EXECUTIVE SUMMARY
Fuel Cells For Portable Applications
March, 2003

This document provides an overview of Manhattan Scientifics, Inc.'s (MSI) medium-power fuel cell technology and approach to commercialization. The technology was developed over the last three years in partnership with NovArs GmbH in Germany. It has attracted worldwide interest from manufacturers and OEMs because of its industry-leading lightweight, compact characteristics. Over the last two years, evaluation prototypes been built and successfully tested by OEMs in a variety of applications with power outputs ranging from 2 watts to 3000 watts.

TECHNOLOGY

The MSI fuel cell is a completely "green" power source that combines hydrogen with air to generate electricity and water. It utilizes a Proton Exchange Membrane (PEM) structure and operates under existing conditions without need for costly, unreliable peripheral equipment (pumps, complex cooling, and humidifiers) used in competitive systems. The patented design applies special composite materials in unique ways to create compact, lightweight results. A special design feature is utilized to control proper moisture for the membrane without added complexity. Also, special sealant techniques are used to avoid conventional assembly with gaskets, bolts, and screws, dramatically reducing the number and weight of parts.

FUEL

Our fuel cell utilizes hydrogen gas as fuel. It can be provided in several ways - high pressure gas stored in small, lightweight tanks; low pressure gas stored in metal hydride containers; gas generated by a reformer which "cracks" fossil fuels such as natural gas, methanol, gasoline, etc; liquid hydrides that generate low-pressure hydrogen gas when in contact with a catalyst. This last approach potentially can reduce the volume needed for fuel by a factor of two.

ADVANTAGE

Our principal advantage over other fuel cells is power density. For a given power, the MSI fuel cell is smaller and lighter weight than the competition We have been able to achieved near 1000Watts/Kg, stack wt.@ rated power. This makes it ideally suited as a power source for portable applications or any application where size and weight are critical. Because of the simplicity of our approach (lack of peripheral equipment), it is possible the system is more reliable (less parts) and lower in cost than other fuel cells.

In the case of rechargeable batteries, our advantage (true for all fuel cells) is in greater energy density. For a given weight, the fuel cell will operate for a longer time. This is true because rechargeable batteries utilize metal alloys and are relatively heavy The battery fuel tank (oxidizer) is part of the sealed battery package, therefore its size is fixed. In other words, operating time is determined by the size of the fuel tank. The fuel cell fuel supply can be made much bigger for a given weight. Energy density or operating time should be three to five times as much as a rechargeable battery for a given weight.

MARKET OPPORTUNITY

Medium power applications offer a stronger near term opportunity for revenue ("low hanging fruit") than high power applications, such as the difficult automotive and fixed, primary power markets pushed by industry leaders. We believe a reasonable "value proposition" can be achieved in less competitive markets where the dollars per watt and "fuel infrastructure" issues are not so difficult. This includes any market where size, weight, and lack of chemical and noise pollution carry a premium. The following markets fit the criteria: Personal Transportation (Scooters, Bicycles, Wheelchairs, Small Boats, Industrial Vehicles, Government Postal and Police Vehicles), Portable Military Electronics (Man-portable, RPVs (Remote Piloted Vehicles), Portable Power for Recreational Use, Home Backup Power, Power Tools for the Construction and Maintenance Industries, Home Maintenance (Lawn Mowers, Blowers, "Weed Eaters", Cordless Vacuum Cleaners), Consumer Portable Electronics (Notebook Computers, PDAs). Power requirements for these applications range from a few kilowatts for personal transportation vehicles to a few tens of watts for small, portable electronic devices. These applications do not have a large fuel infrastructure issue hanging over them as does the automotive and fixed, primary power markets. Some could "carry" their own infrastructure with it and be set up on a small scale. Examples include police and postal bicycles and scooters, military applications, and various industrial vehicles and appliances. "Early adopter" bicycle and scooter users could satisfy initial needs through industrial gas suppliers found almost every place in the world. This is what butane and propane users have done for years with their barbeque and portable grills and heaters.

PRODUCT

The product is a fuel cell unit able to deliver DC or AC power in the range of tens of watts to 5000 watts. It will generally consist of the fuel cell stack, cooling fan, control and power conditioning electronics packaged into a self-contained, lightweight, compact unit. MSI fuel cells utilize a common, basic cell. The strategy is to volume produce the building block material and "cut and stack" to satisfy the individual fuel cell power, voltage, and size requirements. An OEM/manufacturer would then purchase the fuel cell unit from MSI's manufacturing/licensing partner and assemble it with a fuel tank and any other equipment that is required to work with the end product. Of course, there might be more or less manufacturing and/or assembly steps between the delivery of the fuel cell unit and the end-user product as a function of the situation.

STATUS

A number of prototype units have been produced for evaluation testing in a variety of consumer and defense applications. The applications have been consistent with the target markets previously mentioned. Power outputs have ranged from 2 watts to 3000 watts. An example evaluation project has been a cooperative effort with APRILIA in Venice Italy. They are the second largest "two-wheel" vehicle manufacturing company in Europe. We added our fuel cell power unit to two of their prototype "platforms" - a bicycle (600 watts) and scooter (3000 watts). Pictures of these vehicles are included below. The vehicles have been shown at the Bologna Motor Show, The Paris International Fair and The Hanover Fair. The scooter was demonstrated in the Paris Fair and to representatives of the European Union last year (2002). The scooter and bicycle are being shipped to the U.S. and will be available for demonstration at our Dallas Texas office the 4th week in March 2003.

Aprilia Fuel Cell Bicycle and Scooter

Additionally, we have delivered to the U.S. Army a 70-watt man-portable evaluation prototype to power communication equipment carried by the individual soldier. They currently need a "truck load" of rechargeable batteries following them around on the battlefield. The results of the initial evaluations have been successful and we expect a follow-on order for additional units in the 2nd Q 2003 as discussed below.

U.S. Army Fuel Cell System

Currently, we are in final negotiations leading to a contract to produce a 600-watt prototype for integration into a DOD demonstration project conducted by the U.S. Army's Fuel Cell Test and Evaluation Center (FCTEC). Also, the U.S. Army Communications-Electronics Command (CECOM) in Virginia has selected us to manufacture five 600-watt systems for evaluation. We are awaiting their formal request-for-quotation and purchase order.

Additionally, we are processing numerous other requests for product in evaluation sample quantities.

MANUFACTURING

Productization of the prototype design was successfully completed in 2001 providing a solid "design-for-manufacturing" configuration. This included establishing key material suppliers relationships. The next step is to build a pilot production line that will debug the production flow and develop experience necessary to increase the volumes. Our strategy is to partner with or license the design to another company with strong manufacturing expertise and an appropriate factory capability. Discussions with both manufacturing and licensees partners are on-going.

While the search for a manufacturing partner/licensees has been on going, we have hand built units at our NovArs laboratory in Germany to satisfy the need for evaluation prototypes. But, in December 2002, we reached agreement with MES-DEA in Switzerland, a quality volume producer of electric car batteries and automotive parts, to act as our manufacturing subcontractor for near term, small quantity purchases.

INTELLECTUAL PROPERTY

In August of 1999 Manhattan Scientifics, Inc. acquired the intellectual property of NovArs, including pending and future patents. As of this date, 8 different core patents have been filed in key countries throughout the world including the U.S., major EU countries, and key Asian countries. Several patents have been issued to date worldwide. Many others are still pending. These cover the design of our fuel cell and also the key processes for manufacture.

COMPANY HISTORY

Manhattan Scientifics, Inc. is a publicly traded technology incubator founded in January 1998 with headquarters in New York, NY and operations in Texas and New Mexico. It is currently developing MicroFuel Cell™ and Mid-Range energy sources for portable electronic devices and e-Touch™ software which adds the sense of touch to 3D computer interaction. The company is traded on the OTC Bulletin Board under the symbol: MHTX.

CONTACT INFORMATION

Marvin Maslow
Chairman & Chief Executive Officer Manhattan Scientifics, Inc.
405 Lexington Ave.
New York, NY 10174
212.551.0577 or 917.923.3300
maslow@ix.netcom.com

Jack Harrod
Chief Operating Officer
Manhattan Scientifics, Inc.
214.675.8033
harrod@airmail.net