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**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      DC 20549**

**FORM      10-QSB**

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

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

****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                                             | 4      |
|                            | Unaudited                Condensed Consolidated Statements of                Operations                                   | 5      |
|                            | Unaudited                Condensed Consolidated Statement of Stockholders’                Equity (Deficiency)       | 6      |
|                            | Unaudited                Condensed Consolidated Statements of Cash                Flows                                   | 7      |
|                            | Notes                to Unaudited Condensed Consolidated Financial                Statements                              | 8      |
|                       |                                                                                                                      |   |
| Item                2.     | Management’s                Discussion and Analysis of Financial Condition                and Results of Operations | 12     |
|                       |                                                                                                                      |   |
| Item                3.     | Controls                and Procedures                                                                                    | 15     |
|                       |                                                                                                                      |   |
| **PART                II** | **OTHER                INFORMATION**                                                                                      |   |
| Item                6.     | Exhibits                                                                                                                  | 16     |
|                       |                                                                                                                      |   |
|                            | Signatures                                                                                                                | 17     |

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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)**                |        | **(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                                                                                  |   |                           | 62,489      |                              |   | 194,776 |   |
| Total                  current assets                                                                         |   |                           | 9,104,173   |                              |   | 11,028,930 |   |
|                                                                                                               |   |                           |        |                              |   |   |   |
| Property                  and equipment, net                                                                       |   |                           | 100,524     |                              |   | 106,877 |   |
| Other                  assets                                                                                      |   |                           | 70,506      |                              |   | 70,506 |   |
| Total                  assets                                                                                 |   | $                              | 9,275,203   |                              | $      | 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                                                  |   |                           | (36,086,683 | )                                 |   | (33,271,695 | ) |
| Accumulated                  other comprehensive income                                                            |   |                           | 1,989       |                              |   | 987 |   |
| Total                  stockholders’ equity                                                                  |   |                           | 7,028,257   |                              |   | 9,540,496 |   |
| Total                  liabilities and stockholders' equity                                                        |   | $                              | 9,275,203   |                              | $      | 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**                          |   |
|                                                                                                                |   |                                            |       |                         |   |                              |   |
| Revenue                                                                                                        |   | $                                               | —    |                         | $      | —                           |   | $ | — |   |
|                                                                                                           |   |                                            |       |                         |   |                              |   |   |   |   |
| Costs                and expenses:                                                                             |   |                                            |       |                         |   |                              |   |   |   |   |
| Research                and development                                                                        |   |                                            | 2,023,319  |                         |   | 964,040                           |   |   | 13,803,830 |   |
| 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                                                                        |   |                                            | 2,914,184  |                         |   | 1,457,283                         |   |   | 35,461,221 |   |
| Operating                loss                                                                                  |   |                                            | (2,914,184 | )                            |   | (1,457,283                        | )      |   | (35,461,221 | ) |
|                                                                                                           |   |                                            |       |                         |   |                              |   |   |   |   |
| 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                                                                                        |   |                                            | (2,814,988 | )                            |   | (1,426,079                        | )      |   | (34,907,039 | ) |
|                                                                                                           |   |                                            |       |                         |   |                              |   |   |   |   |
| Preferred                stock dividends (including imputed amounts)                                           |   |                                            | —    |                         |   | (127,466                          | )      |   | (1,179,644 | ) |
| Net                loss applicable to common shares                                                            |   | $                                               | (2,814,988 | )                            | $      | (1,553,545                        | )      | $ | (36,086,683 | ) |
|                                                                                                                |   |                                            |       |                         |   |                              |   |   |   |   |
| Net                loss per common share:                                                                      |   |                                            |       |                         |   |                              |   |   |   |   |
| Basic                and diluted                                                                               |   | $                                               | (0.05      | )                            | $      | (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)                                                                                              |

|                                                                                                       |   |                                             |      |                                          |   |        |   |             |       |            |   |                       |   |                            |       |            |   |              |   |                      |        |             |   |
|------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------|-----------|-----------------------------------------------|--------|-------------|--------|------------------|------------|-----------------|--------|----------------------------|--------|---------------------------------|------------|-----------------|--------|-------------------|--------|---------------------------|-------------|------------------|--------|
|                                                                                                       |   |                                             |      |                                          |   |        |   |             |       |            |   |                       |   |                            |       | **Dividends**   |   |              |   |                      |        |             |   |
|                                                                                                       |   | **Series                  A**          |      |                                          |   |        |   |             |       |            |   | **Deficit****accumulated** |   | **payable                  in** |       | **Accumulated** |   |              |   | **Total****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 |   |   | — |   |   | — |   |   | — |   |
| Stock-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 |   |
|                                                                                                       |   |                                             |      |                                          |   |        |   |             |       |            |   |                       |   |                            |       |            |   |              |   |                      |        |             |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock-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                                                                                  |   |                                             | —   |                                          |   | —     |   |             | —    |            |   | —                    |   |                            | —    |            |   | —           |   |                      | (2,814,988  | )                |   | — |   |   | — |   |   | — |   |   | (2,814,988 | ) |
| Balance                  at March 31, 2006                                                                 |   |                                             | —   |                                          | $      | —     |   |             | 60,092,697 |            | $      | 60,093                     |   | $                               | 43,052,858 |            | $      | —           |   | $                         | (36,086,683 | )                | $      | — |   | $ | 1,989 |   | $ | — |   | $ | 7,028,257 |   |
|                                                                                                       |   |                                             |      |                                          |   |        |   |             |       |            |   |                       |   |                            |       |            |   |              |   |                      |        |             |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                            |   |                                             |      |                                          |   |        |   |             |       |            |   |                       |   |                            |       |            |   |              |   |                      |        |             |   |   |   |   |   |   |   |   |   |   |   |   |

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

|                                                                                                               |   |                                         |       |                           |   | **Cumulative**                      |   |
|--------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------|------------|--------------------------------|--------|-------------------------------------|--------|
|                                                                                                               |   |                                         |       |                           |   | **period                  from**    |   |
|                                                                                                               |   |                                         |       |                           |   | **August                  6, 2001** |   |
|                                                                                                               |   |                                         |       |                           |   | **(inception)                  to** |   |
|                                                                                                               |   | **Three                  months ended March 31,** |       | **March                  31,** |   |
|                                                                                                               |   |  **2006**                                    |       | **2005**                       |   | **2006**                            |   |
| Cash                  flows from operating activities:                                                             |   |                                         |       |                           |   |                                |   |
| Net                  loss                                                                                          |   | $                                                 | (2,814,988 | )                              | $      | (1,426,079                          | )      | $ | (34,907,039 | ) |
| 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                                  |   |                                              | 132,287    |                           |   | 39,786                              |   |   | (4,244 | ) |
| 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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NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS      (UNAUDITED)

| (1) | BASIS                OF PRESENTATION |
|-----|--------------------------------------|

| (2) | LIQUIDITY |
|-----|-----------|

| (3) | COMPUTATION                OF NET LOSS PER COMMON SHARE |
|-----|---------------------------------------------------------|

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| (4) | STOCK-BASED                COMPENSATION |
|-----|-----------------------------------------|

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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***

|                                    |   | **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 | % |

| Outstanding                at           |   |   | **Shares**  |   |   | **Weighted****average****exercise**** price**  |   |   | **Weighted                  Average Remaining Contractual****Term                  (years) **  |   |   | **Aggregate****Intrinsic****Value**  |   |
|-----------------------------------------|--------|--------|------------------|--------|--------|----------------------------------------------------------|--------|--------|----------------------------------------------------------------------------------------------------------|--------|--------|-------------------------------------------|--------|
| 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             |   |   |                                                     |   |   |                                                                                                     |   |   |                                      |   |

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| (5) | ACQUISITION                    OF TARPAN THERAPEUTICS,                    INC. |
|-----|--------------------------------------------------------------------------------|

|                                                                |   | **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      | ) |

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| **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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**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                                                                             |
| 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. |

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**SIGNATURES**

|                                 |                                                                            |                               |
|--------------------------------------|---------------------------------------------------------------------------------|------------------------------------|
|                                 | **MANHATTAN              PHARMACEUTICALS, INC.**                                |
|                            |                                                                       |                          |
| Date: May              15, 2006 | By:                                                                   | /s/ Douglas              Abel |
|                                 |                                                                                 |
|                                 | Douglas                AbelPresident and Chief Executive                Officer |

|                                 |                                                                                                                  |                                        |
|--------------------------------------|-----------------------------------------------------------------------------------------------------------------------|---------------------------------------------|
| Date: May              15, 2006 | By:                                                                                                         | /s/ Nicholas              J. Rossettos |
|                                 |                                                                                                                       |
|                                 | Nicholas                J.                RossettosChief Financial Officer and Chief Operating                Officer |

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**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                                                                             |
| 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. |

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