**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
  For
        the
        quarterly period ended September 30, 2005
 
 OR
 
 o
              TRANSITION
                  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                  OF 1934
 
 For
        the
        transition period from _______ to _______
 
 Commission
        file number 001-32639
 
 **Manhattan
        Pharmaceuticals, Inc.**
 (Exact
        Name of Registrant as Specified in Its Charter)
 
 Delaware
                (State
                  or other jurisdiction of
                incorporation
                  or organization)
              36-3898269
                (I.R.S.
                  Employer Identification No.)
  810
        Seventh Avenue, 4th Floor, New York, New York 10019
 (Address
        of principal executive offices)
 
 (212)
        582-3950
 (Issuer’s
        telephone number)
  Check
        whether the issuer: (1) filed all reports required to be filed by Section
        13 or
        15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
        (or
        for such shorter period that the issuer was required to file such reports),
        and
        (2) has been subject to such filing requirements for the past 90 days. Yes
xNo o
 
 Indicate
        by check mark whether the registrant is a shell company (as defined by Rule
        12b-2 of the Exchange Act). Yes oNo
x
 
 As
        of
        November 9, 2005 there were 60,090,379 shares of the issuer’s common stock,
        $.001 par value, outstanding.
 
 Traditional
        Small Business Disclosure Format (check one): Yes oNo
x
  1
  **INDEX**
  Page**PART
                    I**
                **FINANCIAL
                    INFORMATION**Item
                    1.
                Unaudited
                    Condensed Consolidated Balance Sheets
                3Unaudited
                    Condensed Consolidated Statements of Operations
                4Unaudited
                    Condensed Consolidated Statement of Stockholders’ Equity
                    (Deficiency)
                5Unaudited
                    Condensed Consolidated Statements of Cash Flows
                6Notes
                    to Unaudited Condensed Consolidated Financial Statements
                7Item
                    2.
                Management’s
                    Discussion and Analysis of Financial Condition and Results of
                    Operations
                14Item
                    3.
                Controls
                    and Procedures
                19**PART
                    II**
                **OTHER
                    INFORMATION**Item
                    5.
                Other
                    Information
                20Item
                    6.
                Exhibits
                20Signatures
                21
 
 **Forward-Looking
        Statements**
  This
        Quarterly Report on Form 10-QSB contains statements that are not historical
        but
        are forward-looking in nature, including statements regarding the expectations,
        beliefs, intentions or strategies regarding the future. In particular, the
        “Management's Discussion and Analysis of Financial Condition and Results of
        Operations” section in Item 2 of Part I of this Quarterly Report includes
        forward-looking statements that reflect our current views with respect to
        future
        events and financial performance. We use words such as we “expect,” 
“anticipate,”  “believe,” and “intend” and similar expressions to identify
        forward-looking statements. Investors should be aware that actual results
        may
        differ materially from our expressed expectations because of risks and
        uncertainties inherent in future events. Such
        risks and uncertainties include, but are not limited to, uncertainties related
        to the ability to attract and retain partners for our technologies, the
        identification of lead compounds, the successful preclinical development
        thereof, the completion of clinical trials, the FDA review process and other
        governmental regulation, our pharmaceutical collaborator's ability to
        successfully develop and commercialize drug candidates, competition from
        other
        pharmaceutical companies, product pricing and third party reimbursement.
        Additional risks are described under the caption “Risk
        Factors” following Item 1 of our Annual Report on Form 10-KSB for the year ended
        December 31, 2004. Accordingly, you should
        not unduly rely on these forward looking statements.
  2
  PART
        I - FINANCIAL
        INFORMATION
  **Item
        1. Unaudited Condensed Consolidated Financial Statements**
  **MANHATTAN
                      PHARMACEUTICALS, INC. AND SUBSIDIARIES**(A
                      Development Stage Company)Condensed
                      Consolidated Balance Sheets(Unaudited)
 **September
                      30,**
                  
                  **December
                      31,****Assets**
                  
                  **2005**
                  
                  **2004**Current
                      assets:Cash
                      and cash equivalents
                  
                  $
                  11,868,808
                  
                  $
                  905,656Short-term
                      investments, available for sale, at market
                  
                  
                  1,009,793
                  
                  
                  4,514,216Prepaid
                      expenses
                  
                  
                  20,178
                  
                  
                  40,126Total
                      current assets
                  
                  
                  12,898,779
                  
                  
                  5,459,998Property
                      and equipment, net
                  
                  
                  104,001
                  
                  
                  119,017Other
                      assets
                  
                  
                  70,506
                  
                  
                  70,506Total
                      assets
                  
                  $
                  13,073,286
                  
                  $
                  5,649,521**Liabilities
                      and Stockholders’ Equity**Current
                      liabilities:Accounts
                      payable
                  
                  $
                  1,713,516
                  
                  $
                  1,143,603Accrued
                      expenses
                  
                  
                  95,179
                  
                  
                  52,102Total
                      liabilities
                  
                  
                  1,808,695
                  
                  
                  1,195,705Commitments
                      and ContingenciesStockholders’
                      equity:Series
                      A convertible preferred stock, $.001 par value.Authorized
                      1,500,000 shares; 0 and 854,373 shares issued andoutstanding
                      at September 30, 2005 and December 31, 2004, respectively(liquidation
                      preference aggregating $0 and $8,973,730 atSeptember
                      30, 2005 and December 31, 2004, respectively)
                  
                  
                  —
                  
                  
                  854Common
                      stock, $.001 par value. Authorized 150,000,000 shares;59,415,257
                      and 28,309,187 shares issued and outstandingat
                      September 30, 2005 and December 31, 2004, respectively
                  
                  
                  59,415
                  
                  
                  28,309Additional
                      paid-in capital
                  
                  
                  41,932,542
                  
                  
                  18,083,208Deficit
                      accumulated during development stage
                  
                  
                  (30,881,083
                  )
                  
                  (13,955,035
                  )Dividends
                      payable in shares
                  
                  
                  150,756
                  
                  
                  303,411Accumulated
                      other comprehensive income
                  
                  
                  2,961
                  
                  
                  13,237Unearned
                      consulting services
                  
                  
                  —
                  
                  
                  (20,168
                  )Total
                      stockholders’ equity
                  
                  
                  11,264,591
                  
                  
                  4,453,816Total
                      liabilities and stockholders' equity
                  
                  $
                  13,073,286
                  
                  $
                  5,649,521
  See
                      accompanying notes to unaudited condensed consolidated financial
                      statements.
  3
 **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 September 30,**
                  
                  **Nine
                      Months ended September 30,**
                  
                  **September
                      30,****2005**
                  
                  **2004**
                  
                  **2005**
                  
                  **2004**
                  
                  **2005**Revenue
                  
                  $
                  —
                  
                  $
                  —
                  
                  $
                  —
                  
                  $
                  —
                  
                  $
                  —Costs
                      and expenses:Research
                      and development
                  
                  
                  1,370,733
                  
                  
                  1,678,939
                  
                  
                  3,292,008
                  
                  
                  2,907,173
                  
                  
                  9,894,442General
                      and administrative
                  
                  
                  490,894
                  
                  
                  562,752
                  
                  
                  1,537,298
                  
                  
                  1,443,745
                  
                  
                  5,662,788In-process
                      research and development charge
                  
                  
                  —
                  
                  
                  —
                  
                  
                  11,887,807
                  
                  
                  —
                  
                  
                  11,887,807Impairment
                      of intangible assets
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  1,248,230Loss
                      on disposition of intangible assets
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  1,213,878Total
                      operating expenses
                  
                  
                  1,861,627
                  
                  
                  2,241,691
                  
                  
                  16,717,113
                  
                  
                  4,350,918
                  
                  
                  29,907,145Operating
                      loss
                  
                  
                  (1,861,627
                  )
                  
                  (2,241,691
                  )
                  
                  (16,717,113
                  )
                  
                  (4,350,918
                  )
                  
                  (29,907,145
                  )Other
                      (income) expense:Interest
                      and other income
                  
                  
                  (49,137
                  )
                  
                  (47,614
                  )
                  
                  (117,484
                  )
                  
                  (128,705
                  )
                  
                  (309,173
                  )Interest
                      expense
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  23,893Realized
                      gain on sale of marketable equity securities
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  (71,182
                  )
                  
                  (71,182
                  )Total
                      other income
                  
                  
                  (49,137
                  )
                  
                  (47,614
                  )
                  
                  (117,484
                  )
                  
                  (199,887
                  )
                  
                  (356,462
                  )Net
                      loss
                  
                  
                  (1,812,490
                  )
                  
                  (2,194,077
                  )
                  
                  (16,599,629
                  )
                  
                  (4,151,031
                  )
                  
                  (29,550,683
                  )Preferred
                      stock dividends (including imputed amounts)
                  
                  
                  (75,018
                  )
                  
                  (102,273
                  )
                  
                  (326,419
                  )
                  
                  (495,078
                  )
                  
                  (1,330,400
                  )Net
                      loss applicable to common shares
                  
                  $
                  (1,887,508
                  )
                  $
                  (2,296,350
                  )
                  $
                  (16,926,048
                  )
                  $
                  (4,646,109
                  )
                  $
                  (30,881,083
                  )Net
                      loss per common share:Basic
                      and diluted
                  
                  $
                  (0.04
                  )
                  $
                  (0.09
                  )
                  $
                  (0.44
                  )
                  $
                  (0.17
                  )Weighted
                      average shares of common stock outstanding:Basic
                      and diluted
                  
                  
                  44,667,025
                  
                  
                  26,866,155
                  
                  
                  38,174,238
                  
                  
                  26,585,823
 
 See
                    accompanying notes to unaudited condensed consolidated financial
                    statements.
 4
 **MANHATTAN
                      PHARMACEUTICALS, INC. AND SUBSIDIARIES**(A
                      Development Stage Company)Condensed
                      Consolidated Statement of Stockholders' Equity
                      (Deficiency)(Unaudited)
 **Deficit**
                  
                  **Dividends**
                  
                  
                  
                  
                  
                  **Total****Series
                      A**
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  **accumulated**
                  
                  **payable
                      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)**
                  
                  **costs**
                  
                  **(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
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  4,000Stock
                      issued at $0.0004 per share for license rights
                  
                  
                  —
                  
                  
                  —
                  
                  
                  2,541,935
                  
                  
                  2,542
                  
                  
                  (1,542
                  )
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  1,000Stock
                      options issued for consulting services
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  60,589
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  (60,589
                  )
                  
                  —Amortization
                      of unearned consulting services
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  22,721
                  
                  
                  22,721Sales
                      of common stock at $0.63 per share through private placement,
                      net of
                      expenses
                  
                  
                  —
                  
                  
                  —
                  
                  
                  3,043,332
                  
                  
                  3,043
                  
                  
                  1,701,275
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  1,704,318Net
                      loss
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  
                  
                  
                  —
                  
                  
                  (1,037,320
                  )
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  (1,037,320
                  )Balance
                      at December 31, 2002
                  
                  
                  —
                  
                  
                  —
                  
                  
                  15,753,008
                  
                  
                  15,753
                  
                  
                  1,754,154
                  
                  
                  —
                  
                  
                  (1,094,116
                  )
                  
                  —
                  
                  
                  —
                  
                  
                  (37,868
                  )
                  
                  637,923Common
                      stock issued at $0.63 per share, net of expenses
                  
                  
                  —
                  
                  
                  —
                  
                  
                  1,321,806
                  
                  
                  1,322
                  
                  
                  742,369
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  743,691Effect
                      of reverse acquisition
                  
                  
                  —
                  
                  
                  —
                  
                  
                  6,287,582
                  
                  
                  6,287
                  
                  
                  2,329,954
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  2,336,241Amortization
                      of unearned consulting costs
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  37,868
                  
                  
                  37,868Unrealized
                      loss on short-term investments
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  (7,760
                  )
                  
                  —
                  
                  
                  (7,760
                  )Payment
                      for fractional shares for stock combination
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  (300
                  )
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  (300
                  )Preferred
                      stock issued at $10 per share, net of expenses
                  
                  
                  1,000,000
                  
                  
                  1,000
                  
                  
                  —
                  
                  
                  —
                  
                  
                  9,045,176
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  9,046,176Imputed
                      preferred stock dividend
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  418,182
                  
                  
                  —
                  
                  
                  (418,182
                  )
                  
                  —
                  
                  
                  
                  
                  
                  
                  
                  
                  —Net
                      loss
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  (5,960,907
                  )
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  (5,960,907
                  )Balance
                      at December 31, 2003
                  
                  
                  1,000,000
                  
                  
                  1,000
                  
                  
                  23,362,396
                  
                  
                  23,362
                  
                  
                  14,289,535
                  
                  
                  —
                  
                  
                  (7,473,205
                  )
                  
                  —
                  
                  
                  (7,760
                  )
                  
                  —
                  
                  
                  6,832,932Exercise
                      of stock options
                  
                  
                  —
                  
                  
                  —
                  
                  
                  27,600
                  
                  
                  27
                  
                  
                  30,073
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  30,100Common
                      stock issued through private placement at $1.10 per share,
                      net of
                      expenses
                  
                  
                  —
                  
                  
                  —
                  
                  
                  3,368,952
                  
                  
                  3,369
                  
                  
                  3,358,349
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  3,361,718Conversion
                      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
                  )
                  
                  4,590Amortization
                      of unearned consulting costs
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  100,800
                  
                  
                  100,800Reversal
                      of unrealized loss on short-term investments and unrealized
                      gain on
                      short-term investments
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  20,997
                  
                  
                  —
                  
                  
                  20,997Net
                      loss
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  (5,896,031
                  )
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  (5,896,031
                  )Balance
                      at December 31, 2004
                  
                  
                  854,373
                  
                  
                  854
                  
                  
                  28,309,187
                  
                  
                  28,309
                  
                  
                  18,083,208
                  
                  
                  —
                  
                  
                  (13,955,035
                  )
                  
                  303,411
                  
                  
                  13,237
                  
                  
                  (20,168
                  )
                  
                  4,453,816Common
                      stock issued through private placement at $1.11 and $1.15 per
                      share, net
                      of expenses
                  
                  
                  —
                  
                  
                  —
                  
                  
                  11,917,680
                  
                  
                  11,918
                  
                  
                  12,257,686
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  12,269,604Exercise
                      of stock options
                  
                  
                  —
                  
                  
                  —
                  
                  
                  32,400
                  
                  
                  33
                  
                  
                  32,367
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  32,400Exercise
                      of warrants
                  
                  
                  —
                  
                  
                  —
                  
                  
                  278,080
                  
                  
                  277
                  
                  
                  68,214
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  68,491Conversion
                      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
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  (326,419
                  )
                  
                  326,419
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —Stock
                      based compensation
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  28,054
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  20,168
                  
                  
                  48,222Reversal
                      of unrealized gain on short-term investments
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  (10,276
                  )
                  
                  —
                  
                  
                  (10,276
                  )Costs
                      associated with private placement
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  (49,725
                  )
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  (49,725
                  )Stock
                      issued in connection with acquisition of Tarpan Therapeutics,
                      Inc.
                  
                  
                  —
                  
                  
                  —
                  
                  
                  10,731,052
                  
                  
                  10,731
                  
                  
                  11,042,253
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  11,052,984Net
                      loss
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  (16,599,629
                  )
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  (16,599,629
                  )Balance
                      at September 30, 2005
                  
                  
                  —
                  
                  $
                  —
                  
                  
                  59,415,257
                  
                  $
                  59,415
                  
                  $
                  41,932,542
                  
                  $
                  —
                  
                  $
                  (30,881,083
                  )
                  $
                  150,756
                  
                  $
                  2,961
                  
                  $
                  —
                  
                  $
                  11,264,591
 
 See
                    accompanying notes to unaudited condensed consolidated financial
                    statements.
 5
 **MANHATTAN
                      PHARMACEUTICALS, INC. AND SUBSIDIARIES**(A
                      Development Stage Company)Condensed
                      Consolidated Statements of Cash Flows(Unaudited)
  **Cumulative****period
                        from****August
                        6, 2001****(inception)
                        to****Nine
                        months ended September 30,**
                    
                    **September
                        30,****2005**
                    
                    **2004**
                    
                    **2005**Cash
                        flows from operating activities:Net
                        loss
                    
                    $
                    (16,599,629
                    )
                    $
                    (4,151,031
                    )
                    $
                    (29,550,683
                    )Adjustments
                        to reconcile net loss tonet
                        cash used in operating activities:Common
                        stock issued for license rights
                    
                    
                    —
                    
                    
                    —
                    
                    
                    1,000Stock
                        based compensation
                    
                    
                    48,222
                    
                    
                    70,560
                    
                    
                    209,611Warrants
                        issued for consulting services
                    
                    
                    —
                    
                    
                    —
                    
                    
                    4,590Amortization
                        of intangible assets
                    
                    
                    —
                    
                    
                    —
                    
                    
                    145,162Gain
                        on sale of marketable equity securities
                    
                    
                    —
                    
                    
                    (71,182
                    )
                    
                    (71,182
                    )Depreciation
                    
                    
                    40,233
                    
                    
                    15,806
                    
                    
                    73,793Non
                        cash portion of in-process research and development charge
                    
                    
                    11,721,623
                    
                    
                    —
                    
                    
                    11,721,623Loss
                        on impairment of intangible assets
                    
                    
                    —
                    
                    
                    —
                    
                    
                    1,248,230Loss
                        on disposition of intangible assets
                    
                    
                    —
                    
                    
                    —
                    
                    
                    1,213,878Changes
                        in operating assets and liabilities, net of acquisitions:Decrease
                        in prepaid expenses
                    
                    
                    19,948
                    
                    
                    2,291
                    
                    
                    38,067Increase
                        in other assets
                    
                    
                    —
                    
                    
                    (70,506
                    )
                    
                    (70,506
                    )Increase
                        in accounts payable
                    
                    
                    543,862
                    
                    
                    838,019
                    
                    
                    1,363,730Increase
                        (decrease) in accrued expenses
                    
                    
                    43,077
                    
                    
                    (329,200
                    )
                    
                    (445,142
                    )Net
                        cash used in operating activities
                    
                    
                    (4,182,664
                    )
                    
                    (3,695,243
                    )
                    
                    (14,117,829
                    )Cash
                        flows from investing activities:Purchase
                        of property and equipment
                    
                    
                    (23,180
                    )
                    
                    (131,298
                    )
                    
                    (168,074
                    )Cash
                        paid in connection with acquisitions
                    
                    
                    —
                    
                    
                    —
                    
                    
                    (32,808
                    )Purchase
                        of short-term investments
                    
                    
                    —
                    
                    
                    —
                    
                    
                    (5,000,979
                    )Proceeds
                        from sale of short-term investments
                    
                    
                    3,494,147
                    
                    
                    431,089
                    
                    
                    4,425,236Proceeds
                        from sale of license
                    
                    
                    —
                    
                    
                    —
                    
                    
                    200,001Cash
                        acquired in acquisition
                    
                    
                    6,777
                    
                    
                    —
                    
                    
                    6,777Net
                        cash provided by (used in) investing activities
                    
                    
                    3,477,744
                    
                    
                    299,791
                    
                    
                    (569,847
                    )Cash
                        flows from financing activities:Proceeds
                        from issuances of notes payable to stockholders
                    
                    
                    —
                    
                    
                    —
                    
                    
                    233,500Repayments
                        of notes payable to stockholders
                    
                    
                    (651,402
                    )
                    
                    —
                    
                    
                    (884,902
                    )Proceeds
                        from issuance of note payable to bank
                    
                    
                    —
                    
                    
                    —
                    
                    
                    600,000Repayment
                        of note payable to bank
                    
                    
                    —
                    
                    
                    —
                    
                    
                    (600,000
                    )Proceeds
                        from subscriptions receivable
                    
                    
                    —
                    
                    
                    —
                    
                    
                    4,000Payment
                        for fractional shares for stock combination
                    
                    
                    (1,296
                    )
                    
                    (1,290
                    )
                    
                    (2,286
                    )Proceeds
                        from sale of common stock, net
                    
                    
                    12,269,604
                    
                    
                    3,361,718
                    
                    
                    18,078,730Costs
                        associated with private placement
                    
                    
                    (49,725
                    )
                    
                    —
                    
                    
                    (49,725
                    )Proceeds
                        from sale of preferred stock, net
                    
                    
                    —
                    
                    
                    —
                    
                    
                    9,046,176Proceeds
                        from exercise of stock options
                    
                    
                    32,400
                    
                    
                    30,100
                    
                    
                    62,500Proceeds
                        from exercise of warrants
                    
                    
                    68,491
                    
                    
                    —
                    
                    
                    68,491Net
                        cash provided by financing activities
                    
                    
                    11,668,072
                    
                    
                    3,390,528
                    
                    
                    26,556,484Net
                        increase (decrease) in cash and cash equivalents
                    
                    
                    10,963,152
                    
                    
                    (4,924
                    )
                    
                    11,868,808Cash
                        and cash equivalents at beginning of period
                    
                    
                    905,656
                    
                    
                    7,413,803
                    
                    
                    —Cash
                        and cash equivalents at end of period
                    
                    $
                    11,868,808
                    
                    $
                    7,408,879
                    
                    $
                    11,868,808Supplemental
                        disclosure of cash flow information:Interest
                        paid
                    
                    $
                    —
                    
                    $
                    —
                    
                    $
                    26,934Supplemental
                        disclosure of noncash investing and financing activities:Stock
                        options/warrants issued for consulting services
                    
                    $
                    312,954
                    
                    $
                    120,968
                    
                    $
                    494,511Preferred
                        stock dividends accrued
                    
                    
                    326,419
                    
                    
                    495,078
                    
                    
                    912,218Conversion
                        of preferred stock to common stock
                    
                    
                    829
                    
                    
                    —
                    
                    
                    1,000Preferred
                        stock dividends paid by issuance of shares
                    
                    
                    477,736
                    
                    
                    —
                    
                    
                    759,134Issuance
                        of common stock for acquisitions
                    
                    
                    11,052,984
                    
                    
                    —
                    
                    
                    13,389,226Marketable
                        equity securities received in connection withsale
                        of license
                    
                    
                    —
                    
                    
                    —
                    
                    
                    359,907Net
                        liabilities assumed in business combination
                    
                    
                    (675,416
                    )
                    
                    —
                    
                    
                    (675,416
                    )
  See
                        accompanying notes to unaudited condensed consolidated financial
                        statements.
 6
 MANHATTAN
          PHARMACEUTICALS, INC. and SUBSIDIARIES
 (A
          Development Stage Company)
 
 NOTES
          TO
          CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 September
          30, 2005
  (1) BASIS
        OF
        PRESENTATION
 
 The
        accompanying unaudited condensed consolidated financial statements have been
        prepared in accordance with accounting principles generally accepted in the
        United States of America for interim financial information. Accordingly,
        the
        consolidated financial statements do not include all information and footnotes
        required by accounting principles generally accepted in the United States
        of
        America for complete annual financial statements. In the opinion of management,
        the accompanying unaudited condensed consolidated financial statements reflect
        all adjustments, consisting of only normal recurring adjustments, considered
        necessary for a fair presentation. Interim operating results are not necessarily
        indicative of results that may be expected for the year ending December 31,
        2005 or for any subsequent period. These unaudited condensed consolidated
        financial statements should be read in conjunction with audited financial
        statements of Manhattan Pharmaceuticals, Inc. and its subsidiaries (“Manhattan”
        or the “Company”) as of and for the year ended December 31, 2004, which are
        included in the Company’s Annual Report on Form 10-KSB for such year. The
        condensed consolidated balance sheet as of December 31, 2004 has been derived
        from the audited consolidated financial statements included in the Form 10-KSB
        for that year.
 
 (2) LIQUIDITY
 
 The
        Company reported a net loss of $16,599,629 and negative cash flows from
        operating activities of $4,182,664 for the nine months ended September 30,
        2005.
        The net loss from date of inception, August 6, 2001, to September 30, 2005
        amounts to $29,550,683.
 
 Management
        believes that the Company will continue to incur net losses through at least
        September 30, 2006 and for the foreseeable future. Based on the resources
        of the
        Company available at September 30, 2005, management believes that the Company
        will need additional equity or debt financing or will need to generate revenues
        during 2006 through licensing of its products or entering into strategic
        alliances to be able to sustain its operations beyond 2006 and that
        it will
        need additional financing thereafter until it can achieve profitability,
        if
        ever.
 
 The
        Company’s continued operations will depend on its ability to raise additional
        funds through various potential sources such as equity and debt financing,
        collaborative agreements, strategic alliances and its ability to realize
        the
        full potential of its technology in development. Additional funds may not
        become
        available on acceptable terms, and there can be no assurance that any additional
        funding that the Company does obtain will be sufficient to meet the Company’s
        needs in the long term. Through September 30, 2005, a significant portion
        of the
        Company’s financing has been through private placements of common and preferred
        stock. Until and unless the Company’s operations generate significant revenues
        and cash flows from operating activities, the Company will attempt to continue
        to fund operations from cash on hand and through the sources of capital
        previously described.
 
 As
        described in Note 6, the Company recently completed a private placement offering
        of units consisting of shares of its common stock and warrants to purchase
        additional shares of common stock. The private placement was completed in
        two
        separate closings held on August 26, 2005 and August 30, 2005, respectively.
        In
        the August 26 closing, the Company sold a total of 10,808,971 shares of common
        stock and five-year warrants to purchase 2,161,767 shares for total gross
        proceeds of approximately $12 million. The warrants issued at the August
        26
        closing are exercisable at a price of $1.44 per share. On August 30, 2005,
        the
        Company closed on the sale of an additional 1,108,709 shares of common stock
        and
        warrants to purchase 221,741 common shares, which resulted in gross proceeds
        of
        approximately $1.28 million. The warrants issued in connection with the August
        30 closing are exercisable at a price of $1.49 per share. Accordingly, the
        total
        gross proceeds resulting from the private placement was $13.27 million, before
        deducting selling commissions and expenses.
  7
  MANHATTAN
        PHARMACEUTICALS, INC. and SUBSIDIARIES
 (A
        Development Stage Company)
 
 NOTES
        TO
        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 September
        30, 2005
  The
        terms
        of the Company’s Series A Preferred Stock, which was originally issued in
        November 2003, provided for its automatic conversion upon the Company’s
        completion of a financing that results in gross proceeds to of at least $10
        million at a pre-money valuation of the Company of at least $30 million.
        Accordingly, as a result of the August 26, 2005 closing of the Company’s private
        placement discussed above, all of the remaining outstanding shares of the
        Company’s Series A Preferred Stock automatically converted into shares of the
        Company’s common stock. As of such date, there were 729,626 shares of Series A
        Preferred Stock outstanding, which, upon the closing of the private placement,
        converted into an aggregate of 6,632,957 shares of common stock (at a rate
        of
        9.0909 common shares per share of preferred stock).
 
 (3) COMPUTATION
        OF NET LOSS PER COMMON SHARE
 
 Basic
        net
        loss per common share is calculated by dividing net loss applicable to common
        shares by the weighted-average number of common shares outstanding for the
        period. Diluted net loss per common share is the same as basic net loss per
        common share, since potentially dilutive securities from stock options, stock
        warrants and convertible preferred stock would have an antidilutive effect
        because the Company incurred a net loss during each period presented. The
        amount
        of potentially dilutive securities excluded from the calculation was 12,754,038
        and 16,161,738 as of September 30, 2005 and 2004, respectively.
 
 (4) STOCK
        OPTIONS
 
 On
        January 11, 2005, the Company granted directors and employees options to
        purchase an aggregate of 367,280 shares of common stock under the Company’s 2003
        Stock Option Plan at an exercise price of $1.00 per share. 168,030 shares
        subject to these options vest in three equal annual installments starting
        on the
        grant date and
        continuing each anniversary thereafter ,
        provided the optionee continues in service. 50,000 shares subject to these
        options vest in two equal annual installments starting on January 3, 2006,
        provided the optionee continues in service, and 149,250 shares subject to
        these
        options vest in three equal annual installments starting one year from the
        grant
        date, provided the optionee continues in service. On April 1, 2005, the Company
        granted its Chief Executive Officer an option to purchase an aggregate of
        2,923,900 shares of common stock under the Company’s 2003 Stock Option Plan at
        an exercise price of $1.50 per share. The option vests in three equal
        installments, on November 1, 2005, November 1, 2006 and November 1, 2007.
        On
        June 16, 2005, the Company granted a consultant options to purchase an aggregate
        of 100,000 shares of common stock under the Company’s 2003 Stock Option Plan at
        an exercise price of $1.60 per share. On August 29, 2005, the Company granted
        a
        consultant options to purchase an aggregate of 250,000 shares of common stock
        under the Company’s 2003 Stock Option Plan at an exercise price of $1.50 per
        share. All shares subject to these options, with the exception of the options
        granted on August 29, 2005, vest in thirty-six equal monthly installments
        beginning on the first month anniversary of the date of the grant, provided
        the
        consultant continues to provide services to the Company. The shares subject
        to
        the options granted on August 29, 2005 vest as follows: 25,000 options vest
        immediately; 50,000 upon reaching a share price goal of $2.50; 75,000 upon
        reaching a share price goal of $3.50; and 100,000 upon reaching a share price
        goal of $5.00.
 8
  MANHATTAN
        PHARMACEUTICALS, INC. and SUBSIDIARIES
 (A
        Development Stage Company)
 
 NOTES
        TO
        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 September
        30, 2005
  The
        Company uses the intrinsic value method of accounting for employee stock
        options
        pursuant to the provisions of APB Opinion No. 25. Since all of the options
        granted by the Company have been at exercise prices that were at least equal
        to
        the market value at the date of grant, there were no charges to operations
        upon
        issuance. Had compensation costs been determined using the Black-Scholes
        option
        pricing model in accordance with the fair value method prescribed by Statement
        of Financial Accounting Standards No. 123 (“SFAS No. 123”) for all options
        issued to employees and amortized over the vesting period, the Company’s net
        loss applicable to common shares and net loss per common share (basic and
        diluted) would have been increased to the pro forma amounts indicated
        below.
 **Three
                          months ended**
                      
                      
                      **Nine
                          months ended****September
                          30,**
                      
                      
                      **September
                          30,****2005**
                      
                      
                      **2004**
                      
                      
                      **2005**
                      
                      
                      **2004**Net
                          loss applicable to common shares, as reported
                      
                      $
                      (1,887,508
                      )
                      $
                      (2,296,350
                      )
                      $
                      (16,926,048
                      )
                      $
                      (4,646,109
                      )Deduct: 
                          Total
                          stock-based employeecompensation
                          expense determinedunder
                          fair value method
                      
                      
                      (393,305
                      )
                      
                      (432,923
                      )
                      
                      (954,524
                      )
                      
                      (997,211
                      )Net
                          loss applicable to common shares, pro forma
                      
                      $
                      (2,280,813
                      )
                      $
                      (2,729,273
                      )
                      $
                      (17,880,572
                      )
                      $
                      (5,643,320
                      )Net
                          loss per common share - basicAs
                          reported
                      
                      $
                      (0.04
                      )
                      $
                      (0.09
                      )
                      $
                      (0.44
                      )
                      $
                      (0.17
                      )Pro
                          forma
                      
                      
                      (0.05
                      )
                      
                      (0.10
                      )
                      
                      (0.47
                      )
                      
                      (0.21
                      )
  As
        a
        result of amendments to SFAS No. 123, the Company will be required to expense
        the fair value of employee stock options over the vesting period, beginning
        January 1, 2006.
  The
        fair
        value of each option granted is estimated on the date of the grant using
        the
        Black-Scholes option pricing model with the following weighted average
        assumptions used for the grants in the nine months ended September 30, 2005:
        dividend yield of 0%; expected volatility of 69%; risk-free interest rate
        of
        4.1%; and expected lives of five years. The following assumptions were used
        for
        the grants in the nine months ended September 30, 2004: dividend yield of
        0%;
        expected volatility of 82%; risk-free interest rate of 3.2%; and expected
        lives
        of eight years. The following weighted average assumptions were used for
        the
        grants in the three months ended September 30, 2005: dividend yield of 0%;
        expected volatility of 69%; risk-free interest rate of 4.1%; and expected
        lives
        of five years. The following weighted average assumptions were used for the
        grants in the three months ended September 30, 2004: dividend yield of 0%;
        expected volatility of 73.6%; risk-free interest rate of 2.0%; and expected
        lives of five years.
  9
 MANHATTAN
        PHARMACEUTICALS, INC. and SUBSIDIARIES
 (A
        Development Stage Company)
 
 NOTES
        TO
        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 September
        30, 2005
  (5) ACQUISITION
        OF TARPAN THERAPEUTICS, INC.
 
 On
        April
        1, 2005, the Company entered into an Agreement and Plan of Merger (the
“Agreement”) with Tarpan Therapeutics, Inc., a Delaware corporation (“Tarpan”),
        and Tarpan Acquisition Corp., a Delaware corporation and wholly-owned subsidiary
        of the Company (“TAC”). The Agreement provided that TAC would merge with and
        into Tarpan, with Tarpan remaining as the surviving corporation and a
        wholly-owned subsidiary of the Company (the “Merger”). The Merger was completed
        April 1, 2005. In consideration for their shares of Tarpan capital stock
        and in
        accordance with the Agreement, the stockholders of Tarpan received 10,731,052
        shares of the Company’s common stock such that, upon the effective time of the
        Merger, the Tarpan stockholders collectively received approximately
        20
        percent of the Company’s outstanding common stock on a fully-diluted basis.
        Based on the five day average price of the Company’s common stock of $1.03 per
        share, the purchase price totaled $11,052,984, plus $166,184 of acquisition
        costs. At the time of the Merger, Tarpan had outstanding indebtedness of
        $651,000 resulting from a series of promissory notes issued to Paramount
        BioCapital Investments, LLC and Horizon BioMedical Ventures, LLC, both of
        which
        are owned or controlled by Dr. Lindsay Rosenwald. The notes were amended
        at the
        time of the Merger to provide that one-half of the outstanding indebtedness
        was
        payable upon completion of the Merger and the remaining one-half was payable
        at
        such time as the Company raised at least $5 million in new financing. The
        Notes
        were repaid as a result of the sale of units in August 2005 (see Note
        6).
 
 The
        acquisition of Tarpan has been accounted for by the Company under the purchase
        method of accounting in accordance with Statement of Financial Accounting
        Standards No. 141 “Business Combinations”. Under the purchase method, assets
        acquired and liabilities assumed by the Company are recorded at their estimated
        fair values and the results of operations of the acquired company are
        consolidated with those of the Company from the date of
        acquisition.
 
 Several
        of Tarpan’s former stockholders are directors or significant stockholders of the
        Company. Dr. Rosenwald and various trusts established for the benefit of
        Dr.
        Rosenwald and members of his immediate family collectively beneficially owned
        approximately 46 percent of Tarpan’s common stock and beneficially own
        approximately 26 percent of the Company’s common stock. In addition, Joshua
        Kazam, David Tanen, Dr. Michael Weiser and Timothy McInerney, all of whom
        were
        members of the Company’s board of directors at the time of the transaction,
        collectively owned approximately 13.4 percent of Tarpan’s outstanding common
        stock. Dr. Weiser and Mr. McInerney are also employed by Paramount BioCapital,
        Inc., an entity owned and controlled by Dr. Rosenwald. As a result of such
        relationships between the Company and Tarpan, the Company’s board of directors
        established a special committee to consider and approve the Agreement. The
        members of the special committee did not have any prior relationship with
        Tarpan.
 
 Upon
        completion of the Merger, Douglas Abel, formerly chief executive officer
        of
        Tarpan, was appointed President and Chief Executive Officer and director
        of the
        Company. As contemplated by the merger agreement, the Company entered into
        an
        employment agreement dated April 1, 2005 with Mr. Abel. The employment agreement
        has a three-year term commencing on April 1, 2005, which may be extended
        for
        additional one-year periods thereafter. Under the agreement, Mr. Abel is
        entitled to an annual salary of $300,000, in addition to health, disability
        insurance and other benefits. The annual salary shall be increased to $325,000
        at such time as the Company completes a financing transaction that results
        in
        aggregate gross proceeds to the Company of at least $5,000,000, retroactive
        to
        the date of the employment agreement, which condition was satisfied in August
        2005. In addition, the Company will pay Mr. Abel a cash bonus of $200,000
        in the
        first year and he may receive a discretionary bonus in the first and subsequent
        years of up to 50 percent of his base salary. Pursuant to his employment
        agreement, Mr. Abel was granted an option to purchase an aggregate of 2,923,900
        shares of common stock at a price of $1.50 per share. The option vests in
        three
        equal installments, on November 1, 2005, November 1, 2006, and November 1,
        2007.
  10
 MANHATTAN
        PHARMACEUTICALS, INC. and SUBSIDIARIES
 (A
        Development Stage Company)
 
 NOTES
        TO
        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 September
        30, 2005
  The
        excess purchase price paid by the Company to acquire the net assets of Tarpan
        was allocated to acquired in-process research and development totaling
        $11,887,807. As required by FASB Interpretation No. 4, “Applicability of FASB
        Statement No. 2 to Business combinations Accounted for by the Purchase Method
“
        (“FIN4”), the Company recorded a charge in its statements of operations for the
        nine months ended September 30, 2005 for the in-process research and
        development. Tarpan is a biopharmaceutical company engaged in the development
        of
        the Phase II pharmaceutical product candidate, PTH (1-34). The acquisition
        of
        Tarpan gives Manhattan this third product candidate. Results of operations
        of
        Tarpan are included in the consolidated financials since April 1, 2005.
 
 A
        summary
        of the allocation of the purchase price is as follows:
  Assets
                    purchased:Cash
                
                $
                6,777Property
                    and equipment
                
                
                2,037Acquired
                    in-process research and development
                
                
                11,887,807Total
                
                
                11,896,621Liabilities
                    assumed:Accounts
                    payable
                
                
                26,051Notes
                    payable - related parties
                
                
                651,402Total
                
                
                677,453Net
                    purchase price
                
                $
                11,219,168
  The
        following unaudited pro forma financial information presents the condensed
        consolidated results of operations of the Company and Tarpan, as if the
        acquisition had occurred on January 1, 2005 and 2004 instead of April 1,
        2005,
        after giving effect to certain adjustments, including the issuance of the
        Company’s common stock as part of the purchase price. The unaudited pro forma
        information does not necessarily reflect the results of operations that would
        have occurred had the entities been a single company during these
        periods.
  11
  MANHATTAN
        PHARMACEUTICALS, INC. and SUBSIDIARIES
 (A
        Development Stage Company)
 
 NOTES
        TO
        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 September
        30, 2005
  **Three
                      months ended**
                  
                  
                  **Nine
                      months ended****September
                      30,**
                  
                  
                  **September
                      30,****2005**
                  
                  
                  **2004**
                  
                  
                  **2005**
                  
                  
                  **2004**Net
                      loss
                  
                  $
                  (1,812,490
                  )
                  $
                  (2,200,061
                  )
                  $
                  (16,726,890
                  )
                  $
                  (16,350,524
                  )Weighted
                      average number of common shares outstanding
                  
                  
                  44,667,025
                  
                  
                  37,597,207
                  
                  
                  41,724,954
                  
                  
                  37,316,875Loss
                      per common share - basic and fully diluted
                  
                  $
                  (0.04
                  )
                  $
                  (0.06
                  )
                  $
                  (0.40
                  )
                  $
                  (0.44
                  )
  (6) PRIVATE
        PLACEMENT OF COMMON SHARES
 
 The
        Company recently completed a private placement offering of units consisting
        of
        shares of its common stock and warrants to purchase additional shares of
        common
        stock. The private placement was completed in two separate closings held
        on
        August 26, 2005 and August 30, 2005, respectively. In the August 26 closing,
        the
        Company sold a total of 10,808,971 shares of common stock and five-year warrants
        to purchase 2,161,767 shares for total gross proceeds of approximately $12
        million. The warrants issued at the August 26 closing are exercisable at
        a price
        of $1.44 per share. On August 30, 2005, the Company closed on the sale of
        an
        additional 1,108,709 shares of common stock and warrants to purchase 221,741
        common shares, which resulted in gross proceeds of approximately $1.28 million.
        The warrants issued in connection with the August 30 closing are exercisable
        at
        a price of $1.49 per share. Accordingly, the total gross proceeds resulting
        from
        the private placement was $13.27 million, before deducting selling commissions
        and expenses.
 
 The
        Company engaged Paramount BioCapital, Inc. (“Paramount”) an affiliate of a
        significant stockholder of the Company, as placement agent and paid total
        cash
        commissions of $836,360, of which $121,625 was paid to certain selected dealers
        engaged by Paramount in connection with the private placement and issued
        five-year warrants to purchase an aggregate of 538,191 shares of common stock
        exercisable at a price of $1.44 per share, of which Paramount received warrants
        to purchase 459,932 common shares. In connection with the August 30 closing,
        the
        Company paid cash commissions to Paramount of $88,550 and issued an additional
        five-year warrant to purchase 55,000 common shares exercisable at a price
        of
        $1.49 per share. After deduction of these selling commissions and expenses,
        the
        Company realized aggregate net proceeds from its August 2005 private placement
        of approximately $12.3 million. Timothy McInerney and Dr. Michael Weiser,
        each a
        director of the Company, are employees of Paramount BioCapital,
        Inc.
  The
        terms
        of the Company’s Series A Preferred Stock, which was originally issued in
        November 2003, provided for its automatic conversion upon the Company’s
        completion of a financing that resulted in gross proceeds of at least $10
        million and a “pre-money valuation” of the Company of at least $30 million.
        Accordingly, as a result of the August 26, 2005 closing of the Company’s private
        placement discussed above, all of the remaining outstanding shares of the
        Company’s Series A Preferred Stock automatically converted into shares of the
        Company’s common stock. As of such date, there were 729,626 shares of Series A
        Preferred Stock outstanding, which, upon the closing of the private placement,
        converted into an aggregate of 6,632,957 shares of common stock (at a rate
        of
        9.0909 common shares per share of preferred stock).
  12
  MANHATTAN
        PHARMACEUTICALS, INC. and SUBSIDIARIES
 (A
        Development Stage Company)
 
 NOTES
        TO
        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 September
        30, 2005
  (7) SUBSEQUENT
        EVENTS
 
 On
        October 21, 2005, the Company issued 675,675 shares of common stock to Cato
        BioVentures, an affiliate of Cato Research, Inc., in exchange for forgiveness
        of
        $750,000 of accounts payable owed by the Company to Cato Research, Inc. The
        transaction was completed on the same terms as the private placement
        described earlier which closed on August 26, 2005.
 
 
 
 
   13
   **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, 2004 (the “Annual Report”) and our financial statements
        as of and for the nine months ended September 30, 2005 included elsewhere
        in
        this report. This discussion includes “forward-looking” statements that reflect
        our current views with respect to future events and financial performance.
        We
        use words such as we “expect,”  “anticipate,”  “believe,” and “intend”
        and similar expressions to identify forward-looking statements. Investors
        should
        be aware that actual results may differ materially from our expressed
        expectations because of risks and uncertainties inherent in future events,
        particularly those risks identified in the “Risk Factors” section of the Annual
        Report, and should not unduly rely on these forward looking
        statements.**
  RESULTS
        OF OPERATIONS
  THREE-MONTH
        PERIOD ENDED SEPTEMBER 30, 2005 VS 2004
  During
        the quarters ended September 30, 2005 and 2004, we had no revenue. We do
        not
        expect to have significant revenues relating to our product candidates in
        development prior to September 30, 2006.
  For
        the
        quarter ended September 30, 2005, research and development expense was
        $1,370,733 as compared to $1,678,939 for the third quarter of 2004. The decrease
        of $308,206 is due primarily to completion of studies of our propofol lingual
        spray candidate partially offset by an acceleration of our Oleoyl-estrone
        drug
        candidate.
  For
        the
        quarter ended September 30, 2005, general and administrative expense was
        $490,894 as compared to $562,752 for the quarter ended September 30, 2004.
        The
        decrease of $71,858 is due primarily to decreases in consulting, outside
        services and rent expense of approximately $68,000, $37,000 and $21,000
        respectively. These decreases are partially offset by increases in taxes,
        travel
        and entertainment, directors’ fees and all other expenses of approximately
        $17,000, $13,000, $11,000 and $13,000, respectively.
  For
        the
        quarter ended September 30, 2005, interest and other income was $49,137 as
        compared to $47,614 for the quarter ended September 30, 2004. The increase
        of
        $1,523 is due primarily to an increase in cash balances and short-term
        investments.
  Net
        loss
        for the quarter ended September 30, 2005, was $1,812,490 as compared to
        $2,194,077 for the quarter ended September 30, 2004. This decrease in net
        loss
        is attributable primarily to decreases in research and development expenses
        of
        $308,206 and general and administrative expenses of $71,858, partially offset
        by
        an increase in interest and other income of $1,523.
  Preferred
        stock dividends of $75,018 and $102,273 reduced earnings per share for the
        three
        months ended September 30, 2005 and 2004 by $0.00 and $0.00,
        respectively.
  14
  NINE-MONTH
        PERIOD ENDED SEPTEMBER 30, 2005 VS 2004
  During
        the nine months ended September 30, 2005 and 2004, we had no revenue. We
        do not
        expect to have significant revenues relating to our product candidates in
        development prior to September 30, 2006.
  For
        the
        nine months ended September 30, 2005, research and development expense was
        $3,292,008 as compared to $2,907,173 for the nine months ended September
        30,
        2004. The increase of $384,835 is due primarily to an acceleration of
        pre-clinical development of our Oleoyl-estrone drug candidate.
  For
        the
        nine months ended September 30, 2005, general and administrative expense
        was
        $1,537,298 as compared to $1,443,745 for the nine months ended September
        30,
        2004. The increase of $93,553 is due primarily to increases in payroll and
        investor relations expenses of approximately $92,000 and $59,000, respectively.
        In addition we had increases in expenses related to taxes, directors’ fees and
        travel and entertainment of approximately $45,000, $34,000 and $25,000,
        respectively. These increases are partially offset by reductions in consulting,
        outside services and all other expenses of approximately $114,000, $29,000
        and
        $18,000, respectively.
  For
        the
        nine months ended September 30, 2005, interest and other income was $117,484
        as
        compared to $128,705 for the nine months ended September 30, 2004. The decrease
        of $11,221 is due primarily to a reduction in cash balances and short-term
        investments.
  Net
        loss
        for the nine months ended September 30, 2005, was $16,599,629 as compared
        to
        $4,151,031 for the nine months ended September 30, 2004. This increase in
        net
        loss is attributable primarily to the in-process research and development
        charge
        of $11,887,807 related to the acquisition of Tarpan. Additionally, there
        were
        increases in research and development expenses of $384,835 and general and
        administrative expenses of $93,553 as well as a reduction in interest and
        other
        income of $11,221. Finally in 2004 we had a realized gain on sale of marketable
        equity securities of $71,182, which we did not have in the current
        year.
  Preferred
        stock dividends of $326,419 and $495,078 reduced earnings per share for the
        nine
        months ended September 30, 2005 and 2004 by $0.01 and $0.02,
        respectively.
  LIQUIDITY
        AND CAPITAL RESOURCES
  From
        inception to September 30, 2005, we incurred a deficit during the development
        stage of $30,881,083 primarily as a result of losses, and we expect to continue
        to incur additional losses through at least September 30, 2006 and for the
        foreseeable future. The acquisition of Tarpan will increase these losses.
        These
        losses have been incurred through a combination of research and development
        activities related to the various technologies under our control and expenses
        supporting those activities.
  We
        have
        financed our operations since inception primarily through equity financing
        and
        our licensing and sale of residual royalty rights of CT-3 to Indevus. During
        the
        nine months ended September 30, 2005, we had a net increase in cash and cash
        equivalents of $10,963,152. This increase resulted from net cash provided
        by
        financing activities, substantially all of which was from the net proceeds
        of
        $12,269,604 from the private placement of 11,917,680 shares of common stock
        at
        $1.11 and $1.15 per share and investing activities, which included proceeds
        from
        the sale of short-term investments, of $3,494,147. These increases are partially
        offset by net cash used in operating activities of $4,182,664. Total liquid
        resources including short term investments as of September 30, 2005 were
        $12,878,601 compared to $5,419,872 at December 31, 2004.
  15
  Our
        current liabilities as of September 30, 2005 were $1,808,695 compared to
        $1,195,705 at December 31, 2004, an increase of $612,990. The increase was
        primarily due to an increase in expenditures associated with the commencement
        of
        our Phase I clinical trial for our Oleoyl-estrone product candidate. As of
        September 30, 2005, we had working capital of $11,090,084 compared to $4,264,293
        at December 31, 2004.
  We
        recently completed a private placement offering of units consisting of shares
        of
        our common stock and warrants to purchase additional shares of common stock.
        The
        private placement was completed in two separate closings held on August 26,
        2005
        and August 30, 2005. In the August 26 closing, we sold a total of 10,808,971
        shares of common stock and five-year warrants to purchase 2,161,767 shares
        for
        total gross proceeds of approximately $12 million. The warrants issued at
        the
        August 26 closing are exercisable at a price of $1.44 per share. On August
        30,
        2005, we closed on the sale of an additional 1,108,709 shares of common stock
        and warrants to purchase 221,741 common shares, which resulted in gross proceeds
        of approximately $1.28 million. The warrants issued in connection with the
        August 30 closing are exercisable at a price of $1.49 per share. Accordingly,
        the total gross proceeds resulting from the private placement was $13.27
        million, before deducting selling commissions and expenses.
 
 We
        engaged Paramount BioCapital, Inc. an affiliate of a significant stockholder
        of
        the Company, as placement agent and paid total cash commissions of $836,360,
        of
        which $121,625 was paid to certain selected dealers engaged by Paramount
        in
        connection with the private placement and issued five-year warrants to purchase
        an aggregate of 538,191 shares of common stock exercisable at a price of
        $1.44
        per share, of which Paramount received warrants to purchase 459,932 common
        shares. In connection with the August 30 closing, we paid cash commissions
        to
        Paramount of $88,550 and issued an additional five-year warrant to purchase
        55,000 common shares at a price of $1.49 per share. After deduction of these
        selling commissions and expenses, we realized aggregate net proceeds from
        our
        August 2005 private placement of approximately $12.2 million. Timothy McInerney
        and Dr. Michael Weiser, each a director of the Company, are employees of
        Paramount BioCapital, Inc.
  In
        accordance with the terms of the private placement, we agreed to file a
        registration statement under the Securities Act within 30 days of the final
        closing of the private placement covering the resale of the shares sold in
        the
        private placement, including the shares issuable upon the exercise of the
        warrants.
 
 As
        a
        result of this offering, we expect that our current cash position is sufficient
        to fund our operations, including the development of our three product
        candidates, through 2006.
 
 Our
        available working capital and capital requirements will depend upon numerous
        factors, including progress of our research and development programs, our
        progress in and the cost of ongoing and planned pre-clinical and clinical
        testing, the timing and cost of obtaining regulatory approvals, the cost
        of
        filing, prosecuting, defending, and enforcing patent claims and other
        intellectual property rights, competing technological and market developments,
        changes in our existing collaborative and licensing relationships, the resources
        that we devote to developing manufacturing and commercializing capabilities,
        the
        status of our competitors, our ability to establish collaborative arrangements
        with other organizations and our need to purchase additional capital
        equipment.
  Our
        continued operations will depend on whether we are able to raise additional
        funds through various potential sources, such as equity and debt financing,
        other collaborative agreements, strategic alliances, and our ability to realize
        the full potential of our technology in development. Such additional funds
        may
        not become available on acceptable terms and there can be no assurance
        that any additional funding that we do obtain will be sufficient to meet
        our
        needs in the long term. Through
        September 30, 2005, a significant portion of our financing has been through
        private placements of common stock and warrants. Unless our operations generate
        significant revenues and cash flows from operating activities, we will continue
        to fund operations from cash on hand and through the similar sources of capital
        previously described. We can give no assurances that any additional capital
        that
        we are able to obtain will be sufficient to meet our needs. Management
        believes that we will continue to incur net losses and negative cash flows
        from
        operating activities for the foreseeable future. Based on the resources
        available to us at September 30, 2005, management believes that we will need
        additional equity or debt financing or will need to generate revenues during
        2006 through licensing our products or entering into strategic alliances
        to be
        able to sustain our operations beyond 2006 and we will need additional
        financing thereafter until we can achieve profitability, if ever.
  16
  RESEARCH
        AND DEVELOPMENT PROJECTS
  ***Oleoyl-estrone.*** In
        January 2005, t he
        United
        States Food and Drug Administration (FDA) accepted our filed Investigational
        New
        Drug Application (IND) for the human clinical testing of oleoyl estrone.
        This
        IND allowance was granted on the preclinical chemistry, manufacturing, and
        safety data submitted to the FDA by the Company.
 
 In
        February 2005, we began dosing patients in our first Phase I trial in Basel,
        Switzerland to evaluate the safety and tolerability of defined doses of orally
        administered oleoyl-estrone in obese adults, in accordance with FDA guidelines
        after obtaining formal approval from the Swiss medical regulatory authority,
        Swissmedic. The objective of this human Phase I dose-escalation study was
        to
        determine the pharmacokinetic profile of oleoyl-estrone, as well as its safety
        and tolerability in obese adult volunteers of both genders. The study was
        completed in two parts, Phase Ia and Phase Ib. In May 2005, we concluded
        Phase
        Ia, in which 36 obese volunteers received a single dose of either OE or a
        placebo, in a dose escalating manner. The Phase Ib trial was a 7-day
        repeat-dose, dose escalation trial that evaluated 24 obese volunteers in
        four
        cohorts, randomized 2 to 1, active to placebo. Both Phase Ia and Phase Ib
        have
        been completed. Results from both studies will also be used, in conjunction
        with
        extensive preclinical work, to establish the protocol and obtain approval
        to
        begin Phase II clinical trials. The trial was being conducted under the IND
        accepted by the FDA in January 2005. Oleoyl-estrone
        was well tolerated at all doses and demonstrated no serious adverse events.
        In
        addition, there was evidence of reduction in weight and evidence of a reduction
        in desire to eat and hunger level, reduced fasting glucose, reduced LDL
        cholesterol and other key measures. Oleoyl-estrone also showed reversible,
        dose
        dependent elevations in estrone and estradiol levels as well as reductions
        in
        testosterone levels.
  To
        date,
        we have incurred $6,697,551 **** of
        project costs related to our development of oleoyl-estrone, including milestone
        payments triggered under our license agreement for oleoyl-estrone, of which
        $2,712,058 and $1,714,333 was incurred in the first nine months of 2005 and
        2004, respectively. Currently, we anticipate that we will need to expend
        approximately an additional $1,000,000 to $1,500,000 in development costs
        in
        fiscal 2005. Since oleoyl-estrone is regarded by the FDA as a new entity,
        it is
        not realistic to predict the size and the design of the study at this
        time.
 
 Although
        we currently have sufficient capital to fund our anticipated 2005 R&D
        expenditures relating to oleoyl-estrone, we will need to raise additional
        capital in order to complete the anticipated five or six year development
        program for the product. If we are unable to raise such additional capital,
        we
        may have to sublicense our rights to oleoyl-estrone to a third party as a
        means
        of continuing development, or, although less likely, we may be required to
        abandon further development efforts altogether, either of which would have
        a
        material adverse effect on the prospects of our business.
  17
  In
        addition to raising additional capital, whether we are successful in developing
        oleoyl-estrone is dependent on numerous other factors, including unforeseen
        safety issues, lack of effectiveness, significant unforeseen delays in the
        clinical trial and regulatory approval process, both of which could be extremely
        costly, and inability to monitor patients adequately before and after
        treatments. Additional
        risks and uncertainties are also described in our Annual Report on Form 10-KSB
        for the year ended December 31, 2004. The
        existence of any of these factors could increase our development costs or
        make
        successful completion of development impractical, which would have a material
        adverse affect on the prospects of our business.
 
 ***Lingual
        Spray Propofol.*** We
        are currently working to develop, manufacture and commercialize a propofol
        lingual spray. In July 2004, we released the results of the first human trial
        for our proprietary lingual spray formulation of propofol. In
        January 2005, the FDA accepted our IND for the initiation of the human clinical
        trials in the United States required for FDA approval of Propofol Lingual
        Spray
        (Propofol LS). We continue to pursue FDA approval of Propofol LS under 505(b)2
        regulatory pathway. Section
        505(b)2 of the U.S. Food, Drug & Cosmetic Act allows the FDA to approve a
        drug on the basis of existing data in the scientific literature or data used
        by
        the FDA in the approval of other drugs. Accordingly, the FDA has indicated
        to us
        that we will be able to utilize Section 505(b)2 to proceed directly to a
        pivotal
        Phase III trial for lingual spray propofol following completion of Phase
        I
        trials. We are actively planning the next steps of the clinical development
        process for Propofol LS, meeting with scientific advisors, Novadel and other
        research organizations regarding formulation, reviewing existing data,
        developing trial design, and evaluating plans to re-enter the
        clinic.
 
 To
        date,
        we have incurred $2,801,285 of project costs related to our development of
        propofol lingual spray, of which $184,345 and $1,266,644 was incurred during
        the
        first nine months of 2005 and 2004, respectively. Currently, we anticipate
        that
        we will need to expend approximately an additional $375,000 to $750,000 in
        development costs in fiscal 2005 and at least an aggregate of approximately
        $3,000,000 to $5,000,000 until we receive FDA approval for propofol, should
        we
        opt to continue development until then, including anticipated 2005 costs.
        As
        with our development of oleoyl-estrone, we believe we currently have sufficient
        capital to fund our development activities of propofol lingual spray during
        2005
        and 2006. Since our business does not generate any cash flow, however, we
        will
        need to raise additional capital to continue development of the product beyond
        2006. We expect to raise such additional capital through debt financings
        or by
        selling shares of our capital stock. To the extent additional capital is
        not
        available when we need it, we may be forced to sublicense our rights to propofol
        lingual spray or abandon our development efforts altogether, either of which
        would have a material adverse effect on the prospects of our
        business.
 
 ***PTH
        (1-34).*** To
        date,
        we have incurred $395,606 **** of
        project costs related to our development of PTH (1-34), which was incurred
        since
        April 1, 2005, the date of the Tarpan Therapeutics, Inc. acquisition. Currently,
        we anticipate that we will need to expend approximately an additional $750,000
        to $1,500,000 in development costs in fiscal 2005. We are working toward
        re-entering the clinic utilizing the existing open physician IND. In addition,
        we are planning for a meeting with the FDA to discuss our development plan
        for
        PTH (1-34). In light of the information available from the development of
        FORTEO® (which contains recombinant human parathyroid hormone (1-34),
        [rhPTH(1-34)]) and in the absence of the meeting with the FDA, we are not
        able
        to realistically predict the size and the design of the study at this time.
        As
        with our development of our other product candidates, we believe we currently
        have sufficient capital to fund our development activities of PTH (1-34)
        in
        their entirety during 2005. FORTEO® is a registered trademark of Eli Lilly and
        Company.
  18
  **Off-Balance
        Sheet Arrangements**
 
 We
        have
        not entered into any off-balance sheet arrangements.
 
 **Recently
        Issued Accounting Standards**
 
 In
        December 2004, the FASB issued SFAS No. 123(R) (revised 2004), “Share-Based
        Payment”, which amends SFAS Statement No. 123 and will be effective for our
        quarter ending March 31, 2006. The new standard will require us to expense
        employee stock options and other share-based payments over the vesting period.
        The new standard may be adopted in one of three ways - the modified prospective
        transition method, a variation of the modified prospective transition method
        or
        the modified retrospective transition method. We are currently evaluating
        how we
        will adopt the standard and evaluating the effect that the adoption of SFAS
        123(R) will have on our financial position and results of
        operations.
  **Item
        3.**  **Controls
        and Procedures**
 
 As
        of
        September 30, 2005, we carried out an evaluation, under the supervision and
        with
        the participation of our Chief Executive Officer and Chief Financial Officer,
        of
        the effectiveness of the design and operation of our disclosure controls
        and
        procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities
        Exchange Act of 1934, as amended). During the third quarter of 2005, there
        were
        no changes in our internal controls over financial reporting that have
        materially affected, or are reasonably likely to materially affect, our internal
        controls over financial reporting subsequent to such evaluation. Based upon
        that
        evaluation, however, our Chief Executive Officer and Chief Financial Officer
        concluded that our disclosure controls and procedures as of that date
        were
        not effective because of the material weaknesses in internal control over
        financial reporting described below. We are taking steps to address such
        material weaknesses described below. With the exception of such weaknesses,
        however, the Chief Executive Officer and the Chief Financial Officer believe
        that our current disclosure controls and procedures are adequate to ensure
        that
        information required to be disclosed in the reports we file under the Securities
        Exchange Act is recorded, processed, summarized and reported on an accurate
        and
        timely basis.
  As
        defined by the Public Company Accounting Oversight Board Auditing Standard
        No.
        2, a material weakness is a significant control deficiency or a combination
        of
        significant control deficiencies, that results in there being more than a
        remote
        likelihood that a material misstatement of the annual or interim financial
        statements will not be prevented or detected. During the preparation of this
        Form 10-QSB for the quarter ended September 30, 2005, as part of its review
        of
        this report, our independent registered public accounting firm identified
        material weaknesses, as of September 30, 2005, in our internal controls over
        financial reporting relating to the recording and disclosures of stock options
        that we have granted to non-employee consultants in accordance with Emerging
        Issues Task Force (“EITF”) 96-18 and SFAS 123. Specifically, in accordance with
        EITF 96-18, we should have been accounting for an option issued to a
        non-employee consultant using variable accounting, instead of fixed accounting.
        In addition, we improperly applied SFAS 123 in accounting for a stock option
        granted to a different non-employee consultant. I n
        connection with its review of this Form 10-QSB, our independent registered
        accounting firm also identified certain errors made in the calculation of
        our
        weighted average number of shares outstanding. Our independent registered
        public
        accounting firm advised management and our Audit Committee that it considered
        each of these situations to be a material weakness in our internal
        controls.
  Since
        such material weaknesses were identified by our independent registered
        accounting firm in connection with its review of this Form 10-QSB and because
        they relate only to the quarter ended September 30, 2005, the items subject
        to
        these issues are correctly reflected in the financial statements included
        in
        this Form 10-QSB and no restatement of any previously filed financial statements
        is required. However, on a going forward basis, management will continue
        to
        evaluate our disclosure controls and procedures concerning the selection
        and
        application of accounting principles, in particular stock option accounting,
        in
        order to prevent the recurrence of the circumstances that resulted in the
        material weaknesses identified in connection with the review of this Form
        10-QSB. In addition, we intend to more regularly consult with advisors, increase
        our emphasis on accounting education for our accounting personnel and increase
        our emphasis on reviewing applicable accounting literature, especially with
        regard to the selection and application of accounting principles relating
        to
        stock options. We believe such enhancements to our system of internal controls
        and our disclosure controls and procedures will be adequate to provide
        reasonable assurance that our internal control objectives will be
        met.
  19
  **PART
        II - OTHER INFORMATION**
 
 **Item
        5.**  **Other
        Information**
 
 A.  On
        October 17, 2005, the Company issued a press release announcing results of
        its
        Phase I trial of oleoyl-estrone. A copy of the press release is attached
        hereto
        as Exhibit 99.1 and incorporated herein by reference.
 
 B.  The
        common stock of the Company has been approved for listing on the American
        Stock
        Exchange. Effective October 7, 2005, the Company’s common stock began trading on
        the American Stock Exchange under the symbol “MHA.”
 
 **Item
        6.**  **Exhibits**
 
 Exhibit
                    No.
                Description4.1
                Form
                    of Common Stock Warrant issued in connection with the Company’s August
                    2005 private placement. (incorporated by reference to same exhibit
                    number
                    of the Company’s Form 8-K filed September 1, 2005).4.2
                Form
                    of Common Stock Warrant issued to placement agents in connection
                    with the
                    Company’s August 2005 private placement (incorporated by reference to
                    same
                    exhibit number of Company’s Form 8-K filed September 1,
                    2005).10.1
                Form
                    of Subscription Agreement between the Company and investors in
                    the
                    Company’s August 2005 private placement (incorporated by reference to
                    same
                    exhibit number of the Company’s Form 8-K filed September 1,
                    2005).31.1
                Certification
                    of Chief Executive Officer31.2
                Certification
                    of Chief Financial Officer32.1
                Certifications
                    of Chief Executive Officer and Chief Financial Officer pursuant
                    to Section
                    906 of the Sarbanes-Oxley Act of 2002.99.1
                Press
                    release dated October 17,
                    2005.
  20
  **SIGNATURES**
 
 In
        accordance with the requirements of the Exchange Act of 1934, the registrant
        caused this report to be signed on its behalf by the undersigned, thereunto
        duly
        authorized.
  MANHATTAN
                PHARMACEUTICALS, INC.Date: November
                14, 2005
              By:
              /s/ Douglas
                AbelDouglas
                AbelPresident
                and Chief Executive Officer
  Date: November
                14, 2005
              By:
              /s/ Nicholas
                J. RossettosNicholas
                J. RossettosChief
                Financial Officer and Chief Operating
                Officer
     21
  **Exhibit
        Index**
 
 Exhibit
                  No.
              Description31.1
              Certification
                  of Chief Executive Officer31.2
              Certification
                  of Chief Financial Officer32.1
              Certifications
                  of Chief Executive Officer and Chief Financial Officer pursuant
                  to Section
                  906 of the Sarbanes-Oxley Act of 2002.99.1
              Press
                  release dated October 17,
                  2005.






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