****     **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,
                2007**





**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.)**675
                Third Avenue, Suite 2200**
              **New
                York, New York**
            **10017**(Address
                of principal executive offices)
            (Zip
                Code)




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








(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 13, 2007, the issuer had 137,750,203 shares of common stock
      outstanding.





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










**Lev
      Pharmaceuticals, Inc.**




**Index
      to Form 10-QSB**







PagePart
                I.
            Financial
                InformationItem
                1.
            Condensed
                Consolidated Financial Statements
            3Condensed
                Consolidated Balance Sheets as of September 30, 2007 (Unaudited)
                and
                December 31, 2006
            3Condensed
                Consolidated Statements of Operations (Unaudited) for the Three and
                Nine
                Months Ended
              September
                30, 2007 and September 30, 2006 and for the Period from July 21,
                2003
                (Inception) to September 30, 2007
            4Condensed
                Consolidated Statements of Cash Flows (Unaudited) for the Nine Months
                Ended
              September
                30, 2007 and September 30, 2006 and for the Period from July 21,
                2003
                (Inception) to September 30, 2007
            5Notes
                to Unaudited Condensed Consolidated Financial Statements
            6Item
                2.
            Management’s
                Discussion and Analysis or Plan of Operation
            14Item
                3.
            Controls
                and Procedures
            22Part
                II.
            Other
                Information
            23Item
                1.
            Legal
                Proceedings
            23Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            23Item
                3.
            Defaults
                Upon Senior Securities
            23Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            23Item
                5.
            Other
                Information
            23Item
                6.
            Exhibits
            24Signatures
            25




2




**LEV
                PHARMACEUTICALS , INC. AND SUBSIDIARY**
              **(a
                development stage enterprise)**
              
              **Condensed
                Consolidated Balance Sheets**
            
            September 30,
              2007
              (Unaudited)
            
            December
                31,
              2006ASSETSCurrent
                assets:Cash
                and cash
                equivalents
            
            $
            30,005,427
            
            $
            7,887,635Investments
                - held
                to maturity
            
            
            
            
            
            9,999,845Inventory
            
            
            2,909,056Prepaid
                expenses
            
            
            2,103,171
            
            
            378,786Other
                assets
            
            
            148,843
            
            
            82,030Total
                current assets
            
            
            35,166,497
            
            
            18,348,296Fixed
                assets, net of accumulated depreciation
            
            
            286,207
            
            
            131,094Loan
                receivable
            
            
            140,375Other
                assets
            
            
            93,335
            
            
            93,335Total
                assets
            
            $
            35,686,414
            
            $
            18,572,725LIABILITIESCurrent
                liabilities:Accounts
                payable
            
            $
            2,077,122
            
            $
            1,662,651Accrued
                expenses
            
            
            1,052,179
            
            
            1,494,548Total
                current liabilities
            
            
            3,129,301
            
            
            3,157,199Loan
                payable, net of debt discount
            
            
            4,123,718
            
            
            1,803,554Deferred
                lease liability
            
            
            16,186Total
                liabilities
            
            
            7,269,205
            
            
            4,960,753Commitments
                and contingenciesSTOCKHOLDERS'
                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,
              137,750,203
                and
                114,010,237 shares issued and outstanding at September 30,
                2007
              and
                December 31,
                2006, respectively
            
            
            1,377,502
            
            
            1,140,102Additional
                paid-in capital
            
            
            69,852,536
            
            
            35,660,209Deficit
                accumulated during the development stage
            
            
            (42,812,829
            )
            
            (23,188,339
            )Total
                stockholders' equity
            
            
            28,417,209
            
            
            13,611,972Total
                liabilities and stockholders’ equity
            
            $
            35,686,414
            
            $
            18,572,725




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
                30,2007
            
            2006
            
            2007
            
            2006
            
            2007Costs
                and expenses:Research
                and
                development
            $
            4,459,734
            
            $
            1,556,341
            
            $
            11,773,103
            
            $
            3,492,834
            
            $
            22,443,329Merger
                costs
            
            
            
            
            
            
            
            
            
            
            
            
            
            283,732General
              and
              administrative
            
            2,978,646
            
            
            999,903
            
            
            8,297,525
            
            
            2,863,452
            
            
            20,618,606Loss
                before other income
            
            (7,438,380
            )
            
            (2,556,244
            )
            
            (20,070,628
            )
            
            (6,356,286
            )
            
            (43,345,667
            )Other
                income:Interest
                income
            
            242,139
            
            
            19,535
            
            
            578,870
            
            
            98,533
            
            
            1,093,529Interest
                expense
            
            (60,392
            )
            
            (11,996
            )
            
            (136,074
            )
            
            (27,372
            )
            
            (193,978
            )Foreign
                exchange
                gain
            
            3,342
            
            
            
            
            
            3,342
            
            
            
            
            
            3,342Net
                loss
            $
            (7,253,291
            )
            $
            (2,548,705
            )
            $
            (19,624,490
            )
            $
            (6,285,125
            )
            $
            (42,442,774
            )Net
                loss per share- basic and diluted
            $
            (0.06
            )
            $
            (0.03
            )
            $
            (0.17
            )
            $
            (0.08
            )Weighted
                average shares- basic and diluted
            
            125,576,290
            
            
            81,702,544
            
            
            117,969,088
            
            
            81,623,408







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,**Cash
                flows from operating activities:**
            
            2007
            
            2006
            
            2007Net
                loss
            
            $
            (19,624,490
            )
            $
            (6,285,125
            )
            $
            (42,442,774
            )Adjustments
                to reconcile net loss to net cash usedin operating activities:Compensation
                to
                consultants from issuance ofwarrants
                and
                common stock
            
            
            
            
            
            143,700
            
            
            2,209,177Repricing
                of
                options and warrants
            
            
            
            
            
            
            
            
            1,455,269Option
                and warrants modification resulting from merger
            
            
            
            
            
            
            
            
            75,201Stock
                issued for services
            
            
            
            
            
            78,750
            
            
            78,750Depreciation
                expense
            
            
            38,867
            
            
            13,458
            
            
            69,169Amortization
                of
                debt discount, loan payable
            
            
            135,635
            
            
            27,332
            
            
            191,253Foreign
                exchange gain
            
            
            (3,342
            )
            
            
            
            
            (3,342
            )Stock
                compensation to employees
            
            
            1,475,223
            
            
            322,515
            
            
            1,932,574Accretion
                of
                investment income
            
            
            
            
            
            (12,610
            )
            
            (12,610
            )Gain
                on
                sale of investments
            
            
            (155
            )
            
            
            
            
            (155
            )Supplier
                purchase funding
            
            
            2,184,529
            
            
            662,807
            
            
            3,932,465Changes
                in:Inventory
            
            
            (2,909,056
            )
            
            
            
            
            (2,909,056
            )Prepaid
                expenses and other assets
            
            
            (1,791,198
            )
            
            139,360
            
            
            (2,344,845
            )Accounts
                payable
            
            
            414,471
            
            
            (122,018
            )
            
            2,077,122Accrued
                expenses
            
            
            (442,369
            )
            
            284,437
            
            
            1,052,179Deferred
                lease
                liability
            
            
            16,186
            
            
            (2,519
            )
            
            16,186Income
                taxes liability
            
            
            
            
            
            
            
            
            (64,463
            )Net
                cash used in
                operating activities
            
            
            (20,505,699
            )
            
            (4,749,913
            )
            
            (34,687,900
            )**Cash
                flows from investing activities:**Purchase
                of fixed
                assets
            
            
            (193,980
            )
            
            (33,366
            )
            
            (355,376
            )Loan
                receivable
            
            
            (137,033
            )
            
            
            
            
            (137,033
            )Proceeds
                from
                the sale of investments
            
            
            10,000,000
            
            
            2,500,000
            
            
            12,500,000Purchase
                of
                investments
            
            
            
            
            
            
            
            
            (12,487,235
            )Net
                cash provided
                by (used in) investing activities
            
            
            9,668,987
            
            
            2,466,634
            
            
            (479,644)**Cash
                flows from financing activities:**Proceeds
                from
                stock subscription receivable
            
            
            
            
            
            
            
            
            130Proceeds
                from
                notes payable to stockholder
            
            
            
            
            
            
            
            
            18,000Repayment
                of
                notes payable to stockholder
            
            
            
            
            
            
            
            
            (18,000
            )Net
                proceeds
                from sale of common stock and warrants
            
            
            32,405,549
            
            
            
            
            
            64,623,886Proceeds
                from
                exercise of warrants
            
            
            548,955
            
            
            
            
            
            548,955Net
                cash provided
                by financing activities
            
            
            32,954,504
            
            
            
            
            
            65,172,971**Net
                increase (decrease) in cash and cash equivalents**
            
            
            22,117,792
            
            
            (2,283,279
            )
            
            30,005,427Cash
                and cash equivalents - beginning of period
            
            
            7,887,635
            
            
            3,482,616**Cash
                and cash equivalents - end of period**
            
            $
            30,005,427
            
            $
            1,199,337
            
            $
            30,005,427





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 which 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 subsequently
      changed its name to Lev Pharmaceuticals, Inc. and increased its authorized
      common stock to 200,000,000 shares and its authorized 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 shares of Series A voting
      convertible preferred stock (the "Exchange"). Each Series A voting convertible
      preferred share was converted automatically into 13.940668 shares of FCP common
      stock (an aggregate of 66,767,994 common shares). The 71,797,789 shares of
      common stock represented approximately 94.10% of the ownership interests in
      FCP
      following the merger. In addition, 4,505,530 shares of common stock of FCP
      were
      deemed issued and outstanding in connection with the Exchange. 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 agreed
      to acquire FCP for $350,000. In December 2004, Lev paid certain FCP stockholders
      $283,732 which represents the acquisition price of $350,000 less the assumption
      of a tax liability of $66,268. In connection with the Exchange, the exercise
      price of the outstanding warrants and options remained the same. The Company
      recorded a charge of approximately $75,000 for the change in value of the
      Company’s 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%.





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, dependence on collaborative arrangements,
      development by the Company or its competitors of new technological innovations,
      dependence on key personnel, protection of proprietary technology, and
      compliance with the U.S. Food and Drug Administration (“FDA”) and other
      governmental regulations and approval requirements.





**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.
      There has been no revenue 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, 2007 are not necessarily indicative of the results that may be
      expected for the year ended December 31, 2007. 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 year ended December 31, 2006.


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 (continued):**





As
      a
      development stage enterprise, the Company's primary efforts are devoted to
      conducting research and development for the treatment of inflammatory diseases.
      As 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 the Company has needed to raise capital
      from the sale of its securities to sustain operations. In August 2007, the
      Company raised net proceeds of approximately $32.4 million in a registered
      direct sale of its securities. As of September 30, 2007, the Company had
      approximately $30.0 million in cash and cash equivalents. We expect that our
      cash used in operations will increase significantly over the next several years
      and we may be required to raise additional capital to complete the development
      and commercialization of our current product candidates. Management believes
      that cash and cash equivalents on hand as of September 30, 2007 should be
      sufficient to fund operations for the next twelve months. We may pursue equity
      or debt financing alternatives or other financing in order to raise additional
      funds; however, we do not have any commitments or definitive or binding
      arrangements for such funds other than as discussed below. There can be no
      assurance that such funds, if available at all, can be obtained on terms
      reasonable to the Company. If we are unsuccessful in raising additional capital
      we may need to reduce costs and operations substantially. The unaudited
      condensed consolidated financial statements do not include any adjustments
      that
      might result from the outcome of this uncertainty. However, as described in
      Note
      K, “Subsequent Events”, on November 2, 2007, we entered into a secured loan
      facility for a term loan of up to $20.0 million and received an initial loan
      of
      $10.0 million on the closing date. Pursuant to this facility, we have the option
      to request additional borrowings of a maximum of $10.0 million for the twelve
      months following the closing date.





**[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:**




During
      the three months ended September 30, 2007 and 2006, the Company recorded
      $511,130 and $216,333 of stock-based employee compensation expense and during
      the nine months ended September 30, 2007 and 2006, the Company recorded
      $1,475,223 and $322,515 of stock-based employee compensation expense,
      respectively.





For
      purposes of the disclosure 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. The
      Company calculated expected volatility based upon historical volatility of
      the
      Company’s common stock. The aggregate and per share fair value of options
      granted during the nine months ended September 30, 2007 was approximately
      $6,385,000 or $1.45. No options were granted during the three months ended
      September 30, 2007. The aggregate and per share fair value of options granted
      during the three and nine months ended September 30, 2006 was approximately
      $397,000 or $0.42 and $656,000 or $0.42, respectively. 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, 2007 and 2006.




**Risk
                Free**
              **Interest
                Rate**
            
            **Dividend**
              **Yield**
            
            **Volatility**
              **Factor**
            
            **Estimated
                Life**
              **(Years)**For
                the three months ended September 30, 2007*
            
            N/A
            
            N/A
            
            N/A
            
            N/AFor
                the nine months ended September 30, 2007
            
            4.48%
                - 4.80%
            
            0
            
            124.4%-130.6%
            
            4.97For
                the three months ended September 30, 2006
            
            4.59%
                - 4.88%
            
            0
            
            70%
            
            5.00For
                the nine months ended September 30, 2006
            
            4.59%
                - 4.99%
            
            0
            
            70%
            
            5.00




*
      No
      options were granted during the three months ended September 30,
      2007.


7




**LEV
      PHARMACEUTICALS, INC. AND SUBSIDIARY**


**(a
      development stage enterprise)**





**NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


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





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





A
      summary
      of option activity under the Plan as of September 30, 2007 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, 2006
            
            5,594,900
            
            $
                0.50Granted
            
            4,390,000
            
            $
                1.62Outstanding,
                September 30, 2007
            
            9,984,900
            
            $
                0.99
            
            7.41
            
            $
                5,855,925Vested
                and expected to vest, September 30, 2007
            
            9,984,900
            
            $
                0.99
            
            7.41
            
            $
                5,855,925Exercisable
                shares as of September 30, 2007
            
            4,207,400
            
            $
                0.43
            
            7.68
            
            $
                4,714,550





As
      of
      September 30, 2007, there was $5,828,019 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 29 months. This disclosure does not include options to purchase
      295,000 shares of common stock which have been approved by our board, subject
      to
      approval by our shareholders.





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





Basic
      net
      loss per share is computed on the basis of net loss for the period divided
      by
      the weighted average number of shares of common stock outstanding during the
      period. There were potentially dilutive common shares of 29,474,071 and
      8,709,672 as of September 30, 2007 and 2006, respectively related to stock
      options and warrants, which were excluded from the diluted loss per share
      calculation since their effect would have been anti-dilutive.




**[5]
      Investments:**





Investments
      with original maturities of 91 days to one year are considered short term
      investments and are carried at amortized cost.




**[6]
      Inventory:**




Inventory
      is stated at the lower of cost or market using the first-in first-out method.
      As
      of September 30, 2007 our inventory consists of raw materials.





**[7]
      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 from three to five years.





**[8]
      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
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities Including an Amendment of FASB
      Statement No. 115” (SFAS 159), which permits entities to measure many
      financial




8




**LEV
      PHARMACEUTICALS, INC. AND SUBSIDIARY**


**(a
      development stage enterprise)**





**NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


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





**[8]
      New Accounting Pronouncements (continued):**





instruments
      and certain other items at fair value.  The objective is to improve
      financial reporting by providing entities with the opportunity to mitigate
      volatility in reported earnings caused by measuring related assets and
      liabilities differently without having to apply complex hedge accounting
      provisions.  SFAS 159 is effective for fiscal years beginning after
      November 15, 2007. We are currently evaluating the impact that SFAS 159
      will have on our consolidated financial position, results of operations, and
      cash flows as of its adoption in 2008.





**NOTE
      C - PREPAID EXPENSES**




Prepaid
      expenses consist of the following:





September
                30,
              2007
              (Unaudited)
            
            December
                31,
              2006Advance
                for purchases
            
            $
            1,892,755Prepaid
                insurance
            
            
            134,339
            
            $
            289,089Prepaid
                other
            
            
            76,077
            
            
            89,697Total
            
            $
            2,103,171
            
            $
            378,786




**NOTE
      D - FIXED ASSETS**




Fixed
      assets, at cost, consist of the following:





September
                30,
              2007
              (Unaudited)
            
            December
                31,
              2006Lab
                equipment
            
            $
            11,645
            
            $
            11,645Office
                equipment
            
            
            268,532
            
            
            149,750Other
            
            
            75,198
            
            
            _______Total
            
            
            355,375
            
            
            161,395Accumulated
                depreciation
            
            
            (69,168
            )
            
            (30,301
            )$
            286,207
            
            $
            131,094




The
      Company recorded depreciation expense of $15,942 and $4,856 for the three months
      ended September 30, 2007 and 2006, and $38,867 and $13,458 for the nine months
      ended September 30, 2007 and 2006, respectively.





**NOTE
      E - ACCRUED EXPENSES**





Accrued
      expenses consisted of the following:


September
                30,
              2007
              (Unaudited)
            
            December
                31,
              2006Research
                and development - sponsored research
            
            $
            234,000
            
            $
            234,000Research
                and development - clinical trial
            
            
            297,000
            
            
            480,000Research
                and development - consulting
            
            
            33,750
            
            
            94,000Research
                and development - other
            
            
            -
            
            
            79,540Research
                and development - payroll
            
            
            14,744
            
            
            28,756General
                and administrative - professional fees
            
            
            12,000
            
            
            60,000General
                and administrative - payroll
            
            
            448,155
            
            
            487,380General
                and administrative - other
            
            
            12,530
            
            
            30,872$
            1,052,179
            
            $
            1,494,548







9




**LEV
      PHARMACEUTICALS, INC. AND SUBSIDIARY**


**(a
      development stage enterprise)**





**NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**NOTE
      F - SANQUIN BLOOD SUPPLY FOUNDATION**





**[1]
      Loan payable**





The
      Company has purchased its C1-INH product from the Sanquin Blood Supply
      Foundation (“Sanquin”). Under the agreement with Sanquin, Sanquin provided loans
      to the Company for the value of C1-INH purchased. The loans are 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, 2007 was $4,123,718 net of debt discount of $1,936,299. 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 condensed consolidated
      statement of operations. The Company has recorded interest expense using the
      effective interest rate method. Interest rates range from 4.31% to 7.66%. For
      the three months ended September 30, 2007 and 2006, interest expense was $59,988
      and $11,965, and $135,635 and $27,332 for the nine months ended September 30,
      2007 and 2006, respectively. The amount included in research and development
      expense for product cost for the three months ended September 30, 2007 and
      2006
      was $690,265 and $195,245, and $2,184,529 and $662,807 for the nine months
      ended
      September 30, 2007 and 2006, respectively.





**[2]
      Distribution Agreement and Loan Receivable**





On
      June
      1, 2007 the Company exercised an option to extend the Sanquin distribution
      agreement. Our distribution agreement with Sanquin terminates on December 31,
      2010, unless extended by us for up to a three-year period or by mutual agreement
      of the parties prior to its expiration.





On
      October 10, 2007, the Company entered into an amendment (the “Amendment”), dated
      as of September 24, 2007, to its Distribution and Manufacturing Services
      Agreement (the “Agreement”) with Sanquin. Pursuant to the Amendment, the Company
      and Sanquin will initiate a construction project to scale-up the production
      facilities of Sanquin to be used for the purpose of meeting the Company’s
      anticipated ongoing requirements for the commercial use of its C1-INH product,
      which is proposed to be marketed as CinryzeTM (“Cinryze”). Pursuant to the terms
      and conditions of the Amendment, the Company and Sanquin will jointly develop
      a
      project plan for the construction to the production facilities. Subject to
      the
      terms of the final project plan, Lev would provide Sanquin with a non-interest
      bearing loan, up to a maximum amount of €7.5 million (US $10.7 million, based on
      the exchange rate as of September 30, 2007), to finance the construction
      project. This loan will be due July 1, 2014 and Sanquin agreed to repay the
      principal amount of the loan by providing the Company with a discount to the
      per
      unit purchase price of Cinryze. In addition, in the event the Agreement is
      terminated before July 1, 2014 because of a default by the Company or if by
      such
      date the volume of Cinryze ordered by the Company is less than the required
      volume for Sanquin to repay the loan, then the Company shall waive the then
      outstanding balance of the loan. In addition, if marketing approval by the
      FDA
      is not received within eighteen months (January 31, 2009) from the submission
      date of the biologics license application and after giving affect to the
      contractually specified cure period, we could be required to waive the
      outstanding loan balance in the event Sanquin seeks to terminate our agreement
      with them in the event of a default by the Company. In the event the Agreement
      is terminated because of a default of Sanquin prior to the loan being repaid
      in
      full, then Sanquin shall pay the Company the entire outstanding principal
      balance of the loan as of the date of termination within 60 days from such
      date. The
      loan
      receivable balance outstanding as of September 30, 2007 was
      $140,375.





Pursuant
      to the Amendment, Sanquin shall manufacture the Company’s C1-INH product for the
      Company on a toll-manufacturing basis using blood plasma supplied by the
      Company. The Company agreed to purchase a specified amount of product from
      Sanquin until the scale up is approved by the appropriate regulatory
      authorities, which the Company expects to occur during the middle of 2009.
      In
      addition, the Company agreed to an annual minimum purchase commitment of product
      of approximately $21.0 million during the term of the Agreement commencing
      in
      the year in which the scale up is approved in the U.S. for commercial
      production. The Company and Sanquin agreed to negotiate in good faith to modify
      these requirements in the event that regulatory approval for commercial release
      of Cinryze in the U.S. does not occur by




10




**LEV
      PHARMACEUTICALS, INC. AND SUBSIDIARY**


**(a
      development stage enterprise)**





**NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**NOTE
      F - SANQUIN BLOOD SUPPLY FOUNDATION**





**[2]
      Distribution Agreement and Loan Receivable (continued):**





March
      31,
      2008. The Company’s contractual purchase commitments are subject to annual
      adjustments based on market conditions and do not include the cost of storage,
      handling and testing services that Sanquin will provide for the
      Company.





Further,
      pursuant to the Amendment, Sanquin agreed to transfer to the Company and/or
      one
      or more third parties, all necessary rights and interests to its technology
      for
      manufacturing Cinryze to enable a third party to serve as a second supplier
      of
      Cinryze under certain circumstances. In addition, Sanquin agreed that in the
      event of a change in control of Sanquin (as defined in the Amendment), the
      Company shall have the right to acquire from Sanquin a joint ownership right
      to
      the technology to enable the Company to exploit the technology, including to
      transfer the technology to a third party for the purpose of manufacturing
      Cinryze (and terminating or reducing it’s obligation to purchase from Sanquin).
      If the Company exercised this right, it would pay Sanquin a down payment against
      future annual license fees and royalties and be obligated to pay such future
      fees and royalties as provided for in the Amendment.





As
      provided for in the Amendment, the Agreement between the Company and Sanquin
      shall be effective through December 31, 2010, and thereafter, the Company shall
      have the sole right to extend the initial term for up to an additional 18 years
      by providing for six consecutive renewal terms of three years each; and
      thereafter, the Agreement may be extended by the mutual consent of the Parties.





**NOTE
      G - INCOME TAXES**





We
      adopted the provisions of Financial Standards Accounting Board Interpretation
      No. 48 Accounting for Uncertainty in Income Taxes (“FIN 48”) an interpretation
      of FASB Statement No. 109 (“SFAS 109”) on January 1, 2007. As a result of the
      implementation of FIN 48, we did not recognize any adjustment in the liability
      for unrecognized income tax benefits. The tax years 2003-2006 remain open to
      examination by the major taxing jurisdictions to which we are subject. In the
      event that the Company is assessed interest or penalties at some point in the
      future, they will be classified in the financial statements as general and
      administrative expense.





**NOTE
      H - EMPLOYMENT AGREEMENTS**





On
      January 23, 2007, the Company entered into amended and restated employment
      agreements with each of its Chief Executive Officer, Dr. Joshua D. Schein,
      and
      its Executive Vice President and Chairman, Mr. Judson Cooper. Both employment
      agreements are effective as of January 17, 2007. The employment agreements
      are
      identical in all material respects and are summarized as follows. As used in
      the
      following summary, the term “Executive(s)” shall refer to Messrs. Schein and
      Cooper. The employment agreements are for an initial term of four years and
      at
      the end of the initial term renew automatically for additional one year terms
      unless sooner terminated or not renewed. Under the employment agreements, the
      Executives are entitled to a base salary of $425,000 beginning as of January
      1,
      2007. The base salary increases at the end of each year of service (commencing
      at the end of 2007) by the greater of (i) 4% or (ii) a percentage equal to
      the
      increase, if any, in the United States Department of Labor Consumer Price Index
      (or comparable index, if available) for the New York metropolitan area over
      the
      previous 12 months. In addition, the Executives are entitled to a bonus as
      defined in the employment agreements. On January 17, 2007, the Board of
      Directors granted each of the Executives options to purchase 1,600,000 shares
      of
      the Company common stock, which options expire ten years from the date of grant
      and which are exercisable at an exercise price of $1.60, which was equal to
      the
      closing price of its common stock on the date of grant. The options vest in
      equal annual installments of 25% of the total option amount until vested in
      full, subject to the terms and conditions of the Company’s 2004 Omnibus
      Incentive Compensation Plan. In the event of the termination of employment
      by
      the Company without “cause” or by an Executive for “good reason,” there is a
      lump sum settlement payable as defined in the employment agreements. There
      is a
      provision for change of control.





On
      March
      16, 2007, the Company entered into an employment relationship with Mr. Dov
      S.
      Elefant for Mr. Elefant to serve as its Corporate Controller. Pursuant to the
      terms of an offer letter executed by the Company and Mr. Elefant, Mr. Elefant
      will serve as Corporate Controller on an at-will basis and earn an annual salary
      at the rate of $195,000. Mr. Elefant will be eligible for an annual bonus of
      $20,000 in the discretion of the compensation committee of the Board. In the
      event Mr. Elefant’s employment is terminated by the Company without cause within
      three years of his start date, the Company will pay him a severance payment
      of
      six months of his then-current base salary. In addition, pursuant to the
      Company’s 2004 Omnibus





11


**LEV
      PHARMACEUTICALS, INC. AND SUBSIDIARY**


**(a
      development stage enterprise)**





**NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**NOTE
      H - EMPLOYMENT AGREEMENTS (Continued):**





Incentive
      Compensation Plan and subject to the terms and conditions therein, on March
      19,
      2007, the Company granted Mr. Elefant options to purchase 200,000 shares of
      common stock, which options are exercisable for a period of seven years at
      a per
      share price of $1.75 and which options vest over a three year period, with
      1/3
      of the option award vesting on the one-year anniversary
      of the date of grant and the balance vesting in equal monthly installments
      of
      1/24 of the remaining option award over the following 24 months.




**NOTE
      I - PLASMA AGREEMENT**





On
      July
      19, 2007, the Company entered into an agreement, dated as of July 12, 2007,
      for
      the purchase and sale of plasma with DCI Management Group, LLC (the “DCI
      Agreement”) pursuant to which Lev will purchase certain quantities of U.S.
      Source Plasma to be utilized in the production of product under our Distribution
      and Manufacturing Services Agreement with Sanquin. Under the DCI Agreement,
      the
      supplier agreed to sell us specified annual quantities of plasma, in accordance
      with applicable good manufacturing practices. The Company is committed to
      purchase $9,300,000 worth of product during the remainder of 2007 and
      $13,950,000 worth of product during 2008. Thereafter the Company expects its
      annual purchase commitment to be $11,625,000 for the balance of the term of
      the
      DCI Agreement. The Company’s contractual purchase commitments are subject to
      annual percentage increases based on market conditions. The Company anticipates
      its total commitment under this DCI Agreement to be approximately $61 million.
      As of September 30, 2007 the Company purchased approximately $4.7 million of
      plasma under this agreement of which $2.8 million is included in inventory
      and
      $1.9 million is included in prepaid expenses.





The
      DCI
      Agreement expires December 31, 2011, unless sooner terminated in accordance
      with
      its terms. Either party may terminate the DCI Agreement upon written notice
      if
      the other party is in material breach of any provision thereof, subject to
      applicable cure periods. Subject to the supplier’s ability to mitigate damages,
      in the event the Company is in default of its payment obligation under the
      contract, the Company will be liable to purchase the minimum quantities of
      plasma specified under the contract for the balance of the term. The Company
      has
      the right, however, to terminate the contract if by December 31, 2008 the
      Company does not obtain regulatory approval for the commercialization of its
      lead product candidate or are not able to secure adequate financial arrangements
      to cover our obligations with respect to the initial purchase commitments under
      the DCI Agreement. In either such event, the Company will be obligated to
      complete the purchase of 80% of the initial minimum purchase commitment, subject
      to the supplier’s ability to mitigate damages. Upon expiration of the DCI
      Agreement, or in the event the DCI Agreement is terminated for reasons other
      than as set forth above, the Company will be obligated to purchase a closing
      inventory of plasma in the quantity specified in the DCI Agreement.





**NOTE
      J - 2007 FINANCING**





On
      August
      17, 2007, the Company closed on a registered direct sale of an aggregate
      of 23,333,333 shares of our common stock and warrants to purchase up to an
      aggregate of 4,666,667 shares of our common stock for net proceeds of $32.4
      million to certain institutional investors. The warrants are exercisable at
      any
      time until five years from the closing date at a price of $1.86. We paid
      approximately $2.6 million in total commissions and expenses to investment
      bankers engaged to assist us in the financing. These securities were sold
      pursuant to an effective registration statement.





**NOTE
      K - SUBSEQUENT EVENT**





On
      November 2, 2007, the Company and its wholly-owned subsidiary, Lev Development
      Corp. entered into a Term Loan Agreement dated as of November 2, 2007 (the
“Loan
      Agreement”) and a Pledge and Security Agreement of the same date (the “Security
      Agreement” and together with the Loan Agreement, the “Secured Financing
      Agreements”), among the Company, the Lender executing the Loan Agreement (the
“Lender”) and Mast Capital Management, LLC, as agent for the Lender.





Under
      the
      Loan Agreement, the Lender agreed to provide a term loan facility to the Company
      in an aggregate amount of up to $20,000,000, subject to the further terms and
      conditions of the Loan Agreement. The loan proceeds will be used to finance
      the
      cost of additional plasma purchases. The loan is secured by a first priority
      lien on all of the Company’s assets. Pursuant to the terms and conditions of the
      Secured Financing Agreements, at the initial closing the Company received an
      initial loan of $10,000,000. Subsequent term loan advances may be requested
      by
      the Company in amounts not less than $1,000,000 each during the twelve month
      period from the closing date. The Company’s ability to request additional loans
      is subject to the Company maintaining (i) a borrowing base in excess of the
      outstanding





12


**LEV
      PHARMACEUTICALS, INC. AND SUBSIDIARY**


**(a
      development stage enterprise)**





**NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**NOTE
      K - SUBSEQUENT EVENT (Continued):**








aggregate
      loan amount and (ii) compliance with the covenants and conditions of the loan.
      The loan is for a term of 36 months and matures on November 1,
      2010. Interest on the loan accrues at the rate of 13.5% per annum.





The
      Loan
      Agreement allows the Company to prepay the outstanding principal amount and
      all
      accrued but unpaid interest, subject to payment of a make-whole premium during
      the first year following the closing and a prepayment fee thereafter,


until
      May
      1, 2010. The Loan Agreement requires compliance with customary covenants and
      restrictions on the Company’s ability to, among other things, dispose of certain
      assets, engage in certain transactions, incur indebtedness and pay
      dividends.  The Loan Agreement also provides for customary events of
      default following which, the Lender may, at its option, accelerate the amounts
      outstanding under the Loan Agreement.





In
      connection with the Loan Agreement, the Company issued to the Lender warrants
      to
      purchase an aggregate of 900,000 shares of Company common stock (the
“Warrants”).  The Warrants are for a term of three years and have an
      exercise price of $1.6576 per share, which is the volume weighted average price
      per share of the Company’s common stock for the thirty trading days immediately
      preceding the closing. The Company also entered into a registration rights
      agreement with the Lender pursuant to which the Company agreed to file a
      registration statement with the Securities and Commission covering the resale
      of
      the shares of common stock which may be issued upon exercise of the Warrants
      upon the demand of the holders of a majority of the Warrants. In consideration
      for services provided on behalf of the Company in connection with the
      consummation of the transactions contemplated by the Secured Financing
      Agreements, the Company agreed to pay a fee of 1% of the amounts borrowed under
      the Loan Agreement to Mr. Richard Stone, who is the beneficial owner of greater
      than 5% of the Company’s outstanding common stock. The Company is in the process
      of evaluating the accounting for this transaction.




13


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




*The
      following discussion should be read in conjunction with our unaudited 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.





**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
      hereditary angioedema (“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.





On
      January 17, 2007, we announced that we have completed patient treatment in
      the
      acute portion of a pivotal Phase III clinical trial for our lead product
      candidate, C1-INH for the treatment of HAE and on March 14, 2007, we announced
      positive results from our Phase III clinical trial of C1-INH for the acute
      treatment of HAE. In the acute trial, the protocol-defined primary endpoint
      was
      reached, showing a clinically and statistically significant reduction in the
      time to sustained relief of acute HAE symptoms. The primary endpoint was met
      using the protocol-defined intent to treat analysis, with a median time to
      sustained symptom relief of 2.0 hours for patients receiving C1-INH compared
      to
      greater than 4.0 hours, the maximum evaluation period, for patients receiving
      placebo. In addition, 21 laryngeal attacks were treated in the study on an
      open
      label basis. All of the laryngeal attacks were successfully treated with C1-INH.
      Based on the positive results of this trial, we filed a biologics license
      application, or BLA, with the FDA on July 31, 2007. If approved, we intend
      to
      commercialize C1-INH ourselves through a specialty sales force in the United
      States and market this product under the name CinryzeTM.





14


On
      May
      31, 2007, we announced that we have completed patient treatment in the second
      phase of the trial, examining the effectiveness of C1-INH in preventing
      inflammatory attacks in more severely affected HAE patients and on September
      10,
      2007 we announced positive results from our Phase III clinical trial of C1-INH
      for the prophylactic treatment of HAE. In the prophylactic trial, the
      protocol-defined primary endpoint was achieved, showing a clinically and
      statistically significant reduction in the number of HAE attacks. In the 24
      week, double-blind, placebo controlled study, a total of 24 patients were
      randomly assigned to one of two treatment groups: twelve weeks of C1-INH
      treatment followed by 12 weeks of placebo or 12 weeks of placebo treatment
      followed by 12 weeks of C1-INH. Patients received twice-weekly doses of C1-INH
      or placebo. The primary endpoint was met with a 53% reduction in the number
      of
      attacks in the C1-INH group (p<0.0001). Secondary endpoints in the study also
      showed highly significant differences in favor of C1-INH, including a 66%
      reduction in days of swelling (p<0.0001) and decreases in the average
      severity of attacks (p=0.0008) and average duration of attacks (p=0.0004).
      Based
      on the positive results of this study, we amended our BLA filing with the FDA
      on
      October 30, 2007.





We
      are
      also developing C1-INH for the treatment of 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,
      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, 2007, 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 a commercially available
      product by the end of our 2007 fiscal year. Commercialization of our product
      candidates is subject to FDA approval.





To
      date
      the Company has not generated revenues or profits from inception. Therefore,
      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,
      2007, our research and development expenses were $4,459,734 and $11,773,103,
      respectively.





**2006
      Financing**





On
      October 16, 2006 and October 20, 2006, we closed on the sale of an aggregate
      of 32,307,693 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 $21.0
      million to certain institutions and accredited investors. The warrants are
      exercisable at any time until five years from the initial closing date at a
      price of $0.84 per share. We have been using the net proceeds of the private
      placement of approximately $19.6 million for continued funding of our clinical
      trials, commercial development, additional research and development efforts,
      and
      general working capital purposes. These securities 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 paid approximately $1.4 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 were issued on substantially
      similar terms as the investor warrants.





**2007
      Financings**





**Equity**





On
      August
      17, 2007, we closed on a registered direct sale of an aggregate
      of 23,333,333 shares of our common stock and warrants to purchase up to an
      aggregate of 4,666,667 shares of our common stock for aggregate proceeds of
      $35.0 million to certain institutions. The warrants are exercisable at any
      time
      until five years from the closing date at a price of $1.86. We have been using
      the net proceeds of the private placement of approximately $32.4 million for
      continued funding of our clinical trials, additional research and development
      efforts, and general working capital purposes. We paid approximately $2.6
      million in total commissions and expenses to investment bankers engaged to
      assist us in the financing. These securities were sold pursuant to an effective
      registration statement.





**Secured
      Term Loan**





On
      November 2, 2007, we entered
      into a Term Loan Agreement and a Pledge and Security Agreement with the lender
      executing the Loan Agreement and Mast Capital Management, LLC, as agent for
      the
      lender. Under this arrangement, the Lender agreed to provide a term loan
      facility to us in an aggregate amount of up to $20,000,000, subject to the
      further terms and conditions of the Loan Agreement. The loan proceeds will
      be
      used to finance the cost of additional plasma purchases.The loan is secured
      by a
      first priority lien on all of our assets. At the initial closing, we received
      an
      initial loan of $10,000,000. The loan is for a term of 36 months and matures
      on
      November 1, 2010. Interest on the loan accrues at the rate of 13.5% per
      annum.





15




**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.





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 $283,732 to certain stockholders and assuming
      the
      outstanding tax liability of $66,268. 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%.





*New
      Employment Agreements/Arrangements*





During
      the nine months ended September 30, 2007, we entered into amended and restated
      employment agreements with our Chairman, Judson Cooper and our Chief Executive
      Officer, Joshua Schein and we hired Dov Elefant as our Corporate Controller
      pursuant to the terms of an offer letter. The material terms and conditions
      of
      these employments arrangements are summarized in Note H to our unaudited
      condensed consolidated financial statements.





**Plan
      of Operation**





Our
      plan
      of operation for the next twelve months is to focus primarily on our open-label
      Phase III clinical trials of our lead product candidate, Cinryze for the acute
      and prophylactic treatment of HAE and prepare for the commercialization of
      Cinryze upon approval from the FDA. In addition, we intend to initiate a
      research program for the development of a genetically engineered or recombinant
      version of C1-INH as part of a broader program examining the potential of C1-INH
      in treating cardiovascular disease, including acute myocardial infarction
      (“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. Based
      on
      our current levels of research and development and our business plan, we
      believe that our existing cash and cash equivalents of $30,005,427 as of
      September 30, 2007 and borrowings from the term loan will be sufficient to
      meet
      our cash requirements for the next twelve months. As
      described elsewhere herein, on November 2, 2007, we entered
      into a Term Loan Agreement and a Pledge and Security Agreement with the lender
      executing the Loan Agreement and Mast Capital Management, LLC, as agent for
      the
      lender. Under this arrangement, the Lender agreed to provide a term loan
      facility to us in an aggregate amount of up to $20,000,000 and at closing,
      the
      lender funded the Company $10,000,000.





16


On
      May
      23, 2007 we filed with the SEC a Registration Statement on Form S-3 under the
      Securities Act, which was declared effective by the SEC on June 13, 2007. This
      registration statement allows us, from time to time, to offer and sell shares
      of
      common stock, preferred stock, warrants to purchase our securities and/or debt
      securities, up to a maximum aggregate amount of $70 million of such securities.
      To date, we have issued 23,333,333 shares of common stock and warrants to
      purchase 4,666,667 additional shares of common stock under this registration
      statement and we currently have no firm agreements with any third-parties for
      the sale of additional securities pursuant to this registration
      statement.





As
      we
      expect that our cash used in operations will increase significantly over the
      next several years, we may be required to raise additional capital to complete
      the development and commercialization of our current product candidates. We
      will
      pursue equity and/or debt financing alternatives or other financing in order
      to
      raise needed funds. To raise additional funds, we intend to either undertake
      private placements of our securities, either as a self-offering or with the
      assistance of registered broker-dealers, or negotiate a private sale of our
      securities to one or more institutional investors. There can be no assurance
      that additional financing, if at all available, can be obtained on acceptable
      terms 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. If we are unsuccessful in raising additional capital we
      will need to reduce costs and operations substantially.  Further, if
      expenditures required to achieve our plans are greater 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.





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.





On
      October 10, 2007, we entered into an amendment, dated as of September 24, 2007,
      to our distribution and manufacturing services agreement with Sanquin. Pursuant
      to this amendment, we agreed with Sanquin on the terms regarding a construction
      project to scale-up the production facilities of Sanquin to be used for the
      purpose of meeting our anticipated ongoing requirements for the commercial
      use
      of its C1-INH product, proposed to be marketed as CinryzeTM. Subject to the terms
      of the final project plan, we would provide Sanquin with a non-interest bearing
      loan, up to a maximum amount of €7.5 million (US $10.7 million, based on the
      exchange rate as of September 30, 2007), to finance the construction project.
      In
      addition, Sanquin agreed to manufacture our C1-INH product on a
      toll-manufacturing basis using blood plasma supplied by us. We agreed to
      purchase a specified amount of product from Sanquin until the scale up is
      approved by the appropriate regulatory authorities and also agreed to an annual
      minimum purchase commitment of product of approximately $21.0 million during
      the
      term of the Agreement commencing in the year in which the scale up is approved
      in the U.S. for commercial production.





As
      described in greater detail above under the caption “Overview”, on March 14,
      2007, we announced positive results from our Phase III clinical trial of C1-INH
      for the acute treatment of HAE. Based on the positive results of this study,
      we
      filed a BLA with the FDA on July 31, 2007. On September 10, 2007 we announced
      positive results from our Phase III clinical trial of C1-INH for the
      prophylactic treatment of HAE. Based on the positive results of this study,
      we
      amended our BLA filing with the FDA on October 30, 2007.





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 for certain expenses. In
      addition, we have an obligation to pay Sanquin royalties on sales of products
      incorporating the licensed technology.





17


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. Based on
      the
      rights obtained from Sanquin, we intend to initiate a research program for
      the
      development of a genetically engineered or recombinant version of C1-INH as
      part
      of a broader program examining the potential of C1-INH in treating
      cardiovascular disease, including AMI, in 2008.





As
      of
      September 30, 2007, the Company has inventory of $2,909,056 and advance
      purchases for inventory included in prepaid expenses of $1,892,755. The Company
      is preparing for its product launch of CinryzeTM
      and has been building its inventory. In
      the
      event that the FDA rejects the Company’s BLA, we believe we can recover these
      costs.




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





**Results
      of Operations**





*Three
      Months Ended September 30, 2007 as compared to the Three Months Ended September
      30, 2006*  ******





We
      had no
      revenues during the three months ended September 30, 2007 and 2006 because
      we do
      not have any commercial biopharmaceutical products.





Research
      and development expenses for the three months ended September 30, 2007 and
      2006
      were $4,459,734 and $1,556,341, respectively. The increase of $2,903,393 was
      primarily due to expenses relating to the progress of the Phase III clinical
      trials, purchases of plasma product that were purchased for the open-label
      clinical trial and regulatory consulting expense.





General
      and administrative expenses for the three months ended September 30, 2007 and
      2006 were $2,978,646 and $999,903, respectively. The increase of $1,978,743
      was
      primarily due to increases in payroll and related benefits, share-based
      compensation for employee options, marketing and travel.





Interest
      income for the three months ended September 30, 2007 and 2006 was $242,139
      and
      $19,535, respectively. The increase of $222,604 was attributed to having more
      cash to invest.





Due
      to
      the factors mentioned above, the net loss for the three months ended September
      30, 2007 was $7,253,291 or a loss of $0.06 per common share, basic and diluted,
      as compared to a loss of $2,548,705 for the three months ended September 30,
      2006 or a loss of $0.03 per common share, basic and diluted.





*Nine
      Months Ended September 30, 2007 as compared to the Nine Months Ended September
      30, 2006*  ******





We
      had no
      revenues during the nine months ended September 30, 2007 and 2006 because we
      do
      not have any commercial biopharmaceutical products.





Research
      and development expenses for the nine months ended September 30, 2007 and 2006
      were $11,773,103 and $3,492,834, respectively. The increase of $8,280,269 was
      primarily due to expenses relating to the progress of the Phase III clinical
      trials, purchases of plasma product that were purchased for the open-label
      clinical trial, laboratory services and regulatory consulting
      expense.





General
      and administrative expenses for the nine months ended September 30, 2007 and
      2006 were $8,297,525 and $2,863,452, respectively. The increase of $5,434,073
      was primarily due to increases in payroll and related benefits, share-based
      compensation for employee options, marketing, legal expense, rent and
      travel.





Interest
      income for the nine months ended September 30, 2007 and 2006 was $578,870 and
      $98,533, respectively. The increase of $480,337 was attributed to having more
      cash to invest.





Due
      to
      the factors mentioned above, the net loss for the nine months ended September
      30, 2007 was $19,624,490 or a loss of $0.17 per common share, basic and diluted,
      as compared to a loss of $6,285,125 for the nine months ended September 30,
      2006
      or a loss of $0.08 per common share, basic and diluted.




18




**Liquidity
      and Capital Resources**





As
      of
      September 30, 2007, we had cash and cash equivalents of $30,005,427 and working
      capital of $32,037,196. Net cash used in operations was $20,505,699 for the
      nine
      months ended September 30, 2007 and was primarily due to our loss of $19,624,490
      in addition to purchases of inventory of $2,909,056 and an increase to prepaid
      expenses and other assets of $1,791,198 primarily for funding of advance
      purchases for inventory. The operating loss was partially offset by non cash
      expenses of $3,830,757 primarily related to stock-based compensation related
      to
      employee stock options, purchases of C1-INH product and amortization of debt
      discount. Pursuant to the Sanquin loan agreement, purchases made during our
      Phase III clinical trials are added to our loan and we are not required to
      make
      any principal payments. The loan balance, net of debt discount as of September
      30, 2007 was $4,123,718 and will be forgiven when regulatory approval from
      the
      FDA is received. If we do not receive regulatory approval, then the loan is
      repayable on the earlier of January 16, 2014, or the termination of the
      Agreement. The loan does not bear interest and we impute interest using the
      effective interest rate method. For the nine months ended September 30, 2007,
      net cash provided by investing activities was $9,668,987 resulting from the
      sale
      of investments of $10,000,000 offset by the purchase of fixed assets for
      $193,980 and a loan receivable of $137,033. Cash provided by financing
      activities for the nine months ended September 30, 2007 was $32,954,504
      resulting from $32,405,549 of net proceeds from the sale of common stock and
      warrants and $548,955 resulting from proceeds from the exercise of warrants.





Our
      capital resources are focused on the clinical development and regulatory
      approval of C1-INH for the treatment of HAE .
      To
      date, we have relied solely upon selling equity securities in private placements
      to generate cash to implement our plan of operations. Based
      on
      our current levels of research and development and our business plan, we
      believe that our existing cash and cash equivalents of $30,005,427 as of
      September 30, 2007 plus subsequent borrowings discussed below will be sufficient
      to meet our cash requirements for the next twelve months .
      As we
      expect that our cash used in operations will increase significantly over the
      next several years, we may be required to raise additional capital to complete
      the development and commercialization of our current product candidates. We
      will
      pursue equity and/or debt financing alternatives or other financing in order
      to
      raise needed funds. If we are unsuccessful in raising additional capital we
      will
      need to reduce costs and operations substantially.  Our capital resources
      are focused on the clinical development and regulatory approval of C1-INH for
      the treatment of HAE.





In
      October 2006, we received net proceeds of $19,584,745 in a private placement,
      net of issuance costs of $1,415,255 from the sale of 32,307,693 shares of common
      stock at $0.61 per share and five year warrants to purchase 9,692,308 shares
      of
      common from stock at an exercise price of $0.84 per share. The Company issued
      1,698,538 and 198,519 warrants to purchase common stock to registered
      broker-dealers that assisted us in the financings (the “Agent Warrants”). The
      Agent Warrants are exercisable at $0.84 per share and $1.18 per share and expire
      five years from the date of issue. We paid $1,279,593 to the placement agent
      and
      to the registered broker dealer.





On
      May
      23, 2007, we filed with the SEC a Registration Statement on Form S-3 under
      the
      Securities Act, which was declared effective by the SEC on June 13, 2007. This
      registration statement allows us, from time to time, to offer and sell shares
      of
      common stock, preferred stock, warrants to purchase our securities and/or debt
      securities, up to a maximum aggregate amount of $70 million of such securities.
      In August 2007, we received net proceeds of $32,405,549 in a private placement,
      net of issuance costs of $2,594,451 from the sale of 23,333,333 shares of common
      stock at $1.50 per share and five year warrants to purchase 4,666,667 shares
      of
      common stock at an exercise price of 1.86 per share. We currently have no firm
      agreements with any third-parties for the sale of additional securities pursuant
      to this registration statement.





On
      November 2, 2007, we entered
      into a Term Loan Agreement and a Pledge and Security Agreement with the lender
      executing the Loan Agreement and Mast Capital Management, LLC, as agent for
      the
      lender. Under this arrangement, the Lender agreed to provide a term loan
      facility to us in an aggregate amount of up to $20,000,000, subject to the
      further terms and conditions of the Loan Agreement. The loan is secured by
      a
      first priority lien on all of our assets. At the initial closing, we received
      an
      initial loan of $10,000,000. The loan is for a term of 36 months and matures
      on
      November 1, 2010.  Interest on the loan accrues at the rate of 13.5% per
      annum. We may request additional term loan advances in amounts not less than
      $1,000,000 each during the twelve month period from the closing date. Our
      ability to request additional loans is subject to our maintaining (i) a
      borrowing base in excess of the outstanding aggregate loan amount and (ii)
      compliance with the covenants and conditions of the loan. The Loan Agreement
      allows us to prepay the outstanding principal amount and all accrued but unpaid
      interest, subject to payment of a make-whole premium during the first year
      following the closing and a prepayment fee thereafter, until May 1, 2010. The
      Loan Agreement requires compliance with customary covenants and restrictions
      on
      our ability to, among other things, dispose of certain assets, engage in certain
      transactions, incur indebtedness and pay dividends.  The Loan Agreement
      also provides for customary events of default following which, the Lender may,
      at its option, accelerate the amounts outstanding under the Loan Agreement.
      In
      connection with the Loan Agreement, we issued to the Lender warrants to purchase
      an aggregate of 900,000 shares of our common stock.  The warrants are for a
      term of three years and have an exercise price of $1.6576 per share, which
      is
      the volume weighted average price per share of our common stock for the thirty
      trading days immediately preceding the closing.  The warrants were issued
      in reliance on the Section 4(2) exemption from the registration requirements
      of
      the Securities Act of 1933, as amended.  We also entered into a
      registration rights agreement with the Lender pursuant to which we agreed to
      file a registration statement with the Securities and Commission covering the
      resale of the shares of common stock which may be issued upon exercise of the
      warrants upon the demand of the holders of a majority of the warrants. In
      consideration for services provided on behalf of the Company in connection
      with
      the consummation of the transactions contemplated by the Secured Financing
      Agreements, the Company agreed to pay a fee of 1% of the amounts borrowed under
      the Loan Agreement to Mr. Richard Stone, who is the beneficial owner of greater
      than 5% of the Company’s outstanding common stock.





19


There
      can
      be no assurance that additional
      financing, if at all available, can be obtained 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 through 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. If we are unsuccessful in raising additional capital we
      will need to reduce costs and operations substantially. Further, if expenditures
      required to achieve our plans are greater than projected we will need to raise
      a
      greater amount of funds than currently expected.





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 an accumulated
      deficit of $42,812,829 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**




The
      following is a summary of our significant contractual cash obligations for
      the
      periods indicated that existed as of September 30, 2007.




Less
                than
            
            1
                -
                2
            
            3
                -
                5
            
            More
                thanTotal
            
            
            1
                year
            
            years
            
            years
            
            5
                yearsOffice
                lease
            
            
            $920,266
            
            
            
            $257,111
            
            
            $198,452
            
            
            $464,703
            
            
            $0CRO
                contract
            
            
            888,627
            
            
            
            888,627
            
            
            0
            
            
            0
            
            
            0Executive
                employment contracts
            
            
            3,616,250
            
            
            
            1,294,103
            
            
            1,088,173
            
            
            1,233,974
            
            
            0Plasma
                contract
            
            
            56,021,670
            
            
            
            15,071,857
            
            
            12,656,250
            
            
            28,293,563
            
            
            0Sanquin
                upgrade
            
            
            10,563,474
            
            
            
            10,563,474
            
            
            0
            
            
            0
            
            
            0Sanquin
                purchases
            
            
            19,745,036
            
            
            
            11,867,002
            
            
            7,878,034
            
            
            0
            
            
            0Research
                and development contract
            
            
            234,000
            
            
            
            234,000
            
            
            0
            
            
            0
            
            
            0Total
                obligations
            
            
            $91,989,323
            
            
            
            $40,176,174
            
            
            $21,820,909
            
            
            $29,992,240
            
            
            $
                0





20


Our
      major
      contractual obligations relate to our office leases in New York and
      Pennsylvania, clinical trial costs related to our ongoing open-label trials,
      research and development, purchase commitments and compensation under employment
      contracts. We expect to devote substantial resources to continue our research
      and development efforts, to expand our product pipeline and to support our
      product candidates as they move forward in the clinical development process.





On
      March
      2, 2005, we entered into a CRO services agreement with INC Research which
      governs INC Research’s provision of services in connection with the support of
      clinical investigation and management and/or research of our Phase III clinical
      trial. 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, with prior notice and without
      cause. As of September 30, 2007, we have estimated that we will pay INC Research
      approximately $889,000 for its services under both agreements in 2007. However,
      due 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 if we expand the clinical trials.





During
      our 2006 fiscal year we entered into employment agreements with our Chief
      Financial Officer, Douglas J. Beck, and Jason Bablak, who serves as our Vice
      President, Regulatory Affairs and Product Development. In January 2007, we
      entered into amended and restated employment agreements with our Chairman,
      Judson Cooper and our Chief Executive Officer, Joshua Schein. In March 2007
      we
      hired Dov Elefant as our Corporate Controller pursuant to the terms of an offer
      letter (see Note H to our unaudited condensed consolidated financial
      statements).





On
      June
      1, 2007 we exercised an option to extend the Sanquin distribution agreement.
      Our
      distribution agreement with Sanquin terminates on December 31, 2010, unless
      extended by us for up to a three-year period or by mutual agreement of the
      parties prior to its expiration.





On
      October 10, 2007, we entered into an amendment, dated as of September 24, 2007,
      to our Distribution and Manufacturing Services Agreement with Sanquin. Pursuant
      to the amendment, we agreed with Sanquin on the terms of a construction project
      to scale-up the production facilities of Sanquin to be used for the purpose
      of
      meeting our anticipated ongoing requirements for the commercial use of our
      C1-INH product to be marketed as CinryzeTM. Pursuant to the terms and conditions
      of the amendment, we will develop a project plan for the construction to the
      production facilities with Sanquin. Subject to the terms of the final project
      plan, we would provide Sanquin with a non-interest bearing loan, up to a maximum
      amount of €7.5 million (US $10.7 million, based on the exchange rate as of
      September 30, 2007), to finance the construction project. This loan will be
      due
      July 1, 2014 and Sanquin agreed to repay the principal amount of the loan by
      providing us with a discount to the per unit purchase price of Cinryze.





Pursuant
      to the amendment, Sanquin shall manufacture C1-INH product for us on a
      toll-manufacturing basis using blood plasma supplied by us. We agreed to
      purchase a specified amount of such product from Sanquin totaling approximately
      $19.7 million until the scale up is approved
      by the appropriate regulatory authorities, which we
      expect to occur during the middle of 2009. In addition, we agreed to an annual
      minimum purchase commitment of product of approximately $21.0 million during
      the
      term of the Agreement commencing in the year in which the scale up is approved
      in the U.S. for commercial production. We agreed to negotiate in good faith
      to
      modify these requirements in the event that regulatory approval for commercial
      release of the Cinryze in the U.S. does not occur by the end of March 31, 2008.
      Our contractual purchase commitments are subject to annual adjustments based
      on
      market conditions and do not include the cost of storage, handling and testing
      services that Sanquin will provide for us.





On
      July
      19, 2007, we entered into an agreement, dated as of July 12, 2007, for the
      purchase and sale of plasma with DCI Management Group, LLC (the “DCI Agreement”)
      pursuant to which we will purchase quantities of U.S. Source Plasma to be
      utilized in the production of product under our Distribution and Manufacturing
      Services Agreement with Sanquin. Under the DCI Agreement, the supplier agreed
      to
      sell us specified annual quantities of plasma in accordance with applicable
      good
      manufacturing practices. We committed to purchase $9,300,000 worth of product
      during the remainder of 2007 and $13,950,000 worth of product during 2008.
      Thereafter we expect our annual purchase commitment to be $11,625,000 for the
      balance of the term of the DCI Agreement. Our contractual purchase commitments
      are subject to annual percentage increases based on market conditions. We
      anticipate our total commitment under this DCI Agreement to be approximately
      $61
      million. As of September 30, 2007 we purchased approximately $4.7 million of
      plasma.





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 committed 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 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.





21


**OFF-BALANCE
      SHEET ARRANGEMENTS**





We
      had no
      off-balance sheet arrangements as of September 30, 2007 with the exception
      of
      the leases of our office space and copiers.







**CRITICAL
      ACCOUNTING POLICIES**




There
      have been no material changes to our critical accounting policies and estimates
      from the information provided in Item 6, “Management’s Discussion and Analysis
      or Plan of Operation”, included in our 10-KSB for the fiscal year ended December
      31, 2006, except as follows:





FIN
      48 -
      We account for uncertain tax positions in accordance with FASB Interpretation
      No. 48 Accounting for Uncertainty in Income Taxes (“FIN 48”) an interpretation
      of FASB Statement No. 109 (“SFAS 109”). The application of income tax law is
      inherently complex. Laws and regulations in this area are voluminous and are
      often ambiguous. As such, we are required to make many subjective assumptions
      and judgments regarding our income tax exposures. Interpretations of and
      guidance surrounding income tax laws and regulations change over time. As such,
      changes in our subjective assumptions and judgments can materially affect
      amounts recognized in the consolidated balance sheets and statements of
      operations. See Note G to the unaudited condensed consolidated financial
      statements.




**ITEM
      3. CONTROLS AND PROCEDURES**





*Evaluation
      of Disclosure Controls and Procedures*





Our
      Chief
      Executive Officer and Chief Financial Officer, after evaluating the
      effectiveness of our disclosure controls and procedures (as defined in Rule
      13a-15(e) or 15d-15(e) under the Exchange Act) as of the end of the period
      covered by this report, have concluded that, based on the evaluation of these
      controls and procedures, our disclosure controls and procedures were effective
      at the reasonable assurance level 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 and that such
      information is accumulated and communicated to our management, including our
      chief executive officer and chief financial officer, to allow timely decisions
      regarding required disclosure.





*Changes
      in Internal Controls*





There
      was
      no change in our system of internal control over financial reporting (as defined
      in Rule 13a-15(f) under the Securities Exchange Act of 1934) during our fiscal
      quarter ended September 30, 2007 that has materially affected, or is reasonably
      likely to materially affect, our internal control over financial
      reporting.




We
      do not
      expect that internal controls over financial reporting will prevent all errors
      or all instances of fraud. A control system, no matter how well designed and
      operated, can provide only reasonable, not absolute, assurance that the control
      system’s objectives will be met. Further, the design of a control system must
      reflect the fact that there are resource constraints, and the benefits of
      controls must be considered relative to their costs. Because of the inherent
      limitations in all control systems, no evaluation of controls can provide
      absolute assurance that all control issues and instances of fraud, if any,
      within its company have been detected. These inherent limitations include the
      realities that judgments in decision-making can be faulty, and that breakdowns
      can occur because of simple error or mistake. Controls can also be circumvented
      by the individual acts of some persons, by collusion of two or more people,
      or
      by management override of the controls. The design of any system of controls
      is
      based in part upon certain assumptions about the likelihood of future events,
      and any design may not succeed in achieving its stated goals under all potential
      future conditions. Over time, controls may become inadequate because of changes
      in conditions or deterioration in the degree of compliance with policies or
      procedures. Because of the inherent limitation of a cost-effective control
      system, misstatements due to error or fraud may occur and not be detected.




22


**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**





During
      the quarter ended September 30, 2007, we did not issue any securities that
      were
      not registered under the Securities Act of 1933, as amended.


****


**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**





None.




23


**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**4.1
            
            Form
                of Note issued to Lender
            
            
            
            
            
            
            
            X4.2
            
            Form
                of Warrant issued to Lender
            
            
            
            
            
            
            
            X10.1*
            
            Agreement
                for Purchase and Sale of Plasma entered into on July 19,
                2007
            
            8-K
            
            7/25/07
            
            10.110.2*
            
            Amendment
                to Distribution and Manufacturing Services Agreement with Sanquin
                Blood
                Supply Foundation, dated as of September 24, 2007
            
            
            
            
            
            
            
            X10.3
            
            Term
                Loan Agreement dated as of November 2, 2007, by and among the Company,
                the
                Lender and Mast Capital Management, LLC
            
            
            
            
            
            
            
            X10.4
            
            Pledge
                and Security Agreement dated as of November 2, 2007, by and between
                the
                Company and Mast Capital Management, LLC
            
            
            
            
            
            
            
            X10.5
            
            Registration
                Rights Agreement dated as of November 2, 2007, by and among the Company
                and the Lender
            
            
            
            
            
            
            
            X31.1
            
            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





*
      Confidential treatment has been requested with respect to portions of this
      document pursuant to Rule 24b-2 of the Securities Exchange Act. The redacted
      portions of this document were filed separately with the Securities and Exchange
      Commission.





24


**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.**November
                14, 2007
            By:
            /s/ Joshua
              D. ScheinJoshua
              D. Schein, Ph. D.
              Chief
                Executive Officer




November
                14, 2007
            By:
            /s/ Douglas
              J. BeckDouglas
                J. Beck
                Chief
                  Financial Officer




25