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, 2002

             [ ] 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: $150,000.

State the number of shares outstanding of each of the issuer's classes of common
equity, as of February 17, 2004: 172,008,522 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 December 31, 2003: $6,369,705

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.


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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.


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        In addition, at December 1, 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.

         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 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.


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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.


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<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 2003, 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 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.


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         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.)

         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.

            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.


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

         At December 1, 2003, we owned 0 shares, and warramts 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.


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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 November 1, 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.

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.


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<PAGE>


EMPLOYEES

         As of December 31, 2002, we had two full-time employees (unsalaried
employees in general management). Prior to August 28, 2002, we also had one
compensated employee in research and development). 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, 2002, we
had three independent contractors conducting 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. The loans are secured by the assets of the Company. Currently, the
loans are in default. If we are unable to obtain further financing or if the
officers enforce the default provisions of the loans, 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.

OUR INABILITY TO OBTAIN DIRECTORS' AND OFFICERS' INSURANCE COULD HAVE AN ADVERSE
AFFECT ON OPERATIONS.

We have been unable to obtain directors' and officers' insurance for our
management at reasonable premiums or with adequate coverage. In light of the
Sarbanes-Oxley Act of 2002, it has become increasingly difficult for small
capitalized public companies to obtain such insurance at a reasonable cost. Our
inability to secure such insurance could lead to the loss of one or more
officers and directors which would have a material adverse effect on our
operations and our ability to function as a public entity.

<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 26.3% 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 marketeven
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 we deem appropriate.

<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 may from time
to time become a party to various legal proceedings arising in the ordinary
course of business.

<PAGE>

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.

                                       12


<PAGE>


                                   Bid Prices

2002                                                             High      Low
                                                                ------    ------

First Quarter.......................................            $ .53     $ .25
Second Quarter......................................              .34       .14
Third Quarter.......................................              .16       .06
Fourth Quarter......................................              .11       .05

2001                                                             High      Low
                                                                ------    ------

First Quarter.......................................            $2.34     $0.69
Second Quarter......................................             1.30      0.71
Third Quarter.......................................             0.97      0.38
Fourth Quarter......................................             0.76      0.31


         As of December 31, 2002, we had 479 registered shareholders (however,
this amount does not include shareholders who hold shares in street name, which
can be significant) and 124,262,522 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:

            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.

            In June 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 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 24,750,000
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.

            In March 2003, the Company issued 1,600,000 to four consultants for
services related to legal issues and public relations and 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.

<PAGE>


            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.

         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.


                                       13

<PAGE>


         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.

         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.


                                       14

<PAGE>


         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.

         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.


                                       15

<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, 2002, 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, 2002 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, 2002 was 25,281,000.

<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-KSB.

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
acquirer 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 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. Subsequently, we have sold all of
Tamarack's assets.

         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.


                                       16

<PAGE>

         As of December 31, 2002, we had an accumulated loss since inception,
1992, of $36,483,000. Included in this accumulated loss are charges amounting to
approximately $16,587,000 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.

CRITICAL ACCOUNTING POLICIES

            In preparing our financial statements, we make estimates,
assumptions and judgments that can have a significant effect on our revenues,
income or loss from operations, and net income or net loss, as well as on the
value of certain assets on our balance sheet. On a quarterly basis, we review
our intellectual property portfolio for impairment pursuant to Statement of
Financial Accounting Standards #144 "Impairment of Long-Lived Assets". We
believe that there are several accounting policies that are critical to an
understanding of our historical and future performance as these policies affect
the reported amounts of revenues, expenses and significant estimates and
judgments applied by management. You should refer to the notes to the
accompanying consolidated financial statements for further discussion of our
accounting policies.

COMPARISON OF FISCAL YEAR ENDED DECEMBER 31, 2002 TO FISCAL YEAR ENDED DECEMBER
31, 2001.

         NET LOSS. We reported a net loss of $4,028,000, or $.03 per common
share, basic and diluted, for the year ended December 31, 2002, versus a net
loss of $6,662,000, or $.06 per common share, basic and diluted, for the year
ended December 31, 2001. The decrease of $2,634,000, or 40%, resulted from our
reduced spending commitments for research and development. In addition, we
recorded charges for the issuance of stock for services whereas in the fiscal
2002 period, we issued significantly less stock for services.

         REVENUES. We had revenues of $156,000 for the year ended December 31,
2002 principally from the sale of certain holographic data storage, intellectual
property and related research equipment. We received an initial payment of
$150,000 upon execution of the license agreement. We had no revenue for the year
ended December 31, 2001.

         OPERATING COSTS AND EXPENSES. Operating costs and expenses for the year
ended December 31, 2002 totaled $3,840,000, a decrease of $2,592,000, or 40%,
versus costs and expenses of $6,432,000 for the year ended December 31, 2001.
These costs and expenses are detailed below.

         GENERAL AND ADMINISTRATIVE. General expenses were $2,786,000 for the
year ended December 31, 2002, which consisted of consultants, contractors,
accounting, legal, travel, rent, telephone and other day to day operating
expenses, versus general and administrative expenses of $4,468,000 for the year
ended December 31, 2001. This decrease of $1,682,000, or 38%, is primarily a
result of the fact that, in 2001, we recorded a charge for the issuance of stock
for services, whereas in the fiscal 2002 period, we issued significantly less
stock for services. We anticipate no significant change in general and
administrative expenses in the near future, except for an increase in the
officers and directors insurance expense.

         RESEARCH AND DEVELOPMENT. Research and development expenses were
$865,000 for the year ended December 31, 2002, which consisted of payments on
research and development agreements with various contractors, amortization of
Patents and salary to our Chief Polymer Scientist. Research and development
expenses amounted to $1,964,000 for the year ended December 31, 2001. This
decrease of $1,099,000, or 56% 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, assuming we can raise the necessary capital.

              IMPAIRMENT. The Company has reviewed its patents and technology
licenses for impairment and has determined that its solar fuel cell patents have
become impaired. As a result, in the 4th quarter of 2002, the Company recorded a
charge of approximately $189,000 to reduce the carrying value of these patents
to zero.


                                       17

<PAGE>


LIQUIDITY AND PLAN OF OPERATIONS

         We are a development stage company and are in the technology
acquisition and development phase of its operations. Accordingly, we have relied
primarily upon private placements and subscription sales of stock to fund our
continuing activities and acquisitions. To a limited extent, and as described
below, we have also relied upon borrowing from the Company's two senior
officers, CEO Maslow and COO Harrod, and through a bank guarantee made by Mr.

Maslow of a traditional loan. Until we generate revenue from sales and licensing
of technology, or receive a large infusion of cash from a potential strategic
partner, we intend to continue to rely upon these methods of funding our
operations during the next year.

         Our significant assets include our portfolio of intellectual property
relating to the various technologies, our contracts with third parties
pertaining to technology development, acquisition, and licensing, our holdings
of approximately 3 million shares of common stock in NMXS.com, Inc.(which were
sold in 2003 for approximately $172,000), and 40,672 shares of common stock of
Novint Technologies, Inc., subsequently split into 4,067,200 shares; our cash on
hand; and our strategic alliances with various scientific laboratories,
educational institutions, scientists and leaders in industry and government.

         Stockholders' equity was a deficit of $663,000 on December 31, 2002 and
the working capital was a deficit of $2,186,000 on such date.

         Presently, 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.

         Based upon current projections, our principal cash requirements for the
next 12 months consists of (1) fixed expenses, including rent, payroll, officers
and directors insurance, 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, 2002, we had $68,000 in cash. As of December 31, 2001, we had
$79,000 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. There is no
assurance that additional financing will be available to us on commercially
reasonable terms, or at all. If we incur additional debt, the risks associated
with our business and owning our stock could increase. If we raise capital
though the sale of equity securities, the percentage ownership of our current
stockholders would be diluted.


RECENTLY ISSUED ACCOUNTING STANDARDS


                In November 2002, the Financial Accounting Standards Board
issued Interpretation No. 45, "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Guarantees of Indebtedness of Others,"
("FIN 45"). FIN 45 requires us to recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in the issuance of the
guarantee. FIN 45 is effective for guarantees issued or modified after December
31, 2002. The disclosure requirements effective for the year ending December 31,
2002 expand the disclosures required by a guarantor about its obligations under
a guarantee. The adoption of the disclosure requirements of this statement did
not impact our financial position, results of operations or cash flows.

                In December 2002, The Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards No. 148, "Accounting
for Stock-Based Compensation - Transition and Disclosure," ("SFAS 148") was
issued. SFAS 148 amends Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," ("SFAS 123") to provide alternative
methods of transition for a voluntary change to the fair value method of
accounting for stock-based employee compensation. In addition, SFAS 148 amends
the disclosure requirements of SFAS 123 to require prominent disclosures in both
annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on the
reported results. The provisions of SFAS 148 are effective for financial
statements for fiscal years ending after December 15, 2002 and interim periods
beginning after December 15, 2002. The adoption of the disclosure requirements
of this statement did not impact our financial position, results of operations
or cash flows.

            In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity." SFAS
No. 150 establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some circumstances). SFAS No. 150 is effective
for financial instruments entered into or modified after May 31, 2003, and
otherwise is effective at the beginning of the first interim period beginning
after June 15, 2003. It is to be implemented by reporting the cumulative effect
of a change in an accounting principle for financial instruments created before
the issuance date of SFAS No. 150 and still existing at the beginning of the
interim period of adoption. Restatement is not permitted. The Company does not
expect the adoption of SFAS No. 150 to have a material impact upon its financial
position, cash flows or results of operations.


                                       18

<PAGE>


ITEM 7. FINANCIAL STATEMENTS


12.3        CONTENTS

<TABLE>
<CAPTION>
                                                                                  PAGE
                                                                                  ----
CONSOLIDATED FINANCIAL STATEMENTS
<S>                                                                               <C>
    Independent auditors' report                                                   F-2

    Balance sheet as of December 31, 2002                                          F-3

    Statements of operations for the years ended December 31, 2002, 2001 and
        the period from July 31, 1992 (inception) through December 31, 2002        F-4

    Statements of stockholders' equity (capital deficiency) for the years ended
        December 31, 2002 and for the cumulative period from July 31, 1992
        (inception) through December 31, 2002                                      F-5

    Statements of cash flows for the years ended December 31, 2002, 2001 and
        for the period from July 31, 1992 (inception) through December 31, 2002    F-10

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


                                       19

<PAGE>


12.4        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, 2002 and the related consolidated statements of
operations, stockholders' equity (capital deficiency), and cash flows for the
years ended December 31, 2002 and 2001 and for the period from July 31, 1992
(inception) through December 31, 2002. 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, 2002 and the consolidated results of
their operations and their consolidated cash flows for the years ended December
31, 2002 and 2001 and for the period from July 31, 1992 (inception) through
December 31, 2002 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 suffered recurring losses from operations,
negative cash flows from operations and has both a working capital and
a capital deficiency at December 31, 2002 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
June 10, 2003


                                      F-2
<PAGE>

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

Consolidated Balance Sheet
December 31, 2002

<TABLE>
<CAPTION>
ASSETS
<S>                                                                                   <C>
Current assets:
    Cash and cash equivalents                                                         $     68,000
    Prepaid expenses and other assets                                                       25,000
                                                                                      ------------

        Total current assets                                                                93,000

Property and equipment, net                                                                 56,000
Patents, net of accumulated amortization of $1,017,000                                   1,234,000
Investment in Novint Technologies, Inc.                                                    100,000
Technology license, net of accumulated amortization of $639,000                            145,000
Security deposit                                                                            18,000
                                                                                      ------------

                                                                                      $  1,646,000
                                                                                      ============

LIABILITIES

Current liabilities:
    Accounts payable and accrued expenses                                             $  1,337,000
    NOTE PAYABLE TO OFFICERS                                                               525,000
    NOTE PAYABLE - OTHER                                                                   417,000
                                                                                      ------------

        Total current liabilities                                                        2,279,000
                                                                                      ------------

Commitments

CAPITAL DEFICIENCY
Capital stock $.001 par value
Preferred, authorized 1,000,000 shares
    Series A convertible, redeemable, 10 percent cumulative, authorized 182,525
        shares; issued and outstanding - none
    Series B convertible, authorized 250,000 shares; 74,999 shares issued and
    outstanding Series C convertible, redeemable, authorized 14,000 shares;
    issued and outstanding - none
Common, authorized 250,000,000 shares, 124,262,522 shares issued
    and outstanding                                                                        122,000
Additional paid-in capital                                                              40,875,000
Deferred compensation                                                                     (142,000)
Deficit accumulated during the development stage                                       (41,488,000)
                                                                                      ------------

        Total Capital Deficiency                                                          (633,000)
                                                                                      ------------

                                                                                      $  1,646,000
                                                                                      ============
</TABLE>

See notes to consolidated 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
                                                                                                (INCEPTION)
                                                                  YEAR ENDED                      THROUGH
                                                                 DECEMBER 31,                   DECEMBER 31,
                                                          2002                 2001                 2002
                                                      -------------        -------------        -------------
<S>                                                   <C>                  <C>                  <C>
Revenue                                               $     156,000                             $     406,000

Costs and expenses:
    GENERAL AND ADMINISTRATIVE                            2,786,000        $   4,468,000           31,665,000
    RESEARCH AND DEVELOPMENT                                865,000            1,964,000            7,545,000
  IMPAIRMENT CHARGE OF CERTAIN PATENTS                      189,000                                   189,000
                                                      -------------        -------------        -------------

           Total costs and expenses                       3,840,000            6,432,000           39,399,000
                                                      -------------        -------------        -------------

Loss before other income and expenses                    (3,684,000)          (6,432,000)         (38,993,000)

Other income and expenses:
    Proceeds from sale of NMSX.com Common Stock              78,000                                    78,000
    Contract revenue                                                                                3,602,000
    Interest and other expense                              (51,000)             (41,000)            (661,000)
    Interest income                                           1,000               16,000              168,000
    Equity in losses of investees                          (346,000)            (205,000)            (651,000)
                                                      -------------        -------------        -------------
  Loss on disposal of equipment                             (26,000)                                  (26,000)
                                                      -------------        -------------        -------------
Net loss/comprehensive loss                           $  (4,028,000)       $  (6,662,000)       $ (36,483,000)
                                                      =============        =============        =============

BASIC AND DILUTED LOSS PER SHARE:
    Weighted average number of common shares
        outstanding                                     122,007,937          110,921,175
                                                      =============        =============
    Basic and diluted loss per share                  $        (.03)       $        (.06)
                                                      =============        =============
</TABLE>

See notes to consolidated 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, 2002

<TABLE>
<CAPTION>
                                                                      Preferred Stock   Preferred Stock
                                                          Series A    $.001 Par Value   $.001 Par Value         Common Stock
                                                         Preferred        Series B          Series C           $.001 Par Value
                                                           Stock      Shares    Amount  Shares   Amount    Shares          Amount
                                                           -----      ------    ------  ------   ------    ------          ------
<S>                                                      <C>          <C>       <C>     <C>      <C>     <C>              <C>
Initial issuance of shares to founders on contribution
    of intangible assets at historic cost basis                                                          14,391,627       $ 14,500
Additional founders' contribution
Issuance of 1,037,000 shares of Series A preferred
    stock, net of issuance costs                         $ 10,000
Net loss
                                                         --------                                        ----------       --------
Balance, March 31, 1993                                    10,000                                        14,391,627         14,500
Issuance of shares to investor at approximately

    $.21 per share                                                                                       14,391,627         14,500
Issuance of shares on exercise of options                                                                   479,720          1,000
Services performed in exchange for Series A
    preferred stock issued in fiscal 1993
Net loss
                                                         --------                                        ----------       --------
Balance, March 31, 1994                                    10,000                                        29,262,974         30,000
Services performed for Series A preferred stock
    issued in fiscal 1993
Issuance of shares at approximately $.52 per share                                                          345,399
Net loss
                                                         --------                                        ----------       --------
Balance, December 31, 1994                                 10,000                                        29,608,373         30,000
Issuance of 163,000 shares of Series A preferred stock      2,000
Write-off of amounts receivable from stockholders
Net loss
                                                         --------                                        ----------       --------
Balance, December 31, 1995                                 12,000                                        29,608,373         30,000
Issuance of shares upon exercise of option for $15,000                                                   14,391,627         14,000
Net loss

Balance, December 31, 1996                                 12,000                                        44,000,000         44,000
Purchase and retirement of 1,200,000 shares of
    Series A preferred stock                              (12,000)
Purchase of 7,195,814 treasury shares of common
    stock for $15,000
Net loss/comprehensive loss
                                                         --------                                        ----------       --------
Balance, December 31, 1997 (carried forward)                    0                                        44,000,000         44,000

<CAPTION>
                                                                                                    Deficit
                                                                                       Amounts    Accumulated
                                                          Additional                 Receivable    During the
                                                           Paid-in      Deferred        From      Development   Treasury
                                                           Capital    Compensation  Stockholders     Stage       Stock      Total
                                                           -------    ------------  ------------     -----       -----      -----
<S>                                                      <C>          <C>           <C>          <C>          <C>        <C>
Initial issuance of shares to founders on contribution
    of intangible assets at historic cost basis          $      500                                                        $ 15,000
Additional founders' contribution                            40,000                 $ (40,000)                                    0
Issuance of 1,037,000 shares of Series A preferred
    stock, net of issuance costs                          1,020,000                  (286,000)                              744,000
Net loss                                                                            $(543,000)                             (543,000)
                                                         ----------                 ---------    ----------              ----------
Balance, March 31, 1993                                   1,060,500                  (326,000)     (543,000)                216,000
Issuance of shares to investor at approximately

    $.21 per share                                        2,985,500                                                       3,000,000
Issuance of shares on exercise of options                    49,000                                                          50,000
Services performed in exchange for Series A
    preferred stock issued in fiscal 1993                                             127,000                               127,000
Net loss                                                                                         (2,292,000)             (2,292,000)
                                                         ----------                 ---------    ----------              ----------
Balance, March 31, 1994                                   4,095,000                  (199,000)   (2,835,000)              1,101,000
Services performed for Series A preferred stock
    issued in fiscal 1993                                                             159,000                               159,000
Issuance of shares at approximately $.52 per share          182,000                                                         182,000
Net loss                                                                                         (2,250,000)             (2,250,000)
                                                         ----------                 ---------    ----------              ----------
Balance, December 31, 1994                                4,277,000                   (40,000)   (5,085,000)               (808,000)
Issuance of 163,000 shares of Series A preferred stock    161,000                                                           163,000
Write-off of amounts receivable from stockholders         (40,000)                     40,000                                     0
Net loss                                                                                           (972,000)               (972,000)
                                                         ----------                 ---------    ----------              ----------
Balance, December 31, 1995                                4,398,000                         0    (6,057,000)             (1,617,000)
Issuance of shares upon exercise of option for $15,000        1,000                                                          15,000
Net loss                                                                                           (284,000)               (284,000)

Balance, December 31, 1996                                4,399,000                         0    (6,341,000)             (1,886,000)
Purchase and retirement of 1,200,000 shares of
    Series A preferred stock                                (58,000)                                                        (70,000)
Purchase of 7,195,814 treasury shares of common
    stock for $15,000                                                                                         $ (15,000)    (15,000)
Net loss/comprehensive loss                                                                        (335,000)               (335,000)
                                                         ----------                 ---------    ----------   ---------  ----------
Balance, December 31, 1997 (carried forward)              4,341,000                         0    (6,676,000)    (15,000) (2,306,000)
</TABLE>

See notes to consolidated financial statements

                                      F-5


<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, 2002
(continued)

<TABLE>
<CAPTION>


                                                                      Preferred Stock   Preferred Stock
                                                          Series A    $.01 Par Value     $.01 Par Value         Common Stock
                                                         Preferred        Series B          Series C           $.001 Par Value
                                                           Stock      Shares    Amount  Shares   Amount    Shares          Amount
                                                           -----      ------    ------  ------   ------    ------          ------
<S>                                                      <C>          <C>       <C>     <C>      <C>     <C>              <C>
Balance, December 31, 1997 (brought forward)             $     0                                         44,000,000       $ 44,000
Purchase of 7,195,813 treasury shares of common
    stock for $15,000
Special distribution of 14,391,627 shares of
    common stock to Projectavision, Inc.
Shares deemed issued in connection with reverse
    merger                                                                                               11,000,000         11,000
Issuance of 182,525 shares of Series A preferred stock
    and warrants exercisable into 750,000 shares of
    common stock at an exercise price of $.10 per share
    in exchange for note payable of $1,500,000 and
    accrued interest of $330,000 including deemed
    dividend in connection with beneficial conversion
    feature of preferred stock
Issuance of shares at $.20 per share, net of
    issuance costs                                                                                        5,000,000          5,000
Issuance of shares to purchase intangible assets                                                          7,200,000          7,000
Issuance of shares at $.58 per share for
    consulting services                                                                                   1,000,000          1,000
Issuance of warrants on February 10, 1998 to
    purchase 2,000,000 shares of common stock
    exercisable at $.75 per share at fair value for
    services resulting from cashless exercise feature
Issuance of shares at $.18 per share                                                                        275,000
Issuance of shares on conversion of 182,525 shares
    of Series A preferred stock                                                                           9,435,405         10,000
Issuance of shares at $.05 per share                                                                     20,340,000         20,000
Issuance of stock options and warrants at fair value
    for services
Net loss/comprehensive loss
                                                         -------                                         ----------       --------
Balance, December 31, 1998 (carried forward)                   0                                         98,250,405         98,000

<CAPTION>
                                                                                                   Deficit
                                                                                      Amounts    Accumulated
                                                          Additional                Receivable    During the
                                                           Paid-in     Deferred        From      Development   Treasury
                                                           Capital   Compensation  Stockholders     Stage       Stock      Total
                                                           -------   ------------  ------------     -----       -----      -----
<S>                                                      <C>         <C>           <C>          <C>          <C>        <C>
Balance, December 31, 1997 (brought forward)             $ 4,341,000                 $      0   $(6,676,000) $ (15,000) $(2,306,000)
Purchase of 7,195,813 treasury shares of common
    stock for $15,000                                                                                          (15,000)     (15,000)
Special distribution of 14,391,627 shares of
    common stock to Projectavision, Inc.                     346,000                                            30,000      376,000
Shares deemed issued in connection with reverse
    merger                                                   (11,000)
Issuance of 182,525 shares of Series A preferred stock
    and warrants exercisable into 750,000 shares of
    common stock at an exercise price of $.10 per share
    in exchange for note payable of $1,500,000 and
    accrued interest of $330,000 including deemed
    dividend in connection with beneficial conversion
    feature of preferred stock                             2,850,000                             (1,020,000)              1,830,000
Issuance of shares at $.20 per share, net of
    issuance costs                                           970,000                                                        975,000
Issuance of shares to purchase intangible assets           1,433,000                                                      1,440,000
Issuance of shares at $.58 per share for
    consulting services                                      579,000                                                        580,000
Issuance of warrants on February 10, 1998 to
    purchase 2,000,000 shares of common stock
    exercisable at $.75 per share at fair value for
    services resulting from cashless exercise feature        660,000                                                        660,000
Issuance of shares at $.18 per share                          50,000                                                         50,000
Issuance of shares on conversion of 182,525 shares
    of Series A preferred stock                              (10,000)
Issuance of shares at $.05 per share                         997,000                                                      1,017,000
Issuance of stock options and warrants at fair value
    for services                                           2,165,000                                                      2,165,000
Net loss/comprehensive loss                                                                       (4,580,000)            (4,580,000)
                                                         -----------                  -------   ------------ ---------  -----------
Balance, December 31, 1998 (carried forward)              14,370,000                        0    (12,276,000)        0    2,192,000
</TABLE>



See notes to consolidated financial statements

                                      F-6

<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, 2002
(continued)

<TABLE>
<CAPTION>
                                                                      Preferred Stock   Preferred Stock
                                                          Series A    $.001 Par Value   $.001 Par Value         Common Stock
                                                         Preferred        Series B          Series C           $.0 01 Par Value
                                                           Stock      Shares    Amount  Shares   Amount    Shares          Amount
                                                           -----      ------    ------  ------   ------    ------          ------
<S>                                                      <C>          <C>       <C>     <C>      <C>    <C>               <C>
Balance, December 31, 1998 (brought forward)             $     0                                         98,250,405       $ 98,000
Issuance of shares in satisfaction of accrued
    expenses                                                                                                 78,000
Issuance of shares at $.49 per share for consulting
    services                                                                                                 10,000
Issuance of shares at $.49 per share to purchase
    furniture and fixtures                                                                                  100,000
Issuance of shares at market prices as consulting
    services were performed                                                                                  17,269
Issuance of shares to purchase intangible assets                                                          1,000,000          1,000
Issuance of shares at $1.25 per share for services                                                            1,600
Issuance of stock options 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          1,000
Net loss/comprehensive loss
Issuance of shares at $.75 per share                                                                        515,000          1,000
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          1,000
                                                         -------      -------   ------                  -----------       --------
Balance, December 31, 1999 (carried forward)                   0      245,165        0                  101,687,139        102,000

<CAPTION>

                                                                                       Amounts    Accumulated
                                                          Additional                 Receivable    During the
                                                           Paid-in      Deferred        From      Development   Treasury
                                                           Capital    Compensation  Stockholders     Stage       Stock      Total
                                                           -------    ------------  ------------     -----       -----      -----
<S>                                                      <C>          <C>              <C>       <C>           <C>       <C>
Balance, December 31, 1998 (brought forward)             $14,370,000                   $     0   $(12,276,000) $     0   $2,192,000
Issuance of shares in satisfaction of accrued
    expenses                                                  15,000                                                         15,000
Issuance of shares at $.49 per share for consulting
    services                                                   5,000                                                          5,000
Issuance of shares at $.49 per share to purchase
    furniture and fixtures                                    49,000                                                         49,000
Issuance of shares at market prices as consulting
    services were performed                                   15,000                                                         15,000
Issuance of shares to purchase intangible assets             999,000                                                      1,000,000
Issuance of shares at $1.25 per share for services             2,000                                                          2,000
Issuance of stock options Immediately exercisable
    at fair value for services                             6,572,000                                                      6,572,000
Issuance of warrants on February 10, 1998 to
    purchase 2,000,000 shares of common stock
    exercisable at $.75 per share for consulting
    services resulting from notification of
    warrant holder of intent to exercise                   1,090,000                                                      1,090,000
Shares issuable at $1.27 per share in connection
    with note payable                                        191,000                                                        191,000
Issuance of shares on exercise of 100,000 options
    at $.20 per share                                         20,000                                                         20,000
Issuance of Series B convertible preferred
    shares at $6.00 per share including deemed
    dividend in connection with beneficial
    conversion feature of preferred stock                  2,942,000                               (1,471,000)            1,471,000

Issuance of shares at $.75 per share                         399,000                                                        400,000
Net loss/comprehensive loss                                                                        (9,800,000)           (9,800,000)
Issuance of shares at $.75 per share                         385,000                                                        386,000
Issuance of shares at market price for service
Issuance of common stock to Equilink, LLC on
    exercise of cashless warrants                             (1,000)
                                                         -----------                   -------   ------------  -------   ----------
Balance, December 31, 1999 (carried forward)              27,053,000                         0    (23,547,000)       0    3,608,000
</TABLE>


See notes to consolidated financial statements

                                      F-7

<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, 2002
(continued)

<TABLE>
<CAPTION>

                                                                      Preferred Stock   Preferred Stock
                                                          Series A    $.001 Par Value   $.001 Par Value         Common Stock
                                                         Preferred        Series B          Series C           $.0 01 Par Value
                                                           Stock      Shares    Amount  Shares   Amount    Shares          Amount
                                                           -----      ------    ------  ------   ------    ------          ------
<S>                                                      <C>          <C>       <C>     <C>      <C>      <C>              <C>
Balance, December 31, 1999 (brought forward)             $     0       245,165  $    0                    101,687,139     $ 102,000
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                                                           14,000  $     0
Issuance of shares in connection with Series C
    preferred stock private placement investment                                                              700,000         1,000
Shares issuable at $2.23 per share in connection with
    research and development and license agreement
Issuance of shares at market price for services                                                                11,083
Issuance of options at market value for services
Issuance of options to purchase 100,000 shares
    @$.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                                                          10,500
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
Conversion of Series B preferred stock to common                       (60,000)                               600,000
Issuance of shares at market price for services                                                                51,000
Shares issuable at market price for services
Net loss/comprehensive loss
                                                         -------      --------  ------  -------  -------  -----------     ---------
Balance, December 31, 2000                                     0       185,165       0   14,000        0  104,669,772       105,000
Issuance of shares in connection with private
    placement offerings                                                                                     1,097,500         1,098
Issuance of shares upon conversion of Series B
    preferred stock                                                   (100,166)                             1,001,660         1,002
Issuance of shares upon conversion of Series C
    preferred stock                                                                     (14,000)            2,800,000         2,800
Issuance of shares upon exercise of stock options                                                              15,000            15
Issuance of shares to acquire Teneo Computing Inc.                                                          1,400,000         1,400
Issuance of shares to purchase 42% of Novint
   Technologies, Inc.                                                                                       1,000,000         1,000
Issuance of shares for services at fair market value                                                        3,388,097         1,743
Exercise of warrants issued for services                                                                      942,281           942
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  116,314,310       115,000


<CAPTION>
                                                                                                  Deficit
                                                                                     Amounts    Accumulated
                                                        Additional                 Receivable    During the
                                                         Paid-in      Deferred        From      Development   Treasury
                                                         Capital    Compensation  Stockholders     Stage       Stock      Total
                                                         -------    ------------  ------------     -----       -----      -----
<S>                                                     <C>          <C>              <C>       <C>           <C>       <C>
Balance, December 31, 1999 (brought forward)            $27,053,000                   $    0    $(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                            2,199,000                               (1,400,000)               799,000
Issuance of shares in connection with Series C
    preferred stock private placement investment            600,000                                                         601,000
Shares issuable at $2.23 per share in connection with
    research and development and license agreement        1,115,000                               (1,115,000)
Issuance of shares at market price for services              24,000                                                          24,000
Issuance of options at market value for services            229,000                                                         229,000
Issuance of options to purchase 100,000 shares
    @$.40 per share for services                                                                                            113,000
Issuance of stock options in connection with deferred
    compensation agreement                                  425,000  $  (425,000)
Amortization of deferred compensation                                    113,000
Issuance of shares to purchase furniture and fixtures        40,000                                                          40,000
Issuance of shares in connection with Series C
    preferred stock private placement
Issuance of shares at $1.25 per share                     1,998,000                                                       2,000,000
Conversion of Series B preferred stock to common
Issuance of shares at market price for services             102,000                                                         102,000
Shares issuable at market price for services                 88,000                                                          88,000
Net loss/comprehensive loss                                                                       (4,736,000)            (4,736,000)
                                                        -----------  -----------      ------    ------------  ------    -----------
Balance, December 31, 2000                               33,873,000     (312,000)          0     (30,798,000)      0      2,868,000
Issuance of shares in connection with private
    placement offerings                                     694,000                                                         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             3,000                                                           3,015
Issuance of shares to acquire Teneo Computing Inc.          784,000                                                         785,400
Issuance of shares to purchase 42% of Novint
   Technologies, Inc.                                       560,000                                                         561,000
Issuance of shares for services at fair market value      2,138,000                                                       2,139,743
Exercise of warrants issued for services                    782,000                                                         782,942
Issuance of stock options for services                      250,000                                                         250,000
Amortization of deferred compensation                                     85,000                                             85,000
Net loss/comprehensive loss                                                                       (6,662,000)            (6,662,000)
                                                        -----------  -----------      ------    ------------  ------    -----------
Balance, December 31, 2001 (carried forward)             39,084,000     (227,000)          0     (37,460,000)      0      1,512,000
</TABLE>


See notes to consolidated financial statements

                                      F-8


<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, 2002
(continued)

<TABLE>
<CAPTION>

                                                                      Preferred Stock   Preferred Stock
                                                          Series A    $.001 Par Value   $.001 Par Value         Common Stock
                                                         Preferred        Series B          Series C           $.0 01 Par Value
                                                           Stock      Shares    Amount  Shares   Amount    Shares          Amount
                                                           -----      ------    ------  ------   ------    ------          ------
<S>                                                      <C>          <C>       <C>     <C>      <C>      <C>              <C>
Balance, December 31, 2001 (brought forward)             $     0       84,999   $    0        0  $    0   116,314,310    $ 115,000
Issuance of shares in connection with private
    placement offering                                                                                        850,000        1,000
Issuance of shares for the payment of research and
    development                                                                                                75,000            0
Issuance of shares at market price for services
    rendered                                                                                                    5,000            0
Issuance of shares in connection with private
    placement offering                                                                                        285,700
Issuance of shares for the payment of research
    and development                                                                                           975,000        1,000
Issuance of shares at market price for services
    rendered                                                                                                  620,000        1,000
Issuance of shares in connection with private
    placement offering                                                                                        400,000
Issuance of shares upon conversion of Series B
    preferred stock                                                   (10,000)                                100,000
Issuance of shares  at  market price for services
    rendered                                                                                                  500,000        1,000
Issuance of shares for the payment of research and
    development                                                                                               150,000
Issuance of shares in connection with private
    placement offering                                                                                        600,000        1,000
Issuance of shares at market price for services
    rendered                                                                                                   25,277
Issuance of shares in connection with private
    placement offering                                                                                      1,000,000        1,000
Issuance of shares in connection with private
    placement offering                                                                                        200,000
Issuance of shares at market price for services
    rendered                                                                                                  247,904
Issuance of shares at market price for services
    rendered                                                                                                1,285,301
Issuance of shares at market price for services
    rendered                                                                                                  394,000            0
Issuance of shares at market price for services
    rendered                                                                                                   60,000            0
Issuance of shares at market price for services
    rendered                                                                                                   75,000            0
Amortization of deferred compensation
Net loss/comprehensive loss
                                                         -------      --------  ------  -------  -------  -----------    ----------
Balance, December 31, 2002                               $     0       74,999   $    0        0  $    0   124,262,522    $ 122,000
                                                         =======      =======   ======  =======  =======  ===========    =========

<CAPTION>
                                                                                                    Deficit
                                                                                       Amounts    Accumulated
                                                         Additional                 Receivable    During the
                                                          Paid-in      Deferred        From      Development   Treasury
                                                          Capital    Compensation  Stockholders     Stage       Stock      Total
                                                          -------    ------------  ------------     -----       -----      -----
<S>                                                      <C>          <C>              <C>       <C>           <C>       <C>
Balance, December 31, 2001 (brought forward)             $39,084,000  $ (227,000)      $    0    $(37,460,000) $    0    $1,512,000
Issuance of shares in connection with private
    placement offering                                       253,000                                                        254,000
Issuance of shares for the payment of research and
    development                                               30,000                                                         30,000
Issuance of shares at market price for services
    rendered                                                   2,000                                                          2,000
Issuance of shares in connection with private
    placement offering                                       100,000                                                        100,000
Issuance of shares for the payment of research
    and development                                          360,000                                                        361,000
Issuance of shares at market price for services
    rendered                                                 203,000                                                        204,000
Issuance of shares in connection with private
    placement offering                                       100,000                                                        100,000
Issuance of shares upon conversion of Series B
    preferred stock                                                                                                               0
Issuance of shares  at  market price for services
    rendered                                                 135,000                                                        136,000
Issuance of shares for the payment of research and
    development                                               40,000                                                         40,000
Issuance of shares in connection with private
    placement offering                                       149,000                                                        150,000
Issuance of shares at market price for services
    rendered                                                   8,000                                                          8,000
Issuance of shares in connection with private
    placement offering                                        99,000                                                        100,000
Issuance of shares in connection with private
    placement offering                                        30,000                                                         30,000
Issuance of shares at market price for services
    rendered                                                  59,000                                                         59,000
Issuance of shares at market price for services
    rendered                                                 169,000                                                        170,000
Issuance of shares at market price for services
    rendered                                                  39,000                                                         39,000
Issuance of shares at market price for services
    rendered                                                   8,000                                                          8,000
Issuance of shares at market price for services
    rendered                                                   7,000                                                          7,000
Amortization of deferred compensation                                      85,000                                            85,000
Net loss/comprehensive loss                                                                        (4,028,000)           (4,028,000)
                                                         -----------  -----------      ------    ------------  ------    -----------
Balance, December 31, 2002                               $40,875,000  $ (142,000)      $    0    $(41,488,000) $    0    $ (633,000)
                                                         ===========  ==========       ======    ============  ======    ==========
</TABLE>

See notes to consolidated financial statements

                                      F-9

<PAGE>

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                                                      PERIOD FROM
                                                                                                                       JULY 31, 1992
                                                                                                                       (INCEPTION)
                                                                                          YEAR ENDED                    THROUGH
                                                                                          DECEMBER 31,                 DECEMBER 31,
                                                                                   2002                2001                2002
                                                                               ------------        ------------        ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                            <C>                 <C>                 <C>
    Net loss                                                                   $ (4,028,000)       $ (6,662,000)       $(36,483,000)
    Adjustments to reconcile net loss to net cash used
        in operating activities:
        Reduction of accumulated losses on sale of NMXS.Com common stock            (78,000)                                (78,000)
        Common stock issued for services                                          1,064,000           1,844,000           3,725,000
        Preferred stock issued for services                                                                                 598,000
        Stock options issued for services                                           127,000             335,000           9,541,000
        Warrants issued for services                                                                    782,000           2,532,000
        Financing costs payable with common stock                                                                           191,000
        Loss of equity investee                                                     310,000             205,000             615,000
        Amortization of technology license                                          392,000                                 392,000
         Amorization of patents                                                     244,000                                 244,000
         Depreciation                                                                30,000                                  30,000
        Loss on disposal of equipment                                                26,000                                  26,000
        Impairment charge of certain patents                                        189,000                                 189,000
        Changes in:
           Prepaid expenses                                                          18,000             (30,000)            (24,000)
           Accounts payable and accrued expenses                                    772,000             332,000           1,700,000
           Accounts receivable                                                                           87,000
                                                                               ------------        ------------        ------------
               Net cash used in operating activities                               (934,000)         (2,373,000)        (15,128,000)
                                                                               ------------        ------------        ------------

CASH FLOWS FROM INVESTING ACTIVITIES;
    Purchase of equipment                                                                                (3,000)           (423,000)
    Purchase of investment                                                                                                 (100,000)
    Proceeds received from sale of NMSX.Com common stock                             78,000                                  78,000
                                                                               ------------                            ------------

    Proceeds from sale of equipment                                                                                          14,000
                                                                               ------------        ------------        ------------
               Net cash used in investing activities                                 78,000              (3,000)           (431,000)
                                                                               ------------        ------------        ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Purchase of treasury stock                                                                                             (100,000)
    Proceeds from note payable to stockholders                                                          250,000           2,399,000
    Proceeds from note payable - other                                              115,000                                 415,000
    Repayment of note payable - other                                                (5,000)            (13,000)            (18,000)
    Net proceeds from issuance of preferred stock                                                                         3,569,000
    Net proceeds from issuance of common stock                                      735,000             698,000           9,530,000
    Loan repayment to preferred stockholder                                                                                (148,000)
    Capital lease payments                                                                                                  (13,000)
    Security deposit paid                                                                                                    (7,000)

               Net cash provided by financing activities                            845,000             935,000          15,627,000
                                                                               ------------        ------------        ------------

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                (11,000)         (1,441,000)             68,000
Cash and cash equivalents, beginning of period                                       79,000           1,520,000
                                                                               ------------        ------------        ------------

CASH AND CASH EQUIVALENTS, END OF PERIOD                                       $     68,000        $     79,000        $     68,000
                                                                               ============        ============        ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
    Interest paid                                                              $     22,000        $     20,000        $     14,000

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


See notes to consolidated financial statements

                                      F-10


<PAGE>


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, 2002, the Lauer Entities (Lancer
Management Group, LLC) owns approximately 33% 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.

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.


                                      F-11

<PAGE>


NOTE A - ORGANIZATION AND OPERATIONS  (CONTINUED)

There is no assurance that the Company's research and development and marketing
efforts will be successful, or that the Company will achieve significant sales
of any products 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, 2002. 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.

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.

[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.


                                      F-12
<PAGE>


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

[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 earnings per share calculation
      because they were anti-dilutive amounted to 37,445,000. 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.

[8]   ADVERTISING EXPENSES:

      The Company expenses advertising costs which consist primarily of
      promotional items and print media, as incurred. Advertising expenses
      amounted to $11,000, $6,000 and $82,000 for the years ended December 31,
      2002 and 2001 and for the cumulative period July 31, 1992 (inception)
      through December 31, 2002, respectively.

[9]   USE OF ESTIMATES:

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

[10]  INVESTMENTS:

      The Company recorded its 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".

[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 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.



                                      F-13
<PAGE>


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


[11]  REVENUE RECOGNITION: (CONTINUED)

      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: i. 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 has 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.

      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 due to industry technological advances and the Company's emphasis
      being placed on the Company's other fuel cell technologies. 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-14
<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[3]. 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.

<TABLE>
<CAPTION>
                                                                                       YEAR ENDED
                                                                                       DECEMBER 31,
                                                                                2002                 2001
                                                                            -------------        -------------
<S>                                                                         <C>                  <C>
          Reported net loss                                                 $  (4,028,000)       $  (6,662,000)
          Stock-based employee compensation expense included
              in reported net loss, net of related tax effects                     85,000               85,000
          Stock-based employee compensation determined under
              the fair value based method, net of related tax effects            (306,000)            (306,000)
                                                                            -------------        -------------

          Pro forma net loss                                                $  (4,249,000)       $  (6,883,000)
                                                                            =============        =============

          Basic loss per share:
              As reported                                                   $        (.03)       $        (.06)
                                                                            =============        =============
              Pro forma                                                     $        (.03)       $        (.06)
                                                                            =============        =============

          Diluted loss per share:
              As reported                                                   $        (.03)       $        (.06)
                                                                            =============        =============
              Pro forma                                                     $        (.03)       $        (.06)
                                                                            =============        =============
</TABLE>

      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 158% for
      2001, expected life of options of 5 years, risk free interest rate of
      approximately 6% in 2001 and a dividend yield of 0%. The weighted average
      fair value of options granted during the year ended December 31, 2001 is
      $3.07. No options were granted during the year ended December 31, 2002.

[14]  RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:


                                      F-15
<PAGE>


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


      In August 2001, the FASB issued SFAS No. 144, "Accounting for the
      Impairment or Disposal of Long-Lived Assets." This statement superseded
      SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
      Long-Lived Assets to Be Disposed Of" and addresses financial accounting
      and reporting for impairment of long-lived assets to be held and used, and
      long-lived assets and components of an entity to be disposed of. The
      Company adopted this statement on January 1, 2002.

NOTE C - PROPERTY AND EQUIPMENT

Property and equipment as of December 31, 2002 consists of the following:

                                                    USEFUL LIFE
                                                      (YEARS)
                                                    -----------
         Furniture and fixtures                          5        $  98,000
         Computers                                       3           44,000
         Equipment                                       5          139,000
                                                                  ---------

                                                                    281,000
         Less accumulated depreciation                              225,000
                                                                  ---------

                                                                  $  56,000
                                                                  =========

The depreciation expense for years ended December 31, 2002 and 2001 were
approximately $32,000 and $39,000, respectively.

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.

      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.


                                      F-16
<PAGE>


NOTE D - INVESTMENTS  (CONTINUED)


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

      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. As of
      December 31, 2002 the Company's basis in its NMXS.com, Inc. stock was zero
      and the market value of its NMXS.com, Inc. stock was approximately
      $848,000. The Company now accounts for its shares of NMXS.com, Inc. as
      available for sale pursuant to SFAS 115.

      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-17
<PAGE>


NOTE D - INVESTMENTS  (CONTINUED)


[2]   NOVINT:

      In June 2000, the Company entered into an agreement with Novint ("2000
      agreement") to exclusively sub-license a development stage computer
      software technology on a worldwide basis, to fund research and development
      of such technology, and to exchange certain securities. In May 2001, the
      Company entered into a series of transactions with Novint and Teneo,
      ("2001 agreement") through which the 2000 agreement was modified. Pursuant
      to the 2001 agreement the Company acquired all of the outstanding common
      stock of Teneo and 42% of the outstanding common stock of Novint; the
      Company also agreed to fund additional amounts to Novint to fulfill the
      Company's $1,500,000 research and development commitment under 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, 2002, the Company and Novint have not completed negotiating a research
      and development funding agreement to replace the 2000 agreement; however,
      the Company has funded $58,000 for research and development in addition to
      the $1,500,000 funded pursuant to the 2000 agreement.

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

      During the year ended December 31, 2002, the Company has recorded
      approximately $175,000 in amortization expense relating to the Novint
      technology. This charge is included in the loss from equity method
      investments in the statement of operations.

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


                                      F-18
<PAGE>


NOTE D - INVESTMENTS  (CONTINUED)


[2]   NOVINT: (CONTINUED)

      At December 31, 2002, the Company owns approximately 40% of Novint. During
      the year ended December 31, 2002, the Company recorded a loss of $143,000
      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, 2002 audited financial statements of Novint
      as of December 31, 2002 and for the year ended December 31, 2002:


          Current assets (including cash of $4,000)       $ 51,000
          Property and equipment                           206,000
          Other assets                                      57,000
                                                          --------

                                                          $314,000
                                                          ========

          Liabilities                                     $211,000
          Stockholders' equity                             103,000
                                                          --------

                                                          $314,000
                                                          ========

          Revenue                                         $243,000
                                                          ========

          Net loss                                        $595,000
                                                          ========


During 2002 the Company funded approximately $36,000 of Novint's operating
expenses without any increase in the basis of the Company's investment. This
amount has been recorded in loss from equity investees in the accompanying 2002
statement of operations.

NOTE E - NOTES PAYABLE


                                      F-19
<PAGE>


NOTE E - NOTES PAYABLE  (CONTINUED)

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

In August 1999, the Company borrowed $275,000 from the Chief Operating
Officer. The loan bears interest at the rate of 5.5% per annum and is due upon
the earlier of 18 months or the date of a private placement raising at least
$1,500,000. Repayment of the loan was extended until December 30, 2004. 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.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 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 extended to December 31, 2004. Interest expense for the year
ended December 31, 2002 amounted to approximately $14,000. 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.

The Company's Chief Executive Officer has personally guaranteed a $300,000 loan
from a third-party financial institution.

NOTE F - CAPITAL TRANSACTIONS

[1]   COMMON STOCK:

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

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

      During 1994, the Company effected the following stock transactions:

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

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

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

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

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


                                      F-20
<PAGE>


NOTE F - CAPITAL TRANSACTIONS  (CONTINUED)


[1]   COMMON STOCK: (CONTINUED)

      During 1998, the Company effected the following transactions:

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

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

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

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

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

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

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

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

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

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


                                      F-21
<PAGE>


NOTE F - CAPITAL TRANSACTIONS  (CONTINUED)


[1]   COMMON STOCK: (CONTINUED)

      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.

            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).


                                      F-22
<PAGE>


NOTE F - CAPITAL TRANSACTIONS  (CONTINUED)


[1]   COMMON STOCK: (CONTINUED)

            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-23
<PAGE>


NOTE F - CAPITAL TRANSACTIONS  (CONTINUED)


[1]   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-24
<PAGE>


NOTE F - CAPITAL TRANSACTIONS  (CONTINUED)


[1]   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-25
<PAGE>


NOTE F - CAPITAL TRANSACTIONS  (CONTINUED)


[1]   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.

[2]   PREFERRED STOCK:

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

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

      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.



                                      F-26
<PAGE>


NOTE F - CAPITAL TRANSACTIONS  (CONTINUED)


[2]   PREFERRED STOCK: (CONTINUED)

      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.

      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.


                                      F-27
<PAGE>


NOTE F - CAPITAL TRANSACTIONS  (CONTINUED)


[3]   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
                                                          ===========                                             ===========
</TABLE>


      All options issued during 2001, 2000 and 1999 vested within ninety days
      from the date of grant and expire at various dates during 2008 through
      2011.

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


                                      F-28
<PAGE>


NOTE F - CAPITAL TRANSACTIONS  (CONTINUED)


[3]   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.



                                      F-29
<PAGE>

NOTE F - CAPITAL TRANSACTIONS  (CONTINUED)

[3]   STOCK OPTIONS: (CONTINUED)

      Exercise prices and weighted-average contractual lives of stock options
      outstanding as of December 31, 2002 are as follows:

<TABLE>
<CAPTION>
                                          OPTIONS OUTSTANDING                                  OPTIONS EXERCISABLE
                           ------------------------------------------------------        ---------------------------------
                                                   WEIGHTED
                                                   AVERAGE               WEIGHTED                                WEIGHTED
                                                  REMAINING              AVERAGE                                 AVERAGE
      EXERCISE                NUMBER             CONTRACTUAL             EXERCISE           NUMBER               EXERCISE
       PRICE               OUTSTANDING             LIFE                   PRICE          EXERCISABLE              PRICE
--------------------------------------------------------------------------------------------------------------------------
<S>                        <C>                     <C>                   <C>              <C>                    <C>
      $0.05                16,625,000              6.40                  $ 0.05           16,625,000             $ 0.05
       0.20                 5,760,000              5.46                    0.20            5,760,000               0.20
       0.39                   250,000              8.73                    0.39              250,000               0.39
       1.25                   200,000              8.01                    1.25              200,000               1.25
       2.25                   110,000              7.53                    2.25              110,000               2.25
       2.40                   500,000              7.67                    2.40              200,000               2.40
</TABLE>


[4]   WARRANTS:

      The Company issued the following warrants at the corresponding weighted
      average exercise price as of December 31, 2002:

                                                                       WEIGHTED
                                                                       AVERAGE
                                                                       EXERCISE
                                                      WARRANTS          PRICE
                                                    -----------       ----------
          Outstanding as of December 31, 1997                 0        $   0.16
          Issued                                     17,750,000

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

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

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

          Outstanding as of December 31, 2001        13,250,000
          Issued                                              0
          Converted into common stock                         0
                                                    -----------

          Outstanding as of December 31, 2002        13,250,000
                                                    ===========


                                      F-30
<PAGE>


NOTE F - CAPITAL TRANSACTIONS  (CONTINUED)


[4]   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, 2002 and 2001, since the Company has incurred net operating
losses.

The Company's deferred tax asset as of December 31, 2002 represents benefits
from equity related compensation charges and net operating loss carryforwards of
approximately $4,362,000 and $6,699,000, respectively, which is reduced by a
valuation allowance of approximately $11,061,000 since the future realization of
such tax benefit is not presently determinable.

As of December 31, 2002, the Company has a net operating loss carryforward of
approximately $26,558,000 expiring in 2008 through 2022 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 $16,857,000 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
year ended December 31, 2002 and 2001 is summarized as follows:


                                                          YEAR ENDED
                                                         DECEMBER 31,
                                                         ------------
                                                        2002        2001
                                                        ----        ----
          Statutory federal income tax rate             (35)%      (35)%
          Increase in valuation allowance                35%        35%
                                                        ---         ---
                                                        0.0%        0.0%
                                                        ===         ===


                                      F-31
<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 years ended December 31,
      2002 and 2001 and for the cumulative period July 31, 1992 through December
      31, 2002 amounted to $0, $0 and $83,000, respectively.

      On January 11, 1998, the Company entered into a research and development
      agreement with Energy Related Devices, Inc. ("ERDI"). The term of the
      agreement is for the later of three years from the commencement date as
      defined in the agreement or the delivery of a prototype suitable for
      commercial sale or license regarding the fuel cell product defined in the
      agreement. The Company is obligated to fund up to $1 million in accordance
      with certain milestones as defined in the agreement. Upon the delivery of
      a prototype suitable for commercial sale or license regarding the fuel
      cell product, the Company's obligation will be to pay ERDI $10,000 per
      month until the Company funds or determines not to fund the research and
      development of ERDI's solar cell invention. Through December 31, 2000, the
      Company has provided $1,000,000 to ERDI for research and development
      activities. In addition, the Company is providing for key-man life
      insurance coverage on the primary stockholder of ERDI. In May 1999, the
      Company committed to additional funding of ERDI. For the year ended
      December 31, 2001, the Company has funded an additional $805,000. There
      has been no funding for the year ended December 31, 2002.

      In August 1999, the Company entered into a license option agreement with
      the Regents with the University of California for Cyclodextrin Polymer
      Separation materials. The agreement grants the Company an exclusive option
      to negotiate an exclusive world-wide license under 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.

[2]   CONSULTING AGREEMENTS:

      During 1998, the Company entered into a consulting agreement (the
      "Agreement") with a former stockholder of Tamarack to provide research
      related activities. In connection with the Agreement, the consultant
      receives approximately $2,300 per month for such services and is eligible
      for a lump sum payment of $50,000 upon the attainment of a revenue
      milestone as defined in the Agreement. In accordance with the Agreement,
      the Company issued stock options to purchase 250,000 shares of the
      Company's common stock at $.20 per share.


                                      F-32
<PAGE>


NOTE H - COMMITMENTS  (CONTINUED)

[2]   CONSULTING AGREEMENTS: (CONTINUED)

      200,000 of such options are subject to conditional vesting and are not
      currently exercisable. The vesting of these options is based upon the
      attainment of certain milestones as follows: 50,000 options upon
      successful testing and acceptance by a third party of the holographic
      storage media; 50,000 options upon commencement of commercial production
      of devices incorporating holographic storage media; 100,000 options upon
      attainment of $250,000 of gross revenues resulting from sales of devices
      incorporating the holographic storage media. These options are subject to
      variable plan accounting treatment in accordance with APB No. 25 and as
      such, the Company will record a charge to operations if the criteria for
      vesting are attained. The measurement date will be determined based upon
      the vesting.

      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 fourth quarter of 2002, the Company accrued $550,000 for
      accrued salaries to its Chief Executive Officer and its Chief Operating
      Officer.

[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-33
<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.

[5]   LEASES:

      The Company is obligated under two separate operating leases for office
      space located in Los Alamos, New Mexico and New York City. The Company
      renewed its lease in New York City for one year pursuant to the lease's
      original terms. 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 $51,000 for the year ended December 31, 2002 and $68,000 for
      the year ended December 31, 2001. 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.


NOTE I - RELATED PARTY TRANSACTIONS

During 2002, the Company's Board of Directors authorized $550,000 in bonuses
payable to the CEO and COO. This amount is included in accounts payable and
accrued expenses at December 31, 2002.

The law firm of one director received approximately $105,319 and $100,000 of
compensation for legal services rendered to the Company during the years ended
December 31, 2002 and 2001, respectively.

The accounting firm of one of our directors received approximately $77,000 and
$66,000 of compensation for accounting services rendered to the Company during
the years ended December 31, 2002 and 2001, respectively.

NMXS.com, Inc. paid the Company's Chief Executive a yearly salary of $36,000 and
leases a car as consideration for his services in 2001. In 2002, 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 is
due on December 30, 2004 (see Note E).

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 instituion on the Company's behalf.
The Company has issued a loan and security agreement with respect to these
transactions in which the Company agreed to pledge all of its assets as
security. This loan was extended to December 31, 2004 (see Note E).


                                      F-34
<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 10K-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 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.

During 2003, the Company was in arrears on a $100,000 loan from a third party.
As a result, the lender took the collateral consisting of 1,500,000 shares of
NMXS.com, Inc. common stock in full settlement of the liability.

Subsequent to December 31, 2002, the Company sold 1,000,000 shares of its common
stock for $40,000.

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/CE)/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 option in exchange for an equivalent number of
restricted shares as follows: COO - 5,250,000 shares (April 1, 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.


                                      F-35
<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, 2001 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        57        Director since June, 2003


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

            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

         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 45%. 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.


                                       20

<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. Since
2001, Mr. Anderson has also served as Senior Vice President at Executive
Monetary Management (a division of Neuberger Berman), where he is 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, 2002, we believe that our executive officers, directors and ten
percent stockholders complied with all reporting requirements applicable to
them..

                                       21


<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, 2000, 2001 and 2002.


<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,             2000       $0        $0        $109,788(1)      --             -          --       --
CEO/Chairman            --------- ---------- --------- -------------- ---------- -------------- -------- --------
                           2001       $0        $0        $ 40,800(2)      --             -          --       --
                        --------- ---------- --------- -------------- ---------- -------------- -------- --------
                           2002       $0        $0        $0               --             -          --       --
                        --------- ---------- --------- -------------- ---------- -------------- -------- --------

=================================================================================================================
Jack Harrod,               2000       $0        $0        $ 48,000(3)      --             -          --       --
COO                     --------- ---------- --------- -------------- ---------- -------------- -------- --------
                           2001       $0        $0        $ 36,000(3)      --             -          --       --
                        --------- ---------- --------- -------------- ---------- -------------- -------- --------
                           2002       $0        $0        $ 39,500(3)      --             -          --       --
                        --------- ---------- --------- -------------- ---------- -------------- -------- --------

=================================================================================================================
Scott Bach,                2000       $0        $0        $     0          --             -          --       --
Secretary/Director      --------- ---------- --------- -------------- ---------- -------------- -------- --------
                           2001       $0        $0        $     0          --        60,000(4)       --       --
                        --------- ---------- --------- -------------- ---------- -------------- -------- --------
                           2002       $0        $0        $     0          --             -          --       --
                        --------- ---------- --------- -------------- ---------- -------------- -------- --------

=================================================================================================================
David Teich,               2000       $0        $0        $     0          --             -          --       --
Treasurer/Director      --------- ---------- --------- -------------- ---------- -------------- -------- --------
                           2001       $0        $0        $     0          --       200,000(5)       --       --
                        --------- ---------- --------- -------------- ---------- -------------- -------- --------
                           2002       $0        $0        $     0          --             -          --       --
                        --------- ---------- --------- -------------- ---------- -------------- -------- --------

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

     (1)  Includes $4,000 in monthly non-accountable expenses paid by us, and a
          $56,988 annual salary and a car allowance of $4,800 paid for by
          NMSX.Com, Inc.

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

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

     (4)  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.


                                       22

<PAGE>


     (5)  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.

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 uncompensated 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.

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.

                                       23


<PAGE>


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth, as of February 17, 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
                                                    Number of       Outstanding
                                                     Shares            Shares
                                                  Beneficially      Beneficially
Name and Address                                     Owned             Owned
                                                  ------------      ------------

Michael Lauer (1)................................. 55,000,000             32.0%
375 Park Avenue, Suite 2006
New York, New York    10152

Marvin Maslow (2) ................................ 25,900,000             15.1%
c/o Manhattan Scientifics, Inc.
405 Lexington Avenue, 32nd Floor
New York, New York 10174

Jack Harrod ......................................  8,000,000              4.7%
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              2.3%
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(1)(2)
(6 persons).                                               (3)(5)(6)      26.3%

*      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.


                                       24

<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

         $11,000 of our annual rent of $60,000 in New York was paid by Normandie
Capital Corp., a company owned by Mr. Maslow, our chief executive officer.

         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
$250,000 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 a partner, received $10,000 for legal services rendered in 2003.


                                       25

<PAGE>


ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a) EXHIBITS


<TABLE>
<CAPTION>
Exhibit
Number                Description of Exhibit
------                ----------------------
<S>      <C>
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)

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)
</TABLE>


                                       26

<PAGE>


<TABLE>
<S>      <C>
10.11    Agreement with Equilink (1)

10.12    Stock Purchase Agreement between Manhattan Scientifics, Inc., Projectavision,
         Inc., and Lancer Partners, L.P. (2)

10.13    License Option Agreement with Mr. Edward Vanzo (3)

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)

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)
</TABLE>

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

         (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 as Amendment No. 2 to the registrant's
Form 10-SB filed with the Securities and Exchange Commission on February 9,
2000.

         (3) 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.

         (4) 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.

         (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
2002.

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, 2001 and December 31, 2002 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, 2002    December 31, 2001
                                       -----------------    -----------------

(i)             Audit Fees                 $60,000              $60,000
(ii)            Audit Related Fees         $0                   $0
(iii)           Tax Fees                   $0                   $0
(iv)            All Other Fees             $0                   $0



                                           27

<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:     February 18, 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.

<TABLE>
<CAPTION>
    Signature                   Title of Capacities                Date
    ---------                   -------------------                ----
<S>                         <C>                                 <C>
/s/ Marvin Maslow           President, Chief Executive          February 18, 2004
-----------------           Officer, Chairman of the Board
Marvin Maslow               (principal executive officer)


/s/ Scott L. Bach           Director, Secretary                 February 19, 2004
-----------------
Scott L. Bach


/s/ David A. Teich          Director, Treasurer                 February 19, 2004
------------------
David A. Teich


/s/ Ralph Anderson          Director                            February 11, 2004
------------------
Ralph Anderson


/s/ Larry Schatz            Director                            February 11, 2004
------------------
Larry Schatz
</TABLE>


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