Forward Looking Statements
This Form 10-Q contains "forward-looking" statements including statements
regarding our expectations of our future operations. For this purpose, any
statements contained in this Form 10-Q 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. In addition, these forward-looking
statements are subject, among other things, to our successful completion of the
research and development of our technologies; successful commercialization of
our technologies; successful protection of our patents; and effective
significant industry competition from various entities whose research and
development, financial, sales and marketing and other capabilities far exceeds
ours. In light of these risks and uncertainties, you are cautioned not to place
undue reliance on these forward-looking statements. Except as required by law,
we undertake no obligation to announce publicly revisions we make to these
forward-looking statements to reflect the effect of events or circumstances that
may arise after the date of this report.
OVERVIEW
Manhattan Scientifics, Inc. (the "Company" or "Manhattan Scientifics"), a
Delaware corporation, was established on July 31, 1992 and has one operating
wholly-owned subsidiary: Metallicum, Inc., ("Metallicum"). Manhattan Scientifics
is focused on technology transfer and commercialization of these transformative
technologies.
The Company operates as a technology incubator that seeks to acquire, develop
and commercialize life-enhancing technologies in various fields, with emphasis
in the areas of nanotechnology. Nanotechnology is the use and manipulation of
matter on an atomic and molecular scale. To achieve this goal, the Company is
actively seeking to identify emerging technologies through strategic alliances
with scientific laboratories, educational institutions, scientists and leaders
in industry and government. The Company and its executives have a long-standing
relationship with the Los Alamos Laboratories in New Mexico.
Metallicum
In June 2008, we acquired Metallicum and its licensed patented technology. We
entered into a stock purchase agreement with Metallicum to acquire all of the
outstanding capital in exchange for 15,000,000 restricted shares of our common
stock. An additional 15,000,000 shares of our common stock will be payable to
Metallicum in the event of meeting certain milestones. At December 31, 2011, one
milestone was met: Metallicum was granted an exclusive license by the Los Alamos
National Laboratory on patents related to nanostructured metals. In September
2009, we entered into a technology transfer agreement and sale with Carpenter
Technology Corporation, ("Carpenter") wherein Carpenter was to fully develop,
manufacture and market a new class of high strength metals. On February 11,
2015, the Company and Carpenter entered into a Settlement Agreement and Mutual
Release pursuant to which the parties provided a full release of one another,
Carpenter paid the Company $8,000,000, Carpenter transferred to the Company all
intellectual and physical property that was part of the original agreement,
Carpenter agreed to provide follow-on technical assistance and Carpenter
provided a list of all customers and contacts.
On May 1, 2019, Manhattan Scientifics, Inc., a Delaware corporation (the
"Company"), and Metallicum, Inc., a wholly-owned subsidiary of the Company,
entered into an Overarching Agreement with a non-affiliated third party ("Third
Party"), providing for an exclusive license by the Company of its ECAP
technology to the Third Party for a term of 17 years unless terminated sooner, a
sublicense by the Company to the Third Party of its rights under that certain
Exclusive Field-of-Use Patent License Agreement dated January 5, 2009 entered
with The Los Alamos National Laboratory for a term until the expiration of the
last valid claim to expire of the patents pursuant to such agreement and the
sale by the Company of ECAP-C machines to the Third party. As part of the above
license agreements, the Company will receive royalty payments, including minimum
payments, based on a percentage of the Third Party's sales. The Company
anticipates royalty income as the nanotitanium is commercialized for use in
medial prosthetics. Royalties will be 10% on sales of licensed dental products
and an average of 5% in all other sales of licensed products.
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Imagion
On May 31, 2011, we entered into an Agreement and Plan of Reorganization to
acquire Senior Scientific. The total purchase price was 21,668,000 restricted
shares of our common stock (less 7,667,000 shares previously issued pursuant to
an option agreement). As a result of this acquisition, Senior Scientific owned
patented technologies that can use biosafe nanoparticles and sensitive magnetic
sensors to detect and measure cancer cells in biopsies or in the human body with
the potential to transform how cancer is detected and treated. On November 17,
2016, Senior Scientific merged with and into Imagion, a Nevada company.
Following the merger, Imagion held all of the liabilities, obligations and
assets of Senior Scientific and the Company continued as the sole equity holder
of Imagion. On November 29, 2016, the Company announced a plan to have Imagion
pursue an IPO and listing on the Australian Stock Exchange (ASX).
As of September 30, 2022, Manhattan Scientifics presently owns 51,766,508 shares
of Imagion, with a fair market value of approximately $ 1,064,000, based upon
the closing price per share of Imagion common stock on the ASX. The Company
accounts for its investment in Imagion in accordance with ASC 825-10 and elected
fair value option. We initially held 31% of the total issued and outstanding
shares of Imagion and had one seat on the Board of Directors of Imagion. The
guidance allows entities to elect to measure certain financial assets and
financial liabilities (as well as certain nonfinancial instruments that are
similar to financial instruments) at fair value. Investments over which an
investor has the ability to exercise significant influence are eligible for the
fair value option as they represent recognized financial assets. When the fair
value option is elected for an instrument, all subsequent changes in fair value
for that instrument are reported in earnings.
Novint
We made an investment in Novint Technologies Inc. ("Novint") in 2001. Novint is
currently engaged in the development and sale of 3D haptics products and
equipment. Haptics refers to one's sense of touch and Novint's focus is in the
consumer interactive computer gaming market. The Company owns 1,028,425 shares
of Novint's common stock. The fair value of the Novint shares are not recorded
on the balance sheet as of September 30, 2022.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2022 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 2021
REVENUE. Revenue was $9,000 and $0 for the three months ended September 30, 2022
and 2021, respectively.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist of
consultants, contractors, accounting, legal, travel, rent, telephone and other
day-to-day operating expenses. General and administrative expenses were $175,000
for the three months ended September 30, 2022 compared with $175,000 for the
three months ended September 30, 2021.
RESEARCH AND DEVELOPMENT. Research and development costs were $2,000 and $3,000,
for the three months ended September 30, 2022 and 2021, respectively.
OTHER INCOME (EXPENSES). Total other income for the three months ended September
30, 2022 totaled $97,000 compared to the total other expense of $978,000 for the
three months ended September 30, 2021. The decrease is primarily attributable to
the loss on fair value adjustments of its investment in Imagion during the
period for the amount of $874,000.
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NET INCOME (LOSS). During the three months ended September 30, 2022, the Company
had net loss of $71,000, compared to net gain of $1,156,000 for the three months
ended September 30, 2021. The decrease of $1,085,000 is primarily attributable
to the decrease gain on fair value adjustment of investment.
NINE MONTHS ENDED SEPTEMBER 30, 2022 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
2021
REVENUE. Revenue was $50,0000 and $50,000 for the nine months ended September
30, 2022 and 2021, respectively.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist of
consultants, contractors, accounting, legal, travel, rent, telephone and other
day-to-day operating expenses. General and administrative expenses were $548,000
for the nine months ended September 30, 2022 compared with $565,000 for the nine
months ended September 30, 2021. The decrease is primarily attributable from the
decrease of accounting, advertising, consulting, and legal fees.
RESEARCH AND DEVELOPMENT. Research and development costs were $7,000 and $8,000
for the nine months ended September 30, 2022 and 2021, respectively.
OTHER INCOME (EXPENSES). Total other expense for the nine months ended September
30, 2022 totaled $1,829,000 compared to the total other loss of $3,082,000 for
the nine months ended September 30, 2021. The decrease of $1,260,000 is
primarily attributable to the decrease loss on fair value adjustments of its
investment in Imagion during the period.
NET INCOME (LOSS). During the nine months ended September 30, 2022, the Company
had net loss of $2,334,000, compared to net loss of $3,605,000 for the nine
months ended September 30, 2021. The decrease of $1,271,000 is primarily
attributable to the decrease loss on fair value adjustment of investment.
LIQUIDITY AND CAPITAL RESOURCES
The Company had Stockholders' deficit of $1,299,000 and the working capital
deficit was $1,309,000 on September 30, 2022. The Company had an increase of
$56,000 in cash and cash equivalents for the nine months ended September 30,
2022.
Based upon current projections, our principal cash requirements for the next 12
months consists of (1) fixed expenses, including consulting and professional
services and (2) variable expenses, including technology research and
development, milestone payments and intellectual property protection, and
additional scientific consultants. As of September 30, 2022, we had $288,000 in
cash. We believe our current cash position may not be sufficient to maintain our
operations for the next twelve months. Accordingly, we may need to engage in
equity or debt financings to secure additional funds. If we raise additional
funds through future issuances of equity or convertible debt securities, our
existing stockholders could suffer significant dilution, and any new equity
securities we issue could have rights, preferences and privileges superior to
those of holders of our common stock. Any debt financing that we secure in the
future could involve restrictive covenants relating to our capital raising
activities and other financial and operational matters, which may make it more
difficult for us to obtain additional capital and to pursue business
opportunities, including potential acquisitions. We may not be able to obtain
additional financing on terms favorable to us, if at all. If we are unable to
obtain adequate financing or financing on terms satisfactory to us when we
require it, our ability to continue to support our business growth and to
respond to business challenges could be impaired, and our business may be
harmed.
On October 17, 2019, we executed a secured note with our only independent
director for $100,000 and a secured note with an unrelated party for $50,000.
The secured notes are due on October 17, 2022. The Company agreed that the notes
bear interest at 10% per annum, to be paid in advance with shares of Imagion
Biosystems Limited common stock ("IBX"), calculated at $0.015 per share or
3,000,000 shares of IBX. We currently plan to sell IBX common stock to raise
funds for operations, we have sold 750,000 shares of IBX common stock as of
September 30, 2022.
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CASH FLOW INFORMATION
The Company had cash and cash equivalents of approximately $288,000 and $232,000
at September 30, 2022 and December 31, 2021, respectively. This figure
represents an increase in cash of $56,000.
OPERATING ACTIVITIES
The Company used approximately $262,000 of cash for operating activities in the
nine months ended September 30, 2022, as compared to using $287,000 of cash for
operating activities in the nine months ended September 30, 2021.
The change is mainly from the decrease in the loss on fair value adjustments of
its investment in Imagion during the period.
INVESTING ACTIVITIES
The Company received approximately $328,000 of cash from investing activities in
the nine months ended September 30, 2022 as compared to, received approximately
$300,000 of cash for investing activities in the nine months ended September 30,
2021.
The change is mainly from the sale of investment in Imagion in the nine months
ended September 30, 2022.
FINANCING ACTIVITIES
During the nine months ended September 30, 2022, cash used in financing
activities was $10,000 compared to $0 of cash for financing activities in the
nine months ended September 30, 2021. The decrease was primarily a result of
repayment of note payable.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our discussion and analysis of our financial condition and results of operations
are based upon our consolidated financial statements, which have been prepared
in accordance with generally accepted accounting principles in the United States
of America.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles in the United States of America requires management to
make estimates and assumptions that affect the amount of assets and liabilities
and disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses during the
reporting period. A significant estimate includes the carrying value of our
patents, fair value of our common stock, assumptions used in calculating the
value of stock options, depreciation and amortization.
Fair Value of Financial Instruments:
The Company recognizes the fair value of financial instruments in accordance
with FASB ASC 820, Fair Value Measurements and Disclosures, "Fair Value
Measurements", which provides a framework for measuring fair value under GAAP.
Fair value is defined as the exchange price that would be received for an asset
or paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between
market participants on the measurement date. The standard also expands
disclosures about instruments measured at fair value and establishes a fair
value hierarchy, which requires an entity to maximize the use of observable
inputs and minimize the use of unobservable inputs when measuring fair value.
The standard describes three levels of inputs that may be used to measure fair
value:
Level 1 - Quoted prices for identical assets and liabilities in active markets;
Level 2 - Quoted prices for similar assets and liabilities in active markets;
quoted prices for identical or similar assets and liabilities in markets that
are not active; and model-derived valuations in which all significant inputs and
significant value drivers are observable in active markets; and
Level 3 - Valuations derived from valuation techniques in which one or more
significant inputs or significant value drivers are unobservable.
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The Company designates cash equivalents (consisting of money market funds) and
investments in securities of publicly traded companies as Level 1. The total
amount of the Company's investment classified as Level 3 is de minimis. Fair
value of financial instruments: The carrying amounts of financial instruments,
including cash and cash equivalents, short-term investments, accounts payable,
accrued expenses and notes payables approximated fair value as of September 30,
2022 and December 31, 2021, because of the relative short term nature of these
instruments.
During the year ended December 31, 2017, the Company elected fair value option
for its investment in Imagion Biosystems, Inc. ("Imagion") based on triggering
event of dilution of ownership, which lead to the deconsolidation of Imagion.
Investments in Imagion are measured at fair value as opposed to equity method
based on ASC 825-10. The guidance allows entities to elect to measure certain
financial assets and financial liabilities (as well as certain nonfinancial
instruments that are similar to financial instruments) at fair value.
Investments over which an investor has the ability to exercise significant
influence are eligible for the fair value option as they represent recognized
financial assets. When the fair value option is elected for an instrument, all
subsequent changes in fair value for that instrument are reported in earnings.
As of September 30, 2022, the Company holds 51,766,508 shares of Imagion and is
reported under fair value method under ASC 320. Management determined that it
was appropriate to carry its investment in Imagion at fair value because the
investment is traded on the ASX and has daily trading activity and is a better
indicator of value. The investments are re-measured at the end of each quarter
based on the trading price and converted from AUD to USD. Any change in the
value is reported on the income statement as an unrealized gain or loss.
Property and equipment:
Property and equipment are recorded at cost. Expenditures for major additions
and improvements are capitalized, and minor replacements, maintenance, and
repairs are charged to expense as incurred. When property and equipment are
retired or otherwise disposed of, the cost and accumulated depreciation are
removed from the accounts and any resulting gain or loss is included in the
results of operations for the respective period. Depreciation is provided over
the estimated useful lives of the related assets, the useful lives range between
3-10 years, using the straight-line method for financial statement purposes.
License Agreements:
In 2008, the Company obtained licenses to the rights of certain patents
regarding nanostructured materials developed by another company as a result of
the acquisition of Metallicum. The purchase price paid for these licenses was
$305,000, which represented its fair value. The Company obtained an exclusive
license on two (2) patents and a non-exclusive license on the third patent. The
value attributable to license agreements is being amortized over the period of
its estimated benefit period of 10 years. At September 30, 2022, the license
agreements were fully amortized. Under the terms of the agreement, the Company
may be required to pay royalties, as defined, to the licensors.
In 2009, the Company entered into a patent license agreement with Los Alamos
National Security LLC for the exclusive use of certain technology relating to
the manufacture and application of nanostructuring metals and alloys. The
purchase price paid for this license agreement was $33,000 based on the fair
market value of 2,000,000 shares of common stock issued. The value attributable
to license agreements is being amortized over the period of its estimated
benefit period of 10 years. At September 30, 2022, the license agreements were
fully amortized. Beginning in 2010, the Company was required to pay an annual
license fee of $10,000 and may be required to pay royalties, as defined, to the
licensors.
Due from the Sale of Assets:
Non-current assets are classified as held for sale if it is highly probably that
they will be recovered primarily through sale rather than through continuing
use.
Immediately before classification as held for sale, the assets are remeasured at
the lower of their carrying amount and fair value less costs to sell. Any
impairment loss on initial classification as held for sale and subsequent gains
and losses on re-measurement are recognized in profit or loss. Gains are not
recognized in excess of any cumulative impairment loss.
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During the year ended December 31, 2019, the Company sold the assets held for
sale that were presented on the balance sheet as of December 31, 2018. During
the year ended December 31, 2018, the Company recorded impairment and adjusted
the asset valuation to $1.2 million. The Company sold the assets for a total of
$1.2 million of which $300,000 was received during the year ended December 31,
2019. The remaining $900,000 will be collected during the next three (3) years
in equal increments on the anniversary date of the agreement, May 1. During May
2022 and 2021, the Company received $300,000 and reduced the amount due from the
sale of assets to the balance of $0.
Marketable Securities:
The Company considers securities with original maturities of greater than 90
days to be available-for-sale debt securities. Securities under this
classification are recorded at fair value and unrealized gains and losses within
other income (loss). The estimated fair value of the available-for-sale debt
securities is determined based on quoted market prices or rates for similar
instruments. In addition, the cost of debt securities in this category is
adjusted for amortization of premium and accretion of discount to maturity. For
available-for-sale debt securities in an unrealized loss position, the Company
assesses whether it intends to sell or if it is more likely than not that the
Company will be required to sell the security before recovery of its amortized
cost basis. If either of the criteria regarding intent or requirement to sell is
met, the security's amortized cost basis is written down to fair value. If the
criteria are not met, the Company evaluates whether the decline in fair value
has resulted from a credit loss or other factors. In making this assessment,
management considers, among other factors, the extent to which fair value is
less than amortized cost, any changes to the rating of the security by a rating
agency, and adverse conditions specifically related to the security. If this
assessment indicates that a credit loss exists, the present value of cash flows
expected to be collected from the security are compared to the amortized cost
basis of the security. If the present value of the cash flows expected to be
collected is less than the amortized cost basis, a credit loss exists and an
allowance for credit losses is recorded for the credit loss, limited by the
amount that the fair value is less than the amortized costs basis. Any
impairment that has not been recorded through an allowance for credit losses is
recognized in other income (loss). For the three months ended September 30,
2022, no allowance was recorded for credit losses.
Revenue Recognition:
The Company recognizes revenue in accordance with generally accepted accounting
principles as outlined in the Financial Accounting Standard Board's ("FASB")
Accounting Standards Codification ("ASC") 606, Revenue From Contracts with
Customers, which consists of five steps to evaluating contracts with customers
for revenue recognition: (i) identify the contract with the customer; (ii)
identity the performance obligations in the contract; (iii) determine the
transaction price; (iv) allocate the transaction price; and (v) recognize
revenue when or as the entity satisfied a performance obligation.
Revenue recognition occurs at the time we satisfy a performance obligation to
our customers, when control transfers to customers, provided there are no
material remaining performance obligations required of the Company or any
matters of customer acceptance. We only record revenue when collectability is
probable.
The revenue was generated was from minimum royalty payments from the license
agreement.
Accounting for Leases:
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) and subsequent
amendments to the initial guidance: ASU 2017-13, ASU 2018-10, ASU 2018-11, ASU
2018-20 and ASU 2019-01 (collectively, Topic 842). Topic 842 requires companies
to generally recognize on the balance sheet operating and financing lease
liabilities and corresponding right-of-use assets. The Company early adopted
Topic ASC 842 using the effective date of January 1, 2019 as the date of our
initial application of the standard. The Company used the new transition
election to not restate comparative periods and elected the package of practical
expedients upon adoption, which permits the Company to not reassess under the
new standard the Company's prior conclusions about lease identification, lease
classification and initial direct costs. Consequently, financial information for
the comparative periods will not be updated. Upon adoption, there was no
material impact to the financial statements as under the practical expedient the
lease consist of terms less than one year, and therefore is not required to
capitalize the lease.
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Stock Based Compensation:
In June 2018, FASB issued ASU No. 2018-07, Compensation - Stock Compensation
(Topic 718), Improvements to Nonemployee Share Based Payment Accounting. The
amendments in this Update expand the scope of stock compensation to include
share-based payment transactions for acquiring goods and services from
nonemployees. The guidance in this Update does not apply to transactions
involving equity instruments granted to a lender or investor that provides
financing to the issuer. The guidance is effective for fiscal years beginning
after December 31, 2018 including interim periods within the fiscal year. The
Company adopted with an effective date of January 1, 2019. Upon adoption, there
was no material impact to the financial statements.
Basic and Diluted Earnings (Loss) Per Share:
In accordance with FASB ASC 260, "Earnings Per Share," the basic loss per share
is computed by dividing the loss attributable to common stockholders by the
weighted average number of common shares outstanding during the period. Basic
net income (loss) per share excludes the dilutive effect of stock options or
warrants and convertible notes Diluted net earnings (loss) per common share is
determined using the weighted-average number of common shares outstanding during
the period, adjusted for the dilutive effect of common stock equivalents,
consisting of shares that might be issued upon exercise of common stock options
and warrants. In periods where losses are reported, the weighted-average number
of common shares outstanding excludes common stock equivalents, because their
inclusion would be anti-dilutive. As of September 30, 2022 and 2021, there were
28,922,917 and 28,922,917, respectively, potentially dilutive shares that need
to be considered as common share equivalents. As a result of the net loss for
the periods presented, the potentially dilutive shares for the periods ended
September 30, 2022 and 2021 are anti-dilutive.
OFF BALANCE SHEET ARRANGEMENTS
We have not entered into any off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations
liquidity, capital expenditures or capital resources and would be considered
material to investors.
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MANHATTAN SCIENTIFICS, INC. 
