consulting
services                                                                      5,000
Issuance of shares at $.49 per share to purchase
furniture and fixtures                                                       49,000
Issuance of shares at market prices as consulting
  services were performed                                                    15,000
Issuance of shares to purchase intangible assets               1,000        999,000
Issuance of shares at $1.25 per share for services                            2,000
Issuance of stock options Immediately exercisable
at fair value for services                                                6,572,000
Issuance of warrants 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
Shares issuable at $1.27 per share in connection
with note payable                                                           191,000
Issuance of shares on exercise of 100,000 options
at $.20 per share                                                            20,000
Issuance of Series B convertible preferred shares
at $6.00 per share including deemed dividend
in connection with beneficial conversion
feature of preferred stock                                                2,942,000
Issuance of shares at $.75 per share                           1,000        399,000
Net loss/comprehensive loss
Issuance of shares at $.75 per share                           1,000        385,000
Issuance of shares at market price for service
Issuance of common stock to Equilink, LLC on
exercise of cashless warrants                                  1,000         -1,000

BALANCE, DECEMBER 31, 1999 (CARRIED FORWARD)                 102,000     27,053,000                                             0
</TABLE>

<TABLE>
<CAPTION>
                                                            DEFICIT
                                                          ACCUMULATED
                                                           DURING THE
                                                          DEVELOPMENT      TREASURY
                                                            STAGE            STOCK           TOTAL
<S>                                                      <C>              <C>            <C>
Balance, December 31, 1998 (brought forward)              ($12,276,000)   $          0   $ 2,192,000
Issuance of shares in satisfaction of accrued
expenses                                                                                      15,000
Issuance of shares at $.49 per share for consulting
services                                                                                       5,000
Issuance of shares at $.49 per share to purchase
furniture and fixtures                                                                        49,000
Issuance of shares at market prices as consulting
  services were performed                                                                     15,000
Issuance of shares to purchase intangible assets                                           1,000,000
Issuance of shares at $1.25 per share for services                                             2,000
Issuance of stock options Immediately exercisable
at fair value for services                                                                 6,572,000
Issuance of warrants 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
Shares issuable at $1.27 per share in connection
with note payable                                                                             191,000
Issuance of shares on exercise of 100,000 options
at $.20 per share                                                                             20,000
Issuance of Series B convertible preferred shares
at $6.00 per share including deemed dividend
in connection with beneficial conversion
feature of preferred stock                                  -1,471,000                      1,471,000
Issuance of shares at $.75 per share                                                          400,000
Net loss/comprehensive loss                                 -9,800,000                     -9,800,000
Issuance of shares at $.75 per share                                                          386,000
Issuance of shares at market price for service
Issuance of common stock to Equilink, LLC on
exercise of cashless warrants

BALANCE, DECEMBER 31, 1999 (CARRIED FORWARD)               -23,547,000              0       3,608,000
</TABLE>


                                      F-8
<PAGE>

Consolidated Statements of Stockholders' Equity (Capital Deficiency)
(Notes A and F)
For the Cumulative Period From July 31, 1992 (Inception)
Through December 31, 2003 (continued)

<TABLE>
<CAPTION>

                                                                                 PREFERRED STOCK             PREFERRED STOCK
                                                            SERIES A             $.001 PAR VALUE             $.001 PAR VALUE
                                                           PREFERRED                SERIES B                    SERIES C
                                                            STOCK              SHARES       AMOUNT        SHARES        AMOUNT
<S>                                                     <C>               <C>           <C>            <C>          <C>
BALANCE, DECEMBER 31, 1999 (BROUGHT FORWARD)            $          0        245,165   $          0
Shares issued of Series C convertible preferred
shares at $100.00 per share including deemed
dividend in connection with beneficial conversion
feature of preferred stock                                                                                 14,000   $          0
Issuance of shares in connection with Series C
preferred stock private placement investment
Shares issuable at $2.23 per share in connection with
research and development and license agreement
Issuance of shares at market price for services
Issuance of options at market value for services
Issuance of options to purchase 100,000 shares
@$.40 per share for services
Issuance of stock options in connection with deferred
compensation agreement
Amortization of deferred compensation
Issuance of shares to purchase furniture and fixtures
Issuance of shares in connection with Series C
preferred stock private placement
Issuance of shares at $1.25 per share
Conversion of Series B preferred stock to common                            -60,000
Issuance of shares at market price for services
Shares issuable at market price for services
Net loss/comprehensive loss

BALANCE, DECEMBER 31, 2000                                         0        185,165              0         14,000              0
Issuance of shares in connection with private
placement offerings
Issuance of shares upon conversion of Series B
preferred stock                                                            -100,166
Issuance of shares upon conversion of Series C
preferred stock                                                                                           -14,000
Issuance of shares upon exercise of stock options
Issuance of shares to acquire Teneo Computing Inc.
Issuance of shares to purchase 42% of Novint
Technologies, Inc.
Issuance of shares for services at fair market value
Exercise of warrants issued for services
Issuance of stock options for services
Amortization of deferred compensation
Net loss/comprehensive loss

BALANCE, DECEMBER 31, 2001 (CARRIED FORWARD)                       0         84,999              0              0              0
</TABLE>

<TABLE>
<CAPTION>
                                                                                                                       AMOUNTS
                                                               COMMON STOCK              ADDITIONAL                    RECEIVABLE
                                                              $.001 PAR VALUE             PAID-IN       DEFERRED         FROM
                                                           SHARES        AMOUNT           CAPITAL     COMPENSATION   STOCKHOLDERS
<S>                                                    <C>            <C>             <C>            <C>            <C>
BALANCE, DECEMBER 31, 1999 (BROUGHT FORWARD)              101,687,139   $    102,000   $ 27,053,000                  $          0
Shares issued of Series C convertible preferred
shares at $100.00 per share including deemed
dividend in connection with beneficial conversion
feature of preferred stock                                                                2,199,000
Issuance of shares in connection with Series C
preferred stock private placement investment                  700,000          1,000        600,000
Shares issuable at $2.23 per share in connection with
research and development and license agreement                                            1,115,000
Issuance of shares at market price for services                11,083                        24,000
Issuance of options at market value for services                                            229,000
Issuance of options to purchase 100,000 shares
@$.40 per share for services
Issuance of stock options in connection with deferred
compensation agreement                                                                      425,000   ($   425,000)
Amortization of deferred compensation                                                                      113,000
Issuance of shares to purchase furniture and fixtures          10,500                        40,000
Issuance of shares in connection with Series C
preferred stock private placement                              10,000
Issuance of shares at $1.25 per share                       1,600,050          2,000      1,998,000
Conversion of Series B preferred stock to common              600,000
Issuance of shares at market price for services                51,000                       102,000
Shares issuable at market price for services                                                 88,000
Net loss/comprehensive loss

BALANCE, DECEMBER 31, 2000                                104,669,772        105,000     33,873,000       -312,000              0
Issuance of shares in connection with private
placement offerings                                         1,097,500          1,098        694,000
Issuance of shares upon conversion of Series B
preferred stock                                             1,001,660          1,002
Issuance of shares upon conversion of Series C
preferred stock                                             2,800,000          2,800
Issuance of shares upon exercise of stock options              15,000             15          3,000
Issuance of shares to acquire Teneo Computing Inc.          1,400,000          1,400        784,000
Issuance of shares to purchase 42% of Novint
Technologies, Inc.                                          1,000,000          1,000        560,000
Issuance of shares for services at fair market value        3,388,097          1,743      2,138,000
Exercise of warrants issued for services                      942,281            942        782,000
Issuance of stock options for services                                                      250,000
Amortization of deferred compensation                                                                       85,000
Net loss/comprehensive loss

BALANCE, DECEMBER 31, 2001 (CARRIED FORWARD)              116,314,310        115,000     39,084,000       -227,000              0
</TABLE>

<TABLE>
<CAPTION>
                                                             DEFICIT
                                                           ACCUMULATED
                                                            DURING THE
                                                           DEVELOPMENT      TREASURY
                                                             STAGE            STOCK           TOTAL
<S>                                                       <C>              <C>            <C>
BALANCE, DECEMBER 31, 1999 (BROUGHT FORWARD)                ($23,547,000)  $          0   $  3,608,000
Shares issued of Series C convertible preferred
shares at $100.00 per share including deemed
dividend in connection with beneficial conversion
feature of preferred stock                                    -1,400,000                       799,000
Issuance of shares in connection with Series C
preferred stock private placement investment                                                   601,000
Shares issuable at $2.23 per share in connection with
research and development and license agreement                -1,115,000
Issuance of shares at market price for services                                                 24,000
Issuance of options at market value for services                                               229,000
Issuance of options to purchase 100,000 shares
@$.40 per share for services                                                                   113,000
Issuance of stock options in connection with deferred
compensation agreement
Amortization of deferred compensation
Issuance of shares to purchase furniture and fixtures                                           40,000
Issuance of shares in connection with Series C
preferred stock private placement
Issuance of shares at $1.25 per share                                                        2,000,000
Conversion of Series B preferred stock to common
Issuance of shares at market price for services                                                102,000
Shares issuable at market price for services                                                    88,000
Net loss/comprehensive loss                                   -4,736,000                    -4,736,000

BALANCE, DECEMBER 31, 2000                                   -30,798,000              0      2,868,000
Issuance of shares in connection with private
placement offerings                                                                            695,098
Issuance of shares upon conversion of Series B
preferred stock                                                                                  1,002
Issuance of shares upon conversion of Series C
preferred stock                                                                                  2,800
Issuance of shares upon exercise of stock options                                                3,015
Issuance of shares to acquire Teneo Computing Inc.                                             785,400
Issuance of shares to purchase 42% of Novint
Technologies, Inc.                                                                             561,000
Issuance of shares for services at fair market value                                         2,139,743
Exercise of warrants issued for services                                                       782,942
Issuance of stock options for services                                                         250,000
Amortization of deferred compensation                                                           85,000
Net loss/comprehensive loss                                   -6,662,000                    -6,662,000

BALANCE, DECEMBER 31, 2001 (CARRIED FORWARD)                 -37,460,000              0      1,512,000
</TABLE>


                                      F-9

<PAGE>

Consolidated Statements of Stockholders' Equity (Capital Deficiency)
(Notes A and F)
For the Cumulative Period From July 31, 1992 (Inception)
Through December 31, 2003 (continued)

<TABLE>
<CAPTION>
                                                                                 PREFERRED STOCK             PREFERRED STOCK
                                                            SERIES A             $.001 PAR VALUE             $.001 PAR VALUE
                                                           PREFERRED                SERIES B                    SERIES C
                                                            STOCK              SHARES       AMOUNT        SHARES        AMOUNT
<S>                                                     <C>               <C>           <C>            <C>          <C>
BALANCE, DECEMBER 31, 2001 (BROUGHT FORWARD)            $          0         84,999   $          0              0   $          0
Issuance of shares in connection with private
placement offering
Issuance of shares for the payment of research and
development
Issuance of shares at market price for services
rendered
Issuance of shares in connection with private
placement offering
Issuance of shares for the payment of research and
development
Issuance of shares at market price for services
rendered
Issuance of shares in connection with private
placement offering
Issuance of shares upon conversion of Series B
preferred stock                                                             -10,000
Issuance of shares  at  market price for services
rendered
Issuance of shares for the payment of research and
development
Issuance of shares in connection with private
placement offering
Issuance of shares at market price for services
rendered
Issuance of shares in connection with private
placement offering
Issuance of shares in connection with private
placement offering
Issuance of shares at market price for services
rendered
Issuance of shares at market price for services
rendered
Issuance of shares at market price for services
rendered
Issuance of shares at market price for services
rendered
Issuance of shares at market price for services
rendered
Amortization of deferred compensation
Net loss/comprehensive loss

BALANCE, DECEMBER 31, 2002                              $          0         74,999   $          0              0   $          0
</TABLE>

<TABLE>
<CAPTION>
                                                                                                                         AMOUNTS
                                                                  COMMON STOCK             ADDITIONAL                    RECEIVABLE
                                                                $.001 PAR VALUE             PAID-IN       DEFERRED         FROM
                                                             SHARES        AMOUNT           CAPITAL     COMPENSATION   STOCKHOLDERS
<S>                                                      <C>            <C>             <C>            <C>            <C>
BALANCE, DECEMBER 31, 2001 (BROUGHT FORWARD)                116,314,310   $    115,000   $ 39,084,000   ($   227,000)   $          0
Issuance of shares in connection with private                   850,000          1,000        253,000
placement offering
Issuance of shares for the payment of research and               75,000              0         30,000
development
Issuance of shares at market price for services                   5,000              0          2,000
rendered
Issuance of shares in connection with private                   285,700                       100,000
placement offering
Issuance of shares for the payment of research and              975,000          1,000        360,000
development
Issuance of shares at market price for services                 620,000          1,000        203,000
rendered
Issuance of shares in connection with private                   400,000                       100,000
placement offering
Issuance of shares upon conversion of Series B
preferred stock                                                 100,000
Issuance of shares  at  market price for services               500,000          1,000        135,000
rendered
Issuance of shares for the payment of research and              150,000                        40,000
development
Issuance of shares in connection with private                   600,000          1,000        149,000
placement offering
Issuance of shares at market price for services                  25,277                         8,000
rendered
Issuance of shares in connection with private                 1,000,000          1,000         99,000
placement offering
Issuance of shares in connection with private                   200,000                        30,000
placement offering
Issuance of shares at market price for services                 247,904                        59,000
rendered
Issuance of shares at market price for services               1,285,301                       169,000
rendered
Issuance of shares at market price for services                 394,000              0         39,000
rendered
Issuance of shares at market price for services                  60,000              0          8,000
rendered
Issuance of shares at market price for services                  75,000              0          7,000
rendered
Amortization of deferred compensation                                                                         85,000
Net loss/comprehensive loss

BALANCE, DECEMBER 31, 2002                                  124,262,522   $    122,000   $ 40,875,000   ($   142,000)   $          0
</TABLE>

<TABLE>
<CAPTION>
                                                             DEFICIT
                                                           ACCUMULATED
                                                            DURING THE
                                                            DEVELOPMENT       TREASURY
                                                             STAGE             STOCK           TOTAL
<S>                                                     <C>              <C>            <C>
BALANCE, DECEMBER 31, 2001 (BROUGHT FORWARD)               ($37,460,000)   $          0   $  1,512,000
Issuance of shares in connection with private                                                  254,000
placement offering
Issuance of shares for the payment of research and                                              30,000
development
Issuance of shares at market price for services                                                  2,000
rendered
Issuance of shares in connection with private                                                  100,000
placement offering
Issuance of shares for the payment of research and                                             361,000
development
Issuance of shares at market price for services                                                204,000
rendered
Issuance of shares in connection with private                                                  100,000
placement offering
Issuance of shares upon conversion of Series B
preferred stock                                                                                      0
Issuance of shares  at  market price for services                                              136,000
rendered
Issuance of shares for the payment of research and                                              40,000
development
Issuance of shares in connection with private                                                  150,000
placement offering
Issuance of shares at market price for services                                                  8,000
rendered
Issuance of shares in connection with private                                                  100,000
placement offering
Issuance of shares in connection with private                                                   30,000
placement offering
Issuance of shares at market price for services                                                 59,000
rendered
Issuance of shares at market price for services                                                170,000
rendered
Issuance of shares at market price for services                                                 39,000
rendered
Issuance of shares at market price for services                                                  8,000
rendered
Issuance of shares at market price for services                                                  7,000
rendered
Amortization of deferred compensation                                                           85,000
Net loss/comprehensive loss                                  -4,028,007                     -4,028,007

BALANCE, DECEMBER 31, 2002                                 ($41,488,007)   $          0   ($ 5,633,000)

</TABLE>

                                      F-10

<PAGE>

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

CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                                                               PERIOD FROM
                                                                                                              JULY 31, 1992
                                                                                 YEAR ENDED                    (INCEPTION)
                                                                                December 31,                     THROUGH
                                                                      ---------------------------------
                                                                           2003              2002           December 31, 2003
                                                                      ----------------  ---------------  ------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                    <C>                <C>                        <C>
Net loss                                                               $   (2,569,000)    $ (4,028,000)              (39,051,000)
Adjustments to reconcile net loss to net cash
   used in operating activities:
   Gain on disposition of investment                                         (315,000)         (78,000)                 (393,000)
   Common stock issued for services                                         1,747,000        1,064,000                 5,471,000
   Preferred stock issued for services                                                               -                   598,000
   Stock options issued for services                                          255,000          127,000                 9,796,000
   Warrants issued for services                                                                                        2,532,000
   Financing costs payable with common stock                                                                             191,000
   Loss of equity investee                                                    100,000          310,000                   715,000
   Amortization of technology license                                         145,000          392,000                   537,000
   Amortization of patents                                                    208,000          244,000                   452,000
   Loss on disposal of equipment                                                                26,000                    26,000
   Impairment charge of certain patents                                                        189,000                   189,000
   Depreciation                                                                15,000           30,000                 1,721,000
   Changes in:
   Prepaid expenses and other assets                                          (59,000)          18,000                   (84,000)
   Accounts payable and accrued expenses                                      222,000          772,000                 1,922,000
                                                                      ----------------  ---------------  ------------------------

Net cash (used in) operating activities;                                     (251,000)        (934,000)              (15,378,000)
                                                                      ----------------  ---------------  ------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of equipment                                                                                                   (423,000)
Purchase of investment                                                                                                  (100,000)
Proceeds from sale of equipment                                                                                           14,000
Proceeds received from sale of investment                                     315,000           78,000                   393,000
                                                                      ----------------  ---------------  ------------------------

Net cash provided by (used in) investing activities                           315,000           78,000                  (116,000)
                                                                      ----------------  ---------------  ------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock                                                                                              (100,000)
Proceeds from note payable to stockholders                                          -                                  2,399,000
Proceeds from note payable - other                                                             115,000                   415,000
Repayment of note payable - other                                            (117,000)          (5,000)                 (135,000)
Net proceeds from issuance of preferred stock                                                                          3,569,000
Net proceeds from issuance of common stock                                     41,000          735,000                 9,571,000
Loan repayment to preferred stockholder                                                                                 (148,000)
Capital lease payments                                                                                                   (13,000)
Security deposit paid                                                                                                     (8,000)
                                                                      ----------------  ---------------  ------------------------

Net cash (used in) provided by financing activities                           (76,000)         845,000                15,550,000
                                                                      ----------------  ---------------  ------------------------


NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                          (12,000)         (11,000)                   56,000
Cash and cash equivalents, beginning of period                                 68,000           79,000                         -
                                                                      ----------------  ---------------  ------------------------

CASH AND CASH EQUIVALENTS, END OF PERIOD                                     $ 56,000         $ 68,000                  $ 56,000
                                                                      ================  ===============  ========================

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid                                                                  19,000           22,000                    14,000

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINACING ACTIVITIES:
Fixed assets contributed to the company in exchange for
Series A preferred stock                                                                                                  45,000
Issuance of 14,391,627 common shares to acquire intangible assets                                                         15,000
Special distribution of 14,391,627 shares of common sotck to
stockholder in settlement of stockholder advances                                                                        376,000
Issuance of 7,200,000 cimmon shares to acquire intangible asssets                                                      1,440,000
Issuance of Series A preferred stock and warrants in settlement
of note payable and accrued interest                                                                                   1,830,000
Issuance of 1,000,000 common shares to acquire intangible assets                                                       1,000,000
Issuance of 100,000 common shares to acquire furniture and fixtures                                                       49,000
Issuance of 78,000 common shares in satisfaction of accrued expenses                                                      15,000
Issuance of 10,500 shares to acquire furniture and fuxtures                                                               40,000
Issuance of 1,400,00 of common shares to acquire Teneo Computing                                                         785,000
Issuance of 1,000,000 of common shares to purchase 42% of Novint
Technologies                                                                                                             561,000
Issueance of 200,000 shares of common stock in connection with the
   conversionof Series B preferred shares
Issuance of 250,000 shares of common stock in connection with the
   conversion of Series B preferred shares
</TABLE>


See notes to financial statements

                                      F-11

<PAGE>


                  MANHATTAN SCIENTIFICS, INC. AND SUBSIDIAIRES
                        (A DEVELOPMENT STAGE ENTERPRISE)

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 2003

NOTE A - ORGANIZATION AND OPERATIONS

Manhattan Scientifics, Inc. (formerly Grand Enterprises, Inc. ("Grand"), and its
wholly-owned subsidiaries Tamarack Storage Devices, Inc. and Teneo Computing,
Inc. ("Teneo") (collectively "the Company"), a development stage enterprise,
operates in a single business segment as a technology incubator that seeks to
acquire, develop and bring to market technologies with an emphasis on consumer
and commercial electronics. At December 31, 2003, the Lauer Entities (Lancer
Management Group, LLC) owns approximately 32% of the Company's common stock. In
April 2003, Lancer Partners LLC filed a voluntary petition for relief under
Chapter 11 of the Bankruptcy Code in the United States for the District of
Connecticut.

In January 1998, Manhattan Scientifics, Inc., then a non-operating public
corporation with nominal net assets acquired all of the outstanding common stock
of Tamarack Storage Devices, Inc. ("Tamarack") by issuing 44 million shares of
its common stock including approximately 43,120,000 shares issued to
Projectavision, a public company which gave the stockholders of Tamarack actual
control of the combined company. In addition, Manhattan Scientifics, Inc. issued
182,525 shares of Series A preferred stock and a warrant to purchase 750,000
shares of its common stock at an exercise price of $.10 per share in exchange
for a note payable of $1.5 million plus accrued interest of $330,000 due to
Projectavision from Tamarack. In connection with the legal form of this
transaction, Tamarack became a wholly-owned subsidiary of Manhattan Scientifics,
Inc. For accounting purposes, the acquisition was treated as a recapitalization
of Tamarack rather than a business combination. Tamarack as the accounting
acquiror of the public shell did not record goodwill or any other intangible
asset for this "Reverse Acquisition". The historical financial statements are
those of Tamarack. Tamarack, a development stage enterprise, was a Texas
corporation formed in July 1992. Tamarack was involved in the research and
development of products based on holographic data storage technology. Loss per
share has been restated for all periods prior to the acquisition to include the
number of equivalent shares received by Tamarack's stockholders in the Reverse
Acquisition. In 2002, the Company sold the holographic data storage technology
associated with Tamarack for $150,000.

Prior to this transaction, Projectavision owned approximately 98% of Tamarack.
Projectavision through cash investments acquired approximately 65% of Tamarack
through December 31, 1996. During late 1997 and early 1998, as a result of a
treasury stock transaction between Tamarack and its two founding stockholders,
Projectavision came to own approximately 97% of the outstanding shares of
Tamarack. In lieu of repayment of certain advances made by Projectavision
amounting to approximately $376,000, Tamarack made a special dividend
distribution to Projectavision of the 14,391,627 treasury shares increasing
Projectavision's ownership of Tamarack to 98%. The value ascribed to this
transaction amounted to a reduction of the treasury stock at historical cost and
a contribution to additional paid-in capital of $346,000 as part of the reverse
acquisition.

Concurrently with the Reverse Acquisition, Tamarack merged with DKY, Inc., a
newly formed company. In connection with this transaction, Tamarack, as the
surviving entity, obtained certain license/intellectual property assignment
rights held by DKY, Inc. In addition, the Company issued 7,200,000 common shares
to acquire certain intangible assets from DKY, Inc.'s stockholder valued at $1.4
million. Subsequently, the Company has sold all the assets of Tamarack.


                                      F-12
<PAGE>


NOTE A - ORGANIZATION AND OPERATIONS (CONTINUED)

In May 2001 as part and parcel of a series of transactions between the Company
and Novint Technologies, Inc. ("Novint") modifying an earlier agreement, the
Company acquired all of the outstanding common stock of Teneo by issuing
1,400,000 common shares to the stockholders of Teneo valued at $785,000 and 42%
of the outstanding common stock of Novint by issuing 1,000,000 common shares to
Novint valued at $561,000. Teneo and Novint are both development stage
enterprises involved in research and development of proprietary technologies and
products in the area of haptics (see Note D [2]). Haptics is an emerging
technology that allows computer users to have the physical sensation of
manipulating and touching objects on a computer screen as if they were
three-dimensional, using a special mouse.

The Company has been engaged primarily in directing, supervising and
coordinating research and development efforts and raising funds. The Company
conducts its operations primarily in the United States and Germany.

There is no assurance that the Company's research and development and marketing
efforts will be successful, or that the Company will achieve significant sales
of any products derived therefrom. The Company has incurred net losses and
negative cash flows from operations since its inception and it has both a
working capital and stockholders deficit at December 31, 2003. In addition, the
Company operates in an environment of rapid change in technology and is
dependent upon the services of its employees and its consultants. If the Company
is unable to successfully commercialize its technologies, it is unlikely that it
will continue in business.

The accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America, which
contemplates continuation of the Company as a going concern and realization of
assets and settlement of liabilities and commitments in the normal course of
business. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty. The Company will continue to
require the infusion of capital until operations become profitable. During 2003
the Company was able to raise $40,000 through the sale of its stock in private
placement transactions and it also licensed its mid-range fuel cell technology
to a third-party for $300,000. The Company has also issued its common stock to
employees and consultants as payment for services rendered. The Company has
minimized its cash obligation to consist primarily of certain professional fees,
insurance and lease obligations.


NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RELATED MATTERS

[1]   CASH AND CASH EQUIVALENTS:

      The Company maintains cash and cash equivalents with various financial
      institutions. The Company performs periodic evaluations of the relative
      credit standing of the financial institutions which is considered in the
      Company's investment strategy.

[2]   PRINCIPLES OF CONSOLIDATION:

      The consolidated financial statements include the accounts of the Company
      and its two wholly-owned subsidiaries. All material intercompany accounts
      and transactions have been eliminated.

[3]   PROPERTY AND EQUIPMENT:

      Property and equipment are recorded at cost. The cost of maintenance and
      repairs is charged against results of operations as incurred. Depreciation
      is charged against results of operations using the straight-line method
      over the estimated economic useful life of the asset.

[4]   INTANGIBLE ASSETS:

      Patents and licenses are recorded at cost. Amortization is charged against
      results of operations using the straight-line method over the estimated
      economic useful life. Patents related to the mid-range fuel cell and the
      micro fuel cell technologies are estimated to have an economic useful life
      of 10 years. Licenses relating to the haptics technology are estimated to
      have economic useful lives ranging between two and three years.


                                      F-13
<PAGE>

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RELATED MATTERS
(CONTINUED)

[5]   INCOME TAXES:

      The Company recognizes deferred tax liabilities and assets for the
      expected future tax consequences of events that have been included in the
      financial statements or tax returns. Under this method, deferred tax
      liabilities and assets are determined on the basis of the differences
      between the tax basis of assets and liabilities and their respective
      financial reporting amounts ("temporary differences") at enacted tax rates
      in effect for the years in which the differences are expected to reverse.
      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.

[6]   PER SHARE DATA:

      The basic and diluted per share data has been computed on the basis of the
      net loss available to common stockholders for the period divided by the
      historic weighted average number of shares of common stock outstanding.
      All potentially dilutive securities (see Note F) have been excluded from
      the computations since they would be antidilutive. The total potential
      common shares that were excluded from the loss per share calculation
      because they were anti-dilutive amounted to 30,505,000. These potential
      common shares include shares issuable upon the exercise of options and
      shares issuable upon conversion of the Series B preferred stock.

[7]   RESEARCH AND DEVELOPMENT EXPENSES:

      Costs of research and development activities are expensed as incurred and
      include amortization of the Company's patents.

[8]   ADVERTISING EXPENSES:

      The Company expenses advertising costs which consist primarily of
      promotional items and print media, as incurred. Advertising expenses
      amounted to $0, $9,000 and $82,000 for the years ended December 31, 2003
      and 2002 and for the cumulative period July 31, 1992 (inception) through
      December 31, 2003, respectively.

[9]   USE OF ESTIMATES:

      The preparation of financial statements in conformity with accounting
      principles generally accepted in the United States of America requires
      management to make estimates and assumptions that affect the amount of
      assets and liabilities and disclosures of contingent assets and
      liabilities at the date of the financial statements and the reported
      amounts of revenue and expenses during the reporting period. A significant
      estimate includes the carrying value of the Company's patents.

[10]  INVESTMENTS:

      The Company recorded its investment in Novint at cost and uses the equity
      method of accounting to record its share of income or loss (see Note
      D[2]). In October of 2002, the Company's ownership interest in NMXS.com,
      Inc. fell below 20%. As a result, the Company discontinued the equity
      method of accounting for NMXS.com, Inc. (see Note D[1]). The Company now
      accounts for its shares of NMXS.com as available for sale pursuant to SFAS
      No. 115 "Accounting For Certain Investments in Debt and Equity
      Securities". As of December 31, 2003, the Company fully liquidated its
      investment in NMXS.com.


                                      F-14
<PAGE>


NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RELATED MATTERS
(CONTINUED)

[11]  REVENUE RECOGNITION:

      The Company expects to earn revenues from the sale or licensing of its
      products and such revenue will be recognized in accordance with the terms
      of the underlying agreements at the time such transactions are
      consummated.

      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.

      In September 2002, the Company entered into an agreement to sell certain
      holographic data storage intellectual property and related research
      equipment to a privately held company (the "buyer"). As consideration for
      the intellectual property and the related research equipment, the Company
      received cash and a warrant to purchase 238,998 shares of the buyer's
      junior preferred stock (the "warrants"). Also, for a period of two years
      commencing on the date of the sale, the Company is eligible to receive
      additional junior preferred stock warrants valued at approximately
      $200,000 if the buyer receives $1 million in licensing fees related to the
      holographic data storage intellectual property sold by the Company to the
      buyer or if the buyer receives $1 million in a qualified stock transaction
      as defined in the agreement.

      The warrants have an exercise price of $0.01 per share and they have an
      exercise date of January 1, 2004 or earlier as defined below: (1) The
      closing of a round of preferred stock financing by the buyer, ii. The
      fifth business day prior to closing of a consolidation or merger of the
      buyer and another company where the buyer is not the surviving company,
      iii. The fifth business day prior to the sale of substantially all of the
      buyer's assets, iv. The fifth business day prior to the recapitalization
      of the buyer, v. The fifth business day prior to the liquidation of the
      buyer, vi. 180 days following the closing of an initial public offering by
      the company. The junior preferred stock warrants expire on December 31,
      2004 or thirty days following one of the aforementioned events.

      The junior preferred stock underlying the warrants has a liquidation
      preference of $2.50 per share and it is junior in all respects to other
      classes of preferred stock of the buyer. Each share of junior preferred
      stock can be converted into one share of the buyer's common stock. The
      junior preferred stock is also not eligible to receive any dividends.

      In connection with the sale of the aforementioned intellectual property
      and research equipment the Company had recognized $150,000 in revenue
      during the year ended December 31, 2002. Based on certain financial
      information pertaining to the buyer and the terms of the warrant described
      above the Company has ascribed a $10,000 value to the warrants received.

      In 2003, the Company recognized approximately $4,900 in revenue related to
      government research contracts.

      Revenue was recognized in 2000 upon production and delivery of fuel cell
      prototypes. Contract revenue represent primarily reimbursed expenditures
      incurred in prior years in connection with a government research contract.
      The significant aspects of this contract were completed in 1997 and the
      Company does not expect any reimbursements beyond 1997. Amounts reimbursed
      represent miscellaneous other income.

[12]  IMPAIRMENT OF LONG-LIVED ASSETS:

      Long-lived assets, including patents and technology licenses to be held
      and used are reviewed for impairment whenever events or changes in
      circumstances indicate that the related carrying amounts may not be
      recoverable using expected future undiscounted cash flows. When required,
      impairment losses on assets to be held and used are recognized based on
      the excess of the asset's carrying amount over its fair value as
      determined by selling prices for similar assets or application of other
      appropriate valuation techniques. Long-lived assets to be disposed of are
      reported at the lower of their carrying amount or fair value less disposal
      costs. The Company has reviewed its patents and technology licenses for
      impairment and determined that its solar fuel cell patents have become
      impaired. As a result, in the fourth quarter of 2002, the Company recorded
      a charge of approximately $189,000 to reduce the carrying value of these
      patents to zero.


                                      F-15
<PAGE>


NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RELATED MATTERS
(CONTINUED)

[13]  STOCK-BASED COMPENSATION:

      The Company accounts for stock-based employee compensation under
      Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock
      Issued to Employees" and related interpretations. The Company has adopted
      the disclosure-only provisions of Statement of Financial Accounting
      Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation" and
      SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and
      Disclosure," which was released in December 2002 as an amendment of SFAS
      No. 123. The Company's stock option plans are described in Note F [4]. The
      following table illustrates the effect on net loss and net loss per share
      if the fair value based method had been applied to all awards.

                              MANHATTAN SCIENTIFICS
                                    12/31/03
<TABLE>
<CAPTION>
                                                                            FOR THE YEAR ENDED
                                                                               DECEMBER 31
                                                                        ---------------------------
                                                                            2003          2002
                                                                        ------------  -------------
         <S>                                                            <C>           <C>
         Reported net loss                                              $ (2,569,000) $ (4,028,000)
         Stock-based employee compensation expense included in reported
            net loss, net of related tax effects                                            85,000
         Stock-based employee compensation determined under
            the fair value  based  method,  net of related tax  effects                   (306,000)

                                                                        ------------  -------------
         Pro forma net loss
                                                                        $(2,569,000)  $ (4,249,000)
         Basic and diluted loss per share:
            As reported
            Pro forma                                                     $ (.02)       $ (.03)
                                                                          $ (.02)       $ (.03)
</TABLE>


      During the year ended December 31, 2003, the fair value of each option
      grant on the date of grant is estimated using the Black-Scholes
      option-pricing model with a volatility of 117% for 2003, expected life of
      options of 10 years, an average risk free interest rate of 3.96% to 3.33%
      and a dividend yield of 0%. The weighted average fair value of options
      granted during the year ended December 31, 2003 is $.03 to $.05.


                                      F-16
<PAGE>


NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RELATED MATTERS
(CONTINUED)

[14]  RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:

      In December 2003, the Financial Accounting Standards Board ("FASB") issued
      interpretation No. 46R ("FIN 46R"), "Consolidation of Variable Interest
      Entities." Until this interpretation, a company generally included another
      entity in its consolidated financial statements only if it controlled the
      entity through voting interests. FIN 46R requires a variable interest
      entity, as defined, to be consolidated by a company if that company is
      subject to a majority of the risk of loss from the variable interest
      entity's activities or is entitled to receive a majority of the entity's
      residual returns. Certain provisions of FIN 46R were deferred until the
      period ending after March 15, 2004. The adoption of FIN 46R for provisions
      effective during 2003 did not have a material impact on the Company's
      financial position, cash flows or results of operations.

      In April 2003,the FASB issued Statement No. 149, "Amendment of Statement
      133 on Derivative Instruments and Hedging Activities." (SFAS No. 149),
      which amends SFAS 133 for certain decisions made by the FASB Derivatives
      Implementation Group. In particular, SFAS 149: (1) clarifies under what
      circumstances a contract with an initial net investment meets the
      characteristic of a derivative, (2) clarifies when a derivative contains a
      financing component, (3) amends the definition of an underlying financial
      component to conform it to language used in FASB Interpretation No. 45,
      "Guarantor's Accounting and Disclosure Requirements for Guarantees,
      Including Indirect Guarantees of Indebtedness of Others," and (4) amends
      certain other existing pronouncements. This statement is effective for
      contracts entered into or modified after June 30, 2003 and for hedging
      relationships designated after June 30, 2003. In addition, most provisions
      of SFAS 149 are to be applied prospectively. The adoption of this standard
      did not have a material impact on the Company's financial position, cash
      flows or results of operations.

      In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
      Financial Instruments with Characteristics of Both Liabilities and Equity"
      ("SFAS 150"). FAS No. 150 changes the accounting for certain financial
      instruments that under previous guidance issuers could be accounted for as
      equity. It required that those instruments be classified as liabilities in
      balance sheets. The guidance in FAS No. 150 is generally effective for all
      financial instruments entered into or modified after May 31, 2003, and
      otherwise is effective on July 1, 2003. The adoption of SFAS No. 150 did
      not have a material impact on the Company's financial position, cash flows
      or results of operations.

NOTE C - PROPERTY AND EQUIPMENT

Property and equipment as of December 31, 2003 consists of artwork with a cost
basis of $41,000:

The depreciation expense for year ended December 31, 2003 and 2002 were
approximately $15,000 and $32,000.


NOTE D - INVESTMENTS

[1]   NMXS.COM, INC.:

      On June 3, 1999, the Company entered into an agreement with NMXS.com, Inc.
      (formerly New Mexico Software, Inc.) and invested $100,000 ($70,000 June
      1999 and $30,000 July 1999) for 5,416,300 shares of common stock which
      resulted in the Company owning approximately 49% of NMXS.com, Inc. The
      initial investment amount exceeded the underlying net equity by
      approximately $63,000. The Company treated such excess as an expense to
      fund the development of software.

      During 1999, in connection with NMXS.com, Inc.'s transactions in its own
      common stock, the Company's ownership was first reduced to 31% and then in
      August 1999, the Company realized gains amounting to approximately
      $532,000 and its ownership percentage was further diluted to 28% when
      NMXS.com, Inc. became public through a reverse merger. The Company's
      equity in the net losses of NMXS.com, Inc. exceeded such gains. As a
      result of net losses through December 31, 1999 amounting to $632,000,
      including the above transactions, the Company's investment in NMXS.com,
      Inc. was reduced to zero.


                                      F-17
<PAGE>


NOTE D - INVESTMENTS (CONTINUED)

[1]   NMXS.COM, INC.:  (CONTINUED)


      Similarly during 2000, the Company realized gains amounting to
      approximately $305,000 resulting from NMXS.com, Inc.'s capital
      transactions, which diluted the Company's ownership interest to 26%. The
      Company's equity in net losses of NMXS.com, Inc. during 2000 exceeded such
      gain.

      On June 24, 2000, in connection with a private placement offering, the
      Company delivered 100,000 shares of NMXS.com, Inc. stock to a stockholder.
      The Company recognized a gain of approximately $169,000 from this
      transaction. The gain was offset by losses of $481,000 in 2000. In
      addition, the Company delivered an option to purchase an additional
      100,000 shares of the Company's holdings in NMXS.com, Inc. for a purchase
      price of $1 per share.

      On July 27, 2000, the Company exchanged 5,000 shares of NMXS.com, Inc.
      stock for the purchase of furniture and fixtures.

      On February 20, 2001, the Company entered into a stock swap agreement with
      NMXS.com, Inc. The agreement provides for the exchange of cashless
      assignable warrants to purchase 1,500,000 shares of NMXS.com, Inc. common
      stock at an exercise price of $0.50 per share for 150,000 restricted
      shares of the Company's common stock. The transaction was recorded as an
      investment valued at $225,000, which represents the market value of the
      Company's common stock exchanged on the date of the agreement.

      On April 12, 2001, the Company sold 250,000 shares of its NMXS.com, Inc.
      common stock to a third party for a $62,500 note payable at over three
      years.

      On June 27, 2001, the Company transferred 150,000 shares of its NMXS.com,
      Inc. common stock to a third party as a prepayment for services.

      During 2001, the Company realized gains amounting to approximately $29,000
      resulting from NMXS.com, Inc. capital transactions. The Company's equity
      in net losses of NMXS.com, Inc. during 2001 exceeded such gain.

      In April and May of 2002, the Company sold 110,000 shares of NMXS.com,
      Inc. common stock for $39,000.

      In July 2002, the Company obtained a loan from a third party in the amount
      of $100,000. The loan bears interest at a rate of 24% per annum, and was
      due January 2003. The loan was collateralized by 1,500,000 shares of the
      Company's common stock of NMXS.com, Inc. In January 2003, the Company was
      in arrears on the loan and the 1,500,000 shares of NMXS.com, Inc. common
      stock was delivered to the third party to extinguish the loan.

      In August and September 2002, the Company sold 110,000 shares of NMXS.com,
      Inc. common stock market for $25,000.

      During the fourth quarter of 2002, the Company sold 230,000 shares of its
      NMXS.com, Inc. stock market for $14,000. After this transaction the
      Company's ownership interest in NMXS.com, Inc. was reduced to 18%.

      Effective October 1, 2002, the Company has discontinued the use of the
      equity method of accounting for its investment in NMXS.com, Inc.

      In addition, through August 1999, pursuant to the stock purchase agreement
      with NMXS.com, Inc., the Company provided NMXS.com, Inc. with management
      services without remuneration. Also, in consideration for his services
      through December 2000, including board membership provided to NMXS.com,
      Inc., the Company's Chief Executive Officer received a salary of $56,988
      and leased a car from NMXS.com, Inc. During 2001, the Company's Chief
      Executive Officer did not receive any compensation from NMXS.com, Inc. In
      May 2002, the Company's Chief Executive Officer received 117,948 shares of
      NMXS.com, Inc. common stock valued at approximately $61,000.


                                      F-18
<PAGE>


NOTE D - INVESTMENTS  (CONTINUED)

[1]   NMXS.COM, INC.: (CONTINUED)


      During the first quarter of 2003, the Company sold approximately 23,913
      shares of NMXS.com, Inc. common stock for approximately $22,000.

      During the second quarter of 2003, the Company sold 1,150,000 shares of
      NMXS.com, Inc. common stock for approximately $115,000.

      During the third quarter of 2003, the Company sold their remaining
      1,787,387 shares of NMXS.com, Inc. common stock for approximately $43,000.

      As of December 31, 2003, the Company held 1,500,000 warrants to purchase
      shares of NMXS.com common stock.

[2]   NOVINT:

      In June 2000, the Company entered into an agreement with Novint ("2000
      agreement") to exclusively sub-license a development stage computer
      software technology on a worldwide basis, to fund research and development
      of such technology, and to exchange certain securities. In May 2001, the
      Company entered into a series of transactions with Novint and Teneo,
      ("2001 agreement") through which the 2000 agreement was modified. Pursuant
      to the 2001 agreement the Company acquired all of the outstanding common
      stock of Teneo and 42% of the outstanding common stock of Novint; the
      Company also agreed to fund additional amounts to Novint to fulfill the
      Company's $1,500,000 research and development commitment under the 2000
      agreement. The Company is obligated to pay Novint a 5% royalty fee on net
      revenue from products developed from the Novint technology. As of December
      31, 2003, the Company and Novint have not completed negotiating a research
      and development funding agreement to replace the 2000 agreement; however,
      the Company has funded $58,000 for research and development in addition to
      the $1,500,000 funded pursuant to the 2000 agreement.

      In May of 2001, the Company issued 1,400,000 shares of common stock,
      valued at $785,000, to acquire all the outstanding common stock of Teneo.
      The entire purchase price has been allocated to the Teneo haptics
      technology and its related technology license and it is being amortized
      over two years. During 2001 the Company had recorded approximately
      $245,000 in amortization expense related to the Teneo technology. In May
      of 2001, the Company also issued 1,000,000 shares of common stock, valued
      at $561,000, to acquire 42% of the outstanding common stock of Novint. The
      initial $561,000 investment in Novint exceeded the underlying net equity
      in Novint by approximately $523,000. The excess purchase price over the
      underlying net equity in Novint has been assigned to the Novint haptics
      technology and its related license and it is being amortized over three
      years.

      As of December 31, 2003 and 2002, the Company recorded approximately
      $197,000 and $175,000, respectively, in amortization expense relating to
      the Novint technology. This charge is included in the loss from equity
      method investments in the statement of operations.

      As part of the 2001 agreement, Novint exclusively licensed the Teneo
      haptics technology from the Company. In consideration for the license
      Novint has agreed to assume all of the current and future obligations of
      Teneo as it relates to Teneo's license agreement with Harvard University
      ("Harvard"), the patent holder for the Teneo haptics technology. Novint,
      through its license with Teneo, is obligated to make certain royalty and
      research and development payments to Harvard. Novint will be required to
      make royalty payments of 5% of net revenue, up to $1 million, and 2.5% of
      net revenue, in excess $1 million, on sales derived from the Teneo
      technology. Novint is also obligated to make certain research payments to
      Harvard.


                                      F-19
<PAGE>


NOTE D - INVESTMENTS  (CONTINUED)

[2]   NOVINT: (CONTINUED)

      At December 31, 2003, the Company owns approximately 40% of Novint. During
      the year ended December 31, 2003, the Company recorded a loss of $100,000
      pursuant to its ownership interest in Novint. The following is a summary
      of financial data regarding financial position and results of operations
      derived from the December 31, 2003 financial statements of Novint as of
      December 31, 2003 and for the year ended December 31, 2003.

            Current assets (including cash of $32,000)        $ 625,000
            Property and equipment                              201,000
            Other assets                                         40,000
                                                            -----------

                                                            $   866,000
                                                            ===========

            Liabilities                                     $   945,000
            Capital deficit                                     (79,000)
                                                            -----------

                                                            $   866,000
                                                            ===========

            Revenue                                         $   469,000
                                                            ===========

            Net loss                                        $   927,000
                                                            ===========

      Cumulative Losses in excess amounts recognized in the financial statements
      approximates $310,000 as of December 31, 2003.

NOTE E - NOTES PAYABLE

In August 1999, the Company borrowed $275,000 from the Chief Operating Officer.
The loan bears interest at the rate of 5.5% per annum and is due upon the
earlier of 18 months or the date of a private placement raising at least
$1,500,000. This loan was due December 31, 2002. In April of 2004 the Company
and the Chief Operating Officer agreed to extend the term of the loan to
December 31, 2004. The Company and the Chief Operating Officer also agreed to
convert $550,000 in accrued salaries to a note payable. The chief Operating
Officer had originally delivered to the Company $275,000 to exercise options,
each exercisable to purchase common stock, but such exercise was rescinded and
the options have been treated as if not exercised. No shares were delivered as a
result of this transaction. Interest expense for the year ended December 31,
2003 amounted to approximately $15,000.

In October 1999, the Company obtained a $500,000 loan from a stockholder (the
Peters Corporation) with interest at prime plus 1%. The loan was paid in full in
December 1999 plus interest amounting to $7,000. In connection with this loan,
the Company arranged to have 150,000 common shares of the Company delivered to
the Peters Corporation from another stockholder. The fair market value of the
Company's stock was approximately $1.27 per share at the date of the
transaction. Subsequently, the Company agreed to issue to the third party
shareholder 150,000 common shares in replacement of shares provided by the third
party. The Company recognized a charge in 1999 of $191,000 for the value of the
shares delivered with a corresponding credit to additional paid-in capital.


                                      F-20
<PAGE>


NOTE E - NOTES PAYABLE (CONTINUED)

In August 2001, the Company borrowed $250,000 from the Chief Executive Officer.
The loan bears interest at the rate of 5.5% per annum and was due December 31,
2002. This loan was due December 31, 2002. In April of 2004 the Company and the
CEO agreed to extend the term of the loan to December 31, 2004. The Company and
the Chief Executive Officer also agreed to convert $550,000 in accrued salaries
to a note payable. Interest expense for the year ended December 31, 2003
amounted to approximately $12,000. This loan is secured by substantially all of
the assets of the Company. In the event of default on this loan, the Company's
Chief Executive Officer may foreclose on the collateral provided he receives
written consent of the Company's Board of Directors.

In July 2002, the Company obtained a loan from a third party in the amount of
$100,000. The loan bears interest at a rate of 24% per annum, and was due
January 2003. The loan was collateralized by 1,500,000 shares of the Company's
common stock of NMXS.com, Inc. In January 2003, the Company was in arrears on
the loan and the 1,500,000 shares of NMXS.com, Inc. common stock was delivered
to the third party to extinguish the loan.

Prior to 2002, the Company's Chief Executive Officer/Principal Stockholder has
personally guaranteed a $300,000 loan from a third-party financial institution.
This loan was paid off in March of 2004 (See Note K).

Effective December 31, 2003, the Company reclassified the accrued salaries
payable to the CEO and COO of $1,100,000 to notes payable. The loans bear
interest at the rate of 5.5% per annum and are due December 31, 2004.

NOTE F - CAPITAL TRANSACTIONS

[1]   COMMON STOCK AND OPTION ISSUANCES

      In order to retain existing management and attract additional, independent
      directors, the Company authorized the issuance of various securities and
      incentives to its officers and directors in 2003. Restricted shares as
      compensation for services as officer and/or director were issued as
      follows: President/CEO/Chairman - 13,500,000 shares (April 2003);
      Secretary/Director - 1,750,000 shares (April 2003); Treasurer/Director -
      2,250,000 shares (April 2003); new Director (1 of 2) - 1,000,000 shares
      (June 2003); with longevity incentives of up to another 500,000 shares;
      and new Director (2 of 2) - 1,000,000 shares (June 2003); with longevity
      incentives of up to another 500,000 shares. New options as compensation
      for services as officer and/or director were issued as follows:
      Secretary/Director - 1,000,000 options (April 2003); Treasurer/Director -
      1,000,000 options (April 2003); new Director (1 of 2) - 1,000,000 options
      (June 2003); and new Director (2 of 2) - 1,000,000 options (June 2003).
      Also, two members of management elected to return and cancel previously
      issued options in exchange for an equivalent number of restricted shares
      as follows: COO - 5,250,000 shares (April 2003) and 2,750,000 shares
      (April 2003) in replacement of returned options; and Secretary/Director -
      990,000 shares (April 2003) in replacement of returned options.

      For the year ended December 31, 2003 the Company recorded a charge to
      operations for the fair market value of all restricted shares of common
      stock and stock options issued for services.

      Pursuant to the provisions of FASB Interpretation No. 44 "Accounting for
      Certain Transactions Involving Stock Compensation - an Interpretation of
      APB Opinion No. 25" the Company has recorded a charge to operations for
      the fair value of the restricted stock issued in conjunction with the
      cancellation of previously issued options to the COO and the Company's
      Secretary/Director.



                                      F-21
<PAGE>


NOTE F - CAPITAL TRANSACTIONS - CONTINUED

[2[   COMMON STOCK:

      The following common stock transactions include the effects of restating
      of stockholders' equity for the shares received in the
      recapitalization/merger as a result of the reverse acquisition. The
      exchange rate of such shares was 9.59 Manhattan Scientifics, Inc. common
      shares for each Tamarack common share. Accordingly, the Company's
      financial statement presentation indicates that there were 44,000,000
      common shares outstanding immediately prior to consummating the reverse
      merger.

      Effective July 31, 1992, the Company issued 14,391,627 shares of common
      stock to the founders for certain intangible assets.

      During 1994, the Company effected the following stock transactions:

            Issued 14,391,627 shares of common stock to Projectavision, Inc. at
            approximately $.21 per share in accordance with a stock purchase
            agreement.

            Issued 479,720 shares of common stock on exercise of options at a
            price of approximately $.10 per share.

            Issued 345,399 shares of common stock at a price of approximately
            $.52 per share.

      During 1996, the Company issued 14,391,627 shares of common stock for
      $15,000.

      During 1997, the Company repurchased 7,195,814 shares of common stock for
      $15,000.

      During 1998, the Company effected the following transactions:

            In January 1998, repurchased 7,195,813 shares of common stock for
            $15,000.

            In January 1998, the Company made a special distribution to
            Projectavision of 14,391,627 common shares held in treasury.

            In January 1998, in accounting for the reverse merger transaction,
            the Company was deemed to have issued 11 million common shares for
            the net monetary assets of Grand which was nominal.

            In January 1998, issued 5,000,000 shares of common stock for $.20
            per share in a private placement offering.

            In January 1998, issued 7,200,000 shares of common stock at $.20 per
            share to acquire certain intangible assets.

            In February 1998, issued 1,000,000 shares of common stock with a
            market value of $.58 per share for consulting services.

            In April 1998, issued 275,000 shares of common stock at $.18 per
            share to an accredited investor in a private placement offering.

            In July 1998, issued 9,435,405 shares of common stock on conversion
            of 182,525 shares of Series A convertible preferred stock, and
            included 309,155 of common shares representing payment in
            satisfaction of accumulated dividend of approximately $100,000 at
            date of conversion.


                                      F-22
<PAGE>


NOTE F - CAPITAL TRANSACTIONS  (CONTINUED)

[2]   COMMON STOCK: (CONTINUED)

            In July 1998, as part of the private placement transaction described
            below, the Company issued 10 million common stock purchase warrants
            at an exercise price of $.05 per share to the "Lauer Entities". In
            addition, the Company arranged for this third party to purchase
            43,170,512 shares of the Company's common stock from Projectavision,
            Inc. Furthermore, the Company agreed to issue 20 million shares of
            common stock to this third party at a price of $.05 per share,
            together with rights to assign such shares to certain other third
            parties. Such rights were assigned to the certain other third
            parties as noted directly below.

      From August 1998 through December 1998, issued 20,340,000 shares of its
      common stock at $.05 per share in a private placement offering.

      During 1999, the Company effected the following transactions:

            In August 1999, issued 1,000,000 shares of common stock for $1.00
            per share to acquire certain intangible assets.

            In October 1999, issued 78,000 shares in satisfaction of accrued
            expenses.

            In October 1999, issued 100,000 shares at $.49 per share to acquire
            furniture and fixtures that were issuable in May.

            In October 1999, issued 10,000 shares at $.49 per share for
            consulting services that were issuable in May.

            In October 1999 issued 17,269 shares at market prices from April
            through September as consulting services were performed.

            In October 1999, exercised 100,000 options into 100,000 shares of
            common stock at $.20 per share.

            In December 1999, issued 1,600 shares of its common stock at $1.25
            per share for services rendered.

            In December 1999, issued 533,000 shares of common stock at $.75 per
            share in a private placement offering.

      During 2000, the Company effected the following transactions:

            In January 2000, issued 515,000 shares of common stock at $.75 per
            share in a private placement offering.

            In January 2000, issued 4,942 shares of common stock, at market
            price, for consulting services performed.

            In January 2000, issued 1,076,923 shares of common stock, pursuant
            to the July 28, 1999 exercise of warrants by Equilink, LLC.

            In April 2000, issued 1,500 shares of common stock, at market price,
            for consulting services performed.

            In June 2000, issued 700,000 shares of common stock in connection
            with the private placement offering of Series C preferred shares.

            In July 2000, issued 5,833 shares of common stock, at market price,
            for consulting services performed.

            In July 2000, issued 5,000 shares of common stock, at market price,
            to acquire furniture and fixtures.


                                      F-23
<PAGE>


NOTE F - CAPITAL TRANSACTIONS  (CONTINUED)

[2]   COMMON STOCK: (CONTINUED)


            In August 2000, issued 10,000 shares of common stock in connection
            with the private placement offering of Series C preferred shares
            (completed June 2000).

            In August 2000, the Company issued 100,000 options to purchase stock
            at $.40 per share for services rendered.

            In September 2000. issued 5,500 shares of its common stock to
            acquire furniture and fixtures.

            In October 2000, issued 3,750 shares of common stock, at market
            price, for services rendered.

            In October 2000, issued 1,000 shares of common stock, at market
            price, for services rendered.

            On October 20, 2000, the Board of Directors of the Company
            authorized to increase the total number of authorized shares of
            common stock from 150,000,000 to 250,000,000.

            In November 2000, issued 800,050 shares of common stock at $1.25 per
            share in a private placement offering.

            In December 2000, issued 600,000 shares of common stock in
            connection with the conversion of Series B preferred shares at a
            rate of 1 Series B preferred share to 10 common shares.

            In December 2000, issued 50,000 shares of common stock, at market
            price, for services rendered.

            In December 2000, issued 800,000 shares of common stock at $1.25 per
            share in a private placement offering.

      During 2001, the Company effected the following transactions:

            In January 2001, issued 5,040 shares of common stock at market price
            for services rendered.

            In January 2001, issued 666,660 shares of common stock in connection
            with the conversion of Series B preferred shares at a rate of 1
            Series B preferred share to 10 common shares.

            In January 2001, 75,000 options were exercised for 73,064 shares of
            common stock on a cashless basis.

            In February 2001, issued 150,000 shares of common stock in exchange
            for 1,500,000 warrants of NMXS.com, Inc. (see Note D).

            In February 2001, issued 46,370 shares of common stock at market
            price for services rendered.

            In March 2001, issued 150,000 shares of common stock at $0.67 per
            share in a private placement offering.

            In March 2001, issued 200,000 shares of common stock at $0.72 per
            share in a private placement offering.

            In March 2001, issued 414,247 shares of common stock at market price
            for services rendered.

            In April 2001, issued 97,500 shares of common stock at the market
            price for consulting services performed.


                                      F-24
<PAGE>


NOTE F - CAPITAL TRANSACTIONS  (CONTINUED)

[2]   COMMON STOCK: (CONTINUED)

            In April 2001, issued 112,500 shares of common stock at $0.62 per
            share in a private placement offering.

            In April 2001, issued 3,125 shares of common stock at market price
            for services rendered.

            In May 2001, issued 800,000 shares of common stock in connection
            with the conversion of Series C preferred shares at the rate of 1
            Series C preferred share to 200 common shares.

            In May 2001, issued 200,000 shares of common stock at $0.83 per
            share in a private placement offering.

            In May 2001, issued 100,000 shares of common stock at $0.83 per
            share in a private placement offering.

            In May 2001, issued 197,500 shares of common stock at market price
            for services rendered.

            In May 2001, issued 942,281 shares of common stock upon exercise of
            warrants by a stockholder.

            In May 2001, issued 1,400,000 shares of common stock, valued at
            $784,000, to acquire all the outstanding common stock of Teneo.

            In May 2001, issued 1,000,000 shares of common stock, valued at
            $560,000, to acquire 42% of the outstanding common stock of Novint.

            In June 2001, issued 135,000 shares of common stock at $0.92 per
            share in a private placement offering.

            In June 2001, issued 15,000 shares of common stock pursuant to the
            exercise 15,000 options at $0.20 per share.

            In June 2001, issued 720,382 shares of common stock at market prices
            for services rendered.

            In July 2001, issued 200,000 shares of common stock at $0.50 per
            share in a private placement offering.

            In July 2001, issued 2,000,000 shares of common stock in connection
            with the conversion of Series C preferred shares at a rate of 1
            Series C preferred share to 200 common shares.

            In July 2001, issued 229,165 shares of common stock at market prices
            for services rendered.

            In August 2001, issued 7,386 shares of common stock at market price
            for services rendered.

            In September 2001, issued 335,000 shares of common stock in
            connection with the conversion of Series B preferred shares at the
            rate of 1 Series B preferred share to 10 common shares.

            In September 2001, issued 350,000 shares of common stock at $0.45
            for payment of research and development costs.

            In September 2001, issued 155,208 shares of common stock at the
            market price for services rendered.


                                      F-25
<PAGE>


NOTE F - CAPITAL TRANSACTIONS  (CONTINUED)

[2]   COMMON STOCK: (CONTINUED)

            In October 2001, issued 77,451 shares of common stock at the market
            price for payment of research and development costs.

            In November 2001, issued 322,549 shares of common stock at the
            market price for payment of research and development costs.

            In November 2001, issued 510,000 shares of common stock at the
            market price for service rendered.

            In December 2001, issued 10,000 shares of common stock at the market
            price for services rendered.

      During 2002, the Company effected the following transactions:

            In January 2002, issued 850,000 shares of common stock at $0.30 per
            share in a private placement offering.

            In January 2002, issued 75,000 shares of common stock at $0.40 per
            share for payment of research and development services performed by
            a third party consultants.

            In January 2002, issued 24,110 shares of common stock at the market
            price for services rendered.

            In January 2002, issued 285,700 shares of common stock at $0.35 per
            share in a private placement offering.

            In February 2002, issued 975,000 shares of common stock at the
            market price for research and development costs.

            In February 2002, issued 620,000 shares of common stock at the
            market price for services rendered.

            In March 2002, issued 400,000 shares of common stock at $0.25 per
            share in a private placement offering.

            In March 2002, issued 100,000 shares of common stock in connection
            with the conversion of Series B preferred shares at a rate of 1
            Series B preferred share to 10 common shares.

            In March 2002, issued 500,000 shares of common stock at the market
            price for services rendered.

            In March 2002, issued 150,000 shares of common stock at the market
            price for research and development costs.

            In April 2002, issued 600,000 shares of common stock at $0.25 per
            share in a private placement offering.

            In May 2002, issued 25,277 shares of common stock at the market
            price for services rendered.

            In May 2002, issued 1,000,000 shares of common stock at $0.10 per
            share in a private placement offering.

            In May 2002, issued 200,000 shares of common stock at $0.15 per
            share in a private placement offering.


                                      F-26
<PAGE>


NOTE F - CAPITAL TRANSACTIONS  (CONTINUED)

[2]   COMMON STOCK: (CONTINUED)

            In May 2002, issued 247,939 shares of common stock at the market
            price for services rendered.

            In July 2002, issued 1,285,301 shares of common stock at the market
            price for services rendered.

            In August 2002, issued 394,000 shares of common stock at the market
            price for services rendered.

            In September 2002, issued 160,000 shares of common stock at the
            market price for services rendered.

            In October 2002, issued 75,000 shares of common stock at the market
            price for services rendered.

            During 2003, the company effected the following transactions.


            In January 2003, issued 1,000,000 shares of common stock at the
            market price for services rendered.

            In February 2003, issued 1,000,000 shares of common stock at $0.04
            per share in a private placement offering.

            In February 2003, issued 125,000 shares of common stock at the
            market price for services rendered.

            In March 2003, issued 10,756,000 shares of common stock at the
            market price for services rendered.

            In April 2003, issued 23,750,000 shares of common sock at $0.03 per
            share as officer compensation for services rendered.

            In April 2003, 3,740,000 options were exercised for 3,740,000 shares
            of common stock on a cashless basis.

            In June 2003, issued 2,000,000 shares of common stock at $0.05 per
            share as officer compensation for services rendered.

            In June 2003, 2,955,000 options were exercised for 2,955,000 shares
            of common stock on a cashless basis.

            In June 2003, issued 1,585,000 shares of common stock at the market
            price for services rendered.

            In August 2003, issued 250,000 shares of common stock in connection
            with the conversion of Series B preferred shares at the rate of 1
            Series B preferred share to 10 common shares.

            In October 2003, issued 585,000 shares of common stock at the market
            price for services rendered.


[3]   PREFERRED STOCK:

      During 1993, in accordance with a Share Purchase Agreement, the Company
      issued 1,037,000 shares of its Series A preferred stock in exchange for
      consideration of $1,037,000 in cash, goods and services provided to the
      Company by an unrelated third party.

      During 1995, the Company issued an additional 163,000 shares of its Series
      A preferred stock in settlement of all amounts due to the above mentioned
      third party in exchange for services valued at $163,000.

      During 1997, the Company repurchased all outstanding shares of its Series
      A preferred stock from the above mentioned third party for $70,000. In
      conjunction with this transaction, the Board of Directors canceled and
      retired the then existing Series A preferred stock.


                                      F-27
<PAGE>


NOTE F - CAPITAL TRANSACTIONS  (CONTINUED)

[3]   PREFERRED STOCK: (CONTINUED)

      On January 8, 1998, the Board of Directors of the Company authorized
      1,000,000 shares of preferred stock having a par value of $.001 per share
      to be issued in such series and to have such rights, preferences and
      designations as determined by the Board of Directors.

      On January 8, 1998, the Board of Directors of the Company authorized
      182,525 shares of Series A convertible redeemable preferred stock having a
      par value of $.001. Dividends, which are cumulative, are paid
      semi-annually in cash or common stock at the Company's option at a rate of
      ten percent per share based on a liquidation value of $10 per share. The
      Series A shares are convertible at the rate of fifty shares of the
      Company's common stock for each Series A preferred share, are redeemable
      at the option of the Company at $15 per share, have preference in case of
      liquidation, and have voting rights equal to fifty votes per share.

      On January 8, 1998, in connection with the reverse merger transaction, the
      Company issued 182,525 shares of its Series A convertible redeemable
      preferred stock and a warrant to purchase 750,000 shares of the Company's
      common stock at a price of $.10 per share in settlement of a note payable
      due to Projectavision, Inc. in the amount of $1,500,000 plus accrued
      interest of $330,000. The note required interest at 6% per annum. Interest
      expense related to this note payable for 1997 amounted to $90,000. The
      Company recorded a deemed dividend of $1,020,000 in accordance with EITF
      D-60 as a result of the beneficial conversion feature of such preferred
      shares at the date of issuance with a corresponding increase to additional
      paid-in capital. The amount of the deemed dividend was computed based upon
      the excess of the market value of equivalent common shares which
      approximated $2,737,000 plus the fair value of the warrant of $113,000,
      over the deemed proceeds in the exchange for the settlement of the
      obligation with Projectavision. The warrant was valued using the
      Black-Scholes option pricing model. The following assumptions were used in
      computing the fair value of the warrant: weighted risk free interest rate
      of 5.49%; zero dividend yield; volatility of Company common stock of 43%
      and an expected life of the warrant of ten years.

      On July 28, 1998, the holder of the Series A convertible redeemable
      preferred stock converted their shares into 9,435,405 shares of the
      Company's common stock.

      In December 1999, the Company issued 245,165 shares of Series B
      convertible preferred stock at $6.00 per share in a private placement
      offering. The shares are convertible at a rate of ten common shares for
      each preferred share. These shares have voting rights and dividend rights
      as if each share had been converted to common stock.

      The 1999 financial statements reflect the deemed dividend on the Series B
      preferred stock of $1,471,000 was reflected in accordance with EITF 98-5
      resulting from the calculation of the beneficial conversion feature based
      on the quoted market price of the common stock. The amount of the deemed
      dividend was computed based upon the excess of the market value of
      equivalent common shares deemed issued over the proceeds received from the
      sale of the convertible preferred stock. The amount of the deemed dividend
      has been limited to the offering proceeds.

      In June 2000, the Company authorized 14,000 shares of Series C
      convertible, redeemable preferred stock at $100 per share. The Series C
      shares are convertible into common shares after 180 days; such conversion
      is based upon a formula dividing the product of the stated value of the
      preferred stock by the number of shares of Series C preferred stock to be
      converted on the date of conversion by the average closing price. The
      average closing price is the product of $.50 and the average closing bid
      price of the Company's common stock as reported by the quotation system on
      which the common stock is quoted, for the ten trading days immediately
      preceding the date that notice of conversion of the shares is furnished to
      the Company. In no event shall the Series C preferred stock be converted
      into more than an aggregate of 2,800,000 shares of common stock or less
      than an aggregate of 933,334 shares of common stock. For the purposes of
      determining the conversion ratio, the average closing price shall not be
      less than $.50 or greater than $1.50. The Series C shares are redeemable
      for the stated value of the stock at the option of the Company from time
      to time on or prior to 180 days from June 21, 2000.


                                      F-28
<PAGE>


NOTE F - CAPITAL TRANSACTIONS  (CONTINUED)

[3]   PREFERRED STOCK: (CONTINUED)

      The 2000 financial statements reflect the deemed dividend on the Series C
      preferred stock of $1,400,000 was reflected in accordance with EITF 98-5
      resulting from the calculation of the beneficial conversion feature based
      on the quoted market price of the common stock. The amount of the deemed
      dividend was computed based upon the excess of the market value of
      equivalent common shares deemed issued over the proceeds received from the
      sale of the convertible preferred stock. The amount of the deemed dividend
      has been limited to the offering proceeds.

      In 2001, pursuant to a conversion ratio of 10 common shares to 1 preferred
      share, 100,166 shares of the Company's Series B preferred stock were
      converted into 1,001,660 shares of the Company's common stock. Also in
      2001, all 14,000 shares of the Company's Series C preferred stock were
      converted into 2,800,000 shares of the Company's common stock. The
      2,800,000 shares of common stock issued pursuant to the Series C
      conversion was the maximum allowable under the Series C preferred stock
      conversion formula.

      In March 2002, pursuant to a conversion ratio of 10 common shares to 1
      preferred share, 10,000 shares of the Company's Series B preferred stock
      were converted into 100,000 of the Company's common stock.

      In August 2003, pursuant to a conversion ratio of 10 common shares to 1
      preferred share, 25,000 shares of the Company's Series B preferred stock
      were converted into 250,000 of the Company's common stock.


                                      F-29
<PAGE>


NOTE F - CAPITAL TRANSACTIONS  (CONTINUED)

[4]   STOCK OPTIONS:

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

<TABLE>
<CAPTION>
                                                                            WEIGHTED      NUMBER OF
                                                NUMBER OF      EXERCISE     AVERAGE         COMMON
                                                 COMMON       PRICE PER     EXERCISE        SHARES
                                                 SHARES         SHARE         PRICE      EXERCISABLE
                                                ----------  -------------  ----------   --------------

<S>                                             <C>         <C>               <C>          <C>
      Outstanding as of December 31, 1997                0                                          0
      Granted                                   20,825,000  $0.05 - $0.20     $0.17        20,825,000
      Canceled                                 (15,000,000)     0.20          0.20        (15,000,000)
                                                ----------                              --------------

      Outstanding as of December 31, 1998        5,825,000                                  5,825,000
      Granted                                   16,750,000   0.05 - 0.20      0.05         16,750,000
      Exercised                                   (100,000)                                  (100,000)
                                                ----------                              --------------

      Outstanding as of December 31, 1999       22,475,000                                 22,475,000
      Granted                                      610,000   2.25 - 2.40      2.37            110,000
                                                ----------                              --------------

      Outstanding as of December 31, 2000       23,085,000                                 22,585,000
      Granted                                      450,000   0.39 - 1.25      0.77            450,000
      Exercised                                    (90,000)                                   (90,000)
      Options vested pursuant to deferred
         compensation agreement                          0      2.40          2.40            100,000
                                                ----------                              --------------

      Outstanding as of December 31, 2001       23,445,000                                 23,045,000
      Granted                                            0                                          0
      Exercised                                          0                                          0
      Options vested pursuant to deferred
         compensation agreement                          0      2.40          2.40            100,000
                                                ----------                              --------------

      Outstanding as of December 31, 2002       23,445,000                                 23,145,000
                                                ----------                              --------------
      Granted                                    5,000,000     .04-.05         .04          3,000,000
      Canceled                                  (6,610,000)                                (6,310,000)
                                                ----------                              --------------
      Outstanding as of December 31, 2003       21,835,000                                 19,835,000
                                                ==========                              ==============
</TABLE>


      All options issued through December 31, 2003 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.

      Tamarack Storage Devices, Inc. 1992 Stock Option Plan was terminated in
      connection with the reverse merger transaction. All options outstanding
      were canceled at that time.


                                      F-30
<PAGE>


NOTE F - CAPITAL TRANSACTIONS  (CONTINUED)

[4]   STOCK OPTIONS: (CONTINUED)

      In 2000, the Company adopted its 2000 Stock Option Plan (the "Plan").
      Under the Plan, incentive and nonqualified stock options, stock
      appreciation rights ("SAR's") and restricted stock may be granted to key
      employees and consultants at the discretion of the Board of Directors. Any
      incentive option granted under the Plan will have an exercise price of not
      less than 100% of the fair market value of the shares on the date on which
      such option is granted. With respect to an incentive option granted to a
      participant who owns more than 10% of the total combined voting stock of
      the Company or of any parent or subsidiary of the Company, the exercise
      price for such option must be at least 110% of the fair market value of
      the shares subject to the option on the date on which the option is
      granted. A nonqualified option granted under the Plan (i.e., an option to
      purchase the common stock that does not meet the Internal Revenue Code's
      requirements for incentive options) must have an exercise price of not
      less than 100% of the fair market value of the stock on the date of grant.
      The directors determine the vesting of the options under the Plan at the
      date of grant. A maximum of 30,000,000 options can be awarded under the
      Plan. The terms of grant permit a noncash exercise.

      SAR's entitle a participant to receive a cash payment equal to the
      difference between the fair market value of a share of common stock on the
      exercise date and the exercise price of the SAR. The terms of the SAR are
      determined by the board of directors at the date of grant.

      Awards of restricted stock are grants of shares of common stock that are
      subject to a restricted period during which such shares may not be sold,
      assigned, transferred or gifted.

      On July 28, 1998 in connection with a private placement transaction, the
      holders of 15 million options relinquished those options. 10 million of
      such options were recast as warrants to purchase shares of the Company's
      common stock at an exercise price of $.05 per share and given to a third
      party as a portion of the consideration for the private placement. No
      value such was ascribed to the 10 million warrants as they were deemed to
      have been issued in connection with the private placement. The remaining 5
      million options were also recast as warrants to purchase shares of the
      Company's common stock at an exercise price of $.05 per share and given to
      the original option holders. The in the money feature of such options
      amounted to $1,100,000 and was recorded as compensation and was classified
      in general and administrative expense in the statements of operations for
      the year ended December 31, 1998. The incremental fair value associated
      with those warrants was computed using the Black-Scholes method which
      approximated $115,000. On May 6, 1999, 500,000 options were repriced to
      $.05 which were previously granted at $.20 on January 8, 1998 to a
      director of the Company. The in the money feature of such options amounted
      to $220,000 and was recorded as compensation and was classified in general
      and administrative expense in the statement of operations for the year
      ended December 31, 1999.

      In September 2001, the Company granted 250,000 stock options to a
      consultant for services. The exercise price for these options was $0.39,
      which was the market price of the stock on the date of the grant. The
      stock options became fully vested forty-five days from the date of grant.
      These stock options were valued using the Black-Scholes option pricing
      model with the following assumptions: expected term, three years; risk
      free interest rate, 4.75%; dividend yield, zero; and volatility, 133%. In
      2001, the Company has recorded a charge of approximately $72,000 relating
      to these stock options.

      In April 2003, the Company granted 2,000,000 stock options to directors
      for non director services. The exercise price for these options was $.02.
      The stock options vest 50% after 30 days from the date of grant and the
      other 50% vest one year from date of grant. These stock options were
      valued using the Black-Scholes option pricing model with the following
      assumptions: expected term; ten years; risk free interest rate 3.96%;
      dividend yield, zero; volatility 117%. In 2003 the Company has recorded
      approximately $30,000 relating to these options. In June 2003, the Company
      granted 2,000,000 stock options to new directors for non director
      services. The exercise price for these options was $0.05. The stock
      options vest 50% after 30 days and the other 50% on June 2004 if the
      individuals are still on the board of directors. These stock options were
      valued using the Black-Scholes option pricing model with the following
      assumptions: expected term, ten years; risk free interest rate, 3.33%;
      dividend yield, zero; and volatility, 117%. In 2003, the Company has
      recorded a charge of approximately $89,000 relating to these stock
      options.


                                      F-31
<PAGE>


NOTE F - CAPITAL TRANSACTIONS  (CONTINUED)

[4]   STOCK OPTIONS: (CONTINUED)

      Exercise prices and weighted-average contractual lives of stock options
      outstanding as of December 31, 2003 are as follows:

<TABLE>
<CAPTION>
                                   OPTIONS OUTSTANDING                  OPTIONS EXERCISABLE
                        -----------------------------------------  ----------------------------
                                          WEIGHTED
                                           AVERAGE      WEIGHTED                     WEIGHTED
                                          REMAINING     AVERAGE                       AVERAGE
            EXERCISE        NUMBER       CONTRACTUAL   EXERCICE        NUMBER        EXERCISE
              PRICE      OUTSTANDING        LIFE         PRICE       EXERCISABLE       PRICE
           ----------   -------------  --------------- ----------  ---------------  -----------
<S>          <C>           <C>               <C>          <C>          <C>              <C>
             $0.02         5,000,000         9.58         0.02         3,000,000        0.02
              0.05        14,155,000         5.65         0.05        14,155,000        0.05
              0.20         2,230,000         4.71         0.20         2,230,000        0.20
              0.39           250,000         7.98         0.39           250,000        0.39
              1.25           200,000         7.26         1.25           200,000        1.25
</TABLE>


[5]   WARRANTS:

      The Company issued the following warrants at the corresponding weighted
      average exercise price as of December 31, 2003:

<TABLE>
<CAPTION>
                                                                                    WEIGHTED
                                                                                    AVERAGE
                                                                                    EXERCISE
                                                                      WARRANTS        PRICE
                                                                    -------------  -----------

       <S>                                                           <C>            <C>
        Outstanding as of December 31, 1997                                  0       $0.16
         Issued                                                      17,750,000

         Outstanding as of December 31, 1998                         17,750,000
         Converted into stock options                                (2,500,000)      0.05

         Outstanding as of December 31, 1999                         15,250,000
         Converted into common stock                                 (2,000,000)      0.75

         Outstanding as of December 31, 2000                         13,250,000
         Issued                                                         942,281       0.01
         Converted into common stock                                   (942,281)      0.01

         Outstanding as of December 31, 2001, 2002 and 2003          13,250,000
</TABLE>


                                      F-32
<PAGE>


NOTE F - CAPITAL TRANSACTIONS  (CONTINUED)

[5]   WARRANTS: (CONTINUED)

<TABLE>
<CAPTION>
                               NUMBER OF      EXERCISE      CONTRACTUAL   NUMBER OF SHARES
              DATE             WARRANTS          PRICE         LIFE         EXERCISABLE
         -----------------   -------------   -----------  -------------- -------------------
         <S>                  <C>             <C>           <C>                <C>
         January 8, 1998          750,000      $.10          10 years           750,000
         July 28, 1998         12,500,000      .05           10 years        12,500,000
                               ----------                                    ----------

                               13,250,000                                    13,250,000
                               ==========                                    ==========
</TABLE>

            On May 6, 1999, 2,500,000 warrants held by the Chief Executive
            Officer were converted into 2,500,000 options.

            In January 2000, the Company issued 1,076,923 shares of common
            stock, pursuant to the July 28, 1999 exercise of warrants by
            Equilink, LLC.

            In March of 2001, the Company executed a warrant agreement with an
            existing stockholder as compensation for services. The agreement
            allows the stockholder to purchase a variable quantity of common
            stock (between 200,000 and 1,000,000 shares) at a variable strike
            price (between $.01 and $1.25) based upon a market share price
            formula at the time of exercise. The fair value associated with a
            minimum exercise of 200,000 warrants was computed using the
            Black-Scholes option pricing model which approximated $150,000,
            which is included as a charge in the statement of operations. In May
            2001, the Company issued 942,281 shares of common stock at a market
            price of $0.83 per share pursuant to the May 15, 2001 exercise of
            warrants by the stockholder. An additional charge of $632,000 was
            recorded in the statement of operations upon exercise of the
            warrants.


NOTE G - INCOME TAXES

There is no provision for federal, state or local income taxes for the periods
ended December 31, 2003 and 2002, since the Company has incurred net operating
losses.

The Company's deferred tax asset as of December 31, 2003 represents benefits
from equity related compensation charges and net operating loss carryforwards of
approximately $4,362,000 and $7,139,000, respectively, which is reduced by a
valuation allowance of approximately $11,501,000 since the future realization of
such tax benefit is not presently determinable. During 2003 the Company recorded
an increase to the valuation allowance of approximately $440,000.

As of December 31, 2003, the Company has a net operating loss carryforward of
approximately $27,658,000 expiring in 2008 through 2024 for federal income tax
purposes and 2005 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 $17,957,000 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, 2003 and 2002 is summarized as follows:

                                                  FOR THE YEAR
                                                      ENDED
                                                   DECEMBER 31,
                                              --------------------
                                                 2003        2002
                                              ---------   ---------

      Statutory federal income tax rate           (35)%      (35)%
      Increase in valuation allowance              35 %       35 %

                                                  0.0 %      0.0 %


                                      F-33
<PAGE>


NOTE H - COMMITMENTS

[1]   LICENSE AND DEVELOPMENT AGREEMENTS:

      In March 1997, the Company entered into a Cooperative Research and
      Development Agreement (the "CRADA Agreement") with the Regents of the
      University of California to develop a polymeric based recording media that
      will satisfy all of the requirements for a holographic media storage
      device. The work was to be completed within 25 months from the original
      date of execution. Each party shall have the first option to retain title
      to any subject inventions made by its employees during the work under this
      agreement. The agreement provides that the Company's contribution to
      funding will be $264,000. The CRADA research and development expenses
      charged to the statement of operations for the cumulative period July 31,
      1992 through December 31, 2003 amounted to $83,000. No expenses were
      incurred during 2002 and 2003.

      On January 11, 1998, the Company entered into a research and development
      agreement with Energy Related Devices, Inc. ("ERDI"). The term of the
      agreement is for the later of three years from the commencement date as
      defined in the agreement or the delivery of a prototype suitable for
      commercial sale or license regarding the fuel cell product defined in the
      agreement. The Company is obligated to fund up to $1 million in accordance
      with certain milestones as defined in the agreement. Upon the delivery of
      a prototype suitable for commercial sale or license regarding the fuel
      cell product, the Company's obligation will be to pay ERDI $10,000 per
      month until the Company funds or determines not to fund the research and
      development of ERDI's solar cell invention. Through December 31, 2000, the
      Company has provided $1,000,000 to ERDI for research and development
      activities. In addition, the Company is providing for key-man life
      insurance coverage on the primary stockholder of ERDI. In May 1999, the
      Company committed to additional funding of ERDI. For the year ended
      December 31, 2001, the Company has funded an additional $805,000. There
      has been no funding since 2001.

      In August 1999, the Company entered into a license option agreement with
      the Regents with the University of California for Cyclodextrin Polymer
      Separation materials. The agreement grants the Company an exclusive option
      to negotiate an exclusive world-wide license under the University's patent
      rights. The initial term expired on February 29, 2000 and was extended for
      a second term to February 28, 2001. The Company decided not to renew the
      license option agreement beyond February 28, 2001. The Company paid
      $10,000 in 2000.

On March 7, 2000, the Company entered into a license option agreement with a
third party for nanoporous polymer molecular filter technologies. The agreement
grants the Company an exclusive option to negotiate an exclusive world-wide
license under the third party's patent rights. The initial term expired on
September 15, 2000 and was renewed for an additional six months. The Company
paid $10,000 to execute the license option agreement and another $10,000 for its
renewal. During 2001, the Company decided not to renew the agreement.



                                      F-34
<PAGE>


NOTE H - COMMITMENTS  (CONTINUED)

[2]   CONSULTING AGREEMENTS:

      In February 2001, the Company entered into a marketing and management
      consulting agreement. In connection with this agreement the consulting
      firm will receive a fee payable in stock. The term of the agreement is for
      one year plus a one year automatic renewal. In March 2001, the Company
      issued 200,000 shares of common stock to the consulting firm as
      compensation for services rendered and to be rendered. The market value of
      the stock on the date of issuance was $1.25 per share. This amount is
      reflected in prepaid expenses as of December 31, 2001. The remaining
      balance of $42,000 was amortized in the year ended December 31, 2002. In
      addition, as of December 31, 2001, the Company has issued 897,500 and
      626,250 additional shares to this consulting firm in private placement
      transactions and for services rendered, respectively. These additional
      shares were valued at $684,700 and $430,730, respectively.

[3]   EMPLOYMENT AGREEMENT:

      On August 30, 1999, the Company entered into an employment and
      noncompetition agreement with an individual to provide research related
      activities. The term of the agreement was for one year commencing on
      September 1, 1999 and was renewed. The agreement allows for four one year
      renewal options unless terminated by either party. The employment
      agreement was renewed for an additional year effective September 1, 2000.
      Base salary is $90,000 per annum with available additional cash
      compensation as defined in the agreement. In addition, the employee
      received stock options to purchase 500,000 shares of common stock at $.40
      per share. The market price of the Company's common shares was $1.25 per
      share on the date of grant. The total fair value of such options
      approximated $425,000. In accordance with the agreement, 100,000 options
      vest each year on the anniversary date. During the third quarter of 2003,
      the Company terminated the employment agreement with the individual and
      the remaining deferred compensation amount was expensed.

[4]   INTANGIBLE ASSET ACQUISITION:

      On August 6, 1999, the Company entered into an agreement with NovARS GmbH
      ("Novars") to acquire all of the intellectual property rights of Novars.
      As compensation, the Company issued 1,000,000 shares of its common stock.
      The purchase price was estimated at $1,000,000 based upon the value of the
      common shares issued at the date of the transaction as determined by
      management. In addition, the Company is obligated to pay a three percent
      royalty in perpetuity on the revenues earned by the Company as defined in
      the agreement.


                                      F-35
<PAGE>


NOTE H - COMMITMENTS  (CONTINUED)

[4]   INTANGIBLE ASSET ACQUISITION: (CONTINUED)

      In conjunction with the above, the Company entered into a three year
      research and development agreement with Novars with automatic one year
      renewals unless terminated by either party. In accordance with this
      agreement, the Company advanced $200,000 in August 1999. The Company has
      amended the research and development agreement to provide for additional
      funding based on a milestone timetable. As of December 31, 2001, the
      Company has funded an additional $1,620,000 and issued 1,550,000 shares of
      its common stock valued at $158,000 to be used for funding research and
      development costs. No activity has occurred since 2001.

[5]   LEASES:

      The Company originally was obligated under two separate operating leases
      for office space located in Los Alamos, New Mexico and New York City. The
      Company renewed its lease in New York City for one year pursuant to the
      lease's original terms. During 2001, the Company renegotiated its lease in
      Los Alamos, New Mexico. During 2002, the Company only leased certain
      offices in Los Alamos, New Mexico, while certain related parties leased
      the laboratory space previously leased by the Company. The Company
      received reimbursement of $11,000 against rent charges for the year ended
      December 31, 2002 from related parties. Rent expense charged to operations
      was approximately $12,000 for the year ended December 31, 2003 and $43,000
      for the year ended December 31, 2002. During 2003, the Company terminated
      the Los Alamos lease and relocated the New York City office. During 2003,
      the Company is renting office space in New York City on a monthly basis.

      In April 2003, the Company entered into a non-exclusive 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.

NOTE I - RELATED PARTY TRANSACTIONS

The law firm of one director received approximately $30,000 and $20,000 of
compensation for legal services rendered to the Company during the years ended
months ended December 31, 2003 and 2002, respectively.

The accounting firm of one of our directors received approximately $35,000 of
compensation for accounting services rendered to the Company during each of the
year's ended December 31, 2003 and 2002, respectively.

NMXS.com, Inc. paid the Company's Chief Executive a yearly salary of $36,000 and
leases a car as consideration for his services in 2001. In 2002, NMXS.com, Inc.
issued 117,918 shares of its common stock valued at $61,000.

During 1998, the Company entered into a research and development agreement with
Energy Related Devices, Inc. ("ERDI"). ERDI is majority-owned by a shareholder
of the Company (see Note H[1]).

The Company's Chief Operating Officer loaned the Company $275,000. This loan was
due December 31, 2002. In April of 2004 the Company and the COO agreed to extend
the term of the loan to December 31, 2004. The Company and the COO also agreed
to convert $550,000 in accrued salaries to a note payable.

In August 2001, the Company borrowed $250,000 from its Chief Executive Officer.
In addition, the Company's Chief Executive Officer personally guaranteed a
$300,000 loan from a third-party financial institution on the Company's behalf.
In March of 2004 this loan was repaid 9See Note K). The Company has issued a
loan and security agreement with respect to these transactions in which the
Company agreed to pledge all of its assets as security. This loan was due
December 31, 2002. In April of 200 the Company and the CEO agreed to extend the
term of the loan to December 31, 2004. The Company and the CEO also agreed to
convert $550,000 in accrued salaries to a note payable.


                                      F-36
<PAGE>


NOTE J - CONTINGENCY

During the third quarter of 2001, a former consultant threatened to bring a
claim against the Company. As of the date of filing this 10Q-SB, no claim has
been filed, nor does the Company anticipate such filing. The Company believes
that the consultant's threats are without merit and would defend vigorously
against any claims.


NOTE K - SUBSEQUENT EVENTS

In January 2004, the Company licensed its mid-range (NovArs) 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 other forms of
consideration.

In February 2004, the Company sold 200,000 shares of its common stock holdings
of Novint Technologies, Inc. for $132,000.

In March 2004, the Company sold 494,538 shares of its common stockholdings of
Novint Technologies, Inc. for $326,596.

In March 2004 the Company paid in full a $300,000 loan from a third party
financial institution.

In March 2004 the company issued 1,668,000 shares for services rendered valued
at $.16 per share.


<PAGE>


ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

      None.


ITEM 8A. CONTROLS AND PROCEDURES

            (a) Evaluation of Disclosure Controls and Procedures. Regulations
under the Securities Exchange Act of 1934 require public companies to maintain
"disclosure controls and procedures," which are defined to mean a company's
controls and other procedures that are designed to ensure that information
required to be disclosed in the reports that it files or submits under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported,
within the time periods specified in the Commission's rules and forms. Our Chief
Executive Officer ("CEO"), President and our Chief Financial Officer or the
person performing similar functions ("CFO") carried out an evaluation of the
effectiveness of our disclosure controls and procedures as of the end of the
period covered by this report. Based on those evaluations, as of the Evaluation
Date, our CEO, President and CFO believe:

                        (i) that our disclosure controls and procedures are
            designed to ensure that information required to be disclosed by us
            in the reports we file under the Securities Exchange Act of 1934 is
            recorded, processed, summarized and reported within the time periods
            specified in the SEC's rules and forms and that such information is
            accumulated and communicated to our management, including the CEO
            and CFO, as appropriate to allow timely decisions regarding required
            disclosure; and

                        (ii) that our disclosure controls and procedures are
            effective.

            (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.

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, 2003 are set forth below. There are no
existing family relationships between or among any of our executive officers or
directors.

    Name               Age           Position
    ----               ---           --------
Marvin Maslow          66        Chairman of the Board and Chief Executive
                                 Officer since January 1998

Jack Harrod            61        Chief Operating Officer since August 1998
Scott L. Bach          41        Director and Secretary since January 1998
David A. Teich         47        Director since May 1999 and Treasurer since
                                 December 2000

Ralph A. Anderson      45        Director since June, 2003

Larry H. Schatz        58        Director since June, 2003


            The size of our Board of Directors is currently fixed at five
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:



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

         o        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

         o        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.

      In April 1999, nearly five years ago, (April 22, 1999) Marvin Maslow
resigned as Chairman of the Board of Directors of Projectavision, Inc.
Subsequently, in or about November 1999, Projectavision, having changed its name
to Vidikron Industries, Inc. filed a proceeding under the United States
Bankruptcy Code.

         MARVIN MASLOW has served as our chief executive officer and chairman of
the Board since January 1998. 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., our wholly-owned subsidiary. From 1999
through 2002, Mr. Maslow also served as a director of NMXS.com, Inc., a company
in which we originally owned approximately 23% of the outstanding common stock.
Since June 2000, Mr. Maslow has also served as a director of Novint
Technologies, Inc., a company in which we own approximately 42%. 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.

         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.


                                       26

<PAGE>


      SCOTT L. BACH has served as our director and secretary since January 1998.
Since November 1996, Mr. Bach has served as secretary and director of Tamarack
Storage Devices, Inc., our wholly-owned subsidiary. From 1999 through 2002, Mr.
Bach also served as a director of NMXS.com, Inc. From June, 2000 through
October, 2003, he has also served as a director of Novint Technologies, Inc. In
1995, Mr. Bach founded Bach & Associates, a law practice concentrating in
commercial matters. From 1988 to 1995, he was associated with the law firm of
Robinson Silverman Pearce Aronsohn & Berman. From 1987 to 1988, he was
associated with the law firm of Zalkin, Rodin & Goodman. Mr. Bach received a
B.A. from Queens College, City University of New York in 1984 and a J.D. from
Hofstra Law School in 1987.

      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 1989.

      RALPH ANDERSON has served as our director since June 2003. Mr. Anderson
has served as the head of the Wealth Management and Tax Division at Weiser LLP
since November 1, 2003. From 2001 to October 31, 2003, Mr. Anderso served as
Senior Vice President at Executive Monetary Management (a division of Neuberger
Berman), where he was in charge of the tax department and the servicing of high
net worth individuals. From 1997-2001 Mr. Anderson was co-chair of the tax
department and a member of the Executive Committee at Richard A. Eisner &
Company, LLP. From 1990-1997 Mr. Anderson was in charge of the New Jersey tax
department and a member of the Executive Committee at M.R. Weiser & Company, LLP
where he merged his practice. Mr. Anderson received a Bachelor of Science degree
in Accounting from Rider University and a Master of Science degree in Taxation
from Seton Hall University. Mr. Anderson is a Certified Public Accountant
licensed in New Jersey, New York and Massachusetts and has NASD Securities
License, Series 7, 63 and 66. Ralph Anderson also sits on the board of Rider
University and Progress Realty Advisors.

      LARRY SCHATZ has served as our director since June, 2003. He is a graduate
of The City University of New York at Brooklyn College (B.A., 1967) and of
Brooklyn Law School (J.D. 1969). Mr. Schatz is a practicing attorney in New York
City and a member of both the New York and Florida Bars since 1970. He served as
a Director and Vice-Chairman of the Board of International Fast Food Corporation
from 1998-2000 and was a Director of Noise Cancellation Technologies, Inc. n/k/a
NCT Group, Inc. from 1984 to 1987. Mr. Schatz was a founding Director of the
Association of Public Companies of Florida and served as its Chairman from
1984-1986.

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 31, 2003, we believe that our executive officers, directors and ten
percent stockholders complied with all reporting requirements applicable to
them.

                                       27

<PAGE>


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, 2001, 2002 and 2003.



<TABLE>
<CAPTION>
                                               SUMMARY COMPENSATION TABLE
=================================================================================================================
                                           ANNUAL COMPENSATION                   LONG-TERM COMPENSATION
                                  ----------------------------------- -------------------------------------------
                                                                               AWARDS               PAYOUTS
                                                                      ------------------------- -----------------
                                                                                   SECURITIES              ALL
                                                           OTHER      RESTRICTED   UNDER-LYING    LTIP    OTHER
                                                           ANNUAL       STOCK       OPTIONS/    PAYOUTS   COMP-
     NAME AND                        SALARY    BONUS    COMPENSATION   AWARD(s)       SARS        (S)    ENSATION
PRINCIPAL POSITION         YEAR       ($)       ($)         ($)           ($)         (#)         ($)      ($)
----------------------- --------- ---------- --------- -------------- ---------- -------------- -------- --------

<S>                        <C>        <C>       <C>       <C>          <C>            <C>        <C>       <C>
Marvin Maslow,             2001       $0        $0        $ 40,800(1)      --             -          --       --
CEO/Chairman            --------- ---------- --------- -------------- ---------- -------------- -------- --------
                           2002       $0        $0        $ 0              --             -          --       --
                        --------- ---------- --------- -------------- ---------- -------------- -------- --------
                           2003   $300,000(3)   $0        $ 48,000(2)  405,000(4)         -          --       --
                        --------- ---------- --------- -------------- ---------- -------------- -------- --------

=================================================================================================================
Jack Harrod,               2001       $0        $0        $ 36,000(5)      --             -          --       --
COO                     --------- ---------- --------- -------------- ---------- -------------- -------- --------
                           2002       $0        $0        $ 39,500(5)      --             -          --       --
                        --------- ---------- --------- -------------- ---------- -------------- -------- --------
                           2003   $250,000(3)   $0        $ 48,000(5)  157,500(6)         -          --       --
                        --------- ---------- --------- -------------- ---------- -------------- -------- --------

=================================================================================================================
Scott Bach,                2001       $0        $0        $     0          --        60,000(7)       --       --
Secretary/Director      --------- ---------- --------- -------------- ---------- -------------- -------- --------
                           2002       $0        $0        $     0          --             -          --       --
                        --------- ---------- --------- -------------- ---------- -------------- -------- --------
                           2003       $0        $0        $     0       52,500(8)    30,000(9)       --       --
                        --------- ---------- --------- -------------- ---------- -------------- -------- --------

=================================================================================================================
David Teich,               2001       $0        $0        $     0          --       200,000(10)      --       --
Treasurer/Director      --------- ---------- --------- -------------- ---------- -------------- -------- --------
                           2002       $0        $0        $     0          --             -          --       --
                        --------- ---------- --------- -------------- ---------- -------------- -------- --------
                           2003       $0        $0        $     0      67,500(11)     30,000(9)      --       --
                        --------- ---------- --------- -------------- ---------- -------------- -------- --------

=================================================================================================================
</TABLE>


      (1)   Includes $36,000 of salary and a car allowance of $4,800 paid by
            NMSX.Com, Inc.

      (2)   Includes non-accountable expenses paid in 2003.

      (3)   Salary has been deferred and converted to notes payable as of
            December 31, 2003.

      (4)   Includes 13,500,000 shares of common stock.

      (5)   Includes $4,000 in monthly non-accountable expenses paid by us in
            2000, $3,000 paid by us in 2001 and $3,291.66 in 2002.

      (6)   Includes 5,250,000 shares of common stock.

      (7)   Represents 60,000 Stock Options of New Mexico Software, Inc. at a
            exercise price of $.3125 per share, awarded by New Mexico Software,
            Inc. to Mr. Bach as compensation for his services as director of New
            Mexico Software, Inc.

      (8)   Includes 1,750,000 shares of common stock. (9) Includes 1,000,000
            Stock Options at an exercise price of $0.02 as compensation for his
            services as an officer.

      (10)  On January 8, 2001, Mr. Teich received 200,000 Stock Options at an
            exercise price of $1.25 as compensation for his services as a
            director of our company.

      (11)  Includes 2,250,000 shares of common stock.


                                       28

<PAGE>


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 officers and/or directors who are full time employees of ours,
Messrs. Maslow and Harrod, have previously received a $3,000 to $4,000 per month
non-accountable expense allowance from time to time. For fiscal year 2003,
Messrs. Maslow and Harrod accrued salaries of $300,000 and $250,000 which have
been deferred and converted to notes payable as of December 31, 2003.

EMPLOYMENT AGREEMENTS

      We currently have no employment agreements with our officers or directors,
though we intend to enter into such agreements with our CEO and COO. On
September 1, 1999, we entered into an employment agreement, as amended on
September 15, 1999, with Robert E. Hermes, Ph.D., our Senior Staff Scientist.
That agreement was terminated during 2002.

BOARD OF DIRECTORS INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS

      Mr. Maslow, our director and chief executive officer, participated in
deliberations of the Board of Directors concerning officer compensation.


                                       29

<PAGE>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      The following table sets forth, as of April 9, 2004, 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.

                                                                   Percentage of
                                                                    Outstanding
                                                    Number of          Shares
                                                     Shares         Beneficially
                                                  Beneficially        Name and
Address                                               Owned             Owned
                                                  ------------      ------------
Michael Lauer (1)................................. 55,000,000             31.7%
375 Park Avenue, Suite 2006
New York, New York    10152

Marvin Maslow (2) ................................ 25,900,000             14.9%
c/o Manhattan Scientifics, Inc.
405 Lexington Avenue, 32nd Floor
New York, New York 10174

Jack Harrod ......................................  8,000,000              4.6%
c/o Manhattan Scientifics, Inc.
405 Lexington Avenue, 32nd Floor
New York, New York 10174

Scott L. Bach (3).................................  3,970,000              2.3%
c/o Manhattan Scientifics, Inc.
405 Lexington Avenue, 32nd Floor
New York, New York 10174

David A. Teich (4)................................  3,898,064              2.2%
Teich, Beim & Moro, P.C.
Two Executive Boulevard, Suite 103
Suffern, New York 10901

Larry Schatz (5).................................   1,900,000              1.1%
903 Park Avenue #8E
New York, New York 10021

Ralph Anderson (6)...............................   1,500,000                *
c/o Manhattan Scientifics, Inc.
405 Lexington Avenue, 32nd Floor
New York, New York 10174

All executive officers and directors as a group     45,168,064
(6 persons).                                        (1)(2)(3)(5)(6)        26.0%

*     Represents Less than 1%.

      (1)   Michael Lauer has voting and dispositive powers over various
            entities, collectively known as the Lancer Funds, that are the
            beneficial holders of our securities. Includes 45,000,0000 shares of
            Common Stock and option that are immediately exercisable to purchase
            10,000,000 shares of Common Stock at a price of $.05 per share. A
            bankruptcy trustee now retains control over such shares in light of
            Lancer Partners, LLP filing for bankruptcy in April 2003. In a
            Schedule 13(d) filed with the SEC on February 12, 2004, the trustee
            stated that Manhattan Scientifics also issued one of the Lancer
            funds warrants to purchase 16,000,000 shares of Manhattan
            Scientifics common stock. Manhattan Scientifics has informed the
            trustee that it has no record of issuing such a certificate and
            believes that the claim is not valid, and the trustee noted this in
            the Schedule 13(d).

      (2)   Includes options to purchase 12,400,000 shares of Common Stock at a
            price of $0.05 per share.

      (3)   Includes 2,970,000 share of Common Stock and options that are
            immediately exercisable to purchase 1,000,000 shares of Common Stock
            at a price of $0.02 per share.

      (4)   Includes of 2,273,064 shares of Common Stock; options that are
            immediately exercisable to purchase 1,000,000 shares of Common Stock
            at an exercise price of $0.02 per share; options that are
            immediately exercisable to purchase 425,000 shares of Common Stock
            at a price of $0.05 per share; options that are immediately
            exercisable to purchase 200,000 shares of Common Stock at a price of
            $1.25 per share.


                                       30

<PAGE>


      (5)   Includes 1,400,000 shares of Common Stock and options that are
            immediately exercisable to purchase 500,000 shares of Common Stock
            at an exercise price of $0.05 per share.

      (6)   Includes 1,000,000 shares of Common Stock and options that are
            immediately exercisable to purchase 500,000 shares of Common Stock
            at an exercise price of $0.05 per share.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      In August 2001, we borrowed $250,000 from Mr. Maslow. In addition, Mr.
Maslow previously guaranteed a loan on our behalf to Merrill Lynch for the
maximum principal amount of $300,000. Accordingly, we issued a loan and security
agreement to Mr. Maslow with respect to these transactions in which we agreed to
pledge the Company's assets as security. We also issued a similar loan and
security agreement to Mr. Harrod, our COO, in connection with his loan to us of
$275,000 made in September 1999.

      NMXS.com, Inc. has previously paid Mr. Maslow, our chief executive
officer, an annual salary of $56,988 and leased a car for his use as
consideration for his services. Additionally, in 2002, Mr. Maslow was issued
117,948 shares of NMXS.com, Inc. common stock for his services. The Company
previously owned three million shares of NMXS.com, Inc. common stock.

      Bach & Associates, a law firm of which Mr. Bach, our secretary and
director, is the sole proprietor, received $105,319 in 2002 and $20,000 in 2003
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 $66,000, $76,660 and $35,000
in 2001, 2002 and 2003, respectively, as compensation for accounting services
rendered to us.

      Grubman, Indursky and Schindler, P.C., a law firm in which Mr. Schatz is
of counsel, received $10,000 for legal services rendered in 2003.


                                       31

<PAGE>


ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a) EXHIBITS

Exhibit
Number                Description of Exhibit
------                ----------------------

2.1   Agreement and Plan of Reorganization (1)

2.2   Agreement and Plan of Merger (1)

2.3   Certificate of Incorporation (1)

2.4   Amendment to Certificate of Incorporation (1)

2.5   Bylaws (1)

2.6   Amended Certificate of Designation, Preferences and Rights of Series C
      Preferred Stock (2)

4.1   Specimen Common Stock Certificate (1)

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
      with Novars Gesellschaft fur neue Technologien GmbH (1)

10.5  License Option Agreement with The Regents of the University of California
      (1)

10.6  Lease of Executive Offices (1)

10.7  Lease of New Mexico Facilities (1)

10.8  Manhattan Scientifics, Inc. 1998 Stock Option Plan (1)

10.9  Employment Agreement with Robert Hermes (1)

10.10 Agreement with Stanton Crenshaw Communications (1)



                                       32

<PAGE>


10.11 Agreement with Equilink (1)

10.12 Stock Purchase Agreement between Manhattan Scientifics, Inc.,
      Projectavision, Inc., and Lancer Partners, L.P. (3)

10.13 License Option Agreement with Mr. Edward Vanzo (4)

10.14 Manhattan Scientifics, Inc. 2000 Equity Incentive Plan (5)

10.15 Note to Marvin Maslow in the amount of $250,000 (6)

10.16 Loan and Security Agreement for Marvin Maslow (6)

10.17 Amended and Restated Note for Jack Harrod in the amount of $275,000(7)


10.18 Amended and Restated Loan and Security Agreement for Jack Harrod (7)

21.1  List of Subsidiaries (3)

23.1  Consent of Eisner LLP

31    Certification of Chief Executive Officer and Chief Financial Officer
      Pursuant to Rule 13a-14(a) and 15d- 14(a)(7)

32    Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
      Section 906 of the Sarbanes-Oxley Act of 2002(7)

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

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

      (2) Incorporated by reference to the registrant's Form 10-QSB filed with
the Securities and Exchange 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 the Securities and Exchange Commission on February 9, 2000.

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

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

      (6) Incorporated by reference to the registrant's Form 10-KSB filed with
the Securities and Exchange Commission on April 17, 2002.

      (7) Filed herewith.


(b) REPORTS ON FORM 8-K

      We did not file any reports on Form 8-K during the fourth quarter of 2003.

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

            The following table sets forth fees billed to us by our auditors
during the fiscal years ended December 31, 2002 and December 31, 2003 for: (i)
services rendered for the audit of our annual financial statements and the
review of our quarterly financial statements, (ii) services by our auditor that
are reasonably related to the performance of the audit or review of our
financial statements and that are not reported as Audit Fees, (iii) services
rendered in connection with tax compliance, tax advice and tax planning, and
(iv) all other fees for services rendered. "Audit Related Fees" consisted of
consulting regarding accounting issues. "All Other Fees" consisted of fees
related to the issuance of consents for our S-8 Registration Statements and this
Annual Report.


                                       December 31, 2003    December 31, 2002
                                       -----------------    -----------------
(i)             Audit Fees                 $65,000              $60,000
(ii)            Audit Related Fees         $0                   $0
(iii)           Tax Fees                   $0                   $0
(iv)            All Other Fees             $0                   $0


                                       33
<PAGE>


                                   SIGNATURES

In accordance with the Exchange Act, the registrant caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.


                                        MANHATTAN SCIENTIFICS, INC.


Dated:     April 12, 2004            By: /s/ Marvin Maslow
           --------------                -----------------------
                                         Marvin Maslow

                                         President, Chief Executive Officer,
                                         Chairman of the Board


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



    Signature                   Title of Capacities                Date
    ---------                   -------------------                ----

/s/ Marvin Maslow           President, Chief Executive          April 12, 2004
-----------------           Officer, Chairman of the Board
Marvin Maslow               (principal executive officer)


/s/ Scott L. Bach           Director, Secretary                 April 13, 2004
-----------------
Scott L. Bach


/s/ David A. Teich          Director, Treasurer                 April 14, 2004
------------------
David A. Teich


/s/ Ralph Anderson          Director                            April 14, 2004
------------------
Ralph Anderson


/s/ Larry Schatz            Director                            April 14, 2004
------------------
Larry Schatz



                                       34