**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      DC 20549**





**Amendment
      No. 1 to**


**FORM
      10-Q**





x  QUARTERLY
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For
      the
      quarterly period ended March 31, 2008





OR





o  TRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For
      the
      transition period from _______ to _______




Commission
      file number 001-32639





**Manhattan
      Pharmaceuticals, Inc.**


(Exact
      Name of Registrant as Specified in Its Charter)





Delaware
              (State
                or other jurisdiction of
              incorporation
                or organization)
            36-3898269
              (I.R.S.
                Employer Identification No.)




810
      Seventh Avenue, 4th Floor, New York, New York 10019


(Address
      of principal executive offices)





(212)
      582-3950


(Issuer’s
      telephone number)





Check
      whether the issuer: (1) 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 issuer was required to file such reports),
      and
      (2) has been subject to such filing requirements for the past 90 days. Yes
x No o





Indicate
      by check mark whether the registrant is a large accelerated filer, accelerated
      filer, a non-accelerated filer, or a smaller reporting company. See definition
      of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange
      Act (check one):




Large
      accelerated filer o Accelerated filer o Non-accelerated filer o Smaller
      reporting company x





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





As
      of May
      6, 2008 there were 70,624,232 shares of the issuer’s common stock, $.001 par
      value, outstanding.







Explanatory
      Note:




This
      Amendment No. 1 to Quarterly Report on Form 10-Q (the “Form 10-Q/A”) of
      Manhattan Pharmaceuticals, Inc. (the “Company,” “we,” “us,” or “our”) amends the
      Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008
      (the “Form 10-Q”), which was originally filed with the Securities and Exchange
      Commission (“SEC”) on May 20, 2008. As described in the Form 10-Q, due to the
      complexity of the accounting for the Hedrin JV transaction, the Company
      requested guidance from the SEC in concluding on the appropriate accounting
      treatment for this transaction. We have received guidance from the SEC on
      accounting for this transaction and we are filing this Form 10-Q/A to adjust
      the
      accounting for this transaction based on that guidance. This Form 10-Q/A
      restates our financial statements for the quarter ended March 31, 2008 to
      recognize our Investment in Hedrin JV of $230,127, to recognize our Exchange
      obligation of $2,058,683, to decrease our Additional paid-in capital of
      $1,808,683 and to recognize our equity in the loss of Hedrin JV of $19,873.
      These adjustments relate to a correction in the recording of the joint venture
      transaction with Nordic Biotech Venture Fund II K/S in which Hedrin
      Pharmaceuticals K/S (the “Hedrin JV”) was formed and began operations. In our
      Form 10-Q we recorded the net proceeds received from the Hedrin JV transaction
      as of March 31, 2008 of $1,808,683 as an addition to Additional paid-in capital
      and did not recognize our Investment in the Hedrin JV, the Exchange obligation
      or our equity in the loss of the Hedrin JV. The transaction should have been
      recorded as an Exchange obligation equal the net proceeds received from the
      Hedrin JV transaction as of March 31, 2008 of $1,808,683 plus the amount of
      our
      investment in the Hedrin JV at the closing of the Hedrin JV transaction in
      February 2008 of $250,000. In addition, we should have also recognized our
      equity in the loss of the Hedrin JV for the quarterly period ended March 31,
      2008 of $19,873.




This
      Form
      10-Q/A is being filed solely to amend and restate Items 1, 2 and 3 of Part
      I,
      and Item 6 of Part II.




2


**INDEX**




Page**PART
                I**
            **FINANCIAL
                INFORMATION**Item
                1.
            Unaudited
                Condensed Consolidated Balance Sheets
            5Unaudited
                Condensed Consolidated Statements of Operations
            6Unaudited
                Condensed Consolidated Statement of Stockholders’ Equity
                (Deficiency)
            7Unaudited
                Condensed Consolidated Statements of Cash Flows
            9Notes
                to Unaudited Condensed Consolidated Financial Statements
            10Item
                2.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            22Item
                3.
            Quantitative
                and Qualitative Disclosure About Market Risk
            36Item
                4.
            Controls
                and Procedures
            36**PART
                II**
            **OTHER
                INFORMATION**Item
                1.
            Legal
                Proceedings
            37Item
                1A.
            Risk
                Factors
            37Item
                6.
            Exhibits
            37Signatures
            38




3


**Forward-Looking
      Statements**




This
      quarterly report on Form 10-Q contains forward-looking statements within the
      meaning of Section 27A of the Securities Act of 1933, as amended, or the
      Securities Act, and Section 21E of the Securities and Exchange Act of 1934.
      Any statements about our expectations, beliefs, plans, objectives, assumptions
      or future events or performance are not historical facts and may be
      forward-looking. These statements are often, but not always, made through the
      use of words or phrases such as “anticipate,” “estimate,” “plan,” “project,”
“expect,” “may,” “intend” and similar words or phrases. Accordingly, these
      statements involve estimates, assumptions and uncertainties that could cause
      actual results to differ materially from those expressed in them. These
      statements are therefore subject to risks and uncertainties, known and unknown,
      which could cause actual results and developments to differ materially from
      those expressed or implied in such statements. Such risks and uncertainties
      relate to, among other factors:




·
            the
                development of our drug candidates;


·
            the
                regulatory approval of our drug
                candidates;


·
            our
                use of clinical research centers and other
                contractors;


·
            our
                ability to find collaborative partners for research, development
                and
                commercialization of potential
                products;


·
            acceptance
                of our products by doctors, patients or
                payers;


·
            our
                ability to market any of our
                products;


·
            our
                history of operating losses;


·
            our
                ability to compete against other companies and research
                institutions;


·
            our
                ability to secure adequate protection for our intellectual
                property;


·
            our
                ability to attract and retain key
                personnel;


·
            availability
                of reimbursement for our product
                candidates;


·
            the
                effect of potential strategic transactions on our
                business;


·
            our
                ability to obtain adequate financing;
                and


·
            the
                volatility of our stock price.




Further,
      any forward-looking statement speaks only as of the date on which it is made,
      and we undertake no obligation to update any forward-looking statement or
      statements to reflect events or circumstances after the date on which such
      statement is made or to reflect the occurrence of unanticipated events. New
      factors emerge from time to time, and it is not possible for us to predict
      which
      factors will arise. In addition, we cannot assess the impact of each factor
      on
      our business or the extent to which any factor, or combination of factors,
      may
      cause actual results to differ materially from those contained in any
      forward-looking statements.


4





**Part
      I – Financial
      Information**


**Item
      1. Unaudited Condensed Consolidated Financial Statements**





**MANHATTAN
      PHARMACEUTICALS, INC. and SUBSIDIARIES**


(A
      Development Stage Company)


Condensed
      Consolidated Balance Sheets




**March
                31,**
              **2008**
            
            **December
                31,**
              **2007**(Unaudited)
            
            (See
                Note 1)**Assets**Current
                assets:Cash
                and cash equivalents
            
            $
            1,133,124
            
            $
            649,686Prepaid
                expenses
            
            
            233,545
            
            
            215,852Total
                current assets
            
            
            1,366,669
            
            
            865,538Investment
                in Hedrin JV
            
            
            230,127
            
            
            —Property
                and equipment, net
            
            
            36,621
            
            
            44,533Other
                assets
            
            
            84,126
            
            
            70,506Total
                assets
            
            $
            1,717,543
            
            $
            980,577**Liabilities
                and Stockholders’ Deficiency**Current
                liabilities:Accounts
                payable
            
            $
            986,223
            
            $
            1,279,485Accrued
                expenses
            
            
            800,215
            
            
            592,177Total
                current liabilities
            
            
            1,786,438
            
            
            1,871,662Exchange
                obligation
            
            
            2,058,683
            
            
            —Total
                liabilities
            
            
            3,845,121
            
            
            1,871,662Commitments
                and contingenciesStockholders’
                deficiency:Preferred
                stock, $.001 par value. Authorized 1,500,000 shares; no shares
                issuedand
                outstanding at March 31, 2008 and December 31, 2007Common
                stock, $.001 par value. Authorized 150,000,000 shares; 70,624,232shares
                issued and outstanding at March 31, 2008 and December 31,
                2007
            
            
            70,624
            
            
            70,624Additional
                paid-in capital
            
            
            54,380,215
            
            
            54,037,361Deficit
                accumulated during the development stage
            
            
            (56,578,417
            )
            
            (54,999,070
            )Total
                stockholders’ deficiency
            
            
            (2,127,578
            )
            
            (891,085
            )Total
                liabilities and stockholders' deficiency
            
            $
            1,717,543
            
            $
            980,577




See
      accompanying notes to condensed consolidated financial
      statements.


5




**MANHATTAN
      PHARMACEUTICALS, INC. and SUBSIDIARIES**


(A
      Development Stage Company)


Condensed
      Consolidated Statements of Operations


(Unaudited)




**Three months ended March 31,**
            
            **Cumulative**
              **period from**
              **August 6, 2001
                (inception) to**
              **March 31,****2008**
            
            **2007**
            
            **2008**Costs
                and expenses:Research
                and development
            
            $
            800,071
            
            $
            1,679,448
            
            $
            27,289,113General
                and administrative
            
            
            814,060
            
            
            914,724
            
            
            14,666,424In-process
                research and development charge
            
            
            —
            
            
            —
            
            
            11,887,807Impairment
                of intangible assets
            
            
            —
            
            
            —
            
            
            1,248,230Loss
                on disposition of intangible assets
            
            
            —
            
            
            —
            
            
            1,213,878Total
                operating expenses
            
            
            1,614,131
            
            
            2,594,172
            
            
            56,305,452Operating
                loss
            
            
            (1,614,131
            )
            
            (2,594,172
            )
            
            (56,305,452
            )Other
                (income) expense:Equity
                in loss of Hedrin JV
            
            
            19,873
            
            
            —
            
            
            19,873Interest
                and other income
            
            
            (54,657
            )
            
            (30,390
            )
            
            (876,554
            )Interest
                expense
            
            
            —
            
            
            475
            
            
            26,034Realized
                gain on sale of marketable equity securities
            
            
            —
            
            
            —
            
            
            (76,032
            )Total
                other income
            
            
            (34,784
            )
            
            (29,915
            )
            
            (906,679
            )Net
                loss
            
            
            (1,579,347
            )
            
            (2,564,257
            )
            
            (55,398,773
            )Preferred
                stock dividends (including imputed amounts)
            
            
            —
            
            
            —
            
            
            (1,179,644
            )Net
                loss applicable to common shares
            
            $
            (1,579,347
            )
            $
            (2,564,257
            )
            $
            (56,578,417
            )Net
                loss per common share:Basic
                and diluted
            
            $
            (0.02
            )
            $
            (0.04
            )Weighted
                average shares of common stock outstanding:Basic
                and diluted
            
            
            70,624,232
            
            
            60,120,038




See
      accompanying notes to condensed consolidated financial
      statements.


6


**MANHATTAN
      PHARMACEUTICALS, INC. and SUBSIDIARIES**


(A
      Development Stage Company)


Condensed
      Consolidated Statement of Stockholders’ Equity (Deficiency)


(Unaudited)




**Series A
                convertible preferred stock**
            
            
            
            **Series A
                convertible preferred stock**
            
            **Common
                stock**
            
            
            **Common
                stock**
            
            **Additional**
              **paid-in
                capital**
            
            
            **Subscription
                receivable**
            
            
            **Deficit
                accumulated during development stage**
            
            
            **Dividends
                payable in Series A preferred
                stock**
            
            
            **Accumulated
                other comprehensive income (loss)**
            
            
            **Unearned
                consulting services**
            
            
            **Total
                stockholders’ equity (deficiency)****Shares**
            
            
            
            **Amount**
            
            **Shares**
            
            
            **Amount**
            
            **Amount**
            
            
            **Amount**
            
            
            **Amount**
            
            
            **Amount**
            
            
            **Amount**
            
            
            **Amount**
            
            
            **Amount**Stock
                issued at $0.0004 per share for subscription receivable
            
            —
            
            
            $
            —
            
            10,167,741
            
            $
            10,168
            $
            (6,168
            )
            $
            (4,000
            )
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —Net
                loss
            
            —
            
            
            
            —
            
            —
            
            
            —
            
            —
            
            
            —
            
            
            (56,796
            )
            
            —
            
            
            —
            
            
            —
            
            
            (56,796
            )Balance
                at December 31, 2001
            
            —
            
            
            
            —
            
            10,167,741
            
            
            10,168
            
            (6,168
            )
            
            (4,000
            )
            
            (56,796
            )
            
            —
            
            
            —
            
            
            —
            
            
            (56,796
            )Proceeds
                from subscription receivable
            
            —
            
            
            
            —
            
            —
            
            
            —
            
            —
            
            
            4,000
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            4,000Stock
                issued at $0.0004 per share for license rights
            
            —
            
            
            
            —
            
            2,541,935
            
            
            2,542
            
            (1,542
            )
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            1,000Stock
                options issued for consulting services
            
            —
            
            
            
            —
            
            —
            
            
            —
            
            60,589
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (60,589
            )
            
            —Amortization
                of unearned consulting services
            
            —
            
            
            
            —
            
            —
            
            
            —
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            22,721
            
            
            22,721Common
                stock issued at $0.63 per share, net of expenses
            
            —
            
            
            
            —
            
            3,043,332
            
            
            3,043
            
            1,701,275
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            1,704,318Net
                loss
            
            —
            
            
            
            —
            
            —
            
            
            —
            
            
            
            
            —
            
            
            (1,037,320
            )
            
            —
            
            
            —
            
            
            —
            
            
            (1,037,320
            )Balance
                at December 31, 2002
            
            —
            
            
            
            —
            
            15,753,008
            
            
            15,753
            
            1,754,154
            
            
            —
            
            
            (1,094,116
            )
            
            —
            
            
            —
            
            
            (37,868
            )
            
            637,923Common
                stock issued at $0.63 per share, net of expenses
            
            —
            
            
            
            —
            
            1,321,806
            
            
            1,322
            
            742,369
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            743,691Effect
                of reverse acquisition
            
            —
            
            
            
            —
            
            6,287,582
            
            
            6,287
            
            2,329,954
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            2,336,241Amortization
                of unearned consulting costs
            
            —
            
            
            
            —
            
            —
            
            
            —
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            37,868
            
            
            37,868Unrealized
                loss on short-term investments
            
            —
            
            
            
            —
            
            —
            
            
            —
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (7,760
            )
            
            —
            
            
            (7,760
            )Payment
                for fractional shares for stock combination
            
            —
            
            
            
            —
            
            —
            
            
            —
            
            (300
            )
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (300
            )Preferred
                stock issued at $10 per share, net of expenses
            
            1,000,000
            
            
            
            1,000
            
            —
            
            
            —
            
            9,045,176
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            9,046,176Imputed
                preferred stock dividend
            
            
            
            
            
            
            
            
            
            
            
            
            418,182
            
            
            —
            
            
            (418,182
            )
            
            —
            
            
            
            
            
            
            
            
            —Net
                loss
            
            —
            
            
            
            —
            
            —
            
            
            —
            
            —
            
            
            —
            
            
            (5,960,907
            )
            
            —
            
            
            —
            
            
            —
            
            
            (5,960,907
            )Balance
                at December 31, 2003
            
            1,000,000
            
            
            
            1,000
            
            23,362,396
            
            
            23,362
            
            14,289,535
            
            
            —
            
            
            (7,473,205
            )
            
            —
            
            
            (7,760
            )
            
            —
            
            
            6,832,932Exercise
                of stock options
            
            —
            
            
            
            —
            
            27,600
            
            
            27
            
            30,073
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            30,100Common
                stock issued at $1.10, net of expenses
            
            —
            
            
            
            —
            
            3,368,952
            
            
            3,369
            
            3,358,349
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            3,361,718Preferred
                stock dividend accrued
            
            —
            
            
            
            —
            
            —
            
            
            —
            
            —
            
            
            —
            
            
            (585,799
            )
            
            585,799
            
            
            —
            
            
            —
            
            
            —Preferred
                stock dividends paid by issuance of shares
            
            24,901
            
            
            
            25
            
            —
            
            
            —
            
            281,073
            
            
            —
            
            
            —
            
            
            (282,388
            )
            
            —
            
            
            —
            
            
            (1,290
            )Conversion
                of preferred stock to common stock at $1.10 per share
            
            (170,528
            )
            
            
            (171
            )
            1,550,239
            
            
            1,551
            
            (1,380
            )
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Warrants
                issued for consulting services
            
            —
            
            
            
            —
            
            —
            
            
            —
            
            125,558
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (120,968
            )
            
            4,590Amortization
                of unearned consulting costs
            
            —
            
            
            
            —
            
            —
            
            
            —
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            100,800
            
            
            100,800Unrealized
                gain on short-term investments and reversal of unrealized loss on
                short-term investments
            
            —
            
            
            
            —
            
            —
            
            
            —
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            20,997
            
            
            —
            
            
            20,997Net
                loss
            
            —
            
            
            
            —
            
            —
            
            
            —
            
            —
            
            
            —
            
            
            (5,896,031
            )
            
            —
            
            
            —
            
            
            —
            
            
            (5,896,031
            )Balance
                at December 31, 2004
            
            854,373
            
            
            
            854
            
            28,309,187
            
            
            28,309
            
            18,083,208
            
            
            —
            
            
            (13,955,035
            )
            
            303,411
            
            
            13,237
            
            
            (20,168
            )
            
            4,453,816




7





**MANHATTAN
      PHARMACEUTICALS, INC. and SUBSIDIARIES**


(A
      Development Stage Company)


Consolidated
      Statement of Stockholders’ Equity (Deficiency)


(Unaudited)




**Series A
                convertible preferred stock**
            
            
            **Series A
                convertible preferred stock**
            
            
            **Common
                stock**
            
            
            **Common
                stock**
            
            
            **Additional
                paid-in capital**
            
            
            **Subscription
                receivable**
            
            
            **Deficit
                accumulated during development stage**
            
            
            **Dividends
                payable in Series A preferred
                stock**
            
            
            **Accumulated
                other comprehensive income (loss)**
            
            
            **Unearned
                consulting services**
            
            
            **Total
                stockholders’ equity (deficiency)****Shares**
            
            
            **Amount**
            
            
            **Shares**
            
            
            **Amount**
            
            
            **Amount**
            
            
            **Amount**
            
            
            **Amount**
            
            
            **Amount**
            
            
            **Amount**
            
            
            **Amount**
            
            
            **Amount**Common
                stock issued at $1.11 and $1.15, net of expenses
            
            
            —
            
            
            —
            
            
            11,917,680
            
            
            11,918
            
            
            12,238,291
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            12,250,209Common
                stock issued to vendor at $1.11 per share in satisfaction of accounts
                payable
            
            
            —
            
            
            —
            
            
            675,675
            
            
            676
            
            
            749,324
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            750,000Exercise
                of stock options
            
            
            —
            
            
            —
            
            
            32,400
            
            
            33
            
            
            32,367
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            32,400Exercise
                of warrants
            
            
            —
            
            
            —
            
            
            279,845
            
            
            279
            
            
            68,212
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            68,491Preferred
                stock dividend accrued
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (175,663
            )
            
            175,663
            
            
            —
            
            
            —
            
            
            —Preferred
                stock dividends paid by issuance of shares
            
            
            41,781
            
            
            42
            
            
            —
            
            
            —
            
            
            477,736
            
            
            —
            
            
            —
            
            
            (479,074
            )
            
            —
            
            
            —
            
            
            (1,296
            )Conversion
                of preferred stock to common stock at $1.10 per share
            
            
            (896,154
            )
            
            (896
            )
            
            8,146,858
            
            
            8,147
            
            
            (7,251
            )
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Share-based
                compensation
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            66,971
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            20,168
            
            
            87,139Reversal
                of unrealized gain on short-term investments
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (12,250
            )
            
            —
            
            
            (12,250
            )Stock
                issued in connection with acquisition of Tarpan Therapeutics,
                Inc.
            
            
            —
            
            
            —
            
            
            10,731,052
            
            
            10,731
            
            
            11,042,253
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            11,052,984Net
                loss
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (19,140,997
            )
            
            —
            
            
            —
            
            
            —
            
            
            (19,140,997
            )Balance
                at December 31, 2005
            
            
            —
            
            
            —
            
            
            60,092,697
            
            
            60,093
            
            
            42,751,111
            
            
            —
            
            
            (33,271,695
            )
            
            —
            
            
            987
            
            
            —
            
            
            9,540,496Cashless
                exercise of warrants
            
            
            —
            
            
            —
            
            
            27,341
            
            
            27
            
            
            (27
            )
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Share-based
                compensation
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            1,675,499
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            1,675,499Unrealized
                loss on short-term investments
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (987
            )
            
            —
            
            
            (987
            )Costs
                associated with private placement
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (15,257
            )
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (15,257
            )Net
                loss
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (9,695,123
            )
            
            —
            
            
            —
            
            
            —
            
            
            (9,695,123
            )Balance
                at December 31, 2006
            
            
            —
            
            
            —
            
            
            60,120,038
            
            
            60,120
            
            $
            44,411,326
            
            
            —
            
            
            (42,966,818
            )
            
            —
            
            
            —
            
            
            —
            
            
            1,504,628Common
                stock issued at $0.84 and $0.90 per shares, net of
                expenses
            
            
            —
            
            
            —
            
            
            10,185,502
            
            
            10,186
            
            
            7,841,999
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            7,852,185Common
                stock issued to directors at $0.72 per share in satisfaction of accounts
                payable
            
            
            —
            
            
            —
            
            
            27,776
            
            
            28
            
            
            19,972
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            20,000Common
                stock issued to in connection with in-licensing agreement at $0.90
                per
                share
            
            
            —
            
            
            —
            
            
            125,000
            
            
            125
            
            
            112,375
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            112,500Common
                stock issued to in connection with in-licensing agreement at $0.80
                per
                share
            
            
            —
            
            
            —
            
            
            150,000
            
            
            150
            
            
            119,850
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            120,000Exercise
                of warrants
            
            
            —
            
            
            —
            
            
            10,327
            
            
            15
            
            
            7,219
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            7,234Cashless
                exercise of warrants
            
            
            —
            
            
            —
            
            
            5,589
            
            
            —
            
            
            (6
            )
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (6
            )Share-based
                compensation
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            1,440,956
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            1,440,956Warrants
                issued for consulting
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            83,670
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            83,670Net
                loss
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (12,032,252
            )
            
            —
            
            
            —
            
            
            —
            
            
            (12,032,252
            )Balance
                at December 31, 2007
            
            
            —
            
            
            —
            
            
            70,624,232
            
            
            70,624
            
            
            54,037,361
            
            
            —
            
            
            (54,999,070
            )
            
            —
            
            
            —
            
            
            —
            
            
            (891,085
            )Share-based
                compensation
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            192,854
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            192,854Sale
                of warrant
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            150,000
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            150,000Net
                loss
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (1,579,347
            )
            
            —
            
            
            —
            
            
            —
            
            
            (1,579,347
            )Balance
                at March 31, 2008
            
            
            —
            
            
            —
            
            
            70,624,232
            
            $
            70,624
            
            $
            54,380,215
            
            $
            —
            
            $
            (56,578,417
            )
            $
            —
            
            $
            —
            
            $
            —
            
            $
            (2,127,578
            )




See
      accompanying notes to condensed consolidated financial statements.




8


**MANHATTAN
      PHARMACEUTICALS, INC. and SUBSIDIARIES**


(A
      Development Stage Company)


Condensed
      Consolidated Statements of Cash Flows


(Unaudited)


**Three months ended March 31,**
              
              
              **Cumulative**
                **period from**
                **August 6, 2001**
                **(inception) to**
                **March 31,****2008**
              
              
              **2007**
              
              
              **2008**Cash
                  flows from operating activities:Net
                  loss
              
              $
              (1,579,347
              )
              $
              (2,564,257
              )
              $
              (55,398,773
              )Adjustments
                  to reconcile net loss to net cash used in operating
                  activities:Equity
                  in loss of Hedrin JV
              
              
              19,873
              
              
              —
              
              
              19,873Share-based
                  compensation
              
              
              192,854
              
              
              335,210
              
              
              3,557,837Shares
                  issued in connection with in-licensing agreement
              
              
              —
              
              
              —
              
              
              232,500Warrants
                  issued to consultant
              
              
              —
              
              
              —
              
              
              83,670Amortization
                  of intangible assets
              
              
              —
              
              
              —
              
              
              145,162Gain
                  on sale of marketable equity securities
              
              
              —
              
              
              
              
              
              (76,032
              )Depreciation
              
              
              7,912
              
              
              15,878
              
              
              203,737Non
                  cash portion of in-process research and development charge
              
              
              —
              
              
              —
              
              
              11,721,623Loss
                  on impairment and disposition of intangible assets
              
              
              —
              
              
              —
              
              
              2,462,108Other
              
              
              —
              
              
              —
              
              
              5,590Changes
                  in operating assets and liabilities, net of acquisitions:(Increase)/decrease
                  in prepaid expenses
              
              
              (17,693
              )
              
              12,494
              
              
              (175,300
              )Increase
                  in other assets
              
              
              —
              
              
              (250,000
              )
              
              (70,506
              )Increase
                  /(decrease) in accounts payable
              
              
              (293,262
              )
              
              150,367
              
              
              1,406,436Increase
                  in accrued expenses
              
              
              208,038
              
              
              119,218
              
              
              259,894Net
                  cash used in operating activities
              
              
              (1,461,625
              )
              
              (2,181,090
              )
              
              (35,622,181
              )Cash
                  flows from investing activities:Purchase
                  of property and equipment
              
              
              —
              
              
              (6,267
              )
              
              (230,635
              )Cash
                  paid in connection with acquisitions
              
              
              —
              
              
              —
              
              
              (26,031
              )Net
                  cash provided from the purchase and sale of short-term investments,
                  net
              
              
              —
              
              
              —
              
              
              435,938Proceeds
                  from the sale of license
              
              
              —
              
              
              —
              
              
              200,001Investment
                  in Hedrin JV’s general partner
              
              
              (13,620
              )
              
              —
              
              
              (13,620
              )Net
                  cash (used in) provided by investing activities
              
              
              (13,620
              )
              
              (6,267
              )
              
              365,653Cash
                  flows from financing activities:Repayments
                  of notes payable to stockholders
              
              
              —
              
              
              —
              
              
              (884,902
              )Proceeds
                  related to sale of common stock, net
              
              
              —
              
              
              7,848,031
              
              
              25,896,262Proceeds
                  from sale of preferred stock, net
              
              
              —
              
              
              —
              
              
              9,046,176Proceeds
                  from exercise of warrants and stock options
              
              
              —
              
              
              —
              
              
              138,219Proceeds
                  from Hedrin JV Agreement, net
              
              
              1,958,683
              
              
              —
              
              
              1,958,683Other,
                  net
              
              
              —
              
              
              —
              
              
              235,214Net
                  cash provided by financing activities
              
              
              1,958,683
              
              
              7,848,031
              
              
              36,389,652Net
                  increase in cash and cash equivalents
              
              
              483,438
              
              
              5,660,674
              
              
              1,133,124Cash
                  and cash equivalents at beginning of period
              
              
              649,686
              
              
              3,029,118
              
              
              —Cash
                  and cash equivalents at end of period
              
              $
              1,133,124
              
              $
              8,689,792
              
              $
              1,133,124Supplemental
                  disclosure of cash flow information:Interest
                  paid
              
              $
              —
              
              $
              475
              
              $
              26,033Supplemental
                  disclosure of noncash investing and financing activities:Common
                  stock issued in satisfaction of accounts payable
              
              $
              —
              
              $
              —
              
              $
              770,000Imputed
                  preferred stock dividend
              
              
              —
              
              
              —
              
              
              418,182Preferred
                  stock dividends accrued
              
              
              —
              
              
              —
              
              
              761,462Preferred
                  stock dividends paid by issuance of shares
              
              
              —
              
              
              —
              
              
              759,134Conversion
                  of preferred stock to common stock
              
              
              —
              
              
              —
              
              
              1,067Issuance
                  of common stock for acquisitions
              
              
              —
              
              
              —
              
              
              13,389,226Issuance
                  of common stock in connection with in-licensing agreement
              
              
              —
              
              
              —
              
              
              232,500Marketable
                  equity securities received in connection with sale of
                  license
              
              
              —
              
              
              —
              
              
              359,907Warrants
                  issued to consultant
              
              
              —
              
              
              —
              
              
              83,670Net
                  liabilities assumed over assets acquired in business
                  combination
              
              
              —
              
              
              —
              
              
              (675,416
              )Investment
                  in Hedrin JV
              
              
              250,000
              
              
              —
              
              
              250,000Cashless
                  exercise of warrants
              
              
              —
              
              
              27
              
              
              33




See
      accompanying notes to condensed consolidated financial
      statements.


9






**MANHATTAN
      PHARMACEUTICALS, INC. and SUBSIDIARIES**


**(A
      Development Stage Company)**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**




**1.**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES**





**Basis
      of Presentation**





The
      accompanying unaudited condensed consolidated financial statements of Manhattan
      Pharmaceuticals, Inc. and its subsidiaries (“Manhattan” or the “Company”) have
      been prepared in accordance with accounting principles generally accepted in
      the
      United States of America for interim financial information and the rules and
      regulations of the Securities and Exchange Commission. Accordingly, the
      unaudited condensed consolidated financial statements do not include all
      information and footnotes required by accounting principles generally accepted
      in the United States of America for complete annual financial statements. In
      the
      opinion of management, the accompanying unaudited condensed consolidated
      financial statements reflect all adjustments, consisting of only normal
      recurring adjustments, considered necessary for a fair presentation. Interim
      operating results are not necessarily indicative of results that may be expected
      for the year ending December 31, 2008 or for any other interim period.
      These unaudited condensed consolidated financial statements should be read
      in
      conjunction with the Company’s audited consolidated financial statements as of
      and for the year ended December 31, 2007, which are included in the
      Company’s Annual Report on Form 10-K for such year. The condensed balance sheet
      as of December 31, 2007 has been derived from the audited financial statements
      included in the Form 10-K for that year.





As
      of
      December 31, 2006 all of the Company’s subsidiaries had either been dissolved or
      merged into Manhattan. As a result, the Company had no subsidiaries during
      the
      three month period ended March 31, 2008 and 2007.





As
      of
      March 31, 2008, the Company has not generated any revenues from the development
      of its products and is therefore considered to be a development stage
      company.





**Segment
      Reporting**





The
      Company has determined that it operates in only one segment currently, which
      is
      biopharmaceutical research and development.





**Income
      Taxes**





Effective
      January 1, 2007, the Company adopted the provisions of Financial Accounting
      Standards Board (“FASB”) Interpretation No. 48 (“FIN 48”), “Accounting for
      Uncertainty in Income Taxes – an interpretation of FASB No. 109” *.* The
      implementation of FIN 48 had no impact on the Company’s consolidated financial
      statements as the Company has no unrecognized tax benefits. ** The
      Company’s policy is to recognize interest and penalties related to income tax
      matters in income tax expense.




**Equity
      in Joint Venture**





The
      Company accounts for its investment in joint venture (See Note 7) using the
      equity method of accounting. Under the equity method, the Company records its
      pro-rata share of joint venture income or losses and adjusts the basis of its
      investment accordingly.


10





**MANHATTAN
      PHARMACEUTICALS, INC. and SUBSIDIARIES**


**(A
      Development Stage Company)**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**




**New
      Accounting Pronouncements**





In
      March
      2008, the FASB issued SFAS No. 161 "Disclosures About Derivative Instruments
      and
      Hedging Activities - an amendment of FASB Statement No. 133" ("SFAS 161").
      SFAS
      161 amends SFAS 133 by requiring expanded disclosures about an entity's
      derivative instruments and hedging activities. SFAS 161 requires qualitative
      disclosures about objectives and strategies for using derivatives, quantitative
      disclosures about fair value amounts of and gains and losses on derivative
      instruments, and disclosures about credit-risk-related contingent features
      in
      derivative instruments. SFAS 161 is effective for the Company as of January
      1,
      2009. The Company does not believe that SFAS 161 will have any impact on its
      consolidated financial statements.




**2.**  **LIQUIDITY**





The
      Company incurred a net loss of $1,579,347 and negative cash flows from operating
      activities of $1,461,625 for the three month period ended March 31, 2008. The
      net loss applicable to common shares from date of inception, August 6, 2001,
      to
      March 31, 2008 amounts to $56,578,417.





The
      Company received approximately $7.9 million net from a private placement of
      common stock and warrants in March 2007. This private placement is more fully
      described in Note 6.





The
      Company received approximately $2.0 million from a joint venture agreement
      in
      February 2008. This joint venture agreement is more fully described in Note
      7.





Management
      believes that the Company will continue to incur net losses through at least
      March 31, 2009 and for the foreseeable future thereafter. Based on the resources
      of the Company available at December 31, 2007 and the net proceeds received
      from
      the February 2008 joint venture agreement, management does not believe that
      the
      Company has sufficient capital to fund its operations through 2008. Management
      believes that the Company will need additional equity or debt financing or
      will
      need to generate revenues through licensing of its products or entering into
      strategic alliances to be able to sustain its operations through 2008.
      Furthermore, we will need additional financing thereafter to complete
      development and commercialization of our products. There can be no assurances
      that we can successfully complete development and commercialization of our
      products.




These
      matters raise substantial doubt about the Company’s ability to continue as a
      going concern. The accompanying condensed consolidated financial statements
      do
      not include any adjustments that might result from the outcome of this
      uncertainty.





The
      Company’s continued operations will depend on its ability to raise additional
      funds through various potential sources such as equity and debt financing,
      collaborative agreements, strategic alliances and its ability to realize the
      full potential of its technology in development. Additional funds may not become
      available on acceptable terms, and there can be no assurance that any additional
      funding that the Company does obtain will be sufficient to meet the Company’s
      needs in the long-term.




11





**MANHATTAN
      PHARMACEUTICALS, INC. and SUBSIDIARIES**


**(A
      Development Stage Company)**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**




**3.**  **COMPUTATION
      OF NET LOSS PER COMMON SHARE**





Basic
      net
      loss per common share is calculated by dividing net loss applicable to common
      shares by the weighted-average number of common shares outstanding for the
      period. Diluted net loss per common share is the same as basic net loss per
      common share, since potentially dilutive securities from the assumed exercise
      of
      stock options and stock warrants would have an antidilutive effect because
      the
      Company incurred a net loss during each period presented. The amounts of
      potentially dilutive securities excluded from the calculation of diluted net
      loss per share were 19,685,161 and 17,886,567 as of March 31, 2008 and 2007,
      respectively. These amounts do not include the shares issuable in connection
      with the Hedrin JV (see Note 7); the 17,857,143 shares of common stock issuable
      upon exercise of the put or call rights; the up to 17,857,143 additional shares
      which may become issuable upon exercise of a conditionally issuable put or
      call
      rights and the 7,142,857 shares of common stock issuable upon exercise of a
      conditionally issuable warrant.




**4.**  **SHARE-BASED
      COMPENSATION**





Effective
      January 1, 2006, the Company adopted Statement of Financial Accounting Standards
      No. 123(R), “Share-Based Payment,” (“Statement 123(R)”) for employee options
      using the modified prospective transition method. Statement 123(R) revised
      Statement 123 “Accounting for Stock-based Compensation” to eliminate the option
      to use the intrinsic value method and required the Company to expense the fair
      value of all employee options over the vesting period. Under the modified
      prospective transition method, the Company recognized compensation cost for
      the
      three month periods ending March 31, 2008 and 2007 based on the grant date
      fair
      value estimated in accordance with Statement 123(R). This includes (a) period
      compensation cost related to share-based payments granted prior to, but not
      yet
      vested, as of January 1, 2006, based on the grant date fair value estimated
      in
      accordance with the original provisions of Statement 123; and (b) period
      compensation cost related to share-based payments granted on or
      after
      January 1, 2006. In accordance with the modified prospective method, the Company
      has not restated prior period results.





The
      Company recognizes compensation expense related to stock option grants on a
      straight-line basis over the vesting period. The Company recognized share-based
      compensation cost of $192,308 and $335,210 for the three month periods ended
      March 31, 2008 and 2007, respectively, in accordance with Statement 123(R).
      The
      Company did not capitalize any share-based compensation cost.





Options
      granted to consultants and other non-employees are accounted for in accordance
      with Emerging Issues Task Force (“EITF”) No. 96-18 "Accounting for Equity
      Instruments That Are Issued to Other than Employees for Acquiring, or in
      Conjunction with Selling, Goods or Services", and Financial Accounting Standards
      Board Interpretation No 28 “Accounting for Stock Appreciation Rights and Other
      Variable Option or Award Plans”.  Accordingly, such options are recorded at
      fair value at the date of grant and subsequently adjusted to fair value at
      the end of each reporting period until such options vest, and the fair
      value of the options, as adjusted, is amortized to consulting expense over
      the related vesting period.  As a result of adjusting consultant and other
      non-employee options to fair value as of March 31, 2008 and 2007, net of
      amortization, the Company recognized share-based compensation cost of $546
      and
      $3,371, respectively, for the three month periods ended March 31, 2008 and
      2007,
      respectively.


12





**MANHATTAN
      PHARMACEUTICALS, INC. and SUBSIDIARIES**


**(A
      Development Stage Company)**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**




The
      Company has allocated share-based compensation costs and credits to general
      and
      administrative and research and development expenses as follows:




**Three months ended March 31,****2008**
              
              **2007**General
                  and administrative expense:Share-based
                  employee compensation costs
              
              $
              140,043
              
              $
              221,921Share-based
                  consultant and non-employee costs
              
              
              —
              
              
              10,550Total
                  general and administrative expense
              
              $
              140,043
              
              $
              232,471Research
                  and development expense:Share-based
                  employee compensation costs
              
              $
              52,265
              
              $
              109,918Share-based
                  consultant and non-employee (credits) costs
              
              
              546
              
              
              (7,179
              )Total
                  research and development expense
              
              $
              52,811
              
              $
              102,739Total
                  share-based costs
              
              $
              192,854
              
              $
              335,210




To
      compute compensation expense in 2008 and 2007, the Company estimated the fair
      value of each option award on the date of grant using the Black-Scholes model.
      The Company based the expected volatility assumption on a volatility index
      of
      peer companies as the Company did not have a sufficient number of years of
      historical volatility data related to its common stock for the application
      of
      Statement 123(R). The expected term of options granted represents the period
      of
      time that options are expected to be outstanding. The Company estimated the
      expected term of stock options by the simplified method as permitted by the
      Securities and Exchange Commission’s Staff Accounting Bulletin No. 107. The
      expected forfeiture rates are based on the historical forfeiture experiences.
      To
      determine the risk-free interest rate, the Company utilized the U.S. Treasury
      yield curve in effect at the time of grant with a term consistent with the
      expected term of the Company’s awards. The Company has not declared a dividend
      on its common stock since its inception and has no intentions of declaring
      a
      dividend in the foreseeable future and therefore used a dividend yield of
      zero.





The
      following table shows the weighted average assumptions the Company used to
      develop the fair value estimates for the determination of the compensation
      charges in 2008 and 2007:





**Three months ended March 31,****2008**
            
            **2007**Expected
                Volatility
            
            
            93
            %
            
            55
            %Dividend
                yield
            
            
            —
            
            
            —Expected
                term (in years)
            
            
            6
            
            
            6Risk-free
                interest rate
            
            
            2.81
            %
            
            4.88
            %




13




**MANHATTAN
      PHARMACEUTICALS, INC. and SUBSIDIARIES**


**(A
      Development Stage Company)**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**




The
      Company has shareholder-approved stock incentive plans for employees under
      which
      it has granted non-qualified and incentive stock options. In December 2003,
      the
      Company established the 2003 Stock Option Plan (the “2003 Plan”), which provided
      for the granting of up to 5,400,000 options to officers, directors, employees
      and consultants for the purchase of common stock. The Company increased the
      number of shares of common stock reserved for issuance under the 2003 Plan
      in
      August 2005 by 2,000,000 shares and in May 2007 by 3,000,000 shares. At March
      31, 2008, under the 2003 Plan, 10,400,000 shares of common stock were authorized
      for issuance. At March 31, 2008, under the 2003 Plan, options to purchase
      9,864,068 shares of common stock were outstanding. The options have a maximum
      term of 10 years and vest over a period determined by the Company’s Board of
      Directors (generally three years) and are issued at an exercise price equal
      to
      or greater than the fair market value of the shares at the date of grant. The
      2003 Plan expires on December 10, 2013 or when all options have been granted,
      whichever is sooner. Under the 2003 Plan, the Company granted options to
      purchase an aggregate of 2,967,500 shares of common stock during the three
      months ended March 31, 2008 at an exercise price of $0.17 per share. In
      addition, 27,776 shares of common stock were issued during 2007 under the 2003
      Plan.





At
      March
      31, 2008, there were 508,156 shares reserved for future grants under the 2003
      Plan.


In
      July
      1995, the Company established the 1995 Stock Option Plan (the”1995 Plan”), which
      provided for the granting of options to purchase up to 130,000 shares of the
      Company’s common stock to officers, directors, employees and consultants. The
      1995 Plan was amended several times to increase the number shares reserved
      for
      stock option grants. In June 2005, the 1995 Plan expired and no further options
      can be granted. As of March 31, 2008, options to purchase 1,137,240 shares
      were
      outstanding under the 1995 Plan and no shares were reserved for future stock
      option grants.





A
      summary
      of the status of the Company’s outstanding stock options as of March 31, 2008
      and changes during the three months then ended is presented below:





**Shares**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**
            
            **Weighted**
              **Average**
              **Remaining**
              **Contractual**
              **Term (years)**
            
            **Aggregate**
              **Intrinsic**
              **Value**Outstanding
                at December 31, 2007
            
            
            8,033,808
            
            $
            1.25Granted:Officers
            
            
            2,400,000Directors
            
            
            375,000Employees
            
            
            192,500Total
                granted
            
            
            2,967,500
            
            
            0.17Exercised
            
            
            -Cancelled
            
            
            -Outstanding
                at March 31, 2008
            
            
            11,001,308
            
            $
            0.96
            
            
            7.55
            
            $
            500Exercisable
                at March 31, 2008
            
            
            6,687,574
            
            $
            1.10
            
            
            6.96Weighted
                average fair value of options granted during the three months ended
                March
                31, 2008
            
            $
            0.13




14




**MANHATTAN
      PHARMACEUTICALS, INC. and SUBSIDIARIES**


**(A
      Development Stage Company)**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**




As
      of
      March 31, 2008, the total compensation cost related to non-vested option awards
      not yet recognized is $717,769. The weighted average period over which it is
      expected to be recognized is approximately 1.5 years.




**5.**  **COMMITMENTS
      AND CONTINGENCIES**





**Swiss
      Pharma**





Swiss
      Pharma Contract LTD, or Swiss Pharma, a clinical site that the Company used
      in
      one of its obesity trials, gave notice to the Company that Swiss Pharma believes
      it is entitled to receive an additional payment of $322,776 for services in
      connection with that clinical trial. While the contract between the Company
      and
      Swiss Pharma provides for additional payments if certain conditions are met,
      Swiss Parma has not specified which conditions they believe have been achieved
      and the Company does not believe that Swiss Pharma is entitled to additional
      payments and has not accrued any of these costs as of March 31, 2008 and
      December 31, 2007. The contract between the Company and Swiss Pharma provides
      for arbitration in the event of a dispute, such as this claim for an additional
      payment. On March 10, 2008, Swiss Pharma filed for arbitration with the Swiss
      Chamber of Commerce. As the Company does not believe that Swiss Pharma is
      entitled to additional payments, the Company intends to defend its position
      in
      arbitration. On April 2, 2008, the Company filed its statement of defense and
      counterclaim for recovery of costs incurred by the Company as a result of Swiss
      Pharma’s failure to meet agreed upon deadlines under the contract.





**Therapeutics,
      Inc.**





During
      2007, we entered into an agreement with Therapeutics, Inc. for the conduct
      of a
      Phase 2a clinical trial of PTH (1-34). The amount of the agreement is
      approximately $845,000. The remaining financial commitment at March 31, 2008
      related to the conduct of the clinical trial is approximately $430,000. This
      clinical trial is expected to conclude in the second quarter of
      2008.





**Contentions
      of a Former Employee**





In
      February 2007, a former employee of the Company alleged an ownership interest
      in
      two of the Company’s provisional patent applications covering our discontinued
      product development program for Oleoyl-estrone. Also, without articulating
      precise legal claims, the former employee contends that the Company wrongfully
      characterized the former employee’s separation from employment as a resignation
      instead of a dismissal in an effort to harm the former employee’s immigration
      sponsorship efforts, and, further, to wrongfully deprive the former employee
      of
      the former employee’s alleged rights in two of the Company’s provisional patent
      applications.  The former employee is seeking an unspecified amount in
      damages. The Company refutes the former employee’s contentions and intends to
      vigorously defend itself should the former employee file claims against the
      Company. There have been no further developments with respect to these
      contentions.




15





**MANHATTAN
      PHARMACEUTICALS, INC. and SUBSIDIARIES**


**(A
      Development Stage Company)**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**




**Employment
      Agreements**





The
      Company has employment agreements with two employees for the payment of
      aggregate annual base salaries of $655,000 as well as performance based bonuses.
      These agreements have a remaining term of one year for one of the employees,
      and
      15 months for the second employee, and have a total remaining obligation under
      these agreements of $738,000 as of March 31, 2008.




**6.**  **PRIVATE
      PLACEMENT OF COMMON SHARES**





On
      March
      30, 2007, the Company entered into a series of subscription agreements with
      various institutional and other accredited investors for the issuance and sale
      in a private placement of an aggregate of 10,185,502 shares of its common stock
      for total net proceeds of approximately $7.85 million, after deducting
      commissions and other costs of the transaction. Of the total amount of shares
      issued, 10,129,947 were sold at a per share price of $0.84, and an additional
      55,555 shares were sold to an entity affiliated with a director of the Company,
      at a per share price of $0.90, the closing sale price of the common stock on
      March 29, 2007. Pursuant to the subscription agreements, the Company also issued
      to the investors 5-year warrants to purchase an aggregate of 3,564,897 shares
      of
      common stock at an exercise price of $1.00 per share. The warrants are
      exercisable during the period commencing March 31, 2008 and ending March 30,
      2012. Gross and net proceeds from the private placement were $8,559,155 and
      $7,852,185, respectively.




Pursuant
      to these subscription agreements the Company filed a registration statement
      on
      Form S-3 covering the resale of the shares issued in the private placement,
      including the shares issuable upon exercise of the investor warrants and the
      placement agent warrants, with the Securities and Exchange Commission on May
      9,
      2007, which was declared effective by the Securities and Exchange Commission
      on
      May 18, 2007.





The
      Company engaged Paramount BioCapital, Inc. (“Paramount”), an affiliate of a
      significant stockholder of the Company, as its placement agent in connection
      with the private placement. In consideration for its services, the Company
      paid
      aggregate cash commissions of approximately $600,000 and issued to Paramount
      a
      5-year warrant to purchase an aggregate of 509,275 shares at an exercise price
      of $1.00 per share.


16





**MANHATTAN
      PHARMACEUTICALS, INC. and SUBSIDIARIES**


**(A
      Development Stage Company)**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**




**7.**  **IN-LICENSING
      TRANSACTIONS**





**Altoderm
      License Agreement**





On
      April
      3, 2007, the Company entered into a license agreement for “Altoderm” (the
“Altoderm Agreement”) with Thornton & Ross LTD (“T&R”). Pursuant to the
      Altoderm Agreement, the Company acquired an exclusive North American license
      to
      certain patent rights and other intellectual property relating to Altoderm,
      a
      topical skin lotion product candidate using sodium cromoglicate for the
      treatment of atopic dermatitis. In accordance with the terms of the Altoderm
      Agreement, the Company issued 125,000 shares of its common stock, valued at
      $112,500, and made a cash payment of $475,000 to T&R upon the execution of
      the agreement. These amounts have been included in research and development
      expense. Further, the Company agreed to make future milestone payments to
      T&R comprised of various combinations of cash and common stock in respective
      aggregate amounts of $5,675,000 and 875,000 shares of common stock upon the
      achievement of various clinical and regulatory milestones. The Company also
      agreed to pay royalties on net sales of products using the licensed patent
      rights at rates ranging from 10% to 20%, depending on the level of annual net
      sales, and subject to an annual minimum royalty payment of $1 million in each
      year following the first commercial sale of Altoderm. The Company may sublicense
      the patent rights. The Company agreed to pay T&R 30% of the royalties
      received by the Company under such sublicense agreements.




**Altolyn
      License Agreement**





On
      April
      3, 2007, the Company and T&R also entered into a license agreement for
“Altolyn” (the “Altolyn Agreement”). Pursuant to the Altolyn Agreement, the
      Company acquired an exclusive North American license to certain patent rights
      and other intellectual property relating to Altolyn, an oral formulation product
      candidate using sodium cromoglicate for the treatment of mastocytosis, food
      allergies, and inflammatory bowel disorder. In accordance with the terms of
      the
      Altolyn Agreement, the Company made a cash payment of $475,000 to T&R upon
      the execution of the agreement. This amount is included in research and
      development expense. Further, the Company agreed to make future cash milestone
      payments to T&R in an aggregate amount of $5,675,000 upon the achievement of
      various clinical and regulatory milestones. The Company also agreed to pay
      royalties on net sales of products using the licensed patent rights at rates
      ranging from 10% to 20%, depending on the level of annual net sales, and subject
      to an annual minimum royalty payment of $1 million in each year following the
      first commercial sale of Altolyn. The Company may sublicense the patent rights.
      The Company agreed to pay T&R 30% of the royalties received by the Company
      under such sublicense agreements.





**Hedrin
      License Agreement**





On
      June
      26, 2007, the Company entered into an exclusive license agreement for “Hedrin”
(the “Hedrin License Agreement”) with T&R and Kerris, S.A. (“Kerris”).
      Pursuant to the Hedrin License Agreement, the Company has acquired an exclusive
      North American license to certain patent rights and other intellectual property
      relating to Hedrin(TM), a non-insecticide product candidate for the treatment
      of
      head lice. In addition, on June 26, 2007, the Company entered into a supply
      agreement with T&R pursuant to which T&R will be the Company’s exclusive
      supplier of Hedrin product (the “Hedrin Supply Agreement”).


17





**MANHATTAN
      PHARMACEUTICALS, INC. and SUBSIDIARIES**


**(A
      Development Stage Company)**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**




In
      consideration for the license, the Company issued to T&R and Kerris
      (jointly, the “Licensor”) a combined total of 150,000 shares of its common stock
      valued at $120,000. In addition, the Company also made a cash payment of
      $600,000 to the Licensor. These amounts are included in research and development
      expense. Further, the Company agreed to make future milestone payments to the
      Licensor in the aggregate amount of $2,500,000 upon the achievement of various
      clinical, regulatory, and patent issuance milestones, as well as up to
      $2,500,000 in a one-time success fee based on aggregate sales of the product
      by
      the Company and its licensees of at least $50,000,000. The Company also agreed
      to pay royalties of 8% (or, under certain circumstances, 4%) on net sales of
      licensed products. The Company’s exclusivity under the Hedrin License Agreement
      is subject to an annual minimum royalty payment of $1,000,000 (or, under certain
      circumstances, $500,000) in each of the third through seventh years following
      the first commercial sale of Hedrin. The Company may sublicense its rights
      under
      the Hedrin License Agreement with the consent of Licensor and the proceeds
      resulting from such sublicenses will be shared with the Licensor.




Pursuant
      to the Hedrin Supply Agreement, the Company has agreed that it and its
      sublicensees will purchase their respective requirements of the Hedrin product
      from T&R at agreed upon prices. Under certain circumstances where T&R is
      unable to supply Hedrin products in accordance with the terms and conditions
      of
      the Hedrin Supply Agreement, the Company may obtain products from an alternative
      supplier subject to certain conditions. The term of the Hedrin Supply Agreement
      ends upon termination of the Hedrin License Agreement.




**8.**  **JOINT
      VENTURE**





In
      February 2008, the Company and Nordic Biotech Advisors ApS through its
      investment fund Nordic Biotech Venture Fund II K/S (“Nordic”) entered into a
      50/50 joint venture agreement (the “Hedrin JV Agreement”) to develop and
      commercialize the Company's North American rights (under license) to its Hedrin
      product.





Pursuant
      to the Hedrin JV Agreement, Nordic formed a new Danish limited partnership
      (the
      "Hedrin JV") and provided it with initial funding of $2.5 million. On February
      25, 2008 the Company assigned and transferred its North American rights in
      Hedrin to the Hedrin JV in return for a $2.0 million cash payment and equity
      in
      the Hedrin JV representing 50% of the nominal equity interests in the Hedrin
      JV.  This
      Amendment No. 1 to Quarterly Report on Form 10-Q (the “Form 10-Q/A”) of
      Manhattan Pharmaceuticals, Inc. (the “Company,” “we,” “us,” or “our”) amends the
      Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008
      (the “Form 10-Q”), which was originally filed with the Securities and Exchange
      Commission (“SEC”) on May 20, 2008. As described in the Form 10-Q, due to the
      complexity of the accounting for the Hedrin JV transaction, the Company
      requested guidance from the SEC in concluding on the appropriate accounting
      treatment for this transaction. We have received guidance from the SEC on
      accounting for this transaction and we are filing this Form 10-Q/A to adjust
      the
      accounting for this transaction based on that guidance. This Form 10-Q/A
      restates our financial statements for the quarter ended March 31, 2008 to
      recognize our Investment in Hedrin JV of $230,127, to recognize our Exchange
      obligation of $2,058,683, to decrease our Additional paid-in capital of
      $1,808,683 and to recognize our equity in the loss of Hedrin JV of $19,873.
      These adjustments relate to a correction in the recording of the joint venture
      transaction with Nordic Biotech Venture Fund II K/S in which Hedrin
      Pharmaceuticals K/S (the “Hedrin JV”) was formed and began operations. In our
      Form 10-Q we recorded the net proceeds received from the Hedrin JV transaction
      as of March 31, 2008 of $1,808,683 as an addition to Additional paid-in capital
      and did not recognize our Investment in the Hedrin JV, the Exchange obligation
      or our equity in the loss of the Hedrin JV. The transaction should have been
      recorded as an Exchange obligation equal the net proceeds received from the
      Hedrin JV transaction as of March 31, 2008 of $1,808,683 plus the amount of
      our
      investment in the Hedrin JV at the closing of the Hedrin JV transaction in
      February 2008 of $250,000. In addition, we should have also recognized our
      equity in the loss of the Hedrin JV for the quarterly period ended March 31,
      2008 of $19,873.




18





**MANHATTAN
      PHARMACEUTICALS, INC. and SUBSIDIARIES**


**(A
      Development Stage Company)**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**




Should
      the Hedrin JV be successful in achieving a payment milestone, namely that by
      September 30, 2008, the FDA determines to treat Hedrin as a medical device,
      Nordic will purchase an additional $2.5 million of equity in the Hedrin JV,
      whereupon the Hedrin JV will pay the Company an additional $1.5 million in
      cash
      and issue to the Company an additional $2.5 million in equity in the Hedrin
      JV,
      thereby maintaining the Company’s 50% ownership interest in the Hedrin
      JV.





The
      Hedrin JV is responsible for the development and commercialization of Hedrin
      for
      the North American market and all associated costs including clinical trials,
      if
      required, regulatory costs, patent costs, and future milestone payments owed
      to
      T&R, the licensor of Hedrin.





The
      Hedrin JV has engaged the Company to provide management services to the Limited
      Partnership in exchange for a management fee, which for 2008, on an annualized
      basis, is $527,000. As of March 31, 2008, the Company has recognized $51,496
      of
      other income from management fees earned from the Hedrin JV.





Nordic
      paid to the Company a non-refundable fee of $150,000 at the closing for the
      right to receive a warrant covering 7.1 million shares of the Company’s common
      stock, exercisable for $0.14 per share. The warrant is issuable 90 days from
      closing, provided Nordic has not exercised all or a part of its put, as
      described below. The Company issued the warrant to Nordic on April 30, 2008.
      The
      per share exercise price of the warrant was based on the volume weighted average
      price of the Company’s common stock for the period prior to the signing of the
      Hedrin JV Agreement.





Nordic
      has an option to put all or a portion of its equity interest in the Hedrin
      JV to
      the Company in exchange for the Company’s common stock. The shares of the
      Company’s common stock to be issued upon exercise of the put will be calculated
      by multiplying the percentage of Nordic’s equity in the Hedrin JV that Nordic
      decides to put to the Company multiplied by the dollar amount of Nordic’s
      investment in Limited Partnership divided by $0.14, as adjusted from time to
      time. The put option is exercisable immediately and expires at the earlier
      of
      ten years or when Nordic’s distributions from the Limited Hedrin JV exceed five
      times the amount Nordic invested in the Hedrin JV.





The
      Company has an option to call all or a portion of Nordic’s equity interest in
      the Hedrin JV in exchange for the Company’s common stock. The Company cannot
      begin to exercise its call until the price of the Company’s common stock has
      closed at or above $1.40 per share for 30 consecutive trading days. During
      the
      first 30 consecutive trading day period in which the Company’s common stock
      closes at or above $1.40 per share the Company can exercise up to 25% of its
      call option. During the second 30 consecutive trading day period in which the
      Company’s common stock closes at or above $1.40 per share the Company can
      exercise up to 50% of its call option on a cumulative basis. During the third
      30
      consecutive trading day period in which the Company’s common stock closes at or
      above $1.40 per share the Company can exercise up to 75% of its call option
      on a
      cumulative basis. During the fourth 30 consecutive trading day period in which
      the Company’s common stock closes at or above $1.40 per share the Company can
      exercise up to 100% of its call option on a cumulative basis. The shares of
      the
      Company’s common stock to be issued upon exercise of the call will be calculated
      by multiplying the percentage of Nordic’s equity in the Limited Partnership that
      the Company calls, as described above, multiplied by the dollar amount of
      Nordic’s investment in the Hedrin JV divided by $0.14. Nordic can refuse the
      Company’s call by either paying the Company up to $1.5 million or forfeiting all
      or a portion of their put, calculated on a pro rata basis for the percentage
      of
      the Nordic equity interest called by the Company.


19





**MANHATTAN
      PHARMACEUTICALS, INC. and SUBSIDIARIES**


**(A
      Development Stage Company)**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**




The
      Hedrin JV's Board consists of 4 members, 2 appointed by the Company and 2
      appointed by Nordic. Nordic has the right to appoint one of the directors as
      chairman of the Board. The chairman has certain tie breaking powers. In the
      event that the payment milestone described above is not achieved by June 30,
      2008, then the Hedrin JV's Board will increase to 5 members, 2 appointed by
      the
      Company and 3 appointed by Nordic.





After
      the
      closing, at Nordic's request, the Company will nominate a person identified
      by
      Nordic to serve on the Company’s Board of Directors.





The
      Company granted Nordic registration rights for the shares to be issued upon
      exercise of the warrant, the put or the call. The Company filed an initial
      registration statement on May 1, 2008. The Company is required to file
      additional registration statements, if required, within 45 days of the date
      the
      Company first knows that such additional registration statement was required.
      The Company is required to use commercially reasonable efforts to cause the
      registration statement to be declared effective by the Securities and Exchange
      Commission (“SEC”) within 105 calendar days from the filing date. If the Company
      fails to file a registration statement on time or if a registration statement
      is
      not declared effective by the SEC within 105 days of filing the Company will
      be
      required to pay to Nordic, or its assigns, an amount in cash, as partial
      liquidated damages, equal to 0.5% per month of the amount invested in the Hedrin
      JV by Nordic until the registration statement is declared effective by the
      SEC.
      In no event shall the aggregate amount payable by the Company exceed 9% of
      the
      amount invested in the Hedrin JV by Nordic.





The
      profits of the Hedrin JV will be shared by the Company and Nordic in accordance
      with their respective equity interests in Limited Partnership, which are
      currently 50% to each, except that Nordic will get a minimum distribution from
      the Hedrin JV equal to 5% on Hedrin sales, as adjusted for any change in
      Nordic’s equity interest in the Limited Partnership. If the Hedrin JV realizes a
      profit equal to or greater than a 10% royalty on Hedrin sales, then profits
      will
      be shared by the Company and Nordic in accordance with their respective equity
      interests in the Limited Partnership. However, in the event of a liquidation
      of
      the Limited Partnership, Nordic’s distribution in liquidation will be at least
      equal to the amount Nordic invested in the Hedrin JV ($5 million if the payment
      milestone described above is met, $2.5 million if it is not met) plus 10% per
      year, less the cumulative distributions received by Nordic from the Hedrin
      JV.
      Further, in no event shall Nordic’s distribution in liquidation be greater than
      assets available for distribution in liquidation.




20





**MANHATTAN
      PHARMACEUTICALS, INC. and SUBSIDIARIES**


**(A
      Development Stage Company)**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**




**9.**  **AMERICAN
      STOCK EXCHANGE**





In
      September 2007, the Company received notice from the staff of The American
      Stock
      Exchange, or AMEX, indicating that the Company was not in compliance with
      certain continued listing standards set forth in the AMEX Company Guide.
      Specifically, AMEX notice cited the Company’s failure to comply, as of June 30,
      2007, with section 1003(a)(ii) of the AMEX Company Guide as the Company had
      less
      than $4,000,000 of stockholders’ equity and had losses from continuing
      operations and /or net losses in three or four of our most recent fiscal years
      and with section 1003(a)(iii) which requires the Company to maintain $6,000,000
      of stockholders’ equity if the Company has experienced losses from continuing
      operations and /or net losses in its five most recent fiscal years.





In
      order
      to maintain our AMEX listing, the Company was required to submit a plan to
      AMEX
      advising the exchange of the actions the Company has taken, or will take, that
      would bring the Company into compliance with all the continued listing standards
      by April 16, 2008. The Company submitted such a plan in October 2007. If the
      Company is not in compliance with the continued listing standards at the end
      of
      the plan period, or if the Company has not made progress consistent with the
      plan during the period, AMEX staff could have initiated delisting
      proceedings.





Under
      the
      terms of the Hedrin JV Agreement, the number of potentially issuable shares
      represented by the put and call features thereof and the warrant issuable to
      Nordic, would exceed 19.9% of the Company’s total outstanding shares and would
      be issued at a price below the greater of book or market value. As a result,
      under AMEX regulations, the Company would not have been able to complete the
      transaction without first receiving either stockholder approval for the
      transaction, or a formal “financial viability” exception from AMEX’s stockholder
      approval requirement. The Company estimated that obtaining stockholder approval
      to comply with AMEX regulations would take a minimum of 45 days to complete.
      The
      Company discussed the financial viability exception with AMEX for several weeks
      and had neither received the exception nor been denied the exception. The
      Company determined that our financial condition required the Company to complete
      the transaction immediately, and that the Company’s financial viability depended
      on the completion of the Hedrin JV Agreement without further delay.





Accordingly,
      to maintain the Company’s financial viability, on February 28, 2008, the Company
      announced that it had formally notified AMEX that the Company intended to
      voluntarily delist its common stock from AMEX. The delisting became effective
      on
      March 26, 2008.





The
      Company’s common stock now trades on the Over the Counter Bulletin Board under
      the symbol “MHAN”. The Company intends to maintain corporate governance,
      disclosure and reporting procedures consistent with applicable
      law.


21


**Item
        2.**  **Management’s
        Discussion and Analysis Financial Condition and**
 Results
        of Operations
 
 **You
        should read the following discussion of our results of operations and financial
        condition in conjunction with our Annual Report on Form 10-K for the year
        ended
        December 31, 2007 (the “Annual Report”) and our financial statements as of
        and for the three month period ended March 31, 2008 included elsewhere in
        this
        report.**
  We
        were
        incorporated in Delaware in 1993 under the name Atlantic Pharmaceuticals,
        Inc.
        and, in March 2000, we changed our name to Atlantic Technology Ventures,
        Inc. In
        2003, we completed a “reverse acquisition” of privately held Manhattan Research
        Development, Inc. In connection with this transaction, we also changed our
        name
        to Manhattan Pharmaceuticals, Inc.
  During
        2005 we merged with Tarpan Therapeutics, Inc. (“Tarpan”). Tarpan was a privately
        held New York based biopharmaceutical company developing dermatological
        therapeutics. Through the merger, we acquired Tarpan’s primary product
        candidate, topical PTH (1-34) for the treatment of psoriasis. In consideration
        for their shares of Tarpan’s capital stock, the stockholders of Tarpan received
        an aggregate of approximately 20% of our then outstanding common shares.
        This
        transaction was accounted for as a purchase of Tarpan by the
        Company.
  We
        are a
        development stage biopharmaceutical company focused on developing and
        commercializing innovative pharmaceutical therapies for underserved patient
        populations. We aim to acquire rights to these technologies by licensing
        or
        otherwise acquiring an ownership interest, funding their research and
        development and eventually either bringing the technologies to market or
        out-licensing. We currently have four product candidates in
        development:
  ·
              Topical
                  PTH (1-34) for the treatment of
                  psoriasis;
 ·
              Altoderm,
                  a proprietary formulation of topical cromolyn sodium for the treatment
                  of
                  atopic dermatitis;
 ·
              Hedrin,
                  a novel, non-insecticide treatment for head
                  lice;
 ·
              and
                  Altolyn, a proprietary site specific tablet formulation of oral
                  cromolyn
                  sodium for the treatment of
                  mastocytosis.
 
 We
        have
        not received regulatory approval for, or generated commercial revenues from
        marketing or selling any drugs.
  We
        announced in July 2007 that we are discontinuing development of two product
        candidates, oral Oleoyl-estrone (“OE”) and Propofol Lingual Spray.
  You
        should read the following discussion of our results of operations and financial
        condition in conjunction with the consolidated financial statements and notes
        thereto appearing elsewhere in this Quarterly Report on Form 10-Q. This
        discussion includes “forward-looking” statements that reflect our current views
        with respect to future events and financial performance. We use words such
        as we
“expect,” “anticipate,” “believe,” and “intend” and similar expressions to
        identify forward-looking statements. You should be aware that actual results
        may
        differ materially from our expressed expectations because of risks and
        uncertainties inherent in future events, particularly those risks identified
        under the heading “Risk Factors” following Item 1 in the Annual Report on Form
        10-K, and should not unduly rely on these forward-looking
        statements.
  22
  **RESULTS
        OF OPERATIONS**
  THREE-MONTH
        PERIOD ENDED MARCH 31, 2008 VS 2007
  **Quarter ended March 31,****2008**
              
              **2007**
              
              **Increase**
                **(decrease)**
              
              **%**
                **Increase**
                **(decrease)****COSTS
                  AND EXPENSES*****Research
                  and development***Share-based
                  compensation
              
              $
              53,000
              
              $
              103,000
              
              
              ($50,000
              )
              
              (48.5
              )%Other
                  research and development expense
              
              $
              747,000
              
              $
              1,576,000
              
              
              ($829,000
              )
              
              (52.6
              )%Total
                  research and development expense
              
              $
              800,000
              
              $
              1,679,000
              
              
              ($879,000
              )
              
              (52.4
              )%***General
                  and administrative***Share-based
                  compensation
              
              $
              140,000
              
              $
              232,000
              
              
              ($92,000
              )
              
              (39.7
              )%Other
                  general and administrative expense
              
              $
              674,000
              
              $
              683,000
              
              
              ($9,000
              )
              
              (1.3
              )%Total
                  general and administrative expense
              
              $
              814,000
              
              $
              915,000
              
              
              ($101,000
              )
              
              (11.0
              )%**Other
                  income**
              
              $
              35,000
              
              $
              30,000
              
              $
              5,000
              
              
              16.7
              %**NET
                  LOSS**
              
              
              ($1,579,000
              )
              
              ($2,564,000
              )
              $
              985,000
              
              
              (38.4
              )%
  During
        each of the quarters ended March 31, 2008 and 2007 we did not recognize any
        revenues. We are considered a development stage company, and do not expect
        to
        have revenues relating to our technologies prior to March 31, 2009, if at
        all.
  For
        the
        quarter ended March 31, 2008 total research and development expense was $800,000
        as compared to $1,679,000 for the quarter ended March 31, 2007. The decrease
        of
        $879,000, or 52.4%, is attributable to a decrease of $1,427,000 in development
        costs for OE offset by increases in development costs for PTH (1-34) of
        $436,000, Altoderm of $79,000 and Altolyn of $33,000. There were no development
        costs in the 2008 quarter for OE as the development project was terminated
        during 2007. The increase in development costs for PTH (1-34) is due to the
        costs of the ongoing Phase 2a clinical study. There were no development costs
        for Altoderm and Altolyn in the 2007 quarter as these products were acquired
        in
        the second quarter of 2007.
  For
        the
        quarter ended March 31, 2008 total general and administrative expense was
        $814,000 as compared to $915,000 for the quarter ended March 31, 2007. The
        decrease of $101,000, or 11.0%, is primarily attributable to a decrease of
        $92,000 in stock based compensation.
  For
        the
        three months ended March 31, 2008, other income was $35,000 as compared to
        $30,000 for the three months ended March 31, 2007. The increase of $5,000,
        or
        16.7%, is due primarily to $51,000 of management fees received in accordance
        with the services agreement from the Nordic JV, offset by the equity in loss
        of
        the Hedrin JV of $20,000 and a decrease in interest income which resulted
        from
        lower average balances in interest bearing cash and short-term investment
        accounts.
  Net
        loss
        for the three months ended March 31, 2008 was $1,579,000 as compared to
        $2,564,000 million for the three months ended March 31, 2007. The decrease
        of
        $985,000, or 38.4%, in net loss is principally attributable to a decrease
        in
        research and development expense of $879,000 and a decrease in general and
        administrative expense of $101,000.
  23
  **LIQUIDITY
        AND CAPITAL RESOURCES**
  From
        inception to March 31, 2008, we incurred a deficit during the development
        stage
        of $56.6 million primarily as a result of our net losses and preferred stock
        dividends. We expect to continue to incur additional losses through at least
        March 31, 2009 and for the foreseeable future thereafter. These losses have
        been
        incurred through a combination of research and development activities related
        to
        the various technologies under our control and expenses supporting those
        activities.
  We
        have
        financed our operations since inception primarily through equity financing.
        During the three months ended March 31, 2008, we had a net increase in cash
        and
        cash equivalents of $0.5 million. This increase resulted principally from
        the
        net proceeds from the Hedrin JV Agreement of $2.0, partially offset by net
        cash
        used in operating activities of $1.5 million. Total liquid resources as of
        March
        31, 2008 were $1.1 million compared to $0.6 million at December 31,
        2007.
  **Liquidity**
  As
        of
        March 31, 2008, we had a working capital deficit of $420,000 as compared
        to a
        working capital deficit of $1,006,000 at December 31, 2007. This $586,000
        reduction in the working capital deficit is primarily due to the net proceeds
        received in the Hedrin JV transaction of $1,959,000 and a decrease in accounts
        payable and accrued expenses of $85,000 offset by the net cash used in operating
        activities of $1,462,000.
  ***March
        2007 Private Placement***
  On
        March
        30, 2007, we entered into a series of subscription agreements with various
        institutional and other accredited investors for the issuance and sale in
        a
        private placement of an aggregate of 10,185,502 shares of our common stock
        for
        net proceeds of approximately $7.9 million. Of the total amount of shares
        issued, 10,129,947 were sold at a per share price of $0.84, and an additional
        55,555 shares were sold to an entity affiliated with a director of the Company,
        at a per share price of $0.90, the closing sale price of the common stock
        on
        March 29, 2007. Pursuant to the subscription agreements, we also issued to
        the
        investors 5-year warrants to purchase an aggregate of 3,564,897 shares of
        our
        common stock at an exercise price of $1.00 per share. The warrants are
        exercisable during the period commencing March 31, 2008 and ending March
        30,
        2012.
  Pursuant
        to these subscription agreements the Company filed a registration statement
        covering the resale of the shares issued in the private placement, including
        the
        shares issuable upon exercise of the investor warrants and the placement
        agent
        warrants, with the Securities and Exchange Commission on May 9, 2007, which
        was
        declared effective by the Securities and Exchange Commission on May 18,
        2007.
  The
        Company engaged Paramount BioCapital, Inc. (“Paramount”), a related party, as
        its placement agent in connection with the private placement. In consideration
        for its services, we paid aggregate cash commissions of approximately $600,000
        and issued to Paramount a 5-year warrant to purchase an aggregate of 509,275
        shares at an exercise price of $1.00 per share.
  **JOINT
        VENTURE AGREEMENT**
  In
        February 2008, the Company and Nordic Biotech Advisors ApS through its
        investment fund Nordic Biotech Venture Fund II K/S (“Nordic”) entered into a
        50/50 joint venture agreement (the “Hedrin JV Agreement”) to develop and
        commercialize the Company's North American rights (under license) to its
        Hedrin
        product.
  24
  Pursuant
        to the Hedrin JV Agreement, Nordic formed a new Danish limited partnership
        (the
        "Hedrin JV") and provided it with initial funding of $2.5 million. The Company
        assigned and transferred its North American rights in Hedrin to the Hedrin
        JV in
        return for a $2.0 million cash payment and equity in the Hedrin JV representing
        50% of the nominal equity interests in the Hedrin JV .
  Should
        the Hedrin JV be successful in achieving a payment milestone, namely that
        by
        September 30, 2008, the FDA determines to treat Hedrin as a medical device,
        Nordic will purchase an additional $2.5 million of equity in the Hedrin JV,
        whereupon the Hedrin JV will pay the Company an additional $1.5 million in
        cash
        and issue to the Company an additional $2.5 million in equity in the Hedrin
        JV,
        thereby maintaining the Company’s 50% ownership interest in the Hedrin
        JV.
  The
        Hedrin JV is responsible for the development and commercialization of Hedrin
        for
        the North American market and all associated costs including clinical trials,
        if
        required, regulatory costs, patent costs, and future milestone payments owed
        to
        T&R, the licensor of Hedrin.
  The
        Hedrin JV has engaged the Company to provide management services to the Limited
        Partnership in exchange for an annualized management fee, which for 2008,
        on an
        annualized basis, is $527,000. For the three months ended March 31, 2008,
        the
        Company has recognized $51,496 of other income from the performance of such
        management services in revenues from management fees received from the Hedrin
        JV.
  Nordic
        paid to the Company a non-refundable fee of $150,000 at the closing for the
        right to receive a warrant covering 7.1 million shares of the Company’s common
        stock, exercisable for $0.14 per share. The warrant is issuable 90 days from
        closing, provided Nordic has not exercised all or a part of its put, as
        described below. The Company issued the warrant to Nordic on April 30, 2008.
        The
        per share exercise price of the warrant was based on the volume weighted
        average
        price of the Company’s common stock for the period prior to the signing of the
        Hedrin JV Agreement.
  Nordic
        has an option to put all or a portion of its equity interest in the Hedrin
        JV to
        the Company in exchange for the Company’s common stock. The shares of the
        Company’s common stock to be issued upon exercise of the put will be calculated
        by multiplying the percentage of Nordic’s equity in the Hedrin JV that Nordic
        decides to put to the Company multiplied by the dollar amount of Nordic’s
        investment in Limited Partnership divided by $0.14, as adjusted from time
        to
        time. The put option is exercisable immediately and expires at the earlier
        of
        ten years or when Nordic’s distributions from the Limited Hedrin JV exceed five
        times the amount Nordic invested in the Hedrin JV.
  The
        Company has an option to call all or a portion of Nordic’s equity interest in
        the Hedrin JV in exchange for the Company’s common stock. The Company cannot
        begin to exercise its call until the price of the Company’s common stock has
        closed at or above $1.40 per share for 30 consecutive trading days. During
        the
        first 30 consecutive trading day period in which the Company’s common stock
        closes at or above $1.40 per share the Company can exercise up to 25% of
        its
        call option. During the second 30 consecutive trading day period in which
        the
        Company’s common stock closes at or above $1.40 per share the Company can
        exercise up to 50% of its call option on a cumulative basis. During the third
        30
        consecutive trading day period in which the Company’s common stock closes at or
        above $1.40 per share the Company can exercise up to 75% of its call option
        on a
        cumulative basis. During the fourth 30 consecutive trading day period in
        which
        the Company’s common stock closes at or above $1.40 per share the Company can
        exercise up to 100% of its call option on a cumulative basis. The shares
        of the
        Company’s common stock to be issued upon exercise of the call will be calculated
        by multiplying the percentage of Nordic’s equity in the Limited Partnership that
        the Company calls, as described above, multiplied by the dollar amount of
        Nordic’s investment in the Hedrin JV divided by $0.14. Nordic can refuse the
        Company’s call by either paying the Company up to $1.5 million or forfeiting all
        or a portion of their put, calculated on a pro rata basis for the percentage
        of
        the Nordic equity interest called by the Company.
  25
  The
        Hedrin JV 's Board consists of 4 members, 2 appointed by the Company and
        2
        appointed by Nordic. Nordic has the right to appoint one of the directors
        as
        chairman of the Board. The chairman has certain tie breaking powers. In the
        event that the payment milestone described above is not achieved by June
        30,
        2008, then the Hedrin JV 's Board will increase to 5 members, 2 appointed
        by the
        Company and 3 appointed by Nordic.
  After
        the
        closing, at Nordic's request, the Company will nominate a person identified
        by
        Nordic to serve on the Company’s Board of Directors.
  The
        Company granted Nordic registration rights for the shares to be issued upon
        exercise of the warrant, the put or the call. The Company filed an initial
        registration statement on May 1, 2008. The Company is required to file
        additional registration statements, if required, within 45 days of the date
        the
        Company first knows that such additional registration statement was required.
        The Company is required to use commercially reasonable efforts to cause the
        registration statement to be declared effective by the Securities and Exchange
        Commission (“SEC”) within 105 calendar days from the filing date. If the Company
        fails to file a registration statement on time or if a registration statement
        is
        not declared effective by the SEC within 105 days of filing the Company will
        be
        required to pay to Nordic, or its assigns, an amount in cash, as partial
        liquidated damages, equal to 0.5% per month of the amount invested in the
        Hedrin
        JV by Nordic until the registration statement is declared effective by the
        SEC.
        In no event shall the aggregate amount payable by the Company exceed 9% of
        the
        amount invested in the Hedrin JV by Nordic.
  The
        profits of the Hedrin JV will be shared by the Company and Nordic in accordance
        with their respective equity interests in Limited Partnership, which are
        currently 50% to each, except that Nordic will get a minimum distribution
        from
        the Hedrin JV equal to 5% on Hedrin sales, as adjusted for any change in
        Nordic’s equity interest in the Limited Partnership. If the Hedrin JV realizes a
        profit equal to or greater than a 10% royalty on Hedrin sales, then profits
        will
        be shared by the Company and Nordic in accordance with their respective equity
        interests in the Limited Partnership. However, in the event of a liquidation
        of
        the Limited Partnership, Nordic’s distribution in liquidation will be at least
        equal to the amount Nordic invested in the Hedrin JV ($5 million if the payment
        milestone described above is met, $2.5 million if it is not met) plus 10%
        per
        year, less the cumulative distributions received by Nordic from the Hedrin
        JV.
        Further, in no event shall Nordic’s distribution in liquidation be greater than
        assets available for distribution in liquidation.
  **American
        Stock Exchange**
  In
        September 2007, we received notice from the staff of The American Stock
        Exchange, or AMEX, indicating that we were not in compliance with certain
        continued listing standards set forth in the AMEX Company Guide. Specifically,
        AMEX notice cited our failure to comply, as of June 30, 2007, with section
        1003(a)(ii) of the AMEX Company Guide as we had less than $4,000,000 of
        stockholders’ equity and had losses from continuing operations and /or net
        losses in three or four of our most recent fiscal years and with section
        1003(a)(iii) which requires us to maintain $6,000,000 of stockholders’ equity if
        we have experienced losses from continuing operations and /or net losses
        in its
        five most recent fiscal years.
  26
  In
        order
        to maintain our AMEX listing, we were required to submit a plan to AMEX advising
        the exchange of the actions we have taken, or will take, that would bring
        us
        into compliance with all the continued listing standards by April 16, 2008.
        We
        submitted such a plan in October 2007. If we were not in compliance with
        the
        continued listing standards at the end of the plan period, or if we had made
        progress consistent with the plan during the period, AMEX staff could have
        initiated delisting proceedings.
  Under
        the
        terms of our joint venture agreement with Nordic, the number of potentially
        issuable shares represented by the put and call features thereof and the
        warrant
        issuable to Nordic, would exceed 19.9% of our total outstanding shares and
        would
        be issued at a price below the greater of book or market value. As a result,
        under AMEX regulations, we would not have been able to complete the transaction
        without first receiving either stockholder approval for the transaction,
        or a
        formal “financial viability” exception from AMEX’s stockholder approval
        requirement. We estimated that obtaining stockholder approval to comply with
        AMEX regulations would take a minimum of 45 days to complete. We discussed
        the
        financial viability exception with AMEX for several weeks and had neither
        received the exception nor been denied the exception. We determined that
        our
        financial condition required us to complete the transaction immediately,
        and
        that our financial viability depended on our completion of the transaction
        without further delay.
  Accordingly,
        to maintain our financial viability, on February 28, 2008, we announced that
        we
        had formally notified AMEX that we intended to voluntarily delist our common
        stock from AMEX. The delisting became effective on March 26, 2008.
  Our
        common stock now trades on the Over the Counter Bulletin Board under the
        symbol
“MHAN”. We intend to maintain corporate governance, disclosure and reporting
        procedures consistent with applicable law.
  **Commitments**
  ***General***
  We
        often
        contract with third parties to facilitate, coordinate and perform agreed
        upon
        research and development of our product candidates. To ensure that research
        and
        development costs are expensed as incurred, we record monthly accruals for
        clinical trials and nonclinical testing costs based on the work performed
        under
        the contracts.
  These
        contracts typically call for the payment of fees for services at the initiation
        of the contract and/or upon the achievement of certain milestones. This method
        of payment often does not match the related expense recognition resulting
        in
        either a prepayment, when the amounts paid are greater than the related research
        and development costs recognized, or an accrued liability, when the amounts
        paid
        are less than the related research and development costs
        recognized.
  During
        2007, we entered into an agreement with Therapeutics, Inc. for the conduct
        of a
        Phase 2a clinical trial of Topical PTH (1-34). The amount of the agreement
        is
        approximately $845,000. The remaining financial commitment at March 31, 2008
        related to the conduct of the clinical trial is approximately $430,000. This
        clinical trial is expected to conclude in the second quarter of 2008.
  27
  Swiss
        Pharma Contract LTD, or Swiss Pharma, a clinical site that we used in one
        of its
        obesity trials, gave notice to us that Swiss Pharma believes it is entitled
        to
        receive an additional payment of $322,776 for services in connection with
        that
        clinical trial. While the contract between us and Swiss Pharma provides for
        additional payments if certain conditions are met, Swiss Parma has not specified
        which conditions they believe have been achieved and we do not believe that
        Swiss Pharma is entitled to additional payments and has not accrued any of
        these
        costs as of December 31, 2007. The contract between us and Swiss Pharma provides
        for arbitration in the event of a dispute, such as this claim for an additional
        payment. On March 10, 2008, Swiss Pharma filed for arbitration with the Swiss
        Chamber of Commerce. As we do not believe that Swiss Pharma is entitled to
        additional payments, we intend to defend our position in arbitration. On
        April
        2, 2008, we filed our statement of defense and counterclaim for recovery
        of
        costs incurred by us as a result of Swiss Pharma’s failure to meet agreed upon
        deadlines under our contract.
  In
        February 2007, a former employee of the Company alleged an ownership interest
        in
        two of the Company’s provisional patent applications covering our discontinued
        product development program for Oleoyl-estrone. Also, without articulating
        precise legal claims, the former employee contends that the Company wrongfully
        characterized the former employee’s separation from employment as a resignation
        instead of a dismissal in an effort to harm the former employee’s immigration
        sponsorship efforts, and, further, to wrongfully deprive the former employee
        of
        the former employee’s alleged rights in two of the Company’s provisional patent
        applications.  The former employee is seeking an unspecified amount in
        damages. The Company refutes the former employee’s contentions and intends to
        vigorously defend itself should the former employee file claims against the
        Company. There have been no further developments with respect to these
        contentions.
  ***Development
        Commitments***
  **Hedrin**
  On
        June
        26, 2007, we entered into an exclusive license agreement for Hedrin (the
“Hedrin
        License Agreement”) with Thornton & Ross Ltd, or T&R, and Kerris, S.A.,
        or Kerris (jointly, the “Licensor”). Pursuant to the Hedrin License Agreement,
        we acquired an exclusive North American license to certain patent rights
        and
        other intellectual property relating to Hedrin TM a
        non-insecticide product candidate for the treatment of pediculosis (head
        lice).
        In addition, on June 26, 2007, we entered into a supply agreement with T&R
        pursuant to which T&R will be our exclusive supplier of Hedrin product (the
“Hedrin Supply Agreement”).
  In
        consideration for the license, we issued to Licensor 150,000 shares of our
        common stock valued at $120,000. In addition, we also made a cash payment
        to the
        Licensor of $600,000 . These amounts are included in research and development
        expense.
  Further,
        we agreed to make future milestone payments to the Licensor comprised of
        various
        combinations of cash and common stock in respective aggregate amounts of
        $2,500,000 upon the achievement of various clinical and regulatory milestones
        as
        follows: $250,000 upon acceptance by the U. S. Food and Drug Administration,
        or
        the FDA, of an Investigational New Drug application, or an IND; $1,000,000
        upon
        the achievement of a successful outcome of a Phase 3 clinical trial; $700,000
        upon the final approval of an NDA by the FDA; $300,000 upon the issuance
        of a
        U.S. patent on Hedrin: and $250,000 upon receipt of marketing authorization
        in
        Canada.
  28
  We
        also
        agreed to pay royalties of 8% (or, under certain circumstances, 4%) on net
        sales
        of licensed products. Our exclusivity under the Hedrin License Agreement
        is
        subject to an annual minimum royalty payment of $1,000,000 (or, under certain
        circumstances, $500,000) in each of the third through seventh years following
        the first commercial sale of Hedrin. We may sublicense our rights under the
        Hedrin License Agreement with the consent of the Licensor and the proceeds
        resulting from such sublicenses will be shared with the Licensor.
  Through
        March 31, 2008, none of the milestones have been reached and sales have not
        commenced, therefore, we have not paid any such milestones or
        royalties.
  Pursuant
        to the Hedrin Supply Agreement, we have agreed that we and our sublicensees
        will
        purchase their respective requirements of the Hedrin product from T&R at
        agreed upon prices. Under certain circumstances where T&R is unable to
        supply Hedrin product in accordance with the terms and conditions of the
        Hedrin
        Supply Agreement, we may obtain products from an alternative supplier subject
        to
        certain conditions. The term of the Hedrin Supply Agreement ends upon
        termination of the Hedrin License Agreement.
  **Topical
        PTH (1-34)**
  Through
        our April 2005 acquisition of Tarpan Therapeutics, Inc., or Tarpan, we acquired
        a sublicense agreement with IGI, Inc. dated April 14, 2004. Under the IGI
        sublicense agreement we hold the exclusive, world-wide, royalty bearing
        sublicense to develop and commercialize the licensed technology. Under the
        terms
        of the IGI sublicense agreement, we are responsible for the cost of the
        nonclinical and clinical development of the project, including research and
        development, manufacturing, laboratory and clinical testing and trials and
        marketing of licensed products.
  The
        IGI
        sublicense agreement requires us to make certain milestone payments as follows:
        $300,000 payable upon the commencement of a Phase 2 clinical trial; $500,000
        upon the commencement of a Phase 3 clinical trial; $1,500,000 upon the
        acceptance of an NDA application by the FDA; $2,400,000 upon the approval
        of an
        NDA by the FDA; $500,000 upon the commencement of a Phase 3 clinical trial
        for
        an indication other than psoriasis; $1,500,000 upon the acceptance of and
        NDA
        application for an indication other than psoriasis by the FDA; and $2,400,000
        upon the approval of an NDA for an indication other than psoriasis by the
        FDA.
  During
        2007, we achieved the milestone of the commencement of Phase 2 clinical trial.
        As a result $300,000 became payable to IGI. This $300,000 is included in
        research and development expense for the year ended December 31, 2007. Payment
        was made to IGI in February 2008.
  In
        addition, we are obligated to pay IGI, Inc. an annual royalty of 6% on annual
        net sales up to $200,000,000. In any calendar year in which net sales exceed
        $200,000,000, we are obligated to pay IGI, Inc. an annual royalty of 9% on
        such
        excess. Through March 31, 2008, sales have not commenced, therefore, we have
        not
        paid any such royalties.
  IGI,
        Inc.
        may terminate the agreement (i) upon 60 days’ notice if we fail to make any
        required milestone or royalty payments, or (ii) if we become bankrupt or
        if a
        petition in bankruptcy is filed, or if we are placed in the hands of a receiver
        or trustee for the benefit of creditors. IGI, Inc. may terminate the agreement
        upon 60 days’ written notice and an opportunity to cure in the event we commit a
        material breach or default. Eighteen months from the date of the IGI sublicense
        agreement, we may terminate the agreement in whole or as to any portion of
        the
        PTH patent rights upon 90 days’ notice to IGI, Inc.
  29
  **Altoderm**
  On
        April
        3, 2007, we entered into a license agreement for “Altoderm,” with T&R.
        Pursuant to the Altoderm license agreement, we acquired an exclusive North
        American license to certain patent rights and other intellectual property
        relating to Altoderm, a topical skin lotion product candidate with the active
        ingredient cromolyn sodium (also known as sodium cromoglicate) for the treatment
        of atopic dermatitis. In accordance with the terms of the Altoderm license
        agreement, we issued 125,000 shares of our common stock, valued at $112,500,
        and
        made a cash payment of $475,000 to T&R upon the execution of the agreement.
        These amounts have been included in research and development
        expense.
  Further,
        we agreed to make future milestone payments to T&R comprised of various
        combinations of cash and common stock in respective aggregate amounts of
        $5,675,000 and 875,000 shares of our common stock upon the achievement of
        various clinical and regulatory milestones as follows: $450,000 upon acceptance
        by the FDA of an IND; 125,000 shares of our common stock upon the first dosing
        of a patient in the first Phase 2 clinical trial; 250,000 shares of our common
        stock and $625,000 upon the first dosing of a patient in the first Phase
        3
        clinical trial; $1,000,000 upon the achievement of a successful outcome of
        a
        Phase 3 clinical trial; $1,100,000 upon the acceptance for filing of an NDA
        application by the FDA; 500,000 shares of our common stock and $2,000,000
        upon
        the final approval of an NDA by the FDA; and $500,000 upon receipt of marketing
        authorization in Canada.
  In
        addition, we are obligated to pay T&R an annual royalty of 10% on annual net
        sales of up to $100,000,000; 15% of the amount of annual net sales in excess
        of
        $100,000,000 and 20% of annual net sales in excess of $200,000,000. There
        is a
        minimum royalty of $1,000,000 per year. There is a one-time success fee of
        $10,000,000 upon the achievement of cumulative net sales of $100,000,000.
        Through March 31, 2008, none of the milestones have been reached and sales
        have
        not commenced, therefore, we have not paid any such milestones or
        royalties.
  **Altolyn**
  On
        April
        3, 2007, we and T&R also entered into a license agreement for Altolyn.
        Pursuant to the Altolyn license agreement, we acquired an exclusive North
        American license to certain patent rights and other intellectual property
        relating to Altolyn, an oral formulation product candidate using cromolyn
        sodium
        for the treatment of mastocytosis, food allergies, and inflammatory bowel
        disorder. In accordance with the terms of the Altolyn license agreement,
        we made
        a cash payment of $475,000 to T&R upon the execution of the agreement. This
        amount is included in research and development expense.
  Further,
        we agreed to make future milestone payments to T&R comprised of various
        combinations of cash and common stock in respective aggregate amounts of
        $5,675,000 upon the achievement of various clinical and regulatory milestones.
        as follows: $450,000 upon acceptance for filing by the FDA of an IND; $625,000
        upon the first dosing of a patient in the first Phase 3 clinical trial;
        $1,000,000 upon the achievement of a successful outcome of a Phase 3 clinical
        trial; $1,100,000 upon the acceptance for filing of an NDA application by
        the
        FDA; $2,000,000 upon the final approval of an NDA by the FDA; and $500,000
        upon
        receipt of marketing authorization in Canada.
  In
        addition, we are obligated to pay T&R an annual royalty of 10% on annual net
        sales of up to $100,000,000; 15% of the amount of annual net sales in excess
        of
        $100,000,000 and 20% of annual net sales in excess of $200,000,000. There
        is a
        minimum royalty of $1,000,000 per year. There is a one-time success fee of
        $10,000,000 upon the achievement of cumulative net sales of
        $100,000,000.
  30
 
 Through
        March 31, 2008, none of the milestones have been reached and sales have not
        commenced, therefore, we have not paid any such milestones or
        royalties.
  **Summary
        of Contractual Commitments**
  ***Employment
        Agreements***
  The
        Company has employment agreements with two employees for the payment of
        aggregate annual base salaries of $655,000 as well as performance based bonuses.
        These agreements have a remaining term of one year for one of the employees,
        and
        15 months for the second employee, and have a total remaining obligation
        under
        these agreements of $738,000 as of March 31, 2008.
 
 ***Capital
        Resources***
  Our
        available working capital and capital requirements will depend upon numerous
        factors, including progress of our research and development programs, our
        progress in and the cost of ongoing and planned pre-clinical and clinical
        testing, the timing and cost of obtaining regulatory approvals, the cost
        of
        filing, prosecuting, defending, and enforcing patent claims and other
        intellectual property rights, competing technological and market developments,
        changes in our existing collaborative and licensing relationships, the resources
        that we devote to commercializing capabilities, the status of our competitors,
        our ability to establish collaborative arrangements with other organizations
        and
        our need to purchase additional capital equipment.
  Our
        continued operations will depend on whether we are able to raise additional
        funds through various potential sources, such as equity and debt financing,
        other collaborative agreements, strategic alliances, and our ability to realize
        the full potential of our technology in development. Such additional funds
        may
        not become available on acceptable terms and there can be no assurance that
        any
        additional funding that we do obtain will be sufficient to meet our needs
        in the
        long term. Through March 31, 2008, substantially all of our financing has
        been
        through private placements of common stock, preferred stock and warrants
        to
        purchase common stock. Until our operations generate significant revenues
        and
        cash flows from operating activities, we will continue to fund operations
        from
        cash on hand and through the similar sources of capital previously described.
        We
        can give no assurances that any additional capital that we are able to obtain
        will be sufficient to meet our needs. Management believes that we will continue
        to incur net losses and negative cash flows from operating activities for
        the
        foreseeable future. Based on the resources available to us at March 31, 2008,
        management believes that we will need additional equity or debt financing
        or
        will need to generate revenues through licensing our products or entering
        into
        strategic alliances to be able to sustain our operations into 2008 and we
        will
        need additional financing thereafter until we can achieve profitability,
        if
        ever.
  We
        currently do not have sufficient capital to fund our anticipated 2008
        expenditures, and we will need to raise additional capital in order to complete
        the anticipated development programs for each of our research and development
        projects. If we are unable to raise such additional capital, we may have
        to
        sublicense our rights to a third party as a means of continuing development,
        or,
        although less likely, we may be required to abandon further development efforts
        altogether, either of which would have a material adverse effect on the
        prospects of our business.
  31
  **Research
        and Development Projects**
  ***Hedrin***
  In
        collaboration with Nordic and through the Hedrin JV we are developing Hedrin
        for
        the treatment of pediculosis (head lice). To date, Hedrin has been clinically
        studied in 326 subjects and is currently marketed as a device in Western
        Europe
        and as a pharmaceutical in the United Kingdom.
  In
        a
        randomized, controlled, equivalence clinical study conducted in Europe by
        T&R, Hedrin was administered to 253 adult and child subjects with head louse
        infestation. The study results, published in the British Medical Journal
        in June
        2005, demonstrated Hedrin’s equivalence when compared to the insecticide
        treatment, phenothrin, the most widely used pediculicide in the United Kingdom.
        In addition, according to the same study, the Hedrin-treated subjects
        experienced significantly less irritation (2%) than those treated with
        phenothrin (9%).
  An
        additional clinical study published in the November 2007 issue of PLoS One,
        an
        international, peer-reviewed journal published by the Public Library of Science
        (PLoS), demonstrated Hedrin’s superior efficacy compared to a United Kingdom
        formulation of malathion, a widely used insecticide treatment in both Europe
        and
        North America. In this randomized, controlled, assessor blinded, parallel
        group
        clinical trial, 73 adult and child subjects with head lice infestations were
        treated with Hedrin or malathion liquid. Using intent-to-treat analysis,
        Hedrin
        achieved a statistically significant cure rate of 70% compared to 33% with
        malathion liquid. Using the per-protocol analysis Hedrin achieved a highly
        statistically significant cure rate of 77% compared to 35% with malathion.
        In
        Europe it has been widely documented that head lice had become resistant
        to
        European formulations of malathion, and we believe this resistance had
        influenced these study results. To date, there have been no reports of
        resistance to U.S. formulations of malathion. Additionally, Hedrin treated
        subjects experienced no irritant reactions, and Hedrin showed clinical
        equivalence to malathion in its ability to inhibit egg hatching. Overall,
        investigators and study subjects rated Hedrin as less odorous, easier to
        apply,
        and easier to wash out, and 97% of Hedrin treated subjects stated they were
        significantly more inclined to use the product again versus 31% of those
        using
        malathion.
  In
        the
        United States, we are pursuing the development of Hedrin as a medical device.
        We
        expect to be required to complete at least one clinical trial with this product
        candidate.
  As
        of
        March 31, 2008, we have incurred $1,079,000 of project costs for the development
        of Hedrin. $9,000 of such costs were incurred during the quarter ended March
        31,
        2008.
  ***Topical
        PTH (1-34).***
  We
        are
        developing Topical PTH (1-34) as a topical treatment for psoriasis. In August
        2003, researchers, led by Michael Holick, Ph.D., MD, Professor of Medicine,
        Physiology, and Biophysics at Boston University Medical Center, reported
        positive results from a US Phase 1/2 clinical trial evaluating the safety
        and
        efficacy of Topical PTH (1-34) as a topical treatment for psoriasis. This
        double-blind, placebo controlled trial in 15 patients compared Topical PTH
        (1-34) formulated in the Novasome® Technology versus the Novasome® vehicle
        alone. Following 8 weeks of treatment, the topical application of Topical
        PTH
        (1-34) resulted in complete clearing of the treated lesion in 60% of patients
        and partial clearing in 85% of patients. Additionally, there was a statistically
        significant improvement in the global severity score. Ten patients continued
        into an open label extension study in which the Psoriasis Area and Severity
        Index, or PASI, was measured; PASI improvement across all 10 patients achieved
        statistically significant improvement compared to baseline. This study showed
        Topical PTH (1-34) to be a safe and effective treatment for plaque psoriasis
        with no patients experiencing any clinically significant adverse
        events.
  32
 
 Due
        to
        the high response rate seen in patients in the initial trial with Topical
        PTH
        (1-34) we believe that it may have an important clinical advantage over current
        topical psoriasis treatments. A follow on physician IND Phase 2a trial involving
        Topical PTH (1-34) was initiated in December 2005 under the auspices of Boston
        University. In April 2006, we reported a delay in its planned Phase 2a clinical
        study of Topical PTH (1-34) due to a formulation issue. We believe that we
        have
        resolved this issue through a new gel formulation of Topical PTH (1-34) and
        have
        filed new patent applications in the U.S. for this new proprietary
        formulation.
  In
        September 2007, the U.S. FDA accepted our corporate Investigational New Drug
        (IND) application for this new gel formulation of Topical PTH (1-34), and
        in
        October 2007, we initiated and began dosing subjects in a phase 2a clinical
        study of Topical PTH (1-34) for the treatment of psoriasis. This U.S.
        multi-center, randomized, double-blind, vehicle-controlled, parallel group
        study
        is desiged to evaluate safety and preliminary efficacy of Topical PTH (1-34)
        for
        the treatment of psoriasis. 61 subjects have been enrolled and randomized
        to
        receive one of two dose levels of Topical PTH (1-34), or vehicle, for an
        8 week
        treatment period. In this study the vehicle is the topical formulation without
        the active ingredient, PTH (1-34).
  As
        of
        March 31, 2008, we have incurred $5,801,000 of project costs related to our
        development of Topical PTH (1-34). These project costs have been incurred
        since
        April 1, 2005, the date of the Tarpan Therapeutics acquisition. During the
        first
        quarter of 2008, we incurred $679,000 of these costs.
  As
        with
        the development of our other product candidates, we do not currently have
        sufficient capital to fund our planned development activities of Topical
        PTH
        (1-34) beyond the ongoing phase 2a trial. We will, therefore, need to raise
        additional capital in order to complete our planned R&D activities for
        Topical PTH (1-34) . To the extent additional capital is not available when
        we
        need it, we may be forced to sublicense our rights to Topical PTH (1-34)
        or
        abandon our development efforts altogether, either of which would have a
        material adverse effect on the prospects of our business.
  Since
        PTH
        (1-34) is already available in the injectable form, we should be able to
        utilize
        much of the data that is publicly available in planning our future studies.
        However, since PTH (1-34) will be used topically, bridging studies will need
        to
        be performed and we are not able to realistically predict the size and the
        design of those studies at this time.
  ***Altoderm***
  We
        are
        developing Altoderm for the pruritis (itch) associated with dermatologic
        conditions including atopic dermatitis. In a Phase 3, randomized, double-blind,
        placebo-controlled, parallel-group, clinical study (conducted in Europe by
        T&R.) the compound was administered for 12 weeks to 114 subjects with
        moderately severe atopic dermatitis. The placebo (vehicle) used in this study
        was the Altoderm product without the active ingredient. In the study results,
        published in the British Journal of Dermatology in February 2005, Altoderm
        demonstrated a statistically significant reduction (36%) in atopic dermatitis
        symptoms. During the study, subjects were permitted to continue with their
        existing treatment, in most cases this consisted of emollients and topical
        steroids. A positive secondary outcome of the study was a 35% reduction in
        the
        use of topical steroids for the Altoderm treated subjects. Further analysis
        of
        the clinical data, performed by us showed that Altoderm treated subjects
        also
        experienced a 57% reduction in pruritus.
  33
  Altoderm
        is currently being tested in a second, ongoing Phase 3, randomized,
        double-blind, vehicle-controlled clinical study (also conducted in Europe
        by
        T&R). Analysis of the preliminary data from the initial 12 week, blinded
        portion of this clinical trial has been completed. The vehicle used in this
        study was the Altoderm product without the active ingredient, cromolyn sodium.
        The preliminary data indicate Altoderm was safe and well tolerated, and showed
        a
        trend toward improvement in pruritus, but the efficacy results were
        inconclusive. Altoderm treated subjects and vehicle only treated subjects
        experienced a similar improvement (each greater than 30%), and therefore,
        the
        study did not achieve statistical significance. We believe these outcomes
        were
        due to suboptimal study design where subjects were unrestricted in their
        use of
        concomitant therapies such as topical steroids and immunomodulators. The
        placebo
        (vehicle) used in this study was the Altoderm product without the active
        ingredient, cromolyn sodium. Analysis of the preliminary open label data
        beginning at week 13 of the study, show vehicle treated subjects demonstrating
        further improvement when switched to Altoderm. Given the promising clinical
        data
        obtained from the first European Phase 3 study, and the symptom improvements
        reported in the ongoing European Phase 3 study, both we and Thornton & Ross
        Limited believe there is significant potential for Altoderm and will continue
        development of this product candidate.
  On
        March
        6, 2008, we announced we had successfully completed a pre-IND meeting with
        the
        FDA. Based on a review of the submitted package for Altoderm, including data
        from the two previously reported Phase 3 clinical studies, the FDA determined
        that following completion of certain nonclinical studies, and the acceptance
        of
        an IND, Phase 2 clinical studies may be initiated in the U.S. The FDA also
        concurred that the proposed indication of pruritus associated with dermatologic
        conditions including atopic dermatitis can be pursued.
  As
        of
        March 31, 2008, we have incurred $1,091,000 for the development of Altoderm.
        We
        incurred $79,000 of such costs during the quarter ended March 31,
        2008.
  ***Altolyn***
  We
        are
        developing Altolyn for the treatment of mastocystosis. On March 6, 2008,
        we
        announced we had successfully completed a pre-IND meeting with the FDA. Based
        on
        a review of the submitted package for Altolyn, the FDA concurred that the
        proposed indication of mastocytosis can be pursued and that the 505(b)(2)
        NDA
        would be an acceptable approach provided a clinical bridge is established
        between Altolyn and Gastrocrom ® ,
        the
        oral liquid formulation of cromolyn sodium currently approved in the U.S.
        to
        treat mastocytosis. The FDA also affirmed that a single, Phase 3 study
        demonstrating the efficacy of Altolyn over placebo, may be sufficient to
        support
        a product approval in the U.S. In addition, the FDA also concurs that no
        additional nonclinical studies will be required to support an IND application.
        We are working with T&R and the current United Kingdom manufacturer of
        Altolyn to develop a GMP compliant manufacturing process.
  Early
        clinical experience with Altolyn in the United Kingdom. suggests promising
        activity in patients with various allergic disorders, including food allergy
        and
        inflammatory bowel conditions. We may pursue these as additional
        indications.
  As
        of
        March 31, 2008, we have incurred $823,000 for the development of Altolyn.
        We
        incurred $33,000 of such costs during the quarter ended March 31,
        2008.
  34
  **Off-Balance
        Sheet Arrangements**
  We
        have
        not entered into any off-balance sheet arrangements.
  **New
        Accounting Pronouncements**
  In
        March
        2008, the FASB issued SFAS No. 161 "Disclosures About Derivative Instruments
        and
        Hedging Activities - an amendment of FASB Statement No. 133" ("SFAS 161").
        SFAS
        161 amends SFAS 133 by requiring expanded disclosures about an entity's
        derivative instruments and hedging activities. SFAS 161 requires qualitative
        disclosures about objectives and strategies for using derivatives, quantitative
        disclosures about fair value amounts of and gains and losses on derivative
        instruments, and disclosures about credit-risk-related contingent features
        in
        derivative instruments. SFAS 161 is effective for the Company as of January
        1,
        2009. The Company does not believe that SFAS 161 will have any impact on
        its
        consolidated financial statements.
  35
  **Item
        3.  Quantitative and Qualitative Disclosure About Market
        Risk**
  Our
        exposure to market risk is confined to our cash and cash equivalents. We
        have
        attempted to minimize risk by investing in high-quality financial instruments,
        primarily money market funds with no security having an effective duration
        longer than 90 days. If the market interest rate decreases by 100 basis points
        or 1%, the fair value of our cash and cash equivalents portfolio would have
        minimal to no impact on the carrying value of our portfolio. We did not hold
        any
        derivative instruments as of March 31, 2008, and we have never held such
        instruments in the past.
  **Item
        4.** **Controls and Procedures**
  **Evaluation
        of Disclosure Controls and Procedures**
  As
        of
        March 31, 2008, we carried out an evaluation, under the supervision and with
        the
        participation of our Chief Executive Officer and Chief Financial Officer,
        of the
        effectiveness of the design and operation of our disclosure controls and
        procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities
        Exchange Act of 1934, as amended). Based upon that evaluation, our Chief
        Executive Officer and Chief Financial Officer concluded that our disclosure
        controls and procedures as of that date were effective to ensure that
        information required to be disclosed in the reports we file under the Securities
        and Exchange Act is recorded, processed, summarized and reported on an accurate
        and timely basis.
  The
        Company’s management, including its Chief Executive Officer and its Chief
        Financial Officer, does not expect that disclosure controls or internal controls
        over financial reporting will prevent all errors or all instances of fraud,
        even
        as the same are improved to address any deficiencies. The design of any system
        of controls is based in part upon certain assumptions about the likelihood
        of
        future events, and there can be no assurance that any design will succeed
        in
        achieving its stated goals under all potential future conditions. 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. Over
        time, controls may become inadequate because of changes in conditions or
        deterioration in the degree of compliance with policies or procedures. 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 the Company have been detected.
  Because
        of the inherent limitation of a cost-effective control system, misstatements
        due
        to error or fraud may occur and not be detected. These inherent limitations
        include the realities that judgments in decision-making can be faulty, and
        that
        breakdowns can occur because of a 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.
  **Changes
        in Internal Control**
  During
        the quarter ended March 31, 2008, there were no changes in internal controls
        over financial reporting that have materially affected, or are reasonably
        likely
        to materially affect, our internal controls over financial
        reporting.
  36
  **PART
        II – OTHER INFORMATION**
 
 **Item
        1. Legal Proceedings**
  Swiss
        Pharma Contract LTD, or Swiss Pharma, a clinical site that we used in one
        of its
        obesity trials, gave notice to us that Swiss Pharma believes it is entitled
        to
        receive an additional payment of $322,776 for services in connection with
        that
        clinical trial. While the contract between us and Swiss Pharma provides for
        additional payments if certain conditions are met, Swiss Parma has not specified
        which conditions they believe have been achieved and we do not believe that
        Swiss Pharma is entitled to additional payments and has not accrued any of
        these
        costs as of December 31, 2007. The contract between us and Swiss Pharma provides
        for arbitration in the event of a dispute, such as this claim for an additional
        payment. On March 10, 2008, Swiss Pharma filed for arbitration with the Swiss
        Chamber of Commerce. As we do not believe that Swiss Pharma is entitled to
        additional payments, we intend to defend our position in arbitration. On
        April
        2, 2008, we filed our statement of defense and counterclaim for recovery
        of
        costs incurred by us as a result of Swiss Pharma’s failure to meet agreed upon
        deadlines under our contract .
 
  **Item
        1A. Risk Factors**
  We
        have
        not had material changes to our risk factor disclosure in our Annual Report
        on
        Form 10-K for the year ended December 31, 2007 under the caption “Risk Factors”
following Item 1 of such report.
  **Item
        6. Exhibits**
  Exhibit
                  No.
              
              Description31.1
              
              Certification
                  of Chief Executive Officer31.2
              
              Certification
                  of Chief Financial Officer32.1
              
              Certifications
                  of Chief Executive Officer and Chief Financial Officer pursuant
                  to Section
                  906 of the Sarbanes-Oxley Act of
                  2002.
  37
  **SIGNATURES**
  In
        accordance with the requirements of the Exchange Act of 1934, the registrant
        caused this report to be signed on its behalf by the undersigned, thereunto
        duly
        authorized.
  MANHATTAN
                PHARMACEUTICALS, INC.Date:
                  September 3, 2008
              By:
              /s/
                  Douglas AbelDouglas
                AbelPresident
                and Chief Executive OfficerDate:
                  September 3, 2008
              By:
              /s/
                  Michael G. McGuinnessMichael
                G. McGuinnessChief
                Operating and Financial Officer
  38
  **Index
        to Exhibits Filed with this Report**
 
 Exhibit
                  No.
              
              Description31.1
              
              Certification
                  of Chief Executive Officer31.2
              
              Certification
                  of Chief Financial Officer32.1
              
              Certifications
                  of Chief Executive Officer and Chief Financial Officer pursuant
                  to Section
                  906 of the Sarbanes-Oxley Act of
                  2002.
  39