IMAGION BIOSYSTEMS SPIN-OUT	3 Months Ended
Mar. 31, 2017
Notes to Financial Statements
Note 5. IMAGION BIOSYSTEMS SPIN-OUT	On November 17, 2016, Senior Scientific, a then wholly owned subsidiary of the Company, merged with and into Imagion Biosystems, Inc., a Nevada company (“Imagion”). 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 22, 2016, Imagion issued a Promissory Note in the principal amount of $6,900,000 to the Company (the “Intercompany Note”) payable on the one year anniversary. The Intercompany Note does not accrue interest, provided, however, in the event of a default, interest shall accrue at 10% per annum. Upon the completion of the partial buyout and replacement of the Senior Notes (issued by Imagion during 2014 and 2013, as set forth in Note 4, above) held by the Senior Lenders, as set forth in the Spinout Approval, the Intercompany Note shall automatically be equal to $250,000 (the “Minimum Principal Balance”) plus $1. All obligations of Imagion to the Company under the Intercompany Note shall be subordinate to all obligations of Imagion under the Convertible Notes (together with any replacement notes issued therefor) issued by Imagion or its predecessor. Further, upon the approval of the registration statement for Imagion’s Initial Public Offering (the “Effective Date”), Imagion shall convert the principal and interest in excess of the Minimum Principal Balance for shares of Imagion’s common stock equal to the amount of shares that would cause the sum of (a) all shares of Imagion’s common stock issued to the Company prior to the Effective Date and (b) all shares of Imagion’s common stock issued to the Company upon conversion of the Intercompany Note, to equal 50.1% of Imagion’s total number of common shares issued or issuable on a fully diluted basis; provided, however, if the preceding sum is greater than 50.1% of Imagion’s total number of common shares issued or issuable on a fully diluted basis, the excess balance shall be converted into one share of Imagion’s common stock. Upon the completion of the Imagion’s Initial Public Offering, Imagion shall convert the Minimum Principal Balance and all other amounts due for interest for shares of Imagion’s common stock at a price per share equal to the price paid by investors in Imagion’s Initial Public Offering; provided, however, Imagion may, at its discretion, pay the Company the Minimum Principal Balance and all other amounts due in cash. On February 2, 2017, Imagion repaid a total of $2 million of debt to three lenders and the remaining balance of $500,000 was renegotiated and replaced with three new convertible promissory notes. The notes bear interest at 8% per annum with default interest at 10% per annum. The notes are due in February 2019 with a balloon payment of principal and accrued interest. In addition, at the close of the initial public offering (“IPO”) the note will automatically convert into shares of common stock at the conversion price equal to the price per share paid by investors in the IPO and any accrued interest will be paid in cash. During the three months ended March 31, 2017, Imagion raised a total of approximately $4,662,000 from investors and sold a total of 64,471,412 shares of common stock. Following this sale of stock, Manhattan Scientifics owned a controlling interest of approximately 50.1% of Imagion’s issued and outstanding common stock. Beginning January 1, 2017, the Company is fully consolidating the operations of Imagion into the Company’s condensed consolidated financial statements. The loss attributed to the Company’s noncontrolling interest in Imagion is reflected as a component of non-operating income (losses). During the three months ended March 31, 2017 and 2016, the net loss attributable to its noncontrolling interest in Imagion was $471,000.

IMAGION BIOSYSTEMS SPIN-OUT

3 Months Ended

Mar. 31, 2017

On November 17, 2016, Senior Scientific, a then wholly owned subsidiary of the Company, merged with and into Imagion Biosystems, Inc., a Nevada company (“Imagion”). 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 22, 2016, Imagion issued a Promissory Note in the principal amount of $6,900,000 to the Company (the “Intercompany Note”) payable on the one year anniversary. The Intercompany Note does not accrue interest, provided, however, in the event of a default, interest shall accrue at 10% per annum. Upon the completion of the partial buyout and replacement of the Senior Notes (issued by Imagion during 2014 and 2013, as set forth in Note 4, above) held by the Senior Lenders, as set forth in the Spinout Approval, the Intercompany Note shall automatically be equal to $250,000 (the “Minimum Principal Balance”) plus $1. All obligations of Imagion to the Company under the Intercompany Note shall be subordinate to all obligations of Imagion under the Convertible Notes (together with any replacement notes issued therefor) issued by Imagion or its predecessor. Further, upon the approval of the registration statement for Imagion’s Initial Public Offering (the “Effective Date”), Imagion shall convert the principal and interest in excess of the Minimum Principal Balance for shares of Imagion’s common stock equal to the amount of shares that would cause the sum of (a) all shares of Imagion’s common stock issued to the Company prior to the Effective Date and (b) all shares of Imagion’s common stock issued to the Company upon conversion of the Intercompany Note, to equal 50.1% of Imagion’s total number of common shares issued or issuable on a fully diluted basis; provided, however, if the preceding sum is greater than 50.1% of Imagion’s total number of common shares issued or issuable on a fully diluted basis, the excess balance shall be converted into one share of Imagion’s common stock. Upon the completion of the Imagion’s Initial Public Offering, Imagion shall convert the Minimum Principal Balance and all other amounts due for interest for shares of Imagion’s common stock at a price per share equal to the price paid by investors in Imagion’s Initial Public Offering; provided, however, Imagion may, at its discretion, pay the Company the Minimum Principal Balance and all other amounts due in cash.

On February 2, 2017, Imagion repaid a total of $2 million of debt to three lenders and the remaining balance of $500,000 was renegotiated and replaced with three new convertible promissory notes. The notes bear interest at 8% per annum with default interest at 10% per annum. The notes are due in February 2019 with a balloon payment of principal and accrued interest. In addition, at the close of the initial public offering (“IPO”) the note will automatically convert into shares of common stock at the conversion price equal to the price per share paid by investors in the IPO and any accrued interest will be paid in cash.

During the three months ended March 31, 2017, Imagion raised a total of approximately $4,662,000 from investors and sold a total of 64,471,412 shares of common stock. Following this sale of stock, Manhattan Scientifics owned a controlling interest of approximately 50.1% of Imagion’s issued and outstanding common stock. Beginning January 1, 2017, the Company is fully consolidating the operations of Imagion into the Company’s condensed consolidated financial statements. The loss attributed to the Company’s noncontrolling interest in Imagion is reflected as a component of non-operating income (losses). During the three months ended March 31, 2017 and 2016, the net loss attributable to its noncontrolling interest in Imagion was $471,000.