**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**FORM
      10-QSB**





**(Mark
      One)**





**x**
            
            **QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE
                ACT
                OF 1934**





**For
                the quarterly period ended September 30,
                2006**





**or**





**o**
            
            **TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE
                ACT
                OF 1934**





**For
                the transition period from  ________     to
                ______________**





**Commission
      File Number: 000-32947**




**Lev
      Pharmaceuticals, Inc.**


(Exact
      name of small business issuer as specified in its charter)





**Delaware**
            **88-0211496**(State
                or other jurisdiction of
              incorporation
                or organization)
            (I.R.S.
                Employer Identification No.)**122
                East 42nd Street, Suite 1700**
              **New
                York, New York**
            **10168**(Address
                of principal executive offices)
            (Zip
                Code)




**Issuer’s
      telephone number: (212) 682-3096**





**122
      East 42nd Street, Suite 2606**





(Former
      Name, Former Address and Former Fiscal Year, if Changes Since
      Last Report)





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to the filing requirements
      for
      the past 90 days. Yes x No o





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). o Yes x No





As
      of
      November 7, 2006, the issuer had 114,010,236 shares of common stock
      outstanding.





Transitional
      Small Business Disclosure Format (check one): o Yes x No








1




**Lev
      Pharmaceuticals, Inc.**




**Index
      to Form 10-QSB**







PagePart
                I.
            Financial
                InformationItem
                1.
            Condensed
                Consolidated Financial Statements
            2Condensed
                Consolidated Balance Sheets as of September 30 2006 (Unaudited) and
                December 31, 2005
            2Condensed
                Consolidated Statements of Operations (Unaudited) for the Three and
                Nine
                Months Ended
              September
                30, 2006 and September 30, 2005 and for the Period from July 21, 2003
                (Inception) to September 30, 2006
            3Condensed
                Consolidated Statements of Cash Flows (Unaudited) for the Nine Months
                Ended
              September
                30, 2006 and September 30, 2005 and for the Period from July 21,
                2003
                (Inception) to September 30, 2006
            4Notes
                to Unaudited Condensed Consolidated Financial Statements
            5Item
                2.
            Management’s
                Discussion and Analysis or Plan of Operation
            13Item
                3.
            Controls
                and Procedures
            20Part
                II.
            Other
                Information
            21Item
                1.
            Legal
                Proceedings
            21Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            21Item
                3.
            Defaults
                Upon Senior Securities
            21Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            21Item
                5.
            Other
                Information
            21Item
                6.
            Exhibits
            22Signatures
            22






2




**LEV
                PHARMACEUTICALS , INC. AND SUBSIDIARY**
              **(a
                development stage enterprise)**
              
              **Condensed
                Consolidated Balance Sheets**
            
            September 30,
              2006
              (Unaudited)
            
            December
                31,
              2005ASSETSCurrent
                assets:Cash
                and cash equivalents
            
            $
            1,199,337
            
            $
            3,482,616Investments
                - held to maturity
            
            
            —
            
            
            2,487,390Prepaid
                expenses
            
            
            196,870
            
            
            276,829Other
                assets
            
            
            17,496
            
            
            60,081Total
                current assets
            
            
            1,413,703
            
            
            6,306,916Fixed
                assets, net of accumulated depreciation
            
            
            89,830
            
            
            69,922Other
                assets
            
            
            —
            
            
            16,817$
            1,503,533
            
            $
            6,393,655LIABILITIESCurrent
                liabilities:Accounts
                payable
            
            $
            535,212
            
            $
            657,230Accrued
                expenses
            
            
            636,473
            
            
            352,036Deferred
                lease liability
            
            
            —
            
            
            2,519Total
                current liabilities
            
            
            1,171,685
            
            
            1,011,785Loan
                payable, net of debt discount
            
            
            1,006,216
            
            
            316,077Total
                liabilities
            
            
            2,177,901
            
            
            1,327,862Commitments
                and contingenciesSTOCKHOLDERS'
                (DEFICT)EQUITYPreferred
                stock - $0.01 par value, 20,000,000 authorized,
              no
                shares issued and outstandingCommon
                stock - $0.01 par value, 200,000,000 shares authorized,
              81,702,544
                and 81,527,544 shares issued and outstanding at September 30,
                2006
              and
                December 31, 2005, respectively
            
            
            817,025
            
            
            815,275Additional
                paid-in capital
            
            
            16,214,582
            
            
            15,671,368Deficit
                accumulated during the development stage
            
            
            (17,705,975
            )
            
            (11,420,850
            )Total
                stockholders' (deficit) equity
            
            
            (674,368
            )
            
            5,065,793$
            1,503,533
            
            $
            6,393,655




The
      accompanying notes are an integral part of the unaudited condensed consolidated
      financial statements






3




**LEV
      PHARMACEUTICALS, INC. AND SUBSIDIARY**


(a
      development stage enterprise)




**Condensed
      Consolidated Statements of Operations (Unaudited)**








Three
                Months
              Ended
              September
                30,
            
            Nine
                Months
              Ended
              September
                30,
            
            Period
                From
              July
                21, 2003
              (Inception)
                to
              September
                30,2006
            
            2005
            
            2006
            
            2005
            
            2006Costs
                and expenses:Research
                and development
            
            $
            1,556,341
            
            $
            554,730
            
            $
            3,492,834
            
            $
            1,580,519
            
            $
            6,995,601Merger
                costs
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            283,732General
                and administrative
            
            
            999,903
            
            
            688,982
            
            
            2,863,452
            
            
            1,791,297
            
            
            10,349,089Loss
                before other income
            
            
            (2,556,244
            )
            
            (1,243,712
            )
            
            (6,356,286
            )
            
            (3,371,816
            )
            
            (17,628,422
            )Other
                income:Interest
                income
            
            
            19,535
            
            
            60,800
            
            
            98,533
            
            
            126,276
            
            
            331,340Interest
                expense
            
            
            (11,996
            )
            
            (3,127
            )
            
            (27,372
            )
            
            (3,127
            )
            
            (38,838
            )Net
                loss
            
            $
            (2,548,705
            )
            $
            (1,186,039
            )
            $
            (6,285,125
            )
            $
            (3,248,667
            )
            $
            (17,335,920
            )Net
                loss per share- basic and diluted
            
            $
            (0.03
            )
            $
            (0.01
            )
            $
            (0.08
            )
            $
            (0.04
            )Weighted
                average shares- basic and diluted
            
            
            81,702,544
            
            
            81,385,154
            
            
            81,623,408
            
            
            79,001,223




The
      accompanying notes are an integral part of the unaudited condensed consolidated
      financial statements





4





**LEV
      PHARMACEUTICALS, INC. AND SUBSIDIARY**


(a
      development stage enterprise)





**Condensed
      Consolidated Statements of Cash Flows (Unaudited)**


Nine
                Months
            
            Nine
                Months
            
            July
                21, 2003Ended
            
            Ended
            
            (Inception)
                toSeptember
                30,
            
            September
                30,
            
            September
                30,2006
            
            2005
            
            2006Net
                loss
            
            $
            (6,285,125
            )
            $
            (3,248,667
            )
            $
            (17,335,920
            )Adjustments
                to reconcile net loss to net cash usedin
                operating activities:Compensation
                to consultants from issuance ofwarrants
                and common stock
            
            
            222,450
            
            
            27,819
            
            
            2,238,305Repricing
                of options and warrants
            
            
            
            
            
            
            
            
            1,455,269Option
                and warrants modification from merger
            
            
            
            
            
            
            
            
            75,201Depreciation
                expense
            
            
            13,458
            
            
            7,044
            
            
            24,219Amortization
                of debt discount
            
            
            36,553
            
            
            
            
            
            36,553Stock-based
                compensation expense to employees
            
            
            322,515
            
            
            
            
            
            322,515Accretion
                of investment income
            
            
            (12,610
            )
            
            
            
            
            (12,610
            )Supplier
                purchase funding
            
            
            653,586
            
            
            237,883
            
            
            969,663Changes
                in:Prepaid
                expenses and other assets
            
            
            139,360
            
            
            141,275
            
            
            (213,363
            )Accounts
                payable
            
            
            (122,018
            )
            
            138,639
            
            
            535,212Accrued
                expenses
            
            
            284,437
            
            
            (46,099
            )
            
            636,473Deferred
                lease liability
            
            
            (2,519
            )
            
            (1,459
            )Income
                taxes payable
            
            
            
            
            
            (82,916
            )
            
            (64,463
            )Net
                cash used in operating activities
            
            
            (4,749,913
            )
            
            (2,826,481
            )
            
            (11,332,946
            )Cash
                flows from investing activities:Purchase
                of fixed assets
            
            
            (33,366
            )
            
            (59,684
            )
            
            (114,049
            )Proceeds
                from the sale of investments
            
            
            2,500,000
            
            
            
            
            
            2,500,000Purchase
                of investments
            
            
            
            
            
            (1,500,000
            )
            
            (2,487,390
            )Net
                cash provided by (used in) investing activities
            
            
            2,466,634
            
            
            (1,559,684
            )
            
            (101,439
            )Cash
                flows from financing activities:Proceeds
                from stock subscription receivable
            
            
            
            
            
            
            
            
            130Proceeds
                from notes payable to stockholders
            
            
            
            
            
            
            
            
            18,000Repayment
                of notes payable to stockholders
            
            
            
            
            
            
            
            
            (18,000
            )Net
                proceeds from sale of common stock and warrants
            
            
            
            
            
            4,365,097
            
            
            12,633
                592Net
                cash provided by financing activities
            
            
            
            
            
            4,365,097
            
            
            12,633,722Net
                (decrease) increase in cash and cash equivalents
            
            
            (2,283,279
            )
            
            (21,068
            )
            
            1,199,337Cash
                and cash equivalents - beginning of period
            
            
            3,482,616
            
            
            5,544,507Cash
                and cash equivalents - end of period
            
            $
            1,199,337
            
            $
            5,523,439
            
            $
            1,199,337





Supplemental
      non-cash flow from investing and financing activities:




During
                the nine months ended September 30, 2006 and 2005, our supplier (Sanquin)
                loaned the Company $945,072 and $237,883 for purchases of CI-INH,
                see note
                E. In connection with the loan, the Company recorded a debt discount
                of
                $291,486 and $0 for the nine months ended September 2006 and 2005,
                respectively.
              
              During
                the nine months ended September 30, 2006, the Company issued warrants
                to a
                consultant to purchase 50,000 shares of our common stock at $1.10
                per
                share that vest immediately and expire on January 19, 2009. The fair
                value
                of these warrants was $14,524 using the Black Scholes option pricing
                model.During
                the nine months ended September 30, 2006, the Company issued 175,000
                shares of common stock to an investor relations firm in connection
                with a
                one- year consulting agreement. The fair value of these shares was
                $78,750, see Note G.For
                the nine months ended September 30, 2006, the Company agreed to issue
                to a
                consultant for services to be rendered warrants to purchase an aggregate
                of 225,000 shares of common stock at an exercise price of $0.62 per
                share
                that expire in seven years. Warrants to purchase 100,000 of these
                shares
                vested on the date of issuance and the remainder will vest only if
                the
                consultant satisfies certain performance criteria. The value of the
                100,000 vested warrants was $43,879 using the Black Scholes pricing
                option
                model. The Company recorded the value of 125,000 unvested warrants
                at
                $85,297 based upon the Black Scholes option pricing model related
                to the
                performance condition because as of September 30, 2006, it is probable
                that the performance condition will be satisfied, see Note G.


The
      accompanying notes are an integral part of the unaudited condensed consolidated
      financial statements








5




**LEV
      PHARMACEUTICALS, INC. AND SUBSIDIARY**


**(a
      development stage enterprise)**





**NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
      STATEMENTS**





**NOTE
      A - ORGANIZATION AND BUSINESS**





Fun
      City
      Popcorn, Inc., (the "Company" or "FCP"), a non-operating public company, was
      incorporated on September 18, 1985 in the state of Nevada.





On
      November 5, 2004, FCP entered into an agreement and plan of merger (the
      "Agreement") with Lev Development Corp., formerly known as Lev Pharmaceuticals,
      Inc. ("Lev"), which was incorporated on July 21, 2003 in the State of Delaware.
      Lev is a development stage company that is engaged in developing and
      commercializing therapeutic products for the treatment of inflammatory diseases.
      On December 29, 2004, the merger closed and pursuant to the Agreement, FCP
      acquired 100% of the outstanding capital stock of Lev through its subsidiary
      Lev
      Acquisition Corp. ("LAC"). In connection with the merger, FCP changed its name
      to Lev Pharmaceuticals, Inc. and increased its authorized common stock to
      200,000,000 shares and its preferred stock to 20,000,000 shares. Under terms
      of
      the Agreement, the stockholders of Lev exchanged all of their issued and
      outstanding shares of common stock for 5,029,795 shares of FCP common stock,
      and
      4,789,433 Series A voting convertible preferred shares (the "Exchange"). Each
      Series A voting convertible preferred share is automatically convertible into
      13.940668 shares of FCP common stock (an aggregate 66,767,994 common shares).
      The 71,797,789 shares of common stock represent approximately 94.10% of the
      ownership interests in FCP. The outstanding shares of FCP were deemed issued
      for
      4,505,530 shares of Lev. In addition, all of the outstanding Lev options and
      warrants immediately prior to the merger were exchanged for 2,854,900 FCP
      options and 301,668 FCP warrants. The Exchange which, resulted in the
      stockholders of Lev having control of FCP, represents a recapitalization of
      FCP,
      or a "reverse merger" rather than a business combination. In connection
      therewith, FCP's historic capital accounts were retroactively adjusted to
      reflect the equivalent number of shares issued by FCP in the Exchange while
      Lev's historical accumulated deficit was carried forward. The statement of
      operations reflects the activities of Lev from the commencement of its
      operations on July 21, 2003. In connection with the Agreement, Lev paid $350,000
      for the acquisition of FCP including $283,731 to certain stockholders and
      assuming the outstanding tax liability of $66,269. In connection with the
      Exchange, the exercise price of the outstanding warrants and options remained
      the same. We recorded a charge of approximately $75,000 for the change in value
      of our outstanding options and warrants as of December 29, 2004 as a result
      of
      the increase in the number of common shares into which these equity instruments
      are exercisable based on the exchange ratio used in the merger, since the
      aggregate intrinsic value of the warrants and options after the Exchange is
      greater than before. The Black-Scholes option-pricing model was used to
      calculate the value of certain options and warrants and the related charge
      based
      upon the following weighted average assumptions to determine fair value;
      risk-free interest rate of 3.58%; expected life of 5 years; dividend yield
      of 0%
      and expected volatility of 70%.





As
      a
      development stage enterprise, the Company's primary efforts are devoted to
      conducting research and development for inflammatory diseases and raising
      capital. The Company has limited capital resources and has experienced net
      losses and negative cash flows from operations since inception and expects
      these
      conditions to continue for the foreseeable future. As of September 30, 2006,
      the
      Company had approximately $1.2 million in cash and cash equivalents. Management
      believes that cash and cash equivalents on hand as of September 30, 2006
      together with the net proceeds of approximately $19.7million from a private
      placement, see Note H, will be sufficient to fund operations for the next twelve
      months.





In
      addition to the normal risks associated with a new business venture, there
      can
      be no assurance that the Company's research and development will be successfully
      completed or that any product will be approved or commercially viable. The
      Company is subject to risks common to companies in the biotechnology industry
      including, but not limited to, development by the Company or its competitors
      of
      new technological innovations, dependence on key personnel, protection of
      proprietary technology, and compliance with FDA and other governmental
      regulations and approval requirements.






6


**LEV
      PHARMACEUTICALS, INC. AND SUBSIDIARY**


**(a
      development stage enterprise)**





**NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**





**NOTE
      B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**





**[1]
      Basis of Presentation:**





The
      consolidated financial statements include the accounts of Lev Pharmaceuticals,
      Inc. and its wholly-owned subsidiary Lev Development Corp. All significant
      intercompany transactions and balances have been eliminated in consolidation.
      The Company is devoting its efforts to research and development and there has
      not been any revenues generated from sales, license fees or royalties. The
      Company's financial statements are presented as statements of a development
      stage enterprise. The accompanying unaudited condensed consolidated financial
      statements have been prepared in accordance with accounting principles generally
      accepted in the United States of America for interim financial information.
      Accordingly, they do not include all of the information and footnotes required
      by accounting principles generally accepted in the United States of America
      for
      full year financial statements. In the opinion of management, all adjustments
      considered necessary for a fair presentation have been included and are of
      a
      normal, recurring nature. Operating results for the three and nine months ended
      September 30, 2006 are not necessarily indicative of the results that may be
      expected for the year ended December 31, 2006. These consolidated financial
      statements should be read in conjunction with the consolidated financial
      statements and the notes thereto that are included in the Company's Annual
      Report on Form 10-KSB for the fiscal period ended December 31,
      2005.





**[2]
      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 reported amounts of assets and
      liabilities and disclosures of contingent assets and liabilities at the date
      of
      the financial statements and the reported amounts of revenues and expenses
      during the reporting period. Actual results could differ from those estimates.
      Equity instruments are valued using assumptions which may vary significantly
      between periods.





**[3]
      Stock-based compensation:**




Effective
      January 1, 2006, the Company adopted Statement of Financial Accounting Standard
      No. 123R, “Share Based Payment” (“SFAS No. 123(R)”), which requires all
      stock-based payments, including grants of stock options, to be recognized in
      the
      Statement of Operations as compensation expense, based on their fair values
      on
      the grant date. Under the provisions of SFAS No.123(R), the estimated fair
      value
      of options granted under the Company’s Employee 2004 Omnibus Incentive
      Compensation Plan (“Plan”) are recognized as compensation expense over the
      option-vesting period. The Company has adopted SFAS No. 123(R), the
      modified-prospective-transition method, in which compensation expense is
      recognized beginning with the effective date of the adoption for all stock-based
      payments (i) granted after the effective date of adoption and
      (ii) granted prior to the effective date of adoption and that remain
      unvested on the date of adoption. During the three and nine months ended
      September 30, 2006, the Company recorded $216,333 and $322,514 of
      stock-based employee compensation expense, respectively.





Prior
      to
      December 31, 2005, the Company applied APB Opinion No. 25, *Accounting
      for Stock Issued to Employees,* in
      accounting for its stock option plans. Under the provisions of APB 25, no
      compensation expense was recognized when stock options were granted with
      exercise prices equal to or greater than market value on the date of grant,
      provided that pro forma net loss and net loss per share disclosures
      were made as required by the original provisions of SFAS No. 123. The
      following table illustrates the effect on net loss and loss per share if the
      fair value method had been applied under SFAS No. 123 to the prior
      period.




**Three
                Months Ended**
                **September
                  30, 2005**
            
            
            **Nine
                Months Ended**
                **September
                  30, 2005**Net
                loss applicable to common shareholders, as reported
            
            $
            (1,186,039
            )
            $
            (3,248,667
            )Add:
                Total stock-based employee compensation
              expense
                determined under fair value method
            
            
            (148,812
            )
            
            (431,594
            )Pro
                forma net loss
            
            $
            (1,334,851
            )
            $
            (3,680,261
            )Basic
                and diluted loss per shareAs
                reported
            
            $
            (0.01
            )
            $
            (0.04
            )Pro
                forma
            
            $
            (0.02
            )
            $
            (0.05
            )







7




**LEV
      PHARMACEUTICALS, INC. AND SUBSIDIARY**


**(a
      development stage enterprise)**





**NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**





**NOTE
      B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**





**[3]
      Stock-based compensation (continued):**





The
      following table illustrates the breakdown of total stock compensation expense
      by
      function for the three and nine months ended September 30, 2006:





**Stock
      option expense by function:**




**Three Months Ended**
              
              
              **Nine Months Ended****September
                  30, 2006**
              
              
              **September
                  30, 2006**Research
                  and development expense
              
              $
              1,473,212
              
              $
              3,377,444Stock
                  option expense
              
              
              83,129
              
              
              115,390Total
              
              $
              1,556,341
              
              $
              3,492,834General
                  and administrative expense
              
              $
              866,699
              
              $
              2,656,327Stock
                  option expense
              
              
              133,204
              
              
              207,125Total
              
              $
              999,903
              
              $
              2,863,452







Under
      the
      modified prospective method of transition under SFAS No. 123(R), the Company
      is
      not required to restate its prior period financial statements to reflect
      expensing of stock-based compensation under SFAS No. 123(R). Therefore, the
      results for the period ended September 30, 2006 are not directly comparable
      to
      the same period in the prior year.




Prior
      to
      the adoption of SFAS No. 123(R), the Company presented cash flows resulting
      from
      the tax benefits of deductions resulting from the exercise of stock options
      as
      operating cash flows in the Condensed Consolidated Statement of Cash Flows
      (Unaudited). SFAS No. 123(R) requires cash flows resulting from the tax benefits
      resulting from tax deductions in excess of the compensation cost recognized
      for
      those options (excess tax benefits) to be classified as financing cash flows
      since the Company has incurred net operating losses from operations. The Company
      did not realize any tax benefits from stock options during the three and nine
      months ended September 30, 2006.




For
      purposes of the disclosure in the foregoing table and for purposes of
      determining estimated fair value under SFAS No.123(R), the Company has computed
      the estimated fair values of all share-based compensation using the
      Black-Scholes option -pricing model and has applied the assumptions set forth
      in
      the following table. The Company calculated expected volatility based upon
      comparable companies in the industry. The following table illustrates the
      assumptions used in the Company’s Black-Scholes option pricing model to
      determine the stock option expense for the three and nine months ended September
      30, 2006 and 2005.




**Risk
                Free Interest Rate**
            
            **Dividend**
              **Yield**
            
            **Volatility
                Factor**
            
            **Estimated
                Life (Years)**
            
            **Weighted
                Average**
              **Remaining
                Contractual Life (Months)**For
                the three and nine
              months
                ended September 30, 2006 and 2005
            
            3.58%
                - 4.99%
            
            0%
            
            70.0%
            
            5
            
            98




The
      Black-Scholes option-pricing model requires the input of highly subjective
      assumptions. Because the Company’s employee stock options have characteristics
      significantly different from those of traded options, and because changes in
      the
      subjective input assumptions can materially affect the fair value estimate,
      in
      management’s opinion, the existing models may not provide a reliable single
      measure of the fair value of its employee stock options. In addition, management
      will continue to assess the assumptions and methodologies used to calculate
      estimated fair value of share-based compensation. Circumstances may change
      and
      additional data may become available over time, which can result in changes
      to
      these assumptions and methodologies, which could materially impact the Company’s
      fair value determination.





8




**LEV
      PHARMACEUTICALS, INC. AND SUBSIDIARY**


**(a
      development stage enterprise)**




**NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**





**NOTE
      B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**




**[3]
      Stock-based compensation (continued):**





A
      summary
      of option activity under the Plan as of September 30, 2006 and changes during
      the nine month period then ended is presented below.




**Number
                of Options**
            
            **Weighted
                Average Exercise Price**
            
            **Weighted
                Average Remaining Contractual**
              **Life
                (Years)**
            
            **Aggregate
                Intrinsic Value**Outstanding,
                December 31, 2005
            
            
            3,629,900
            
            $
            0.42Granted
            
            
            1,565,000
            
            
            0.60Exercised
            
            
            —
            
            
            0.00Forfeited
            
            
            —
            
            
            0.00Outstanding,
                September 30, 2006
            
            
            5,194,900
            
            $
            0.47
            
            
            8.21
            
            $
            2,254,240Exercisable
                shares as of September 30, 2006
            
            
            3,429,900
            
            $
            0.32
            
            
            8.81
            
            $
            1,840,440





**Summary
      Details for**  **Plan:**




There
      were no options canceled or exercised during the nine month period ended
      September 30, 2006, therefore, there was no intrinsic value of options exercised
      or canceled. Additionally, the weighted average, grant date fair value of
      options granted during the nine months was approximately $655,846 or $0.42
      per
      share using the Black Scholes option pricing model. For the three and nine
      months ended September 30, 2006 the Company recorded $77,927 to research and
      development expense for the value of performance-based conditions of the options
      to purchase 120,000 shares of common stock because it is more likely then not
      that the performance condition will be met. For subsequent periods, the value
      of
      these options will be charged or credited to the Statement of Operations until
      the performance condition is met based upon our stock price. If the milestone
      is
      not met, then the cumulative charges will be reversed to the Statement of
      Operations. A summary of the status of the Company’s unvested options as of
      September 30, 2006, and changes during the three and nine month period then
      ended is presented below.




**Unvested
      options issued under the Plan:**





**Number of**
              **Options**
            
            **Weighted
                Average**
              **Exercise Price**
            
            **Weighted
                Average**
              **Remaining
                Contractual**
              **Life
                (Years)**
            
            **Aggregate****Intrinsic**
              **Value**Unvested
                balance, December 31, 2005
            
            
            550,000
            
            $
            0.87Granted
            
            
            1,565,000
            
            
            0.60Vested
            
            
            (350,000
            )
            
            0.69Forfeited
            
            
            —
            
            
            0.00Unvested
                balance, September 30, 2006
            
            
            1,765,000
            
            $
            0.67
            
            
            8.45
            
            $
            70,296




As
      of
      September 30, 2006, there was $552,631 of total unrecognized compensation
      expense related to unvested share-based compensation arrangements granted under
      the Plan. This expense is expected to be recognized over a weighted-average
      period of 20 months.







9




**LEV
      PHARMACEUTICALS, INC. AND SUBSIDIARY**


**(a
      development stage enterprise)**




**NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**





**NOTE
      B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**





**[3]
      Stock-based compensation (continued):**




The
      following chart shows the effect of stock option expense on the Consolidated
      Statement of Operations:




**Three
                  Months Ended**
              
              **Nine
                  Months Ended****September
                  30, 2006**
              
              **September
                  30, 2005**
              
              **September
                  30****,****2006**
              
              **September
                  30, 2005**Loss
                  before other income and stock
                option
                  expense
              
              $
              (2,339,910
              )
              $
              (1,243,712
              )
              $
              (5,891,450
              )
              $
              (3,371,816
              )Stock
                  option expense
              
              
              (216,334
              )
              
              —
              
              
              (322,514
              )
              
              —Loss
                  before other income
              
              $
              (2,556,244
              )
              $
              (1,243,712
              )
              $
              (6,213,964
              )
              $
              (3,371,816
              )Net
                  loss before stock option expense
              
              $
              (2,332,371
              )
              $
              (1,186,039
              )
              $
              (5,962,611
              )
              $
              (3,248,667
              )Stock
                  option expense
              
              
              (216,334
              )
              
              —
              
              
              (322,514
              )
              
              —Net
                  loss
              
              $
              (2,548,705
              )
              $
              (1,186,039
              )
              $
              (6,285,125
              )
              $
              (3,248,667
              )Basic
                  and diluted loss per share before
                stock
                  option expense
              
              $
              (0.03
              )
              $
              (0.01
              )
              $
              (0.07
              )
              $
              (0.04
              )Stock
                  option expense per share
              
              
              (0.00
              )
              
              —
              
              
              (0.00
              )
              
              —Basic
                  and diluted loss per share
              
              $
              (0.03
              )
              $
              (0.01
              )
              $
              (0.08
              )
              $
              (0.04
              )




**[4]
      Net loss per share:**





Basic
      net
      loss per common share is computed by dividing the net loss by the weighted
      average number of shares of common stock outstanding during the period. There
      were potentially dilutive common shares of 8,709,672 for the three and nine
      months ended September 30, 2006 and potentially dilutive common shares of
      6,944,672 for the three and nine months ended September 30, 2005 since stock
      options and warrants were excluded from the diluted loss per share calculation
      because their effect would have been anti-dilutive.




**[5]
      Investments:**





Securities
      that the Company has the positive intent and ability to hold to maturity are
      classified as held-to-maturity and are carried at amortized cost on the balance
      sheets. Held to maturity, investments with original maturities of 91 days to
      one
      year are considered short- term investments and are carried at
      cost.





**[6]
      Fixed assets:**




Fixed assets are stated at cost less accumulated depreciation. Depreciation
      is
      calculated using the straight-line method over the asset's estimated useful
      life, which is five years.





**[7]
      New Accounting Pronouncements:**





On
      September 15, 2006 the Financial Accounting Standards Board (“FASB”) issued
      Statement No. 157, *Fair
      Value Measurements.* The Statement provides guidance for using fair value to measure assets and
      liabilities.  This Statement references fair value as the price that would
      be received to sell an asset or paid to transfer a liability in an orderly
      transaction between market participants in the market in which the reporting
      entity transacts. The Statement applies whenever other standards require (or
      permit) assets or liabilities to be measured at fair value.  The Statement
      does not expand the use of fair value in any new circumstances.  It is
      effective for financial statements issued for fiscal years beginning after
      November 15, 2007, and interim periods within those fiscal years.  The
      adoption of SFAS No. 157 is not expected to have a material impact on the
      Company’s financial statements.





In
      July
      2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in
      Income Taxes - An Interpretation of FASB Statement No. 109,” (FIN 48). FIN 48
      prescribes a recognition threshold and measurement criterion for the financial
      statement recognition and measurement of tax positions taken or expected to
      be
      taken in a tax return, among other items. In addition, FIN 48 provides guidance
      on derecognition, classification, interest and penalties, accounting in interim
      periods, disclosure, and transition with respect to uncertainty in income taxes.
      FIN 48 is effective for fiscal years beginning after December 15, 2006. We
      do
      not anticipate that the adoption of this Statement will have a material effect
      on our financial position or results of operation.






10





**LEV
      PHARMACEUTICALS, INC. AND SUBSIDIARY**


**(a
      development stage enterprise)**





**NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**




**NOTE
      C - FIXED ASSETS**




Fixed
      assets, at cost, consist of the following:





September
                30,
              2006
              (Unaudited)
            
            December
                31,
              2005Lab
                Equipment
            
            $
            11,645
            
            $
            11,645Office
                Equipment
            
            
            102,403
            
            
            69,037Total
            
            
            114,048
            
            
            80,682Accumulated
                Depreciation
            
            
            (24,218
            )
            
            (10,760
            )$
            89,830
            
            $
            69,922




The
      Company recorded depreciation expense of $4,856 and $3,226 for the three months
      ended September 30, 2006 and September 30, 2005, and $13,458 and $7,044 for
      the
      nine months ended September 30, 2006 and September 30, 2005,
      respectively.




**NOTE
      D - ACCRUED EXPENSES**





Accrued
      expenses consisted of the following:




September
                30,
              2006
              (Unaudited)
            
            December
                31,
              2005Research
                and development - sponsored research
            
            $
            202,750
            
            $
            125,000Research
                and development -other
            
            
            396,487
            
            
            70,526Research
                and development - clinicalresearch
                organization
            
            
            --
            
            
            28,936Research
                and development -payroll
            
            
            6,260
            
            
            16,655Professional
                fees - general andadministrative
            
            
            27,000
            
            
            64,311Payroll-
                general andadministrative
            
            
            --
            
            
            20,466Other
                - general andadministrative
            
            
            3,976
            
            
            26,142$
            636,473
            
            $
            352,036




**NOTE
      E - LOAN PAYABLE**





The
      Company purchases its C1-INH product from the Sanquin Blood Supply Foundation
      (“Sanquin”). Under our agreement with Sanquin, Sanquin provides a loan to the
      Company for the value of C1-INH purchased. The loan is subject to a purchase
      money security interest. **** Upon
      regulatory approval, Sanquin will forgive each loan and release all security
      interests. If regulatory approval is not obtained, then each loan is payable
      on
      the earlier of January 16, 2014 or the termination of the agreement. The
      principal loan balance outstanding as of September 30, 2006 was $1,006,216
      net
      of debt discount of $522,974. This debt discount relates to interest imputed
      on
      the original loan balance as it is non-interest bearing and was recorded as
      a
      reduction to product costs that were included as research and development
      expense. The loans are payable in Euros and any currency differences are
      recorded in our Unaudited Consolidated Statement of Operations. The Company
      has
      recorded interest expense using the effective interest rate method. Interest
      rates range from 4.31% to 7.64%. For the three months ended September 30, 2006
      and September 30, 2005, interest expense was $11,965 and $3,127 respectively.
      For the nine months ended September 30, 2006 and September 30, 2005, interest
      expense was $15,376 and $3,127, respectively. The amount included in research
      and development expense for product cost for the three months ended September
      30, 2006 and September 30, 2005 was $195,244 and $202,593, respectively. The
      amount included in research and development expense for product cost for the
      nine months ended September 30, 2006 and September 30, 2005 was $653,586 and
      $237,883, respectively.





11





**LEV
      PHARMACEUTICALS, INC. AND SUBSIDIARY**


**(a
      development stage enterprise)**




**NOTE
      F - EMPLOYMENT AGREEMENTS**





The
      Company entered into employment agreements with its Chief Financial Officer
      (“CFO”) and Vice President - Regulatory Affairs and Product Development, on June
      7, 2006 for two and three years, respectively. The Company’s CFO will
      receive an annual base salary of $175,000 for the initial year and increasing
      to
      $183,500 for the second year. The CFO was granted options to purchase 125,000
      shares of our common stock at an exercise price of $0.50 per share, the fair
      market value at the date of grant, 72,500 options vest on each anniversary
      date.
      The Company’s Vice President - Regulatory Affairs and Product Development will
      receive an annual base salary of $200,000 during the term of the agreement
      and
      will be entitled to an annual bonus of $20,000 on each anniversary date. In
      addition, our Vice President- Regulatory Affairs and Product Development was
      granted options to purchase 500,000 shares of the Company’s common stock at an
      exercise price of $0.50 per share, the fair market value at the date of grant,
      which options vest as follows: 100,000 shares vest on the commencement date
      of
      the employment agreement, 300,000 shares shall vest equally over three years
      and
      100,000 shares shall vest upon the occurrence of the milestone event specified
      in the employment agreement. The option agreements contain a change of control
      provision. The employment agreements provide for a severance payment if the
      employee is terminated without cause.





The
      Company entered into an employment agreement with its Vice President - Marketing
      and Sales on August 2, 2006. Pursuant to this agreement, the Company’s Vice
      President - Sales and Marketing receives an annual base salary of $240,000
      during the term of the agreement and will be eligible to receive an annual
      bonus
      of up to 35% of the base salary subject to his attainment of performance
      criteria to be approved by the Board. In addition, the Company awarded the
      Vice
      President - Sales and Marketing a one-time signing bonus of $30,000 upon the
      execution of the employment agreement. In connection with the employment
      agreement, the Vice President - Sales and Marketing was granted options to
      purchase 600,000 shares of the Company’s common stock at an exercise price equal
      of $0.65 per share, the fair value at the date of grant. These options vest
      as
      follows: 200,000 shares vest on the commencement date of the employment
      agreement, and options to purchase an additional 400,000 shares shall vest
      in
      equal amounts of 100,000 on each of the first four anniversary dates of the
      commencement date. The option agreement provides for a change of control
      provision. The employment contract provides for a severance payment if the
      employee is terminated without cause.





**NOTE
      G - CONSULTING AGREEMENTS**





On
      January 19, 2006, the Company entered into an agreement with an investor
      relations firm to provide services. The Company issued warrants to purchase
      50,000 shares of common stock at $1.10 per share that will expire in three
      years. The fair value of warrants was $14,524 based on the Black Scholes
      option pricing model. The weighted average assumptions used to determine fair
      market value of the warrants are as follows: interest rate of 4.34%, expected
      warrant life of 3 years, dividend yield of 0% and expected volatility of
      70%.





On
      May 4,
      2006, the Company has entered into a one-year consulting agreement for services
      from an investor relations firm. The Company issued 175,000 shares of common
      stock at a fair value of $78,750. An additional 175,000 shares are issuable
      in
      six months if the agreement is not cancelled. The Company cancelled this
      agreement on November 1, 2006. The monthly fee is $10,000.





On
      June
      28, 2006, the Company agreed to issue to a consultant for research and
      development services, warrants to purchase an aggregate of 225,000 shares of
      common stock at an exercise price of $0.62 per share and expiring in seven
      years. Warrants to purchase 100,000 of these shares vested on the date of
      issuance and the remainder will vest only if the consultant satisfies a
      milestone performance obligation as specified in the consultant’s agreement. In
      addition, a maximum of 80,000 additional warrants will be granted to this
      consultant in the event he satisfies additional performance milestones. The
      consultant is due $100,000 through February 2007 and can earn an additional
      $180,000 for the attainment of an additional milestone as defined in the
      consulting agreement. The Company valued the 100,000 vested warrants at $43,879
      based upon the Black Scholes option pricing model. The weighted average
      assumptions used to determine fair market value of the warrants is as follows:
      interest rate of 5.23%; expected warrant life of 7 years; dividend yield of
      0%
      and expected volatility of 70%. For the three and nine months ended September
      30, 2006, the Company recorded the value of 125,000 unvested warrants at $85,297
      based upon the Black Scholes option pricing model related to the performance
      condition because it is more probable then not that as of September 30, 2006,
      the performance criteria will be met. The weighted average assumptions used
      to
      determine fair market value of the warrants is as follows: interest rate of
      4.60%; expected warrant life: 7 years; dividend yield of 0% and expected
      volatility of 70%. In addition, the Company incurred $170,000 of expenses
      related to this agreement of through September 30, 2006 which includes an amount
      of $100,000 for the expected milestone payment. For subsequent periods, the value
      of
      the warrant will be credited or charged to the Statement of Operations at each
      reporting by December 31, 2006 to reflect subsequent changes in value until
      the
      milestone has been met. If the milestone has not been met, then cumulative
      charges will be reversed to the Statement of Operations.








12




**LEV
      PHARMACEUTICALS, INC. AND SUBSIDIARY**


**(a
      development stage enterprise)**





**NOTE
      H - SUBSEQUENT EVENT**





On
      October 16, 2006 and October 20, 2006, the Company closed on a private placement
      for the sale of an aggregate of $21,000,000 million of its securities sold
      in
      units to certain institutional and other accredited investors. The securities
      sold in units by the Company in the private placement consist of 32,307,692
      shares of its common stock and 9,692,308 warrants to purchase common stock,
      at a
      purchase price of $0.65 per share. The warrants are exercisable at any time
      until five years from the initial closing date at price of $0.84 per share.
      After giving effect to the payment of commissions and offering expenses, Lev
      received approximately $19.7 million in net proceeds. The Company paid
      commissions of approximately $1.3 million and has agreed to issue 1,698,538
      and
      198,519 warrants to registered broker-dealers that assisted us in the financing
      (the “Agent Warrants”). The Agent Warrants are being issued at $0.84 per share
      and $1.18 per share and expire five years from the date of issue. The Company
      will incur additional expenses to register the shares and warrants. The Company
      has agreed to file a registration statement within 30 days of the initial
      closing date covering the resale of the shares of common stock that were issued
      in the financing, including the shares which may be issued upon exercise of
      the
      warrants. Under a registration rights agreement entered into with the investors,
      the Company is obligated to file a registration statement within 30 days from
      the initial closing date and to have the Securities and Exchange Commission
      declare the registration statement effective within 120 days from the filing
      date, or 180 days from such date if the SEC undertakes a full review of the
      registration statement. The Company is also required to maintain effectiveness
      of the registration statement for two years. In addition, the Company agreed
      to
      issue 630,000 additional warrants to the investors, as liquidated damages,
      in
      the event the Registration Statement is not declared effective within the time
      periods prescribed by the Registration Rights Agreement, which warrants would
      be
      exercisable at $0.01 per share, expiring in five years. The Company will
      evaluate the accounting implications for the warrants issued in this private
      placement.





**ITEM
      2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
      OPERATION**




The
      following discussion should be read in conjunction with our condensed
      consolidated financial statements and notes to those statements. In addition
      to
      historical information, the following discussion and other parts of this
      quarterly report contain forward-looking information that involves risks and
      uncertainties.





**Forward
      Looking Statements**





This
      Report on Form 10-QSB for Lev Pharmaceuticals, Inc. may contain forward-looking
      statements. We are including the following cautionary statement in this
      Quarterly Report on Form 10-QSB to make applicable the safe harbor provisions
      of
      the Private Securities Litigation Reform Act of 1995 for any forward-looking
      statements made by us or on our behalf. Forward looking statements include
      statements concerning plans, objectives, goals, strategies, future events or
      performance and underlying assumptions and other statements which are other
      than
      statements of historical facts. You can identify these statements by
      forward-looking words such as “may,” “will,” “expect,” “intend,” “anticipate,”
“believe,” “estimate” and “continue” or similar words. You should read
      statements that contain these words carefully because they discuss future
      expectations and plans, which contain projections of future results of
      operations or financial condition or state other forward-looking information.
      We
      believe that it is important to communicate future expectations to investors.
      However, there may be events in the future that we are not able to accurately
      predict or control. Any forward-looking statement contained in this document
      speaks only as of the date on which the statement is made. We undertake no
      obligation to update any forward-looking statement or statements to reflect
      events or circumstances that occur after the date on which the statement is
      made
      or to reflect the occurrence of unanticipated events.





The
      forward-looking statements included herein are based on current expectations
      that involve a number of risks and uncertainties which could cause actual
      results or outcomes to differ materially from those expressed in good faith
      forward-looking statements. Certain of these risks are set forth under “Risk
      Factors” in our Annual Report on Form 10-KSB and our periodic reports filed with
      the SEC. These risks include, without limitation: the carrying-out of our
      research and development program for our product candidates, including
      demonstrating their safety and efficacy at each stage of testing; the timely
      obtaining of regulatory approvals; the commercialization of our product
      candidates, at reasonable costs; the ability to compete against products
      intended for similar use by recognized and well capitalized pharmaceutical
      companies; our ability to raise capital when needed, and without adverse and
      highly dilutive consequences to stockholders; and our ability to retain
      management and obtain additional employees as required. Our expectations,
      beliefs and projections are expressed in good faith and are believed by us
      to
      have a reasonable basis, including without limitation, management’s examination
      of historical operating trends, data contained in our records and other data
      available from third parties, but there can be no assurance that management’s
      expectations, beliefs or projections will result or be achieved or accomplished.
      Accordingly, to the extent that this Report contains forward-looking statements
      regarding the financial condition, operating results, business prospects or
      any
      other aspect of our company, please be advised that our actual financial
      condition, operating results and business performance may differ materially
      from
      that projected or estimated by us in forward-looking statements.







13




**Overview**





We
      are a
      development stage biopharmaceutical company that was formed in July 2003 to
      focus on developing and commercializing therapeutic products for the treatment
      of inflammatory diseases. Our product candidates are based on C1-INH, a human
      plasma protein that mediates inflammation and is potentially applicable as
      a
      treatment for a range of medical indications. We initiated a Phase III clinical
      trial of our lead product candidate, C1-INH for the acute treatment of HAE,
      in
      March 2005. In November 2005, we initiated a Phase III clinical trial of C1-INH
      for the prophylactic treatment of HAE. In October 2005, we received fast track
      designation status by the FDA for the treatment of HAE. We are also developing
      C1-INH for the treatment of acute myocardial infarction (“AMI”) and selective
      other diseases and disorders in which inflammation is known or believed to
      play
      an underlying role. **** We have
      certain rights to C1-INH technology through agreements with Sanquin (“Sanquin”),
      an Amsterdam-based not-for-profit organization that provides blood and plasma
      products and related services, carries out research and provides education,
      primarily in the Netherlands.




From
      July
      21, 2003 (inception) through September 30, 2006, we have not generated any
      revenue from operations. We expect to incur additional losses to perform further
      research and development activities. We do not currently have any commercial
      biopharmaceutical products, and do not expect to have such for a number of
      years, if at all.





As
      we do
      not expect to generate product revenues or profits over the next several years,
      management of cash flow is extremely important. The most significant use of
      our
      cash is for research and development activities, which include clinical trials
      and regulatory clearance. During the three and nine months ended September
      30,
      2006, our research and development expenses were $1,556,341 and $3,492,834,
      respectively.





**Financing
      Activities**





On
      October 16, 2006 and October 20, 2006, we sold an aggregate of 32,307,692
      shares of our common stock and warrants to purchase up to an aggregate of
      9,692,308 shares of common stock for aggregate proceeds of $21,000,000 to
      certain institutions and accredited investors. The warrants are exercisable
      at
      any time until five years from the initial closing date at price of $0.84 per
      share. We intend to use the net proceeds of the private placement of
      approximately $19.7 million for continued funding of our clinical trials,
      additional research and development efforts, and general working capital
      purposes. We paid approximately $1.3 million in total commissions and expenses
      to broker-dealers engaged to assist us in the financing and also issued warrants
      to purchase up to 1,897,057 shares of common stock as additional compensation
      to
      the broker-dealers, which warrants will be issued on the substantially the
      same
      terms as the Warrants issued to the investors. We will incur additional expenses
      in connection with registering the resale of these securities in accordance
      with
      the registration rights agreement. The common stock and warrants were sold
      under
      Section 4(2) of the Securities Act of 1933, as amended, and Rule 506 of
      Regulation D, promulgated thereunder, on a private placement basis, to
      institutional and accredited investors. We made our determination of the
      availability of such exemptions based upon the facts and circumstances
      surrounding the private placement, including the representations and warranties
      made by the purchasers in the Securities Purchase Agreement and the fact that
      restrictive legends were placed on, and stop transfer orders placed against,
      the
      certificates for the Shares and the related Warrants.





In
      May 2005, we completed a private placement of units at a price of $50,000 per
      unit, with each unit consisting of 50,000 shares of common stock and a five-year
      warrant to purchase 25,000 shares of common stock at an exercise price of $1.35
      per share. We sold 100.9 units for gross proceeds of $5,044,774. Our net
      proceeds were $4,365,097 after payment of fees and expenses, including
      registration costs. We paid $454,030 to the placement agent and issued warrants
      to the placement agent to purchase 681,044 shares of common stock. These
      warrants are immediately exercisable at $1.35 per share and expire in May 2010.
      We issued an aggregate of 5,044,774 shares of common stock and warrants to
      purchase 2,522,387 shares of common stock to investors in the private placement,
      not including the warrants issued to the placement agent.




**Merger
      Transaction**





On
      November 5, 2004, Fun City Popcorn (“FCP”), its wholly-owned subsidiary, Lev
      Acquisition Corp. (“Lev Sub”) and Lev Development Corp., previously known as Lev
      Pharmaceuticals, Inc. (“Old Lev” or “LDC”), entered into the Agreement and Plan
      of Merger (as amended on December 8, 2004, the “Agreement”). On December 29,
      2004, the merger closed and pursuant to the Agreement, Lev Sub merged into
      Old
      Lev and the combined entity became a wholly-owned subsidiary of FCP (the “Public
      Company Merger”). As a result of the Public Company Merger, FCP issued 5,029,795
      shares of common stock and 4,789,433 shares of Series A convertible preferred
      stock to holders of outstanding Old Lev common stock.






14


On
      December 29, 2004, the Board of Directors and stockholders of FCP approved
      a
      merger of FCP into a newly formed, wholly-owned subsidiary of FCP incorporated
      in Delaware (the “Recapitalization Merger”). This merger was undertaken to
      increase the authorized number of shares of common stock to permit the
      conversion of the Series A preferred stock, to reincorporate FCP in the State
      of
      Delaware and to change the name of the company. On February 17, 2005, the
      Recapitalization Merger closed and the issued and outstanding Series A preferred
      stock of FCP was automatically converted into an aggregate of 66,767,994 shares
      of common stock which, along with the 4,505,530 shares of FCP common stock
      outstanding prior to the Public Company Merger and the 5,029,795 shares of
      common stock issued to the Old Lev stockholders in the Public Company Merger,
      resulted in a total of 76,303,319 shares of common stock outstanding as of
      February 17, 2005. As part of the Recapitalization Merger, Old Lev changed
      its
      name to Lev Development Corp., FCP changed its name to Lev Pharmaceuticals,
      Inc.
      and we increased our authorized common stock to 200,000,000 shares and our
      preferred stock to 20,000,000 shares. As a result of these mergers, the
      stockholders of Old Lev acquired approximately 94% of our outstanding common
      stock.





The
      Public Company Merger, which resulted in the stockholders of Old Lev obtaining
      control of FCP, represents a recapitalization of FCP, or a “reverse merger”,
      rather than a business combination. In connection therewith, Old Lev's
      historical capital accounts were retroactively adjusted to reflect the
      equivalent number of shares issued by FCP while Old Lev's historical accumulated
      deficit was carried forward. The Consolidated Statement of Operations reflects
      the activities of Old Lev from the commencement of its operations on July 21,
      2003. In connection with the Agreement, Old Lev paid $350,000 for the
      acquisition of FCP including $283,731 to certain stockholders and assuming
      the
      outstanding tax liability of $66,269. In connection with these mergers, the
      exercise price of the outstanding warrants and options remained the same. We
      recorded a charge of approximately $75,000 for the change in value of our
      outstanding options and warrants as of December 29, 2004 as a result of the
      increase in the number of common shares into which these equity instruments
      are
      exercisable based on the exchange ratio used in the merger, since the aggregate
      intrinsic value of the warrants and options after the Exchange is greater than
      before. The Black-Scholes option-pricing model
      was
      used to calculate the value of certain options and warrants and the related
      charge based upon the following weighted average assumptions to determine fair
      value; risk-free interest rate of 3.58%; expected life of 5 years; dividend
      yield of 0% and expected volatility of 70%.




**Repricing
      of Options and Warrants**





Following
      the Public Company and Reincorporation Mergers, in May 2005, our Board of
      Directors determined the basis for the exchange of options and warrants to
      purchase common stock of Old Lev outstanding prior to the mergers and determined
      to reduce the exercise price to be proportionate before the merger transaction
      occurred. Though the number of shares issuable upon exercise of these options
      and warrants was increased, the parties to the merger did not proportionately
      reduce the exercise price of these options and warrants to account for the
      increase in the number of shares outstanding after the merger. The reduced
      exercise price of these warrants and options was calculated by multiplying
      the
      number of shares issuable upon exercise of these warrants and options prior
      to
      the mergers times the relevant exercise price, and then dividing that dollar
      amount by the new number of shares issuable upon exercise of these warrants
      and
      options after the mergers.





Prior
      to
      the Public Company Merger, warrants to purchase 66,667 and 39,000 shares of
      common stock were outstanding with exercise prices of $0.10 and $0.85 per share,
      respectively. Subsequently, pursuant to the exchange ratio in the Agreement,
      warrants to purchase 190,327 and 111,341 shares of common stock were outstanding
      with exercise prices of $0.10 and $0.85 per share, respectively. The Board
      believed this was unfair to the holders of the warrants and made a determination
      to treat the warrant holders on the same basis as the holders of common stock
      of
      Old Lev. Accordingly, in May 2005, the exercise price of outstanding warrants
      to
      purchase 190,327 shares was reduced from $0.10 to $0.04 per share, and the
      exercise price of other outstanding warrants to purchase 111,341 shares was
      reduced from $0.85 to $0.30 per share. At the date of this repricing, we
      recognized a charge to operations of approximately $28,000 for the incremental
      value of these warrants based upon the Black Scholes option pricing
      model.





In
      addition, prior to the Public Company Merger, stock options to purchase 500,000
      shares of common stock at an exercise price of $0.85 per share were held by
      each
      of Joshua D. Schein, Ph.D., our Chief Executive Officer, and by Judson Cooper,
      our Chairman. Subsequently, pursuant to the exchange ratio in the Agreement,
      each person’s options were converted into options to purchase 1,427,450 shares
      of common stock with an exercise price of $0.85 per share (an aggregate of
      2,854,900 shares). In May 2005, in addition to repricing the warrants, the
      Board
      further determined, subject to obtaining stockholder approval at our next annual
      meeting, to reduce the exercise price of these options from $0.85 to $0.30
      per
      share. The Board made the determination to seek stockholder approval because
      it
      believed that stockholder approval was necessary to reduce the exercise price
      of
      such options under the terms of our 2004 Omnibus Incentive Compensation Plan.
      In
      addition, the Board believed that the repricing of these options should be
      subject to stockholder
      approval because the reduction in exercise price of the stock options directly
      benefits our Chief Executive Officer
      and Chairman. However, it should be noted that our Chief Executive Officer
      and
      Chairman are also principal stockholders who voted on this proposal. The
      stockholders approved this repricing at the annual meeting held on December
      12,
      2005. Presently, Messrs. Schein and Cooper each own options to purchase
      1,427,450 shares of common stock at an exercise price of $0.30 per share as
      opposed to the prior exercise price of $0.85 per share. If they exerciseall
      of
      these options, Messrs. Schein and Cooper would realize a cash savings of, and
      the proceeds we would receive would be reduced by, $785,098 for each of them.
      A
      charge of $1,427,450 was recorded to our Consolidated Statement of Operations
      based upon our stock price when our stockholders approved the repricing at
      the
      stockholders' meeting and subsequent changes to our stock price through December
      31, 2005. These charges ceased upon the adoption of SFAS No. 123(R) on January
      1, 2006.






15








**Plan
      of Operation**





Our
      plan
      of operation for the next twelve months is to focus primarily on our Phase
      III
      clinical trials of our lead product candidate, C1-INH for the acute and
      prophylactic treatment of HAE. In addition, we intend to initiate a research
      program in 2006 for the development of a genetically engineered or recombinant
      version of C1-INH to be used in the treatment of AMI.





*Satisfaction
      of Cash Resources*





To
      date, we have relied solely upon selling equity securities in private placements
      to generate cash to implement our plan of operations. In October 2006, we
      complete a private financing pursuant to which we received net proceeds of
      approximately $19.7 million. However, we will incur additional expenses in
      connection with registering the resale of these securities in accordance with
      the registration rights agreement we entered into with the investors in this
      financing. Based
      on
      our current levels of research and development and our business plan, we
      believe that our existing cash and cash equivalents (including the proceeds
      received from our recent private placement), payments for research and
      development services and other payments required to be made by our collaboration
      partners should be sufficient to fund our anticipated levels of operations
      through at least the end of 2007. As of September 30, 2006, we have cash
      commitments through December 31, 2006 of approximately $701,000 to primarily
      fund our clinical research organization and executive employment contracts.
      A
      significant expense for the Phase III clinical trials is the C1-INH product
      that
      we purchase from Sanquin. This does not affect our cash position because Sanquin
      has granted continuing loans to us in the amount of the aggregate purchase
      price
      of the C1-INH product. Each loan will be forgiven if regulatory approval is
      obtained. If regulatory approval is not received, then each loan is payable
      on
      the earlier of January 16, 2014 or the termination of the Sanquin distribution
      agreement. We expect to increase our expenditures for the Phase III clinical
      trials over the next twelve months. We also expect that our general and
      administrative expenses and will increase for the next year as we hire
      additional staff.





As
      we
      expect that our cash used in operations will increase significantly over the
      next several years, we may
      need to raise additional
      capital to complete the development and commercialization of our current product
      candidates. No
      assurances can be given that we will be successful in raising additional capital
      from any proposed financings. Further, we cannot assure you that any additional
      financing will be available or, even if it is available that it will be on
      terms
      acceptable to us. If we raise additional funds by selling shares of common
      stock
      or convertible securities, the ownership of our existing shareholders will
      be
      diluted. Further, if additional funds are raised though the issuance of equity
      or debt securities, such additional securities may have powers, designations,
      preferences or rights senior to our currently outstanding securities. Any
      inability to obtain required financing on sufficiently favorable terms could
      have a material adverse effect on our business, results of operations and
      financial condition. Further, if expenditures required to achieve our plans
      are
      greater than projected or if revenues are less than, or are generated more
      slowly than, projected, we will need to raise a greater amount of funds than
      currently expected.




*Research/Product
      Programs*





Hereditary
      Angioedema





In
      January 2004, we entered into a distribution and manufacturing services
      agreement with Sanquin relating to the treatment of HAE. Sanquin currently
      manufactures and markets a highly purified preparation of C1-INH in Europe
      and
      pursuant to the agreement, Sanquin agreed to provide us with C1-INH for use
      in
      our clinical trials and for commercial distribution upon regulatory licensure.
      Pursuant to the agreement, we have distribution rights in Israel and all
      countries in North, Central and South America, with the exception of the Dutch
      Overseas Territories, Argentina and Brazil.






16




Under
      the
      distribution agreement, it is our responsibility to conduct the Phase III
      clinical trials of C1-INH for the treatment of HAE and to prepare and file
      all
      regulatory applications necessary to register the product candidate. Sanquin
      agreed to provide us with the technical data and support necessary to assist
      us
      in preparing and filing all such regulatory applications.





Furthermore,
      Sanquin agreed to supply C1-INH for our Phase III clinical trials. Upon receipt
      of FDA approval for our product candidate for the treatment of HAE, upon
      commercial launch of this product and thereafter during the term of the
      agreement, Sanquin will supply us with our commercial requirements for C1-INH
      for the treatment of HAE in each country where we have received regulatory
      approval. Our purchase of C1-INH from Sanquin is subject to minimum annual
      purchase requirements upon receipt of FDA approval.





We
      initiated a Phase III clinical trial of C1-INH for the acute treatment of HAE
      in
      March 2005. In November 2005, we initiated a phase III clinical trial for C1-INH
      for the prophylactic treatment of HAE. In July 2004, we received orphan drug
      designation from the FDA for C1-INH (human), which, upon product licensure
      by
      the FDA, could provide us with a seven-year exclusive right to market our C1-INH
      product as a treatment for HAE in the United States. In October 2005, we
      received fast track designation status from the FDA.





Acute
      Myocardial Infarction





We
      entered into a separate license agreement with Sanquin on January 27, 2004
      relating to the treatment of AMI. Under this agreement, we have an exclusive,
      worldwide, royalty-bearing license, with the right to sublicense, to the use of
      C1-INH
      for the treatment of AMI. In connection with the license agreement, we paid
      Sanquin certain fees and reimbursed Sanquin expenses. In addition, we have
      an
      obligation to pay Sanquin royalties on sales of products incorporating the
      licensed technology.





This
      second development program is focused on the use of C1-INH in treating AMI.
      Current treatments for AMI, both surgical and pharmaceutical, are directed
      at
      restoring blood flow to heart tissue or preventing further obstruction. Despite
      a widespread appreciation for the role of inflammation in AMI in both the
      scientific and medical communities, no presently available treatments directly
      target the mechanisms of inflammation. Based on preliminary animal and clinical
      data, we believe that C1-INH may be useful as a treatment for AMI. We intend
      to
      initiate a research program during the fourth quarter of 2006 for the
      development of a genetically engineered or recombinant version of C1-INH to
      be
      used in the treatment of AMI. In 2007, we may initiate studies for C1-INH in
      treating AMI, if we obtain additional funding and if we are able to acquire
      additional C1-INH product from Sanquin. There can be no assurance that we will
      raise any additional funds or that we will acquire the resources needed to
      conduct further research and trials for the treatment of AMI.




The
      following analysis of our financial condition and results of operations should
      be read in conjunction with our condensed consolidated financial statements
      and
      notes contained elsewhere in this Form 10-QSB.





**Results
      of Operations**





*Three
      Months Ended September 30, 2006 as compared to the Three Months Ended September
      30, 2005*  ******





We
      had no
      revenues during the three months ended September 30, 2006 and September 30,
      2005
      because we do not have any commercial biopharmaceutical products.





Research
      and development expenses for the three months ended September 30, 2006 and
      2005
      were $1,556,341 and $555,730, respectively. The increase of $1,001,611 primarily
      represents expenses relating to the progress of the Phase III clinical trials
      of
      which $83,129 was for employee stock option expense, $85,297 was for
      compensation expense for warrants issued to a consultant and $118,000 was for
      consulting expenses as described in Note G to our Unaudited Financial
      Statements. In March 2005, we initiated a Phase III clinical trial for the
      acute
      treatment of HAE. In November 2005, we initiated a Phase III clinical trial
      of
      C1-INH for the prophylactic treatment of HAE.





General
      and administrative expenses for the three months ended September 30, 2006 and
      2005 were $999,903 and $688,982, respectively. The increase of $310,921 was
      primarily due to increases in payroll and related benefits, professional fees
      and share-based compensation for employee options. Employee stock compensation
      for options granted was $133,204 for the three months ended September 30, 2006
      and the Company did not have this expense in the prior period ended September
      30, 2005.






17




Interest
      income for the three months ended September 30, 2006 and 2005 was $19,535 and
      $60,800, respectively. The decrease of $41,265 was attributed to having less
      cash to invest.





Due
      to
      the factors mentioned above, the net loss for the three months ended September
      30, 2006 was $2,548,705 or a loss of $ 0.03 per common share, basic and diluted
      as compared to a loss of $1,186,039 for the three months ended September 30,
      2005 or a loss of $0.01 per common share, basic and diluted.




*Nine
      Months Ended September 30, 2006 as compared to the Nine Months Ended September
      30, 2005*  ******





We
      had no
      revenues during the nine months ended September 30, 2006 and September 30,
      2005
      because we do not have any commercial biopharmaceutical products.





Research
      and development expenses for the nine months ended September 30, 2006 and 2005
      were $3,492,834 and $1,580,519, respectively. The increase of $1,912,315
      primarily represents expenses relating the progress of the Phase III clinical
      trials. In March 2005, we initiated a Phase III clinical trial for the acute
      treatment of HAE. In November 2005, we initiated a Phase III clinical trial
      of
      C1-INH for the prophylactic treatment of HAE. The increase is due to increased
      purchases of C1-INH of $415,703, employee stock option expense of $115,390,
      compensation expense for warrants issued to a consultant of $129,176 and
      incurred $176,000 to a consultant as described in the Notes to our Unaudited
      Financial Statements.





General
      and administrative expenses s for the nine months ended September 30, 2006
      and
      2005 were $2,863,452 and $1,791,297 respectively. The increase of $1,072,155
      was
      primarily due to increases in payroll and related benefits, investor relations,
      donations, professional fees and share-based compensation for employee options.
      Employee stock compensation for options granted was $207,125 for the nine months
      ended September 30, 2006 and we did not have this expense in the prior period
      ended September 30, 2005.




Interest
      income for the nine months ended September 30, 2006 and 2005 was $98,533 and
      $126,276, respectively. The decrease of $27,743 was attributed to having less
      cash to invest.





Due
      to
      the factors mentioned above, the net loss for the nine months ended September
      30, 2006 was $6,285,125 or a loss of $ 0.08 per common share, basic and diluted
      as compared to a loss of $3,248,667 for the nine months ended September 30,
      2005
      or a loss of $0.04 per common share, basic and diluted.





**Liquidity
      and Capital Resources**





As
      of
      September 30, 2006, we had cash, cash equivalents and investments of $1,199,337
      and working capital was $242,018. Subsequently, in October 2006, we received
      net
      proceeds of approximately $19.7 million in a private placement of our
      securities. However, we will incur additional expenses in connection with
      registering the resale of these securities in accordance with the registration
      rights agreement we entered into with the investors in this financing. Net
      operating cash used in operations was $4,749,913 for the nine months ended
      September 30, 2006 and was primarily due to our loss of $6,285,125 which was
      offset by non cash expenses of $1,238,951. Net cash used in operating activities
      was $2,826,481 for the nine months ended September 30, 2005. This increase
      in
      cash used of $3,458,644 in operating activities as compared to the same period
      last year primarily relates to the difference in the net loss of $ 3,036,458
      and
      non cash expenses of $966,205. Pursuant to the Sanquin loan agreement, purchases
      made during our Phase III clinical trials are added to our loans and we are
      not
      required to make any principal payments. As of September 30, 2006, our purchase
      commitment to Sanquin was approximately $4,200,000 and the loan was $1,006,216,
      net of debt discount. We received a price increase for C1-INH effective March
      1,
      2006. The loans will be forgiven when regulatory approval from the FDA is
      received. If we do not receive regulatory approval, the loans are repayable
      on
      the earlier of January 16, 2014, or the termination of the Agreement. The loans
      do not bear interest and we impute interest using the effective interest rate
      method. Cash provided by investing activities for the nine months ended
      September 30, 2006 was $2,466,634 primarily resulting from proceeds from the
      sale of investments.





Our
      distribution agreement with Sanquin terminates on December 31, 2007, unless
      extended by us for up to two three-year periods or by mutual agreement of the
      parties prior to its expiration. Commencing with the receipt of FDA regulatory
      approval of C1-INH and thereafter, we must purchase from Sanquin a minimum
      amount of C1-INH valued in Euros equal to be approximately $9,516,000 (as of
      September 30, 2006) per calendar year.




In
      connection with the license agreement with Sanquin for the treatment of AMI
      we
      are required to create a comprehensive research plan for the commercial
      exploitation of the licensed technology. We continue to work with Sanquin on
      the
      design of the research plan. We agreed to commit a minimum of $125,000 per
      annum
      during the first three years following the execution of the license agreement
      toward research on the licensed technology conducted by






18





Sanquin
      and by other parties. To date, we have funded approximately $141,000 to third
      parties engaged in this research. We also have an obligation to pay Sanquin
      royalties on sales of products incorporating the technology.





On
      March
      2, 2005, we entered into a CRO services agreement with INC Research that governs
      INC Research’s provision of services in connection with the support of clinical
      investigation, clinical data management, clinical monitoring and/or research
      of
      our Phase III clinical trials. We entered into a separate services agreement
      with INC Research in September 2006 which governs INC Research’s provision of
      additional services in connection with our Phase III clinical trials and
      activities related to the commercialization of our product candidates. The
      services provided by INC Research pursuant to both contractual arrangements
      are
      on a work-order basis and we are invoiced on a time and materials basis. We
      have
      the right to terminate both agreements, and any pending work-order, on prior
      notice and without cause. As of September 30, 2006, we have estimated that
      we
      will pay INC Research at least $1,492,000 for its services under both agreements
      in 2006 and 2007. However, du e
      to the
      variability associated with the conduct of clinical trials, we are unable to
      estimate with certainty the future costs we will incur under our CRO agreement.
      We anticipate that these costs will increase significantly above our current
      estimates in future periods as a result of our initiation or expansion of the
      clinical trials.





On
      October 16, 2006 and October 20, 2006, we sold an aggregate of 32,307,692
      shares of our common stock and warrants to purchase up to an aggregate of
      9,692,308 shares of common stock for aggregate proceeds of $21,000,000 to
      certain institutions and accredited investors. The warrants are exercisable
      at
      any time until five years from the initial closing date at price of $0.84 per
      share. We intend to use the net proceeds of the private placement of
      approximately $19.7 million for continued funding of our clinical trials,
      additional research and development efforts, and general working capital
      purposes. We paid approximately $1.3 million in total commissions and expenses
      to broker-dealers engaged to assist it in the financing and also issued warrants
      to purchase up to 1,897,057 shares of common stock as additional compensation
      to
      the broker-dealers, which warrants were issued on substantially the same terms
      as the Warrants issued to the investors.





In
      May
      2005, we completed a private placement of units at a price of $50,000 per unit,
      with each unit consisting of 50,000 shares of common stock and a five-year
      warrant to purchase 25,000 shares of common stock at an exercise price of $1.35
      per share. We sold 100.9 units for gross proceeds of $5,044,774. Our net
      proceeds were $4,365,097 after payment of fees and expenses, including
      registration costs. We paid $454,030 to the placement agent and issued warrants
      to the placement agent to purchase 681,044 shares of common stock. These
      warrants are immediately exercisable at $1.35 per share and expire in May 2010.
      We issued an aggregate of 5,044,774 shares of common stock and warrants to
      purchase 2,522,387 shares of common stock to investors in the private placement,
      not including the warrants issued to the placement agent.





As
      of
      September 30, 2006, we have cash commitments for the remainder of the 2006
      fiscal year of approximately $701,000 primarily to fund our clinical research
      organization and executives’ employment contracts.





To
      date,
      we have relied primarily upon selling equity securities from private placements
      to generate cash to implement our plan of operations. Based
      on
      our current levels of research and development and our business plan,
      w e
      believe
      that our cash and cash equivalents as of September 30, 2006 and the net proceeds
      of approximately $19.7 million from our recently completed private placement
      should be sufficient to fund our anticipated levels of operations through at
      least the end of 2007. Our capital resources are focused on the clinical
      development and regulatory approval of C1-INH for the treatment of HAE. As
      we
      expect that our cash used in operations will increase significantly over the
      next several years, we may
      need to raise additional
      capital to complete the development and commercialization of our current product
      candidates. No
      assurances can be given that we will be successful in raising additional capital
      from any proposed financings. Further, we cannot assure you that any additional
      financing will be available or, even if it is available that it will be on
      terms
      acceptable to us. If we raise additional funds by selling shares of common
      stock
      or convertible securities, the ownership of our existing shareholders will
      be
      diluted. Further, if additional funds are raised though the issuance of equity
      or debt securities, such additional securities may have powers, designations,
      preferences or rights senior to our currently outstanding securities. Any
      inability to obtain required
      financing on sufficiently favorable terms could have a material adverse effect
      on our business, results of operations and financial condition. Further, if
      expenditures required to achieve our plans are greater than projected or if
      revenues are less than, or are generated more slowly than, projected, we will
      need to raise a greater amount of funds than currently expected.








19




As
      a
      development stage enterprise, our primary efforts, to date, have been devoted
      to
      conducting research and development, raising capital, forming collaborations
      and
      recruiting staff. We have limited capital resources and have experienced a
      net
      loss attributable to our common stockholders of $17,705,975 since inception
      and
      have had negative cash flows from operations since inception. These losses
      have
      resulted principally from costs incurred in research and development activities,
      including acquisition of technology rights and general and administrative
      expenses. We expect to incur additional operating losses until such time as
      we
      generate sufficient revenue to offset expenses, and we may never achieve
      profitable operations.





We
      expect
      our cash requirements for operating activities will increase due to the
      following future activities:





•
            Conduct
                commercialization activities in support of our product candidates,
                including development of market plans and regional sales and marketing
                capabilities;





•
            Conduct
                clinical programs, including clinical trials to support regulatory
                submissions of our product
                candidates;




•
            Maintain,
                protect and expand our intellectual
                property;




•
            Develop
                expanded internal infrastructure;
                and




•
            Hire
                additional personnel.




**COMMITMENTS
      AND CONTINGENCIES**




In
      our
      Annual Report on Form 10-KSB for the year ended December 31, 2005 under the
      heading “Contractual Obligations,” we outlined our commitments and
      contingencies. For the nine months ended September 30, 2006, there have been
      no
      material changes in our commitments and contingencies except for the employment
      agreements and consulting agreement that we entered into during such period.
      See
      Notes F and G to our Unaudited Condensed Consolidated Financial
      Statements for additional information regarding these agreements.





**OFF
      -BALANCE SHEET ARRANGEMENTS**





We
      had no
      off-balance sheet arrangements as of September 30, 2006 with the exception
      of
      our office lease. As of December 31, 2005, our remaining obligation under this
      lease was $46,365 which was satisfied and we extended it on a month to month
      basis through October 31, 2006. We entered into a one year agreement for office
      space at a location in metropolitan Philadelphia, Pennsylvania, on September
      25,
      2006 for approximately $54,000.




**CRITICAL
      ACCOUNTING ESTIMATES**




In
      our
      Annual Report on Form 10-KSB for the year ended December 31, 2005, our most
      critical accounting policies and estimates upon which our financial status
      depends upon were identified as those relating to income taxes, stock-based
      compensation and research and development cost. We reviewed our policies and
      determined that those policies remain our most critical accounting policies
      for
      the quarter ended September 30, 2006. On January 1, 2006 we adopted stock-based
      compensation (SFAS No. 123(R)), which requires all stock-based payments,
      including grants of stock options, to be recognized in the statement of
      operations as compensation based upon their fair value on the date of grant.
      See
      Note B (3) to our Condensed Consolidated Financial Statements for a discussion
      of the impact on our company of adopting SFAS No. 123(R).




**ITEM
      3. CONTROLS AND PROCEDURES**





As
      of the
      end of the period covered by this report, we conducted an evaluation, under
      the
      supervision and with the participation of our Chief Executive Officer and Chief
      Financial Officer of our disclosure controls and procedures (as defined in
      Rule
      13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon this evaluation,
      our Chief Executive Officer and Principal Accounting Officer concluded that
      our
      disclosure controls and procedures are effective to ensure that information
      required to be disclosed by us in the reports that we file or submit under
      the
      Exchange Act is recorded, processed, summarized and reported, within the time
      periods specified in the SEC’s rules and forms. There have been no changes in
      our internal control over financial reporting during the quarter ended September
      30, 2006 that have materially affected, or are reasonably likely to materially
      affect, our internal controls over financial reporting.






20





**PART
      II - OTHER INFORMATION**




**ITEM
      1. LEGAL PROCEEDINGS**





We
      are
      not currently a party to, nor are any of our property currently the subject
      of,
      any pending legal proceeding.




**ITEM
      2. UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF
      PROCEEDS**





Not
      applicable.


****


**ITEM
      3. DEFAULTS UPON SENIOR SECURITIES**





Not
      applicable.




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





Not
      applicable.





**ITEM
      5. OTHER INFORMATION**





Until
      November 1, 2006, our principal executive office was located at: 122 East 42nd
      Street, Suite 2606, New York, New York. We occupied these premises pursuant
      to a
      sublease which expired on August 31, 2006 and in accordance with a monthly
      arrangement with the landlord thereafter. Commencing November 1, 2006, our
      principal executive office is located at 122 East 42nd Street, Suite 1700,
      New
      York, New York. We occupy this space pursuant to a two-month arrangement with
      the landlord, which we can extend on a month-to-month basis. Our monthly payment
      under our current arrangement is $5,300. In
      addition, in September, 2006, we entered into a twelve month lease for
      approximately 3,100 square feet of office space inmetropolitan
      Philadelphia, Pennsylvania.
      Our
      rent obligation for these premises is $4,458 per month.






21





**ITEM
      6. EXHIBITS**





The
      following exhibits are filed herewith or incorporated by reference.





**Incorporated
                by Reference****Exhibit**
              **Number**
            
            **Exhibit
                Description**
            
            **Form**
            
            **Dated**
            
            **Exhibit**
            
            **Filed****Herewith**10.1
            
            Employment
                Agreement between the Registrant and Joseph Truitt
            
            8-K
            
            8/2/06
            
            10.131.1
            
            Certification
                of Chief Executive Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002
            
            
            
            
            
            
            
            X31.2
            
            Certification
                of Chief Financial Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002
            
            
            
            
            
            
            
            X32.1
            
            Certification
                of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
            
            
            
            
            
            
            
            X32.2
            
            Certification
                of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
            
            
            
            
            
            
            
            X







**SIGNATURES**





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




**Lev
                Pharmaceuticals, Inc.**Date: November
              14, 2006
            By:
            /s/ Joshua
              D.
              Schein, Ph.D.Joshua
                D. Schein, Ph.D.Chief
                Executive Officer


Date: November
              14, 2006
            By:
            /s/ Douglas
              J. BeckDouglas
                J. BeckChief
                Financial Officer






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