**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 1934For
      the quarterly period ended March 31, 2005OR[ 
      ]
    TRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For
      the transition period from _______ to
_______


Commission
file number 0-27282





**Manhattan
Pharmaceuticals, Inc.** (Exact
Name of Registrant as Specified in Its Charter)





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





810
Seventh Avenue, 4th Floor, New York, New York 10019 (Address
of principal executive offices)




(212)
582-3950 (Issuer’s
telephone number)







Check
whether the issuer: (1) filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the issuer was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes [X]
No [ ]





As of May
12, 2005 there were 40,597,064 shares of the issuer’s common stock, $.001 par
value, outstanding.








**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
    10Item
      3.
    Controls
      and Procedures
    14**PART
      II**
    **OTHER
      INFORMATION**Item
      6.
    Exhibits
    16Signatures
    17





**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 include
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)**March
      31,**
    
    **December
      31,****Assets**
    
    **2005**
    
    **2004**Current
      assets:Cash
      and cash equivalents
    
    $
    544,951
    
    $
    905,656Short-term
      investments, available for sale, at market
    
    
    3,521,087
    
    
    4,514,216Prepaid
      expenses
    
    
    340
    
    
    40,126Total
      current assets
    
    
    4,066,378
    
    
    5,459,998Property
      and equipment, net
    
    
    126,355
    
    
    119,017Other
      assets
    
    
    198,739
    
    
    70,506Total
      assets
    
    $
    4,391,472
    
    $
    5,649,521**Liabilities
      and Stockholders’ Equity**Current
      liabilities:Accounts
      payable
    
    $
    1,112,095
    
    $
    1,143,603Accrued
      expenses
    
    
    158,489
    
    
    52,102Total
      liabilities
    
    
    1,270,584
    
    
    1,195,705Commitments
      and contingenciesStockholders’
      equity:Series
      A convertible preferred stock, $.001 par value.
      Authorized 1,500,000 shares; 723,681 and 854,373 shares issued
      and outstanding at March 31, 2005 and December 31, 2004,
      respectively (liquidation preference aggregating $7,396,810 and $8,973,730
      at March 31, 2005 and December 31, 2004,
      respectively)
    
    
    724
    
    
    854Common
      stock, $.001 par value. Authorized 150,000,000 shares;29,885,029
      and 28,309,187 shares issued and outstanding at March 31, 2005 and
      December 31, 2004, respectively
    
    
    29,885
    
    
    28,309Additional
      paid-in capital
    
    
    18,397,713
    
    
    18,083,208Deficit
      accumulated during development stage
    
    
    (15,508,580
    )
    
    (13,955,035
    )Dividends
      payable in Series A preferred shares
    
    
    183,971
    
    
    303,411Accumulated
      other comprehensive income
    
    
    17,175
    
    
    13,237Unearned
      consulting costs
    
    
    —
    
    
    (20,168
    )Total
      stockholders’ equity
    
    
    3,120,888
    
    
    4,453,816Total
      liabilities and stockholders' equity
    
    $
    4,391,472
    
    $
    5,649,521See
      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 March 31,**
    
    **March
      31,****2005**
    
    **2004**
    
    **2005**Revenue
    
    $
    —
    
    $
    —
    
    $
    —Costs
      and expenses:Research
      and development
    
    
    964,040
    
    
    709,273
    
    
    7,566,474General
      and administrative
    
    
    493,243
    
    
    413,238
    
    
    4,618,733Impairment
      of intangible assets
    
    
    —
    
    
    —
    
    
    1,248,230Loss
      on disposition of intangible assets
    
    
    —
    
    
    —
    
    
    1,213,878Total
      operating expenses
    
    
    1,457,283
    
    
    1,122,511
    
    
    14,647,315Operating
      loss
    
    
    (1,457,283
    )
    
    (1,122,511
    )
    
    (14,647,315
    )Other
      (income) expense:Interest
      and other income
    
    
    (28,271
    )
    
    (27,163
    )
    
    (219,960
    )Interest
      expense
    
    
    —
    
    
    —
    
    
    23,893Realized
      gain on sale of short-term investments
    
    
    (2,933
    )
    
    —
    
    
    (74,115
    )Total
      other income
    
    
    (31,204
    )
    
    (27,163
    )
    
    (270,182
    )Net
      loss
    
    
    (1,426,079
    )
    
    (1,095,348
    )
    
    (14,377,133
    )Preferred
      stock dividends (including imputed amounts)
    
    
    (127,466
    )
    
    (212,123
    )
    
    (1,131,447
    )Net
      loss applicable to common shares
    
    $
    (1,553,545
    )
    $
    (1,307,471
    )
    $
    (15,508,580
    )Net
      loss per common share:Basic
      and diluted
    
    $
    (0.05
    )
    $
    (0.05
    )Weighted
      average shares of common stock outstanding:Basic
      and diluted
    
    
    28,665,144
    
    
    26,145,361See
      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
    )
    
    4,453,816Exercise
      of stock options
    
    
    —
    
    
    —
    
    
    1,000
    
    
    1
    
    
    999
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    1,000Exercise
      of warrants
    
    
    —
    
    
    —
    
    
    172,433
    
    
    172
    
    
    68,319
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    68,491Conversion
      of preferred stock to common stock
    
    
    (154,266
    )
    
    (154
    )
    
    1,402,409
    
    
    1,403
    
    
    (1,249
    )
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    —Preferred
      stock dividends paid by issuance of shares
    
    
    23,574
    
    
    24
    
    
    —
    
    
    —
    
    
    246,436
    
    
    —
    
    
    —
    
    
    (246,906
    )
    
    —
    
    
    —
    
    
    (446
    )Preferred
      stock dividend accrued
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    (127,466
    )
    
    127,466
    
    
    —
    
    
    —
    
    
    —Amortization
      of unearned consulting costs
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    20,168
    
    
    20,168Unrealized
      gain on short-term investments
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    3,938
    
    
    —
    
    
    3,938Net
      loss
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    (1,426,079
    )
    
    —
    
    
    —
    
    
    —
    
    
    (1,426,079
    )Balance
      at March 31, 2005
    
    
    723,681
    
    $
    724
    
    
    29,885,029
    
    $
    29,885
    
    $
    18,397,713
    
    $
    —
    
    $
    (15,508,580
    )
    $
    183,971
    
    $
    17,175
    
    $
    —
    
    $
    3,120,888
  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****Three
      months ended March 31,**
    
    **March
      31,****2005**
    
    **2004**
    
    **2005**Cash
      flows from operating activities:Net
      loss
    
    $
    (1,426,079
    )
    $
    (1,095,348
    )
    $
    (14,377,133
    )Adjustments
      to reconcile net loss tonet cash used in operating
      activities:Common
      stock issued for license rights
    
    
    —
    
    
    —
    
    
    1,000Amortization
      of unearned consulting costs
    
    
    20,168
    
    
    10,080
    
    
    181,557Warrants
      issued for consulting services
    
    
    —
    
    
    —
    
    
    4,590Amortization
      of intangible assets
    
    
    —
    
    
    —
    
    
    145,162Gain
      on sale of short-term investments
    
    
    —
    
    
    —
    
    
    (71,182
    )Depreciation
    
    
    12,743
    
    
    2,452
    
    
    46,303Loss
      on impairment of intangible assets
    
    
    —
    
    
    —
    
    
    1,248,230Loss
      on disposition of intangible assets
    
    
    —
    
    
    —
    
    
    1,213,878Changes
      in operating assets and liabilities, net of acquisition:Decrease
      in prepaid expenses and other current assets
    
    
    39,786
    
    
    10,645
    
    
    57,905Increase
      in other assets
    
    
    —
    
    
    —
    
    
    (70,506
    )Increase/(decrease)
      in accounts payable
    
    
    (31,508
    )
    
    20,850
    
    
    788,360Increase/(decrease)
      in accrued expenses
    
    
    106,387
    
    
    (229,084
    )
    
    (381,832
    )Net
      cash used in operating activities
    
    
    (1,278,503
    )
    
    (1,280,405
    )
    
    (11,213,668
    )Cash
      flows from investing activities:Purchase
      of property and equipment
    
    
    (20,081
    )
    
    (33,992
    )
    
    (164,975
    )Cash
      paid in connection with acquisitions
    
    
    (128,233
    )
    
    —
    
    
    (161,041
    )Purchase
      of short-term investments
    
    
    —
    
    
    —
    
    
    (5,000,979
    )Proceeds
      from sales of short-term investments
    
    
    997,067
    
    
    —
    
    
    1,928,156Proceeds
      from sale of license
    
    
    —
    
    
    —
    
    
    200,001Net
      cash provided by (used in) investing activities
    
    
    848,753
    
    
    (33,992
    )
    
    (3,198,838
    )Cash
      flows from financing activities:Proceeds
      from issuances of notes payable to stockholders
    
    
    —
    
    
    —
    
    
    233,500Repayments
      of notes payable to stockholders
    
    
    —
    
    
    —
    
    
    (233,500
    )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
    
    
    (446
    )
    
    —
    
    
    (1,436
    )Proceeds
      from sale of common stock, net
    
    
    —
    
    
    3,431,165
    
    
    5,809,126Proceeds
      from sale of preferred stock, net
    
    
    —
    
    
    —
    
    
    9,046,176Proceeds
      from exercise of stock options
    
    
    1,000
    
    
    12,500
    
    
    31,100Proceeds
      from exercise of warrants
    
    
    68,491
    
    
    —
    
    
    68,491Net
      cash provided by financing activities
    
    
    69,045
    
    
    3,443,665
    
    
    14,957,457Net
      increase (decrease) in cash and cash equivalents
    
    
    (360,705
    )
    
    2,129,268
    
    
    544,951Cash
      and cash equivalents at beginning of period
    
    
    905,656
    
    
    7,413,803
    
    
    —Cash
      and cash equivalents at end of period
    
    $
    544,951
    
    $
    9,543,071
    
    $
    544,951Supplemental
      disclosure of cash flow information:Interest
      paid
    
    $
    —
    
    $
    —
    
    $
    26,934Supplemental
      disclosure of noncash investing and financing activities:Stock
      options/warrants issued for consulting services
    
    $
    —
    
    $
    —
    
    $
    181,557Preferred
      stock dividends accrued
    
    
    127,466
    
    
    —
    
    
    713,265Conversion
      of preferred stock to common stock
    
    
    154
    
    
    —
    
    
    325Preferred
      stock dividends paid by issuance of shares
    
    
    246,436
    
    
    —
    
    
    528,824Issuance
      of common stock for acquisition
    
    
    —
    
    
    —
    
    
    2,336,242Short-term
      investments received in connection withsale of
      license
    
    
    —
    
    
    —
    
    
    359,907
  See
      accompanying notes to condensed consolidated financial
      statements.


6
 MANHATTAN
PHARMACEUTICALS, INC. and SUBSIDIARIES(A Development Stage
Company)
  NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)March 31,
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 the Annual Report on
Form 10-KSB of Manhattan Pharmaceuticals, Inc. and its subsidiaries (“Manhattan”
or the “Company”) as of and for the year ended December 31,
2004.





(2) LIQUIDITY





The
Company reported a net loss of $1,426,079 and negative cash flows from operating
activities of $1,278,503 for the three months ended March 31, 2005. The net loss
from date of inception, August 6, 2001, to March 31, 2005 amounts to
$14,377,133.





Management
believes that the Company will continue to incur net losses and negative cash
flows from operating activities through at least March 31, 2006. Based on the
resources of the Company available at March 31, 2005, management believes that
the Company will need additional equity or debt financing or will need to
generate revenues during 2005 through licensing of its products or entering into
strategic alliances to be able to sustain its operations through 2005 and that
it will need additional financing thereafter until it can achieve profitability,
if ever. These matters raise substantial doubt about the Company’s ability to
continue as a going concern.





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 March 31, 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.





(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 13,575,304
and 15,533,533 as of March 31, 2005 and 2004, respectively.





7
 MANHATTAN
PHARMACEUTICALS, INC. and SUBSIDIARIES(A Development Stage
Company)
  NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)March 31,
2005


(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.





The
Company uses the intrinsic value method of accounting for 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 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
      **March
      31,******2005**
    
    
    **2004**Net
      loss applicable to common shares, as reported
    
    $
    (1,426,079
    )
    $
    (1,095,348
    )Deduct: 
      Total
      stock-based employeecompensation
      expense determinedunder
      fair value method
    
    
    (167,912
    )
    
    (282,168
    )Net
      loss applicable to common shares, pro forma
    
    $
    (1,593,991
    )
    $
    (1,377,516
    )Net
      loss per common share – basicAs
      reported
    
    $
    (0.05
    )
    $
    (0.04
    )Pro
      forma
    
    
    (0.06
    )
    
    (0.05
    )


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 three months ended March 31, 2005:
dividend yield of 0%; expected volatility of 70%; risk-free interest rate of
3.4%; and expected lives of five years. The following assumptions were used for
the grants in the three months ended March 31, 2004: dividend yield of 0%;
expected volatility of 82%; risk-free interest rate of 3.2%; and expected lives
of eight years.




8
 MANHATTAN
PHARMACEUTICALS, INC. and SUBSIDIARIES(A Development Stage
Company)
  NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)March 31,
2005


(5) SUBSEQUENT
EVENTS





On April
1, 2005, Manhattan Pharmaceuticals, Inc. (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 a number of shares of the Company’s common stock
such that, upon the effective time of the Merger, the Tarpan stockholders
collectively received (or are entitled to receive) approximately 20 percent
of the Company’s outstanding common stock on a fully-diluted basis (i.e.,
assuming the issuance of common stock underlying outstanding options, warrants
and other rights). Based on the number of fully-diluted outstanding shares of
the Company’s common stock on the date of the Merger, the current stockholders
of Tarpan will receive an aggregate of approximately 10,731,052 shares of the
Company’s common stock in the Merger. At the time of the Merger, Tarpan had
outstanding indebtedness of approximately $648,000 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 will be payable at such time as the Company
raises at least $5 million in new financing.





The
transaction will be accounted for using the purchase method of accounting. Based
on management’s preliminary purchase price allocation, we believe all or a
significant amount of the purchase price will be allocated to in-process
research and development. The purchase price was approximately $11,700,000 and
acquisition costs related to the transaction were approximately
$178,000.





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 our common stock. In addition, Joshua Kazam, David
Tanen, Dr. Michael Weiser and Timothy McInerney, all of whom are members of the
Company’s board of directors, 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 special committee consisted of Neil Herskowitz,
Malcolm Hoenlein and Richard Steinhart, none of whom had any prior relationship
with Tarpan.





9
 MANHATTAN
PHARMACEUTICALS, INC. and SUBSIDIARIES(A Development Stage
Company)
  NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)March 31,
2005


Upon
completion of the Merger, Douglas Abel, formerly chief executive officer of
Tarpan, was appointed president and chief executive officer of the Company.
Pursuant to the Agreement, the Company entered into an Employment Agreement
dated April 1, 2005 with Mr. Abel. This agreement has a three-year term
commencing on April 1, 2005, which may be extended for additional one (1) 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
agreement. In addition, the Company will pay Dr. 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, on April 1, 2005, 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. Mr. Abel and his dependents are eligible
to receive paid medical and long term disability insurance and such other health
benefits as we make available to other senior officers and directors. Mr. Abel
reports to the Board of Directors of the Company.




10


**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”). 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 MARCH 31, 2005 VS 2004




During
the quarters ended March 31, 2005 and 2004, we had no revenue. We do not expect
to have significant revenues relating to our product candidates in development
prior to March 31, 2006.




For the
quarter ended March 31, 2005, research and development expense was $964,040 as
compared to $709,273 for the first quarter of 2004. The increase of $254,767 is
due primarily to an acceleration of pre-clinical development of our
Oleoyl-estrone drug candidate.




For the
quarter ended March 31, 2005, general and administrative expense was $493,243 as
compared to $413,238 for the quarter ended March 31, 2004. The increase of
$80,005 is due primarily to increases in investor relations expense and
consulting of approximately $55,000. In addition we had increases in expenses
related to rent, telephone, directors’ fees and accounting of $17,000, $16,000,
$15,000 and $12,000, respectively. These increases are partially offset by a
reduction in legal and other expenses of approximately $33,000 and $2,000,
respectively.




For the
quarter ended March 31, 2005, interest and other income was $31,204 as compared
to $27,163 for the quarter ended March 31, 2004. The increase of $4,041 is due
primarily to a realized gain on sale of short-term investments during the
quarter.




Net loss
for the quarter ended March 31, 2005, was $1,426,079 as compared to $1,095,348
for the quarter ended March 31, 2004. This increase in net loss is attributable
primarily to an increase in research and development expenses of $254,767 and an
increase in general and administrative expenses of $80,005. These expense
increases are partially offset by an increase in interest and other income of
$4,041.




Preferred
stock dividends of $127,466 and $212,123 reduced earnings per share for the
three months ended March 31, 2005 and 2004 by $0.00 and $0.01,
respectively.




LIQUIDITY
AND CAPITAL RESOURCES




From
inception to March 31, 2005, we incurred a deficit during the development stage
of $15,508,580 primarily as a result of losses, and we expect to continue to
incur additional losses and negative cash flows from operating activities
through March 31, 2006 and for the foreseeable future. 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.




11


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
three months ended March 31, 2005, we had a net decrease in cash and cash
equivalents of $360,705. This decrease resulted from net cash used in operating
activities of $1,278,503, partially offset by net cash provided by investing and
financing activities of $848,753 and $69,045, respectively. Total liquid
resources including short term investments as of March 31, 2005 were $4,066,038
compared to $5,419,872 at December 31, 2004. In addition, during the three
months ended March 31, 2005, we accrued a preferred stock dividend of
$127,466.




Our
current liabilities as of March 31, 2005 were $1,270,584 compared to $1,195,705
at December 31, 2004, an increase of $74,879. 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 March 31, 2005,
we had working capital of $2,795,794 compared to $4,264,293 at December 31,
2004.




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
March 31, 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 March 31, 2005, management believes that we will need
additional equity or debt financing or will need to generate revenues during
2005 through licensing our products or entering into strategic alliances to be
able to sustain our operations through 2005 and we will need additional
financing thereafter until we can achieve profitability, if ever.




We have
reported net losses of $1,426,079 and $1,095,348 for the three months ended
March 31, 2005 and 2004, respectively. The net loss from date of inception,
excluding preferred stock dividends, August 6, 2001 to March 31, 2005, amounts
to $14,377,133. Management believes that we will continue to incur net losses
through at least March 31, 2006 and in the foreseeable future thereafter. Based
on the current resources available to us, we will need additional equity or debt
or financing or we will need to generate revenues through licensing our products
or entering into strategic alliances to be able to sustain our operations until
we can achieve profitability, if ever. These matters raise substantial doubt
about our ability to continue as a going concern.




12


RESEARCH
AND DEVELOPMENT PROJECTS




***Oleoyl-estrone.*** In
January 2005, The
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 is to
determine the pharmacokinetic profile of oleoyl-estrone, as well as its safety
and tolerability in obese adult volunteers of both genders.  The study
is being completed in two parts, Phase Ia and Phase Ib. In May 2005, we
concluded Phase Ia, in which 36 obese volunteers were randomized to receive a
single dose of either OE or a placebo, in a dose escalating manner, and
currently have begun patient dosing in Phase Ib. We are currently reviewing and
analyzing the results of the Phase Ia portion of the trial, which will
ultimately be used to obtain approval to move forward with Phase II studies. The
Phase Ib trial is a repeat-dose, dose escalation trial that will evaluate 24
obese volunteers in four cohorts randomized 2 to 1, active to placebo. Results
from this study will also be used, in conjunction with extensive preclinical
work, to establish the protocol and obtain approval from the FDA to begin Phase
II clinical trials. The trial
is being conducted under the IND accepted by the FDA in January
2005.  Under our
license agreement with Oleoyl-Estrone Developments, we made a $250,000 milestone
payment upon the treatment of the first patient in the Phase I trial. Given the
uncertainties inherent in early human clinical trials, it is difficult to
predict with accuracy when the Phase I program will be completed.




To date,
we have incurred $4,867,078 **** of
project costs related to our development of oleoyl-estrone, of which $881,584
and $251,178 was incurred in the first three months of 2005 and 2004,
respectively. Currently, we anticipate that we will need to expend approximately
an additional $1,500,000 to $2,500,000 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 from debt financings or by selling shares of our capital stock 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 much 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.





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 with NovaDel 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 1
trials. We are actively planning the next steps of the clinical development
process for Propofol LS, meeting with scientific advisors and Novadel regarding
formulation, reviewing existing data, developing trial design, and evaluating
plans to re-enter the clinic in mid-2005.





13


To date,
we have incurred $2,699,396 of project costs related to our development of
propofol lingual spray, of which $82,456 and $483,778 was incurred during the
first three 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 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. Since our business does not generate any cash flow, however, we will need
to raise additional capital to continue development of the product beyond 2005.
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.





**Off-Balance Sheet
Arrangements**





We have not entered into any off-balance sheet
arrangements.





**Recently
Issued Accounting Standards**





In May
2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity.” SFAS No. 150
changes the accounting for certain financial instruments with characteristics of
both liabilities and equity that, under pervious pronouncements, issuers could
account for as equity. The new accounting guidance contained in SFAS No. 150
requires that those instruments be classified as liabilities in the balance
sheet.





SFAS No.
150 affects the issuer’s accounting for three types of freestanding financial
instruments. One type is mandatory redeemable shares, which the issuing company
is obligated to buy back in exchange for cash or other assets. A second type
included put options and forward purchase contracts, which involves instruments
that do or may require the issuer to buy back some of its shares in exchange for
cash or other assets. The third type of instruments that are liabilities under
SFAS No. 150 are obligations that can be settled with shares, the monetary value
of which is fixed, tied solely or predominantly to a variable such as market
index, or varies inversely with the value of the issuers’ shares. SFAS No. 150
does not apply to features embedded in a financial instrument that is not a
derivative in its entirety.





Most of
the provisions of SFAS No. 150 are consistent with the existing definition of
liabilities in FASB Concepts Statement No. 6, “Elements of Financial
Statements.” The remaining provisions of SFAS No. 150 are consistent with the
FASB’s proposal to revise that definition to encompass certain obligations that
a reporting entity can or must settle by issuing its own shares. SFAS No. 150
was effective for financial instruments entered into or modified after May 31,
2003 and otherwise was effective at the beginning of the first interim period
beginning after June 15, 2003. There was no effect on the Company’s financial
statements from adopting this statement.





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 small
business issuers for annual periods beginning after December 15, 2005. 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.




14


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





As of
March 31, 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). Based upon that evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures are effective in alerting them on a timely basis to
material information required to be disclosed in our periodic reports to the
Securities and Exchange Commission. During the first 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.




As a
non-accelerated filer with a fiscal year end of December 31, we must first begin
to comply with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002
for the fiscal year ending December 31, 2006. We believe that our present
internal control program has been effective at a reasonable assurance level to
ensure that our financial reporting has not been materially misstated.
Nonetheless, during the remaining periods through December 31, 2006, we will
review, and where necessary, enhance our internal control design and
documentation, management review, and ongoing risk assessment as part of our
internal control program, including implementing the requirements of Section 404
of the Sarbanes-Oxley Act of 2002.




15





**PART
II - OTHER INFORMATION**





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





Exhibit
      No.
    Description31.1
    Certification
      of Chief Executive Officer31.2
    Certification
      of Chief Financial Officer32.1
    Certifications
      of Chief Executive Officer and Chief Financial Officer pursuant to Section
      906 of the Sarbanes-Oxley Act of 2002.




16





**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: May 16, 2005
    By:
    /s/ Douglas AbelDouglas AbelPresident and Chief Executive
      Officer




****Date: May 16, 2005
    By:
    /s/ Nicholas J.
      RossettosNicholas J. RossettosChief Financial Officer and Chief
      Operating Officer




17





**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.






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