**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      DC 20549**

**Amendment      No. 1 to**

**FORM      10-QSB**

**Manhattan      Pharmaceuticals, Inc.**

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

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**INDEX**

|                             |                                                                                                                            | Page     |
|----------------------------------|---------------------------------------------------------------------------------------------------------------------------------|----------|
| **PART                I**   | **FINANCIAL                INFORMATION**                                                                                   |     |
| Item                1.      | Unaudited                Condensed Consolidated Balance Sheets                                                             | 5   |
|                             | Unaudited                Condensed Consolidated Statements of Operations                                                   | 6   |
|                             | Unaudited                Condensed Consolidated Statement of Stockholders’ Equity                (Deficiency)        | 7   |
|                             | Unaudited                Condensed Consolidated Statements of Cash Flows                                                   | 8   |
|                             | Notes                to Unaudited Condensed Consolidated Financial Statements                                              | 9   |
| Item                2.      | Management’s                Discussion and Analysis of Financial Condition and Results of                Operations  | 15       |
| Item                3.      | Controls                and Procedures                                                                                     | 19  |
| **PART                II**  | **OTHER                INFORMATION**                                                                                       |     |
| Item                6.      | Exhibits                                                                                                                   | 21  |
|                             | Signatures                                                                                                                 | 22  |

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**Forward-Looking      Statements**

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**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,** |   | **December                  31,** |   |
|   **Assets**                                                                                             |   |  |   | **2006** |   | **2005** |   |
|                                                                                                               |   |    |   | (Unaudited,                  as                  restated) |   | (Note                  1) |   |
| Current                  assets:                                                                                   |   |    |   |   |   |   |   |
| Cash                  and cash equivalents                                                                         |   |   |   |   | $ | 8,532,374 |   | $ | 9,826,336 |   |
| Short-term                  investments, available for sale, at market                                             |   |   |   |   |   | 509,310 |   |   | 1,007,818 |   |
| Prepaid                  expenses                                                                                  |   |   |   |   |   | 479,287 |   |   | 194,776 |   |
| Total                  current assets                                                                              |   |   |   |   |   | 9,520,971 |   |   | 11,028,930 |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |
| Property                  and equipment, net                                                                       |   | 100,524 |   |   | 106,877 |   |
| Other                  assets                                                                                      |   |   |   |   |   | 70,506 |   |   | 70,506 |   |
| Total                  assets                                                                                      |   |   |   |   | $ | 9,692,001 |   | $ | 11,206,313 |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |
|  **Liabilities                  and Stockholders’ Equity**                                              |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |
| Current                  liabilities:                                                                              |   |   |   |   |   |   |   |   |   |   |
| Accounts                  payable                                                                                  |   |   |   |   | $ | 1,991,037 |   | $ | 1,617,489 |   |
| Accrued                  expenses                                                                                  |   |   |   |   |   | 255,909 |   |   | 48,328 |   |
| Total                  liabilities                                                                                 |   |   |   |   |   | 2,246,946 |   |   | 1,665,817 |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |
| Commitments                  and contingencies                                                                     |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |
| Stockholders’                  equity:                                                                       |   |   |   |   |   |   |
| Common                  stock, $.001 par value. Authorized 150,000,000 shares;                                     |   |   |   |   |   |   |   |   |   |   |
| 60,092,697                  shares issued and outstanding                                                          |   |   |   |   |   | 60,093 |   |   | 60,093 |   |
| Additional                  paid-in capital                                                                        |   |   |   |   |   | 43,052,858 |   |   | 42,751,111 |   |
| Deficit                  accumulated during the development stage                                                  |   |   |   |   |   | (35,669,885 | ) |   | (33,271,695 | ) |
| Accumulated                  other comprehensive income                                                            |   |   |   |   |   | 1,989 |   |   | 987 |   |
| Total                  stockholders’ equity                                                                  |   |   |   |   |   | 7,445,055 |   |   | 9,540,496 |   |
| Total                  liabilities and stockholders' equity                                                        |   |   |   |   | $ | 9,692,001 |   | $ | 11,206,313 |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |
| See                  accompanying notes to unaudited condensed consolidated financial                  statements. |   |   |   |

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| **MANHATTAN                  PHARMACEUTICALS, INC. AND SUBSIDIARIES** |
|-----------------------------------------------------------------------|
| (A                  Development Stage Company)                        |
|                                                                  |
| Condensed                  Consolidated Statements of Operations      |
| (Unaudited)                                                           |

|                                                                                                               |   |                                               |       |                           |   | **Cumulative**                      |   |
|--------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------|------------|--------------------------------|--------|-------------------------------------|--------|
|                                                                                                               |   |                                               |       |                           |   | **period                  from**    |   |
|                                                                                                               |   |                                               |       |                           |   | **August                  6, 2001** |   |
|                                                                                                               |   |                                               |       |                           |   | **(inception)                  to** |   |
|                                                                                                               |   |  **Three                  months ended March 31,** |       | **March                  31,** |   |
|                                                                                                               |   |  **2006**                                          |       | **2005**                       |   | **2006**                            |   |
|                                                                                                               |   |  (As                  restated)                    |       |                           |   | (As                  restated)      |   |
|                                                                                                               |   |                                               |       |                           |   |                                |   |
| Revenue                                                                                                            |   | $                                                       | —    |                           | $      | —                             |   | $ | — |   |
|                                                                                                               |   |                                                    |       |                           |   |                                |   |   |   |   |
| Costs                  and expenses:                                                                               |   |                                                    |       |                           |   |                                |   |   |   |   |
| Research                  and development                                                                          |   |                                                    | 1,606,521  |                           |   | 964,040                             |   |   | 13,387,032 |   |
| General                  and administrative                                                                        |   |                                                    | 890,865    |                           |   | 493,243                             |   |   | 7,307,476 |   |
| In-process                  research and development charge                                                        |   |                                                    | —    |                           |   | —                             |   |   | 11,887,807 |   |
| Impairment                  of intangible assets                                                                   |   |                                                    | —    |                           |   | —                             |   |   | 1,248,230 |   |
| Loss                  on disposition of intangible assets                                                          |   |                                                    | —    |                           |   | —                             |   |   | 1,213,878 |   |
| Total                  operating expenses                                                                          |   |                                                    | 2,497,386  |                           |   | 1,457,283                           |   |   | 35,044,423 |   |
|                                                                                                               |   |                                                    |       |                           |   |                                |   |   |   |   |
| Operating                  loss                                                                                    |   |                                                    | (2,497,386 | )                              |   | (1,457,283                          | )      |   | (35,044,423 | ) |
|                                                                                                               |   |                                                    |       |                           |   |                                |   |   |   |   |
| Other                  (income) expense:                                                                           |   |                                                    |       |                           |   |                                |   |   |   |   |
| Interest                  and other income                                                                         |   |                                                    | (98,706    | )                              |   | (31,204                             | )      |   | (500,551 | ) |
| Interest                  expense                                                                                  |   |                                                    | —    |                           |   | —                             |   |   | 23,893 |   |
| Realized                  gain on sale of marketable equity securities                                             |   |                                                    | (490       | )                              |   | —                             |   |   | (77,524 | ) |
| Total                  other income                                                                                |   |                                                    | (99,196    | )                              |   | (31,204                             | )      |   | (554,182 | ) |
|                                                                                                               |   |                                                    |            |                           |   |                                     |   |   |   |   |
| Net                  loss                                                                                          |   |                                                    | (2,398,190 | )                              |   | (1,426,079                          | )      |   | (34,490,241 | ) |
|                                                                                                               |   |                                                    |       |                           |   |                                |   |   |   |   |
| Preferred                  stock dividends (including imputed amounts)                                             |   |                                                    | —    |                           |   | (127,466                            | )      |   | (1,179,644 | ) |
|                                                                                                               |   |                                                    |            |                           |   |                                     |   |   |   |   |
| Net                  loss applicable to common shares                                                              |   | $                                                       | (2,398,190 | )                              | $      | (1,553,545                          | )      | $ | (35,669,885 | ) |
|                                                                                                               |   |                                                    |       |                           |   |                                |   |   |   |   |
| Net                  loss per common share:                                                                        |   |                                                    |       |                           |   |                                |   |   |   |   |
| Basic                  and diluted                                                                                 |   | $                                                       | (0.04      | )                              | $      | (0.05                               | )      |   |   |   |
|                                                                                                               |   |                                                    |       |                           |   |                                |   |   |   |   |
|                  Weighted                  average shares of common stock outstanding:                        |   |                                                    |       |                           |   |                                |   |   |   |   |
| Basic                  and diluted                                                                                 |   |                                                    | 60,092,697 |                           |   | 28,665,144                          |   |   |   |   |
|                                                                                                               |
| See                  accompanying notes to unaudited condensed consolidated financial                  statements. |

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| **MANHATTAN                  PHARMACEUTICALS, INC. AND SUBSIDIARIES**                                                                                                                                                                                                  |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| (A                  Development Stage Company)                                                                                                                                                                                                                         |   |
|                                                                                                                                                                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Condensed                  Consolidated Statements of Stockholders' Equity                  (Deficiency)                                                                                                                                                               |   |
| (Unaudited,                  as restated)                                                                                                                                                                                                                              |
|                                                                                                                                                                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |  **Dividends** |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   | **Deficit** |   | **payable** |   |   |   |   |   |  **Total** |   |
|                                                                                                                                                                                                                                                                   |   |  **Series                  A** |   |   |   |   |   |   |   |   |   |  **accumulated** |   |  **in** |   | **Accumulated** |   |   |   |  **stock-** |   |
|                                                                                                                                                                                                                                                                   |   | **convertible** |   |   |   |   |   | **Additional** |   |   |   | **during** |   | **Series                  A** |   | **other** |   | **Unearned** |   | **holders'** |   |
|                                                                                                                                                                                                                                                                   |   | **preferred                  stock** |   | **Common                  stock** |   | **paid-in** |   | **Subscription** |   | **development** |   | **preferred** |   | **comprehensive** |   | **consulting** |   | **equity** |   |
|                                                                                                                                                                                                                                                                   |   | **Shares** |   | **Amount** |   | **Shares** |   | **Amount** |   | **capital** |   | **receivable** |   | **stage** |   | **shares** |   | **income(loss)** |   | **services** |   | **(deficiency)** |   |
|                                                                                                                                                                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  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 |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 4,000 |   |
|   Stock                issued at $0.0004 per share for                                                                                                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                      license rights                                                                                                                                                                                                                     |   |   | — |   |   | — |   |   | 2,541,935 |   |   | 2,542 |   |   | (1,542 | ) |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 1,000 |   |
| Stock                  options issued for consulting                      services                                                                                                                                                                 |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 60,589 |   |   | — |   |   | — |   |   | — |   |   | — |   |   | (60,589 | ) |   | — |   |
| Amortization                  of unearned consulting                      services                                                                                                                                                                 |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 22,721 |   |   | 22,721 |   |
|                      Sales of common stock at $0.63 per                          share through private placement,                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  net                    of expenses                                                                                                                                                                                                                               |   |   | — |   |   | — |   |   | 3,043,332 |   |   | 3,043 |   |   | 1,701,275 |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 1,704,318 |   |
| Net                  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 | ) |   | 637,923 |   |
|                                                                                                                                                                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                      Common stock issued at $0.63 per                          share, net of expenses                                                                                                           |   |   | — |   |   | — |   |   | 1,321,806 |   |   | 1,322 |   |   | 742,369 |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 743,691 |   |
| Effect                  of reverse acquisition                                                                                                                                                                                                                         |   |   | — |   |   | — |   |   | 6,287,582 |   |   | 6,287 |   |   | 2,329,954 |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 2,336,241 |   |
|                      Amortization of unearned consulting                          costs                                                                                                                              |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 37,868 |   |   | 37,868 |   |
|                      Unrealized 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 |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 9,046,176 |   |
| Imputed                  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 | ) |   | — |   |   | 6,832,932 |   |
|                                                                                                                                                                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Exercise                  of stock options                                                                                                                                                                                                                             |   |   | — |   |   | — |   |   | 27,600 |   |   | 27 |   |   | 30,073 |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 30,100 |   |
|                      Common stock issued through                           private placement at $1.10                                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                            per share, net of expenses                                                                                                                                                                     |   |   | — |   |   | — |   |   | 3,368,952 |   |   | 3,369 |   |   | 3,358,349 |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 3,361,718 |   |
|                      Conversion of preferred stock to                           common stock                                                                                                               |   |   | (170,528 | ) |   | (171 | ) |   | 1,550,239 |   |   | 1,551 |   |   | (1,380 | ) |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |
|                       Preferred stock dividends paid by                           issuance of shares                                                                                                  |   |   | 24,901 |   |   | 25 |   |   | — |   |   | — |   |   | 281,073 |   |   | — |   |   | — |   |   | (282,388 | ) |   | — |   |   | — |   |   | (1,290 | ) |
|                       Preferred stock dividend accrued                                                                                                                                                                                             |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | (585,799 | ) |   | 585,799 |   |   | — |   |   | — |   |   | — |   |
|                       Warrants issued for consulting                           services                                                                                                               |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 125,558 |   |   | — |   |   | — |   |   | — |   |   | — |   |   | (120,968 | ) |   | 4,590 |   |
|                        Amortization of unearned                            consulting costs                                                                                                      |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 100,800 |   |   | 100,800 |   |
|                        Reversal of unrealized loss on                            short-term investments and                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|           unrealized                  gain on short-term                           investments                                                                          |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 20,997 |   |   | — |   |   | 20,997 |   |
| Net                  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 |   |
|                                                                                                                                                                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                      Common stock issued through                            private placement at $1.11 and                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                             $1.15 per share, net of expenses                                                                                                                                                         |   |   | — |   |   | — |   |   | 11,917,680 |   |   | 11,918 |   |   | 12,238,291 |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 12,250,209 |   |
|                       Common stock issued to vendor at           $1.11                  per share in satisfaction of                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                             accounts payable                                                                                                                                                                         |   |   | — |   |   | — |   |   | 675,675 |   |   | 676 |   |   | 749,324 |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 750,000 |   |
| Exercise                  of stock options                                                                                                                                                                                                                             |   |   | — |   |   | — |   |   | 32,400 |   |   | 33 |   |   | 32,367 |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 32,400 |   |
| Exercise                  of warrants                                                                                                                                                                                                                                  |   |   | — |   |   | — |   |   | 279,845 |   |   | 279 |   |   | 68,212 |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 68,491 |   |
|                      Conversion of preferred stock to                            common stock                                                                                                         |   |   | (896,154 | ) |   | (896 | ) |   | 8,146,858 |   |   | 8,147 |   |   | (7,251 | ) |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |
|                       Preferred stock dividends paid by                            issuance of shares                                                                                            |   |   | 41,781 |   |   | 42 |   |   | — |   |   | — |   |   | 477,736 |   |   | — |   |   | — |   |   | (479,074 | ) |   | — |   |   | — |   |   | (1,296 | ) |
| Preferred                  stock dividend accrued                                                                                                                                                                                                                      |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | (175,663 | ) |   | 175,663 |   |   | — |   |   | — |   |   | — |   |
| Share-based                  compensation                                                                                                                                                                                                                              |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 66,971 |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 20,168 |   |   | 87,139 |   |
|                      Reversal 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 |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 11,052,984 |   |
| Net                  loss                                                                                                                                                                                                                                              |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | (19,140,997 | ) |   | — |   |   | — |   |   | — |   |   | (19,140,997 | ) |
| Balance                  at December 31, 2005                                                                                                                                                                                                                          |   |   | — |   |   | — |   |   | 60,092,697 |   |   | 60,093 |   |   | 42,751,111 |   |   | — |   |   | (33,271,695 | ) |   | — |   |   | 987 |   |   | — |   |   | 9,540,496 |   |
|                                                                                                                                                                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Share-based                  compensation                                                                                                                                                                                                                              |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 311,913 |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 311,913 |   |
|                      Unrealized gain on short-term                            investments                                                                                                                  |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 1,002 |   |   | — |   |   | 1,002 |   |
|                       Costs associated with private                            placement                                                                                                         |   |   | — |   |   | — |   |   | — |   |   | — |   |   | (10,166 | ) |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | (10,166 | ) |
| Net                  loss                                                                                                                                                                                                                                              |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | (2,398,190 | ) |   | — |   |   | — |   |   | — |   |   | (2,398,190 | ) |
|                                                                                                                                                                                                                                                                   |   |   |  |   |   |  |   |   |  |   |   |  |   |   |  |   |   |  |   |   |  |   |   |  |   |   |  |   |   |  |   |   |  |   |
| Balance                  at March 31, 2006                                                                                                                                                                                                                             |   |   | — |   | $ | — |   |   | 60,092,697 |   | $ | 60,093 |   | $ | 43,052,858 |   | $ | — |   | $ | (35,669,885 | ) | $ | — |   | $ | 1,989 |   | $ | — |   | $ | 7,445,055 |   |
|                                                                                                                                                                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| See                  accompanying notes to unaudited condensed consolidated financial                  statements.                                                                                                                                                     |   |

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| **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,** |   |
|--------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                               |   |  **2006**                                          |       | **2005**                                                                                                                                              |   | **2006** |   |
|                                                                                                               |   |  (As                  restated)                    |       |                                                                                                                                                  |   | (As                  restated) |   |
| Cash                  flows from operating activities:                                                             |   |                                               |       |                                                                                                                                                  |   |   |   |
| Net                  loss                                                                                          |   | $                                                       | (2,398,190 | )                                                                                                                                                     | $      | (1,426,079 | ) | $ | (34,490,241 | ) |
| Adjustments                  to reconcile net loss to                                                              |   |                                                    |       |                                                                                                                                                  |   |   |   |   |   |   |
|  net                  cash used in operating activities:                                                      |   |                                                    |       |                                                                                                                                                  |   |   |   |   |   |   |
| Common                  stock issued for license rights                                                            |   |                                                    | —    |                                                                                                                                                  |   | — |   |   | 1,000 |   |
| Stock-based                  compensation                                                                          |   |                                                    | 311,913    |                                                                                                                                                  |   | 20,168 |   |   | 560,441 |   |
| Warrants                  issued for consulting services                                                           |   |                                                    | —    |                                                                                                                                                  |   | — |   |   | 4,590 |   |
| Amortization                  of intangible assets                                                                 |   |                                                    | —    |                                                                                                                                                  |   | — |   |   | 145,162 |   |
| Gain                  on sale of marketable equity securities                                                      |   |                                                    | (490       | )                                                                                                                                                     |   | — |   |   | (77,524 | ) |
| Depreciation                                                                                                       |   |                                                    | 14,852     |                                                                                                                                                  |   | 12,743 |   |   | 102,146 |   |
| Non                  cash portion of in-process research and development charge                                    |   |                                                    | —    |                                                                                                                                                  |   | — |   |   | 11,721,623 |   |
| Loss                  on impairment of intangible assets                                                           |   |                                                    | —    |                                                                                                                                                  |   | — |   |   | 1,248,230 |   |
| Loss                  on disposition of intangible assets                                                          |   |                                                    | —    |                                                                                                                                                  |   | — |   |   | 1,213,878 |   |
| Changes                  in operating assets and liabilities, net of acquisitions:                                 |   |                                                    |       |                                                                                                                                                  |   |   |   |   |   |   |
| Decrease                  (increase) in prepaid expenses and other current assets                                  |   |                                                    | (284,511   | )                                                                                                                                                     |   | 39,786 |   |   | (421,042 | ) |
| Increase                  in other assets                                                                          |   |                                                    | —    |                                                                                                                                                  |   | — |   |   | (70,506 | ) |
| Increase                  (decrease) in accounts payable                                                           |   |                                                    | 373,548    |                                                                                                                                                  |   | (31,508 | ) |   | 2,391,251 |   |
| Increase                  (decrease) in accrued expenses                                                           |   |                                                    | 207,581    |                                                                                                                                                  |   | 106,387 |   |   | (284,412 | ) |
| Net                  cash used in operating activities                                                             |   |                                                    | (1,775,297 | )                                                                                                                                                     |   | (1,278,503 | ) |   | (17,955,404 | ) |
| Cash                  flows from investing activities:                                                             |   |                                                    |       |                                                                                                                                                  |   |   |   |   |   |   |
| Purchase                  of property and equipment                                                                |   |                                                    | (8,499     | )                                                                                                                                                     |   | (20,081 | ) |   | (192,948 | ) |
| Cash                  paid in connection with acquisitions                                                         |   |                                                    | —    |                                                                                                                                                  |   | (128,233 | ) |   | (32,808 | ) |
| Purchase                  of short-term investments                                                                |   |                                                    | —    |                                                                                                                                                  |   | — |   |   | (5,000,979 | ) |
| Proceeds                  from sale of short-term investments                                                      |   |                                                    | 500,000    |                                                                                                                                                  |   | 997,067 |   |   | 4,931,088 |   |
| Proceeds                  from sale of license                                                                     |   |                                                    | —    |                                                                                                                                                  |   | — |   |   | 200,001 |   |
| Cash                  acquired in acquisition                                                                      |   |                                                    | —    |                                                                                                                                                  |   | — |   |   | 6,777 |   |
| Net                  cash provided by (used in) investing activities                                               |   |                                                    | 491,501    |                                                                                                                                                  |   | 848,753 |   |   | (88,869 | ) |
| Cash                  flows from financing activities:                                                             |   |                                                    |       |                                                                                                                                                  |   |   |   |   |   |   |
| Proceeds                  from issuances of notes payable to stockholders                                          |   |                                                    | —    |                                                                                                                                                  |   | — |   |   | 233,500 |   |
| Repayments                  of notes payable to stockholders                                                       |   |                                                    | —    |                                                                                                                                                  |   | — |   |   | (884,902 | ) |
| Proceeds                  from issuance of note payable to bank                                                    |   |                                                    | —    |                                                                                                                                                  |   | — |   |   | 600,000 |   |
| Repayment                  of note payable to bank                                                                 |   |                                                    | —    |                                                                                                                                                  |   | — |   |   | (600,000 | ) |
| Proceeds                  from subscriptions receivable                                                            |   |                                                    | —    |                                                                                                                                                  |   | — |   |   | 4,000 |   |
| Payment                  for fractional shares for Preferred stock dividends                                       |   |                                                    | —    |                                                                                                                                                  |   | (446 | ) |   | (2,286 | ) |
| (Costs)                  proceeds related to sale of common stock, net                                             |   |                                                    | (10,166    | )                                                                                                                                                     |   | — |   |   | 18,049,168 |   |
| Proceeds                  from sale of preferred stock, net                                                        |   |                                                    | —    |                                                                                                                                                  |   | — |   |   | 9,046,176 |   |
| Proceeds                  from exercise of stock options                                                           |   |                                                    | —    |                                                                                                                                                  |   | 1,000 |   |   | 62,500 |   |
| Proceeds                  from exercise of warrants                                                                |   |                                                    | —    |                                                                                                                                                  |   | 68,491 |   |   | 68,491 |   |
| Net                  cash (used in) provided by financing activities                                               |   |                                                    | (10,166    | )                                                                                                                                                     |   | 69,045 |   |   | 26,576,647 |   |
|                                                                                                               |   |                                                    |       |                                                                                                                                                  |   |   |   |   |   |   |
| Net                  (decrease) increase in cash and cash equivalents                                              |   |                                                    | (1,293,962 | )                                                                                                                                                     |   | (360,705 | ) |   | 8,532,374 |   |
|                                                                                                               |   |                                                    |       |                                                                                                                                                  |   |   |   |   |   |   |
| Cash                  and cash equivalents at beginning of period                                                  |   |                                                    | 9,826,336  |                                                                                                                                                  |   | 905,656 |   |   | — |   |
| Cash                  and cash equivalents at end of period                                                        |   | $                                                       | 8,532,374  |                                                                                                                                                  | $      | 544,951 |   | $ | 8,532,374 |   |
|                                                                                                               |   |                                                    |       |                                                                                                                                                  |   |   |   |   |   |   |
| Supplemental                  disclosure of cash flow information:                                                 |   |                                                    |       |                                                                                                                                                  |   |   |   |   |   |   |
|                                                                                                               |   |                                                    |       |                                                                                                                                                  |   |   |   |   |   |   |
| Interest                  paid                                                                                     |   | $                                                       | —    |                                                                                                                                                  | $      | — |   | $ | 23,893 |   |
|                                                                                                               |   |                                                    |       |                                                                                                                                                  |   |   |   |   |   |   |
|                                                                                                               |   |                                                    |       |                                                                                                                                                  |   |   |   |   |   |   |
| Supplemental                  disclosure of noncash investing and financing activities:                            |   |                                                    |       |                                                                                                                                                  |   |   |   |   |   |   |
|                                                                                                               |   |                                                    |       |                                                                                                                                                  |   |   |   |   |   |   |
| Common                  stock issued in satisfaction of accounts payable                                           |   | $                                                       | —    |                                                                                                                                                  | $      | — |   | $ | 750,000 |   |
| Imputed                  preferred stock dividend                                                                  |   |                                                    | —    |                                                                                                                                                  |   | — |   |   | 418,182 |   |
| Preferred                  stock dividends accrued                                                                 |   |                                                    | —    |                                                                                                                                                  |   | 127,466 |   |   | 761,462 |   |
| Conversion                  of preferred stock to common stock                                                     |   |                                                    | —    |                                                                                                                                                  |   | 154 |   |   | 1,067 |   |
| Preferred                  stock dividends paid by issuance of shares                                              |   |                                                    | —    |                                                                                                                                                  |   | 246,436 |   |   | 759,134 |   |
| Issuance                  of common stock for acquisitions                                                         |   |                                                    | —    |                                                                                                                                                  |   | — |   |   | 13,389,226 |   |
| Marketable                  equity securities received in connection with                                          |   |                                                    |       |                                                                                                                                                  |   |   |   |   |   |   |
|  sale                  of license                                                                             |   |                                                    | —    |                                                                                                                                                  |   | — |   |   | 359,907 |   |
| Net                  liabilities assumed over assets acquired in business                  combination             |   |                                                    | —    |                                                                                                                                                  |   | — |   |   | (675,416 | ) |
|                                                                                                               |   |                                                    |       |                                                                                                                                                  |   |   |   |   |   |   |
| See                  accompanying notes to unaudited condensed consolidated financial                  statements. |   |                                                    |       |                                                                                                                                                  |   |   |

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----

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|                                                                           |   |   | **Three                    months ended**  |   |
|--------------------------------------------------------------------------------|--------|--------|-------------------------------------------------|--------|
|                                                                           |   |   | **March                    31,**           |   |
|                                                                           |   |   | **2005**                                   |   |
| Net                    loss applicable to common shares, as reported           |   | $      | (1,553,545                                      | )      |
| Deduct:                     Total                    stock-based employee |   |   |                                            |   |
| compensation                    expense determined                             |   |   |                                            |   |
| under                    fair value method                                     |   |   | (114,935                                        | )      |
| Net                    loss applicable to common shares, pro forma             |   | $      | (1,668,480                                      | )      |
| Net                    loss per common share - basic and diluted               |   |   |                                            |   |
| As                    reported                                                 |   | $      | (0.05                                           | )      |
| Pro                    forma                                                   |   |   | (0.06                                           | )      |

***Stock      Options***

***2003      Stock Option Plan***

***1995      Stock Option Plan***

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|                                    | **Three                Months Ended****March                31, **  |   |
|-----------------------------------------|-------------------------------------------------------------------------------|--------|
|                                    | **2006**                                                                 |   |   | **2005**  |   |
| Expected                volatility      | 55                                                                            | %      |   | 70 | % |
| Dividend                yield           | —                                                                       |   |   | — |   |
| Expected                term (in years) | 4                                                                             |   |   | 5 |   |
| Risk-free                interest rate  | 4.25                                                                          | %      |   | 3.4 | % |

----

|                                      |   | **Shares** |      | **Weighted                    average exercise price** |   | **Weighted                    Average Remaining Contractual Term (years)** |   | **Aggregate                    Intrinsic Value** |   |
|-------------------------------------------|--------|------------|-----------|--------------------------------------------------------|--------|----------------------------------------------------------------------------|--------|--------------------------------------------------|--------|
| Outstanding                  at           |   |       |      |                                                   |   |                                                                       |   |                                             |   |   |   |   |   |
| December                      31, 2005    |   |       | 6,328,754 |                                                   | $      | 1.33                                                                       |   |                                             |   |   |   |   |   |
|                                      |   |       |      |                                                   |   |                                                                       |   |                                             |   |   |   |   |   |
| Granted                                   |   |       | 474,500   |                                                   |   | 1.35                                                                       |   |                                             |   |   |   |   |   |
| Exercised                                 |   |       | -         |                                                   |   | -                                                                          |   |                                             |   |   |   |   |   |
| Cancelled                                 |   |       | (120,750  | )                                                      |   | 1.20                                                                       |   |                                             |   |   |   |   |   |
|                                      |   |       |      |                                                   |   |                                                                       |   |                                             |   |   |   |   |   |
| Outstanding                    at         |   |       |      |                                                   |   |                                                                       |   |                                             |   |   |   |   |   |
| March                    31, 2006         |   |       | 6,682,504 |                                                   | $      | 1.34                                                                       |   |                                             | 8.39   |   | $ | 1,241,972 |   |
|                                      |   |       |      |                                                   |   |                                                                       |   |                                             |   |   |   |   |   |
| Options                    exercisable at |   |       |      |                                                   |   |                                                                       |   |                                             |   |   |   |   |   |
| March                    31, 2006         |   |       | 3,722,728 |                                                   | $      | 1.26                                                                       |   |                                             | 7.85   |   | $ | 1,117,173 |   |
|                                      |   |       |      |                                                   |   |                                                                       |   |                                             |   |   |   |   |   |
| Weighted-average                          |   |       |      |                                                   |   |                                                                       |   |                                             |   |   |   |   |   |
| fair                    value of          |   |       |      |                                                   |   |                                                                       |   |                                             |   |   |   |   |   |
| options                    granted        |   |       |      |                                                   |   |                                                                       |   |                                             |   |   |   |   |   |
| during                    the quarter     |   | $          | 0.63      |                                                   |   |                                                                       |   |                                             |   |   |   |   |   |

** **

----

|                                                                    |   |   | **Three                    months ended**  |   |
|-------------------------------------------------------------------------|--------|--------|-------------------------------------------------|--------|
|                                                                    |   |   | **March                    31,**           |   |
|                                                                    |   |   | **2005**                                   |   |
| Net                    loss                                             |   | $      | (1,553,340                                      | )      |
|                                                                    |   |   |                                            |   |
| Weighted                    average number of common shares outstanding |   |   | 39,396,196                                      |   |
| Loss                    per common share - basic and fully diluted      |   | $      | (0.04                                           | )      |

----

**Item      2.**
**Management’s      Discussion and Analysis of 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-KSB for the year      ended December 31, 2005 (the “Annual Report”) and our financial statements      as of and for the three months ended March 31, 2006 included elsewhere in this      report.**

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***Oleoyl-estrone***

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***PTH      (1-34)***

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***Lingual      spray propofol***

**Off-Balance      Sheet Arrangements**

**Item      3. **
**Controls      and Procedures**

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**Restatement      and Remediation of Internal Control Weaknesses **

----

**PART      II - OTHER INFORMATION**

**Item      6.**
**Exhibits      **

| Exhibit No. |   |  Description                                                                                                                                                    |
|-------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.1        |   |  Employment Agreement dated January                26,                2006 between the Company and Alan G. Harris (previously                filed).            |
|  31.1  |   |  Certification of Chief Executive                Officer                                                                                                        |
|  31.2  |   |  Certification of Chief Financial                Officer                                                                                                        |
|  32.1  |   |  Certifications of Chief Executive                Officer and Chief Financial Officer pursuant to Section 906 of the                Sarbanes-Oxley Act of 2002. |

----

**SIGNATURES**

|                                      |                                                                                                 |                                                         |
|-------------------------------------------|------------------------------------------------------------------------------------------------------|--------------------------------------------------------------|
|                                      | MANHATTAN                PHARMACEUTICALS, INC.                                                       |
|                                 |                                                                                            |                                                    |
| Date: August                14, 2006 | By:                                                                                        | /s/ Douglas                Abel     |
|                                      |                                                                                                      |
|                                      | Douglas                  AbelPresident                  and                  Chief Executive Officer |
|                                      |                                                          |                                          |
|-------------------------------------------|---------------------------------------------------------------|-----------------------------------------------|
|                                      |                                                          |
|                                 |                                                     |                                     |
| Date: August                14, 2006 | By:                                                 | /s/ Michael                G. McGuinness |
|                                      |                                                               |
|                                      | Michael                  G. McGuinnessChief Financial Officer |
|                                      |                                                          |

----

**Index      to Exhibits Filed with this Report**

| Exhibit No. |   |  Description                                                                                                                                                                         |
|-------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.1        |   |  Employment Agreement dated January                  26,                  2006 between the Company and Alan G. Harris (previously                  filed).                           |
|  31.1  |   |  Certification of Chief Executive                  Officer                                                                                                                           |
|  31.2  |   |  Certification of Chief Financial                  Officer                                                                                                                           |
|  32.1  |   |  Certifications of Chief Executive                  Officer and Chief Financial Officer pursuant to Section 906 of                  the                  Sarbanes-Oxley Act of 2002. |

----