**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, 2006





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 Small Business Issuer as Specified in Its Charter)





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




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


(Address
      of principal executive offices)





(212)
      582-3950


(Issuer’s
      telephone number)






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





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





As
      of
      November 8, 2006 there were 60,120,038 shares of the issuer’s common stock,
      $.001 par value, outstanding.





Traditional
      Small Business Disclosure Format (check one): Yes o No x






1


**INDEX**




Page**PART
                I**
            **FINANCIAL
                INFORMATION**Item
                1.
            Unaudited
                Condensed Consolidated Balance Sheets
            4Unaudited
                Condensed Consolidated Statements of Operations
            5Unaudited
                Condensed Consolidated Statement of Stockholders’ Equity
                (Deficiency)
            6Unaudited
                Condensed Consolidated Statements of Cash Flows
            7Notes
                to Unaudited Condensed Consolidated Financial Statements
            8Item
                2.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            16Item
                3.
            Controls
                and Procedures
            21**PART
                II**
            **OTHER
                INFORMATION**Item
                5.
            Other
                Events
            23Item
                6.
            Exhibits
            23Signatures
            24






2


**Forward-Looking
        Statements**
  This
        quarterly report on Form 10-QSB contains forward-looking statements within
        the
        meaning of Section 27A of the Securities Act of 1933, as amended, or the
        Securities Act, and Section 21E of the Exchange Act. Any statements about
        our expectations, beliefs, plans, objectives, assumptions or future events
        or
        performance are not historical facts and may be forward-looking. These
        statements are often, but not always, made through the use of words or phrases
        such as “anticipate,” “estimate,” “plan,” “project,” “expect,” “may,” “intend”
and similar words or phrases. Accordingly, these statements involve estimates,
        assumptions and uncertainties that could cause actual results to differ
        materially from those expressed in them. These statements are therefore subject
        to risks and uncertainties, known and unknown, which could cause actual results
        and developments to differ materially from those expressed or implied in
        such
        statements. Such risks and uncertainties relate to, among other
        factors:
  ·
            the
                development of our drug candidates; ·
            the
                regulatory approval of our drug
                candidates; ·
            our
                use of clinical research centers and other
                contractors; ·
            our
                ability to find collaborative partners for research, development
                and
                commercialization of potential products; ·
            acceptance
                of our products by doctors, patients or
                payers; ·
            our
                ability to market any of our products; ·
            our
                history of operating losses; ·
            our
                ability to compete against other companies and research
                institutions; ·
            our
                ability to secure adequate protection for our intellectual
                property; ·
            our
                ability to attract and retain key
                personnel; ·
            availability
                of reimbursement for our product
                candidates; ·
            the
                effect of potential strategic transactions on our
                business; ·
            our
                ability to obtain adequate financing; and ·
            the
                volatility of our stock price. 
  Further,
        any forward-looking statement speaks only as of the date on which it is made,
        and we undertake no obligation to update any forward-looking statement or
        statements to reflect events or circumstances after the date on which such
        statement is made or to reflect the occurrence of unanticipated events. New
        factors emerge from time to time, and it is not possible for us to predict
        which
        factors will arise. In addition, we cannot assess the impact of each factor
        on
        our business or the extent to which any factor, or combination of factors,
        may
        cause actual results to differ materially from those contained in any
        forward-looking statements.




3


**PART
      I - FINANCIAL INFORMATION**





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




**MANHATTAN
          PHARMACEUTICALS, INC. AND SUBSIDIARIES**
  (A
          Development Stage Company)
 Condensed
            Consolidated Balance Sheets
  **September
                    30,**
                
                **December
                    31,****Assets**
                
                **2006**
                
                **2005**(Unaudited)
                
                (Note
                    1)Current
                    assets:Cash
                    and cash equivalents
                
                $
                3,912,684
                
                $
                9,826,336Short-term
                    investments, available for sale, at market
                
                
                505,829
                
                
                1,007,818Prepaid
                    expenses
                
                
                749,050
                
                
                194,776Total
                    current assets
                
                
                5,167,563
                
                
                11,028,930Property
                    and equipment, net
                
                
                78,168
                
                
                106,877Other
                    assets
                
                
                70,506
                
                
                70,506Total
                    assets
                
                $
                5,316,237
                
                $
                11,206,313**Liabilities
                    and Stockholders’ Equity**Current
                    liabilities:Accounts
                    payable
                
                $
                1,085,548
                
                $
                1,617,489Accrued
                    expenses
                
                
                328,733
                
                
                48,328Total
                    liabilities
                
                
                1,414,281
                
                
                1,665,817Commitments
                    and contingenciesStockholders’
                    equity:Common
                    stock, $.001 par value. Authorized 150,000,000 shares;60,120,038
                    and 60,092,697 shares issued and outstandingat
                    September 30, 2006 and December 31, 2005, respectively
                
                
                60,120
                
                
                60,093Additional
                    paid-in capital
                
                
                43,681,686
                
                
                42,751,111Deficit
                    accumulated during the development stage
                
                
                (39,838,358
                )
                
                (33,271,695
                )Accumulated
                    other comprehensive income (loss)
                
                
                (1,492
                )
                
                987Total
                    stockholders’ equity
                
                
                3,901,956
                
                
                9,540,496Total
                    liabilities and stockholders' equity
                
                $
                5,316,237
                
                $
                11,206,313




See
        accompanying notes to unaudited condensed consolidated financial
        statements.


4


**MANHATTAN
          PHARMACEUTICALS, INC. AND SUBSIDIARIES**
  (A
          Development Stage Company)
 Condensed
            Consolidated Statements of Operations
 (Unaudited)
 **Cumulative****period
                    from****August
                    6, 2001****Three
                    Months ended**
                
                **Nine
                    Months ended**
                
                **(inception)
                    to****September
                    30,**
                
                **September
                    30,**
                
                **September
                    30,****2006**
                
                **2005**
                
                **2006**
                
                **2005**
                
                **2006**Revenue
                
                $
                —
                
                $
                —
                
                $
                —
                
                $
                —
                
                $
                —Costs
                    and expenses:Research
                    and development (including stockbased
                    compensation expense of $82,239and
                    $243,148 for the three and nine monthsended
                    September 30, 2006, respectively)
                
                
                1,023,447
                
                
                1,370,733
                
                
                4,248,150
                
                
                3,292,008
                
                
                16,028,661General
                    and administrative (including stockbased
                    compensation expense of $244,491and
                    $702,710 for the three and nine monthsended
                    September 30, 2006, respectively)
                
                
                942,001
                
                
                490,894
                
                
                2,571,980
                
                
                1,537,298
                
                
                8,988,591In-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
                
                
                1,965,448
                
                
                1,861,627
                
                
                6,820,130
                
                
                16,717,113
                
                
                39,367,167Operating
                    loss
                
                
                (1,965,448
                )
                
                (1,861,627
                )
                
                (6,820,130
                )
                
                (16,717,113
                )
                
                (39,367,167
                )Other
                    (income) expense:Interest
                    and other income
                
                
                (68,740
                )
                
                (48,158
                )
                
                (253,929
                )
                
                (117,484
                )
                
                (655,774
                )Interest
                    expense
                
                
                714
                
                
                —
                
                
                952
                
                
                —
                
                
                24,845Realized
                    gain on sale of marketable equity securities
                
                
                —
                
                
                (979
                )
                
                (490
                )
                
                —
                
                
                (77,524
                )Total
                    other income
                
                
                (68,026
                )
                
                (49,137
                )
                
                (253,467
                )
                
                (117,484
                )
                
                (708,453
                )Net
                    loss
                
                
                (1,897,422
                )
                
                (1,812,490
                )
                
                (6,566,663
                )
                
                (16,599,629
                )
                
                (38,658,714
                )Preferred
                    stock dividends (including imputed amounts)
                
                
                —
                
                
                (75,018
                )
                
                —
                
                
                (326,419
                )
                
                (1,179,644
                )Net
                    loss applicable to common shares
                
                $
                (1,897,422
                )
                $
                (1,887,508
                )
                $
                (6,566,663
                )
                $
                (16,926,048
                )
                $
                (39,838,358
                )Net
                    loss per common share:Basic
                    and diluted
                
                $
                (0.03
                )
                $
                (0.04
                )
                $
                (0.11
                )
                $
                (0.44
                )Weighted
                    average shares of common stock outstanding:Basic
                    and diluted
                
                
                60,120,038
                
                
                44,667,025
                
                
                60,109,737
                
                
                38,174,238


See
        accompanying notes to unaudited condensed consolidated financial
        statements.


5


**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)**
                  
                  **services**
                  
                  **(deficiency)**Stock
                        issued at $0.0004 per share for subscription
                        receivable
                  
                  
                  —
                  
                  $
                  —
                  
                  
                  10,167,741
                  
                  $
                  10,168
                  
                  $
                  (6,168
                  )
                  $
                  (4,000
                  )
                  $
                  —
                  
                  $
                  —
                  
                  $
                  —
                  
                  $
                  —
                  
                  $
                  —Net
                      loss
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  (56,796
                  )
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  (56,796
                  )Balance
                      at December 31, 2001
                  
                  
                  —
                  
                  
                  —
                  
                  
                  10,167,741
                  
                  
                  10,168
                  
                  
                  (6,168
                  )
                  
                  (4,000
                  )
                  
                  (56,796
                  )
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  (56,796
                  )Proceeds
                      from subscription receivable
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  4,000
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  4,000Stock
                        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
                  )
                  
                  637,923Effect
                      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
                  
                  
                  12,238,291
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  12,250,209Common
                          stock issued to vendor at $1.11 per share in satisfaction
                          of accounts
                          payable
                  
                  
                  —
                  
                  
                  —
                  
                  
                  675,675
                  
                  
                  676
                  
                  
                  749,324
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  750,000Exercise
                      of stock options
                  
                  
                  —
                  
                  
                  —
                  
                  
                  32,400
                  
                  
                  33
                  
                  
                  32,367
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  32,400Exercise
                      of warrants
                  
                  
                  —
                  
                  
                  —
                  
                  
                  279,845
                  
                  
                  279
                  
                  
                  68,212
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  68,491Conversion
                      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
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  (175,663
                  )
                  
                  175,663
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —Share-based
                      compensation
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  66,971
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  20,168
                  
                  
                  87,139Reversal
                      of unrealized gain on short-term investments
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  (12,250
                  )
                  
                  —
                  
                  
                  (12,250
                  )Stock
                      issued in connection with acquisition of Tarpan Therapeutics,
                      Inc.
                  
                  
                  —
                  
                  
                  —
                  
                  
                  10,731,052
                  
                  
                  10,731
                  
                  
                  11,042,253
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  11,052,984Net
                      loss
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  (19,140,997
                  )
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  (19,140,997
                  )Balance
                      at December 31, 2005
                  
                  
                  —
                  
                  
                  —
                  
                  
                  60,092,697
                  
                  
                  60,093
                  
                  
                  42,751,111
                  
                  
                  —
                  
                  
                  (33,271,695
                  )
                  
                  —
                  
                  
                  987
                  
                  
                  —
                  
                  
                  9,540,496Cashless
                      exercise of warrants
                  
                  
                  —
                  
                  
                  —
                  
                  
                  27,341
                  
                  
                  27
                  
                  
                  (27
                  )
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —Share-based
                      compensation
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  945,858
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  945,858Unrealized
                      loss on short-term investments
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  (2,479
                  )
                  
                  —
                  
                  
                  (2,479
                  )Costs
                      associated with private placement
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  (15,256
                  )
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  (15,256
                  )Net
                      loss
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  (6,566,663
                  )
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  (6,566,663
                  )Balance
                      at September 30, 2006
                  
                  
                  —
                  
                  $
                  —
                  
                  
                  60,120,038
                  
                  $
                  60,120
                  
                  $
                  43,681,686
                  
                  $
                  —
                  
                  $
                  (39,838,358
                  )
                  $
                  —
                  
                  $
                  (1,492
                  )
                  $
                  —
                  
                  $
                  3,901,956


See
      accompanying notes to unaudited condensed consolidated financial
      statements.




6


**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,****2006**
                  
                  **2005**
                  
                  **2006**Cash
                      flows from operating activities:Net
                      loss
                  
                  $
                  (6,566,663
                  )
                  $
                  (16,599,629
                  )
                  $
                  (38,658,714
                  )Adjustments
                      to reconcile net loss to net cash used in operating
                      activities:Common
                      stock issued for license rights
                  
                  
                  —
                  
                  
                  —
                  
                  
                  1,000Share-based
                      compensation
                  
                  
                  945,858
                  
                  
                  48,222
                  
                  
                  1,194,386Warrants
                      issued for consulting services
                  
                  
                  —
                  
                  
                  —
                  
                  
                  4,590Amortization
                      of intangible assets
                  
                  
                  —
                  
                  
                  —
                  
                  
                  145,162Gain
                      on sale of marketable equity securities
                  
                  
                  (490
                  )
                  
                  —
                  
                  
                  (77,524
                  )Depreciation
                  
                  
                  44,581
                  
                  
                  40,233
                  
                  
                  131,875Non
                      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
                      (increase) in prepaid expenses and other current assets
                  
                  
                  (554,274
                  )
                  
                  19,948
                  
                  
                  (690,805
                  )Increase
                      in other assets
                  
                  
                  —
                  
                  
                  —
                  
                  
                  (70,506
                  )Increase
                      (decrease) in accounts payable
                  
                  
                  (531,941
                  )
                  
                  543,862
                  
                  
                  1,485,762Increase
                      (decrease) in accrued expenses
                  
                  
                  280,405
                  
                  
                  43,077
                  
                  
                  (211,588
                  )Net
                      cash used in operating activities
                  
                  
                  (6,382,524
                  )
                  
                  (4,182,664
                  )
                  
                  (22,562,631
                  )Cash
                      flows from investing activities:Purchase
                      of property and equipment
                  
                  
                  (15,872
                  )
                  
                  (23,180
                  )
                  
                  (200,321
                  )Cash
                      paid in connection with acquisitions
                  
                  
                  —
                  
                  
                  —
                  
                  
                  (32,808
                  )Purchase
                      of short-term investments
                  
                  
                  —
                  
                  
                  —
                  
                  
                  (5,000,979
                  )Proceeds
                      from sale of short-term investments
                  
                  
                  500,000
                  
                  
                  3,494,147
                  
                  
                  4,931,088Proceeds
                      from sale of license
                  
                  
                  —
                  
                  
                  —
                  
                  
                  200,001Cash
                      acquired in acquisition
                  
                  
                  —
                  
                  
                  6,777
                  
                  
                  6,777Net
                      cash provided by (used in) investing activities
                  
                  
                  484,128
                  
                  
                  3,477,744
                  
                  
                  (96,242
                  )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 Preferred stock dividends
                  
                  
                  —
                  
                  
                  (1,296
                  )
                  
                  (2,286
                  )(Costs)
                      proceeds related to sale of common stock, net
                  
                  
                  (15,256
                  )
                  
                  12,219,879
                  
                  
                  18,044,078Proceeds
                      from sale of preferred stock, net
                  
                  
                  —
                  
                  
                  —
                  
                  
                  9,046,176Proceeds
                      from exercise of stock options
                  
                  
                  —
                  
                  
                  32,400
                  
                  
                  62,500Proceeds
                      from exercise of warrants
                  
                  
                  —
                  
                  
                  68,491
                  
                  
                  68,491Net
                      cash (used in) provided by financing activities
                  
                  
                  (15,256
                  )
                  
                  11,668,072
                  
                  
                  26,571,557Net
                      (decrease) increase in cash and cash equivalents
                  
                  
                  (5,913,652
                  )
                  
                  10,963,152
                  
                  
                  3,912,684Cash
                      and cash equivalents at beginning of period
                  
                  
                  9,826,336
                  
                  
                  905,656
                  
                  
                  —Cash
                      and cash equivalents at end of period
                  
                  $
                  3,912,684
                  
                  $
                  11,868,808
                  
                  $
                  3,912,684Supplemental
                      disclosure of cash flow information:Interest
                      paid
                  
                  $
                  952
                  
                  $
                  —
                  
                  $
                  24,845Supplemental
                      disclosure of noncash investing and financing activities:Common
                      stock issued in satisfaction of accounts payable
                  
                  $
                  —
                  
                  $
                  —
                  
                  $
                  750,000Imputed
                      preferred stock dividend
                  
                  
                  —
                  
                  
                  —
                  
                  
                  418,182Preferred
                      stock dividends accrued
                  
                  
                  —
                  
                  
                  326,419
                  
                  
                  761,462Conversion
                      of preferred stock to common stock
                  
                  
                  —
                  
                  
                  829
                  
                  
                  1,067Preferred
                      stock dividends paid by issuance of shares
                  
                  
                  —
                  
                  
                  477,778
                  
                  
                  759,134Issuance
                      of common stock for acquisitions
                  
                  
                  —
                  
                  
                  11,052,984
                  
                  
                  13,389,226Marketable
                      equity securities received in connection with sale of
                      license
                  
                  
                  —
                  
                  
                  —
                  
                  
                  359,907Net
                      liabilities assumed over assets acquired in business
                      combination
                  
                  
                  —
                  
                  
                  (675,416
                  )
                  
                  (675,416
                  )Cashless
                      exercise of warrants
                  
                  
                  27
                  
                  
                  —
                  
                  
                  27


See
        accompanying notes to unaudited condensed consolidated financial
        statements.





7


MANHATTAN
      PHARMACEUTICALS, INC. and SUBSIDIARIES


(A
      Development Stage Company)





NOTES
      TO
      CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


(1)
            BASIS
                OF PRESENTATION





The
      accompanying unaudited condensed consolidated financial statements of Manhattan
      Pharmaceuticals, Inc. and its subsidiaries (“Manhattan” or the “Company”) have
      been prepared in accordance with accounting principles generally accepted in
      the
      United States of America for interim financial information and the rules and
      regulations of the Securities and Exchange Commission. Accordingly, the
      unaudited condensed consolidated financial statements do not include all
      information and footnotes required by accounting principles generally accepted
      in the United States of America for complete annual financial statements. In
      the
      opinion of management, the accompanying unaudited condensed consolidated
      financial statements reflect all adjustments, consisting of only normal
      recurring adjustments, considered necessary for a fair presentation. Interim
      operating results are not necessarily indicative of results that may be expected
      for the year ending December 31, 2006 or for any other interim period.
      These unaudited condensed consolidated financial statements should be read
      in
      conjunction with the Company’s audited consolidated financial statements as of
      and for the year ended December 31, 2005, 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, 2005 has been derived from the audited
      consolidated financial statements included in the Form 10-KSB for that
      year.





(2)
            LIQUIDITY





The
      Company realized a net loss of $6,566,663 and negative cash flows from operating
      activities of $6,382,524 for the nine months ended September 30, 2006. The
      net
      loss from date of inception, August 6, 2001 to September 30, 2006 amounts to
      $38,658,714.





Management
      believes that the Company will continue to incur net losses through at least
      September 30, 2007 and for the foreseeable future thereafter. Based on the
      resources of the Company available at September 30, 2006, management believes
      that the Company will need additional equity or debt financing or will need
      to
      generate revenues through licensing of its products or entering into strategic
      alliances to be able to sustain its operations into 2007. Furthermore, we will
      need additional financing thereafter to complete development and
      commercialization of our products. There can be no assurances that we can
      successfully complete development and commercialization of our
      products.





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. The Company is currently evaluating several alternative
      financing initiatives. These issues raise substantial doubt about our ability
      to
      continue as a going concern.





(3)
            COMPUTATION
                OF NET LOSS PER COMMON SHARE





Basic
      net
      loss per common share is calculated by dividing net loss applicable to common
      shares by the weighted-average number of common shares outstanding for the
      period. Diluted net loss per common share is the same as basic net loss per
      common share, since potentially dilutive securities from the assumed exercise
      of
      stock options and stock warrants would have an antidilutive effect because
      the
      Company incurred a net loss during each period presented. The amount of
      potentially dilutive securities excluded from the calculation of diluted net
      loss per share was 13,422,729 and 12,754,038 as of September 30, 2006 and 2005,
      respectively.






8


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


(4)
            SHARE-BASED
                COMPENSATION





The
      Company has stockholder-approved stock incentive plans for employees, directors,
      officers and consultants. Prior to January 1, 2006, the Company accounted for
      the employee, director and officer plans using the intrinsic value method under
      the recognition and measurement provisions of Accounting Principles Board
      (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees” and
      related interpretations, as permitted by Statement of Financial Accounting
      Standards (“SFAS” or “Statement”) No. 123, “Accounting for Stock-Based
      Compensation.”





Effective
      January 1, 2006, the Company adopted SFAS No. 123(R), “Share-Based Payment,”
(“Statement 123(R)”) for employee options using the modified prospective
      transition method. Statement 123(R) revised Statement 123 to eliminate the
      option to use the intrinsic value method and required the Company to expense
      the
      fair value of all employee options over the vesting period. Under the modified
      prospective transition method, the Company recognized compensation cost for
      the
      three- and nine-month periods ending September 30, 2006 which includes a) period
      compensation cost related to share-based payments granted prior to, but not
      yet
      vested, as of January 1, 2006, based on the grant date fair value estimated
      in
      accordance with the original provisions of Statement 123; and b) period
      compensation cost related to share-based payments granted on or after January
      1,
      2006, based on the grant date fair value estimated in accordance with Statement
      123(R). In accordance with the modified prospective method, the Company has
      not
      restated prior period results.





The
      Company recognized compensation expense related to stock option grants on a
      straight-line basis over the vesting period. For the three and nine-month
      periods ended September 30, 2006, the Company recognized share-based employee
      compensation cost of $333,505 and $978,954, respectively, in accordance with
      Statement 123(R). $304,784 and $914,352, respectively, of this expense resulted
      from the grants of stock options to employees and directors of the Company
      on or
      prior to December 31, 2005. The balance of $28,721 and $64,602, respectively,
      relate to the granting of stock options to employees and officers on or after
      January 1, 2006. The Company did not capitalize any share-based compensation
      cost.





Options
      granted to consultants and other non-employees are accounted for in accordance
      with EITF No. 96-18 "Accounting for Equity Instruments That Are Issued to Other
      than Employees for Acquiring, or in Conjunction with Selling, Goods or
      Services".  Accordingly, such options are recorded at fair value at the
      date of grant and subsequently adjusted to fair value at the end of each
      reporting period until such options vest, and the fair value of the
      options, as adjusted, is amortized to consulting expense over the related
      vesting period.  As a result of adjusting consultant and other non-employee
      options to fair value as of September 30, 2006, net of amortization, the Company
      recognized a reduction to general and administrative and research and
      development expenses of $6,775 for the three-months ended September 30, 2006
      and
      $33,096 for the nine-month period ended September 30, 2006.








9








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




**Three
                  months ended**
              
              **Nine
                  months ended****September
                  30, 2006**
              
              **September
                  30, 2006**General
                  and administrative expense:Share-based
                  employee compensation cost
              
              $
              247,453
              
              $
              728,533Share-based
                  consultant and non-employee cost
              
              
              (2,962
              )
              
              (25,823
              )$
              244,491
              
              $
              702,710Research
                  and development expenseShare-based
                  employee compensation cost
              
              $
              86,052
              
              $
              250,421Share-based
                  consultant and non-employee cost
              
              
              (3,813
              )
              
              (7,273
              )$
              82,239
              
              $
              243,148Total
                  share-based cost
              
              $
              326,730
              
              $
              945,858


As
      a
      result of adopting Statement 123(R), net losses for the three- and nine-month
      periods ended September 30, 2006 were greater than if the Company had continued
      to account for share-based compensation under APB 25 by $333,505 and $978,954,
      respectively. The effect of adopting Statement 123(R) on basic and diluted
      earnings per share for the three- and nine-month periods ended September 30,
      2006 was $0.01 and $0.02 per share, respectively.








10





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


The
      net
      loss for the three and nine-month periods ended September 30, 2005 does not
      include any compensation charges related to options granted to employees. The
      following table illustrates the pro forma effect on net loss and loss per share
      assuming the Company had applied the fair value recognition provisions of SFAS
      No. 123 instead of the intrinsic value method under APB 25 to stock-based
      employee compensation:




**Three
                        months ended**
                    
                    **Nine
                        months ended****September
                        30, 2005**
                    
                    **September
                        30, 2005**Net
                        loss applicable to common shares, as reported
                    
                    $
                    (1,887,508
                    )
                    $
                    (16,926,048
                    )Deduct:  Total
                        stock-based employeecompensation
                        expense determinedunder
                        fair value method
                    
                    
                    (393,305
                    )
                    
                    (954,524
                    )Net
                        loss applicable to common shares, pro forma
                    
                    $
                    (2,280,813
                    )
                    $
                    (17,880,572
                    )Net
                        loss per common share - basicAs
                        reported
                    
                    $
                    (0.04
                    )
                    $
                    (0.44
                    )Pro
                        forma
                    
                    
                    (0.05
                    )
                    
                    (0.47
                    )


As
      noted
      above, the Company has shareholder-approved stock incentive plans for employees
      under which it has granted non-qualified and incentive stock options. Options
      granted under these plans must be at a price per share not less than the fair
      market value per share of common stock on the date the option is granted. The
      options generally vest over a three year period and expire ten years from the
      date of grant. Certain option and share awards provide for accelerated vesting
      upon a change in control of the Company, as defined.





In
      December 2003, the Company established the 2003 Stock Option Plan (the “2003
      Plan”), which provided for the granting of up to 5,400,000 options to officers,
      directors, employees and consultants for the purchase of stock. In August 2005,
      the Company increased the number of shares of common stock reserved for issuance
      under the 2003 Plan by 2,000,000 shares. At September 30, 2006, 7,400,000 shares
      were authorized for issuance. Under
      the
      2003 Plan at September 30, 2006 options to purchase 5,875,264 shares were
      outstanding and 1,524,736 shares were reserved for future stock option grants. The
      options have a maximum term of 10 years and vest over a period determined by
      the
      Company’s Board of Directors (generally 3 years) and are issued at an exercise
      price equal to or greater than the fair market value of the shares at the date
      of grant. The 2003 Plan expires on December 10, 2013 or when all options have
      been granted, whichever is sooner. Under
      the
      2003 Plan, the Company granted employees options to purchase an aggregate of
      534,500 shares of common stock at an exercise price of $1.35, 50,000 shares
      of
      common stock at an exercise price of $0.89 and 220,000 shares of common stock
      at
      an exercise price of $0.70 during the nine months ended September 30,
      2006.





11


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


In
        July
        1995, the Company established the 1995 Stock Option Plan (the”1995 Plan”), which
        provided for the granting of options to purchase up to 130,000 shares of
        the
        Company’s common stock to officers, directors, employees and consultants. The
        1995 Plan was amended several times to increase the number shares reserved
        for
        stock option grants. In June 2005 the 1995 Plan expired and no further options
        can be granted. Under the 1995 Plan at September 30, 2006 options to purchase
        1,137,240 shares were outstanding and no shares were reserved for future
        stock
        option grants.




To
      compute compensation expense in 2006 and pro forma compensation expense in
      2005
      the Company estimated the fair value of each option award on the date of grant
      using the Black-Scholes model. The Company based the expected volatility
      assumption on the historical volatility of our common stock. The expected term
      of options granted represents the period of time that options are expected
      to be
      outstanding. The Company estimated the expected term of stock options and
      expected forfeiture rates by using historical exercise and employee forfeiture
      experiences.





The
      following table shows the weighted average assumptions the Company used to
      develop the fair value estimates for the determination of the compensation
      charges in 2006 and the pro forma charges in 2005:





**Three
                  months ended**
              
              **Nine
                  months ended****September
                  30, 2006**
              
              **September
                  30, 2005**
              
              **September
                  30, 2006**
              
              **September
                  30, 2005**Expected
                  Volatility
              
              
              55
              %
              
              69
              %
              
              55
              %
              
              69
              %Dividend
                  yield
              
              
              —
              
              
              —
              
              
              —
              
              
              —Expected
                  term (in years)
              
              
              6
              
              
              5
              
              
              6
              
              
              5Risk-free
                  interest rate
              
              
              4.875
              %
              
              4.1
              %
              
              4.875
              %
              
              4.1
              %
 
 
 12
 MANHATTAN
            PHARMACEUTICALS, INC. and SUBSIDIARIES
 (A
            Development Stage Company)
 
 NOTES
            TO
            CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


A
      summary
      of the status of the Company’s stock outstanding options as of September 30,
      2006 and changes during the nine months then ended is presented
      below:




**Weighted****Weighted**
                
                **Average****average**
                
                **Remaining**
                
                **Aggregate****exercise**
                
                **Contractual**
                
                **Intrinsic****Shares**
                
                **price**
                
                **Term
                    (years)**
                
                **Value**Outstanding
                      at
                    December
                      31, 2005
                
                
                6,328,754
                
                $
                1.33Granted
                
                
                804,500
                
                
                1.14Exercised
                
                
                —
                
                
                —Cancelled
                
                
                (120,750
                )
                
                1.20Outstanding
                    at
                  September
                    30, 2006
                
                
                7,012,504
                
                $
                1.31
                
                
                7.97
                
                $
                306,797Options
                    exercisable at
                  September
                    30, 2006
                
                
                3,847,729
                
                $
                1.25
                
                
                7.40
                
                $
                297,997Weighted-averagefair
                        value of optionsgranted
                        during thenine
                        months endedSeptember
                        30, 2006
                
                $
                0.50
  As
          of
          September 30, 2006, the total compensation cost related to non-vested option
          awards not yet recognized is $1,808,677. The weighted average period over
          which
          it is expected to be recognized is approximately 1.50
          years.





(5)
            ACQUISITION
                OF TARPAN THERAPEUTICS, INC.





On
      April
      1, 2005, the Company entered into an Agreement and Plan of Merger (the “Merger
      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 Merger 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 and accounted for as a purchase.





13


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


The
      following unaudited pro forma financial information presents the condensed
      consolidated results of operations of the Company and Tarpan for the nine months
      ended September 30, 2005, as if the acquisition had occurred on January 1,
      2005
      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.




**Nine
                  months ended**
                **September
                  30, 2005**Net
                  loss applicable to common shares
              
              $
              (16,726,890
              )Weighted
                  average number of common shares outstanding
              
              
              41,724,954Loss
                  per common share - basic and fully diluted
              
              $
              (0.40
              )




(6)
            COMMITMENTS





On
      March
      27, 2006, the Company entered into a research and development agreement with
      Swiss Pharma Contract Ltd. (“Swiss Pharma”) to perform a Phase IIa study in 100
      obese patients of the Company’s Oleoyl-estrone product for the treatment of
      obesity. The terms of the contract call for the Company to pay Swiss Pharma
      up
      to $2,151,840. The payment terms are: 20%, or $430,368, upon signing the
      agreement, 20% after the first patient has received the initial dose, 20% after  half
      the
      patients have received the initial dose, 20% after all patients have completed
      dosing, 10%, on receipt of statistical analyses and 10% on acceptance by the
      Company of the Phase IIa study.





The
      Company often contracts with third parties to facilitate, coordinate and perform
      agreed upon research and development of a new drug. To ensure that research
      and
      development costs are expensed as incurred, the Company records monthly accruals
      for clinical trials and preclinical testing costs based on the work performed
      under the contracts.





These
      contracts typically call for the payment of fees for services at the initiation
      of the contract and/or upon the achievement of certain milestones. This method
      of payment often does not match the related expense recognition resulting in
      either a prepayment, when the amounts paid are greater than the related research
      and development costs expensed, or an accrued liability, when the amounts paid
      are less than the related research and development costs expensed.





14





MANHATTAN
      PHARMACEUTICALS, INC. and SUBSIDIARIES


(A
      Development Stage Company)





NOTES
      TO
      CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)






The
      contract with Swiss Pharma contains a list of the fees to be charged by Swiss
      Pharma for the provision of specific services under the contract. The maximum
      fees to be charged under the contract are $2,151,840. The Company recognizes
      expense as per this list as the specific services are performed by Swiss Pharma.
      As of September 30, 2006, the Company had paid Swiss Pharma $860,736, and
      recognized $243,777 of research and development expense for the Phase IIa study.
      The remainder, $616,959, is included in prepaid expenses.







(7)
            SUBSEQUENT
                EVENTS





Subsequent
      to September 30, 2006, the Company expanded its ongoing Phase IIa clinical
      trial
      of Oleoyle-estrone in obesity into two new clinical sites in the United States.
      Because the size of the study has not been expanded beyond the 100 obese
      patients, the Company does not anticipate the additional sites will materially
      increase its total financial commitment of up to $2,151,840. Such financial
      commitment will now be paid to three clinical centers rather than one. This
      Phase IIa clinical trial is expected to conclude in the second quarter of
      2007.





Subsequent
      to September 30, 2006, the Company commenced a Phase IIa clinical trial in
      the
      morbidly obese at St.Lukes/Roosevelt Hospital in New York City. The financial
      commitment for this study is approximately $685,000. The study is expected
      to
      conclude in the first half of 2007 .





15


**Item
      2.**  **Management’s
      Discussion and Analysis of Financial Condition**


**and
      Results of Operations.**





**You
      should read the following discussion of our results of operations and financial
      condition in conjunction with our Annual Report on Form 10-KSB for the year
      ended December 31, 2005 (the “Annual Report”) and our financial statements
      as of and for the nine months ended September 30, 2006 included elsewhere in
      this report.**




RESULTS
      OF OPERATIONS




THREE-MONTH
      PERIOD ENDED SEPTEMBER 30, 2006 VS 2005




During
      each of the quarters ended September 30, 2006 and 2005, we had no revenues,
      and
      are considered a development stage company. We do not expect to have revenues
      relating to our technologies prior to September 30, 2007, if at
      all.





For
      the
      quarter ended September 30, 2006 research and development expense was $1,023,447
      as compared to $1,370,733 for the quarter ended September 30, 2005. The decrease
      of $347,286 is due primarily to decreased development activities of our
      Oleoyl-estrone and PTH (1-34) product candidates. $238,000 of the spending
      decrease is attributable to Oleoyl-estrone and $225,000 of the spending decrease
      is attributable to PTH (1-34). These decreases were partially offset by
      share-based compensation of approximately $82,000 and an increase in spending
      on
      our propofol lingual spray candidate of $30,000.




For
      the
      three months ended September 30, 2006, general and administrative expense was
      $942,001 as compared to $490,894 for the three months ended September 30, 2005.
      The increase of $451,107 is due primarily to share-based compensation of
      approximately $244,000, accrued bonuses of approximately $96,000, consulting
      of
      approximately $64,000 and payroll expenses of approximately
      $34,000.





For
      the
      quarter ended September 30, 2006, other income was $68,026 as compared to
      $49,137 for the quarter ended September 30, 2005. The increase of $18,889 is
      a
      result of an increase in interest income of approximately $20,000 due to higher
      average balances in interest bearing cash and short-term investment accounts
      earning higher yields during the current year period offset by a realized gain
      on sale of marketable equity securities of approximately $1,000 in the prior
      year period.





Net
      loss
      for the three months ended September 30, 2006, was $1,897,422 as compared to
      $1,812,490 for the three months ended September 30, 2005. The increase of
      $84,932 in net loss is primarily attributable to share-based compensation of
      approximately $327,000, increases in other general and administrative expenses
      of $207,000 offset by decreases in other research and development expenses
      of
      approximately $429,000 and an increase in other income of approximately
      $19,000.





Preferred
      stock dividends were $0 and $75,018 for the three months ended September 30,
      2006 and 2005, respectively, which had no impact on loss per share for such
      periods.





NINE-MONTH
      PERIOD ENDED SEPTEMBER 30, 2006 VS 2005




During
      the nine months ended September 30, 2006 and 2005, we had no revenues, and
      are
      considered a development stage company. We do not expect to have revenues
      relating to our technologies prior to September 30, 2007, if at
      all.





16


For
      the
      nine months ended September 30, 2006 research and development expense was
      $4,248,150 as compared to $3,292,008 for the nine months ended September 30,
      2005. The increase of $956,142 is due primarily to increased development
      activities and spending for our PTH (1-34) product candidate of $916,000 and
      share-based compensation of approximately $243,000, partially offset by
      decreases in spending on our Oleoyl-estrone and propofol lingual spray product
      candidates of $104,000 and $106,000, respectively.





For
      the
      nine months ended September 30, 2006, general and administrative expense was
      $2,571,980 as compared to $1,537,298 for the nine months ended September 30,
      2005. The increase of $1,034,682 is due primarily to share based compensation
      of
      approximately $703,000 and accrued bonuses of approximately $249,000.




For
      the
      nine months ended September 30, 2006, other income was $253,467 as compared
      to
      $117,484 for the quarter ended September 30, 2005. The increase of $135,983
      is
      primarily the result of an increase in interest income of approximately $135,000
      due to higher average balances in interest bearing cash and short-term
      investment accounts earning higher yields during the current year
      period.





Net
      loss
      for the nine months ended September 30, 2006, was $6,566,663 as compared to
      $16,599,629 for the nine months ended September 30, 2005. This decrease in
      net
      loss of $10,032,966 is attributable primarily to the in-process research and
      development charge of $11,887,807 related to the acquisition of Tarpan
      Therapeutics taken in the 2005 period. Additionally, there was share based
      compensation of approximately $946,000, increases in other general and
      administrative expense of approximately $332,000 and increases in other research
      and development expenses of approximately $713,000 partially offset by an
      increase in other income of approximately $136,000.




Preferred
      stock dividends of $0 and $326,419 reduced earnings per share for the nine
      months ended September 30, 2006 and 2005 by $0.00 and $0.01,
      respectively.







LIQUIDITY
      AND CAPITAL RESOURCES




From
      inception to September 30, 2006, we incurred a deficit during the development
      stage of $39,838,358 primarily as a result of our net losses and preferred
      stock
      dividends. We expect to continue to incur additional losses through at least
      September 30, 2007 and for the foreseeable future thereafter. These losses
      have
      been incurred through a combination of research and development activities
      related to the various technologies under our control and expenses supporting
      those activities.





We
      have
      financed our operations since inception primarily through equity financing
      and
      our licensing and sale of certain residual royalty rights. During the nine
      months ended September 30, 2006, we had a net decrease in cash and cash
      equivalents of $5,913,652. This decrease resulted largely from net cash used
      in
      operating activities of $6,382,524 partially offset by net cash provided by
      investing activities of $484,128. Total liquid resources including short term
      investments as of September 30, 2006 were $4,418,513 compared to $10,834,154
      at
      December 31, 2005.





Our
      current liabilities as of September 30, 2006 were $1,414,281 compared to
      $1,665,817 at December 31, 2005, a decrease of $251,536. This decrease was
      primarily due to decreases in expenditures associated with our Oleoyl-estrone
      and propofol lingual spray product candidates during the quarter ended September
      30, 2006 as compare to the quarter ended September 30, 2005. As of September
      30,
      2006, we had working capital of $3,753,282 compared to $9,363,113 at December
      31, 2005. This decrease in working capital is primarily due to our net loss
      for
      the nine months ended September 30, 2006 of approximately $6,600,000 partially
      offset by share based compensation of approximately $946,000, which had no
      effect on working capital.





17


In
      March
      2006, we entered into a research and development agreement with Swiss Pharma
      Contract Ltd., or Swiss Pharma, to perform a Phase IIa clinical study in 100
      obese patients of our Oleoyl-estrone product candidate for the treatment of
      obesity. The contract requires us to pay up to $2,151,840 to Swiss Pharma for
      conducting the study.





Subsequent
      to September 30, 2006, we expanded our ongoing Phase IIa clinical trial of
      Oleyl-estrone in obesity study into two new clinical sites in the United States.
      Because the size of the study has not been expanded beyond the 100 obese
      patients, we do not anticipate the addition of the two new sites to materially
      increase its total financial commitment of up to $2,151,840. Such financial
      commitment will now be paid to three clinical centers rather than one. This
      Phase II a study is expected to conclude in the second quarter of
      2007.





Subsequent
      to September 30, 2006, we commenced a Phase IIa study in the morbidly obese
      at
      St.Lukes/Roosevelt hospital in New York. The financial commitment for this
      study
      is approximately $685,000. The study is expected to conclude in the first half
      of 2007 .





We
      often
      contract with third parties to facilitate, coordinate and perform agreed upon
      research and development of product candidates. To ensure that research and
      development costs are expensed as incurred, we record monthly accruals for
      clinical trials and preclinical testing costs based on the work performed under
      the contracts.





These
      contracts typically call for the payment of fees for services at the initiation
      of the contract and/or upon the achievement of certain milestones. This method
      of payment often does not match the related expense recognition resulting in
      either a prepayment, when the amounts paid are greater than the related research
      and development costs recognized, or an accrued liability, when the amounts
      paid
      are less than the related research and development costs
      recognized.





Expenses
      associated with the ongoing clinical trials are recognized on this activity
      based basis, therefore, the expense recognition differs from the payment
      schedules. Approximately $861,000 was paid and $244,000 of expense was
      recognized in the nine months ended September 30, 2006. Because the amounts
      paid
      were greater than the related research and development costs recognized as
      of
      September 30, 2006, we recognized a prepaid expense of approximately
      $617,000.





Our
      available working capital and capital requirements will depend upon numerous
      factors, including progress of our research and development programs, our
      progress in and the cost of ongoing and planned pre-clinical and clinical
      testing, the timing and cost of obtaining regulatory approvals, the cost of
      filing, prosecuting, defending, and enforcing patent claims and other
      intellectual property rights, competing technological and market developments,
      changes in our existing collaborative and licensing relationships, the resources
      that we devote to commercializing capabilities, the status of our competitors,
      our ability to establish collaborative arrangements with other organizations
      and
      our need to purchase additional capital equipment.




Our
      continued operations will depend on whether we are able to raise additional
      funds through various potential sources, such as equity and debt financing,
      other collaborative agreements, strategic alliances, and our ability to realize
      the full potential of our technology in development. Such additional funds
      may
      not become available on acceptable terms and there can be no assurance
      that any additional funding that we do obtain will be sufficient to meet our
      needs in the long term. Through
      September 30, 2006, a significant portion of our financing has been through
      private placements of common stock, preferred stock and warrants to purchase
      common stock. Until our operations generate significant revenues and cash flows
      from operating activities, we will continue to fund operations from cash on
      hand
      and through the similar sources of capital previously described. We can give
      no
      assurances that any additional capital that we are able to obtain will be
      sufficient to meet our needs. Management
      believes that we will continue to incur net losses and negative cash flows
      from
      operating activities for the foreseeable future. Based on the resources
      available to us at September 30, 2006, management believes that we will need
      additional equity or debt financing or will need to generate revenues through
      licensing our products or entering into strategic alliances to be able to
      sustain our operations into 2007 and we will need additional financing
      thereafter until we can achieve profitability, if ever. These issues raise
      substantial doubt about our ability to continue as a going concern.




18


Although
      we currently have sufficient capital to fund our anticipated 2006 expenditures,
      we will need to raise additional capital in order to complete the anticipated
      development programs for each of our research and development projects. If
      we
      are unable to raise such additional capital, we may have to sublicense our
      rights to a third party as a means of continuing development, or, although
      less
      likely, we may be required to abandon further development efforts altogether,
      either of which would have a material adverse effect on the prospects of our
      business.




RESEARCH
      AND DEVELOPMENT PROJECTS




Our
      success in developing each of our research and development projects is dependent
      on numerous factors, including raising further capital, 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. 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.




***Oleoyl-estrone***





We
      completed Phase Ia and Phase Ib clinical trials in May 2005 and July 2005,
      respectively, and released data on both trials in October 2005. The Phase 1a and
      Phase 1b clinical trials were dose escalation studies to determine the safety
      and tolerability of defined doses of orally administered Oleoyl-estrone in
      obese
      adult volunteers as well as the pharmacokinetic profile (i.e. the manner in
      which the drug is absorbed, distributed, metabolized and excreted by the body)
      of Oleoyl-estrone in both men and women.





The
      results indicated that Oleoyl-estrone was generally well-tolerated at all doses
      and no serious adverse events were reported. There were also no clinically
      significant changes in the physical exams, vital signs, ECGs, coagulation and
      liver function tests. The study demonstrated evidence of greater weight loss
      among the treated groups compared with the placebo group as well as evidence
      of
      reduction in desire to eat, hunger levels, fasting glucose and LDL cholesterol.
      Important clinical laboratories findings included reversible, dose-dependent
      elevations in estrone and estradiol levels, as well as reductions in
      testosterone levels. We received regulatory approval to commence our Phase
      IIa
      study with Oleoyl-estrone. We commenced dosing the first group of patients
      in
      late June 2006. Patient recruitment is ongoing.





19


In
      June
      2006, we commenced a Phase IIa clinical trial of 100 obese patients in
      Switzerland and expanded that Phase IIa study to two additional sites in the
      United States subsequent to September 30, 2006. The size of the study has not
      been expanded beyond the 100 obese patients. This Phase II a study is expected
      to conclude in the second quarter of 2007.





Subsequent
      to September 30, 2006, we commenced a Phase IIa clinical trial in the morbidly
      obese at St.Lukes/Roosevelt hospital. The study is expected to conclude in
      the
      first half of 2007 .





To
      date,
      we have incurred $10,712,192 of project costs related to our development of
      oleoyl-estrone, including milestone payments triggered under our license
      agreement for oleoyl-estrone, of which $2,722,375 was incurred in the first
      nine
      months of 2006. Since oleoyl-estrone is regarded by the FDA as a new entity,
      it
      is not realistic to predict the size and the design of future studies at this
      time.




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





PTH
      (1-34), which we acquired as a result of our April 2005 acquisition of Tarpan
      Therapeutics, Inc., is being developed as a topical treatment for psoriasis.
      In
      August 2003 positive results were reported from a US Phase I and II clinical
      trial evaluating the safety and efficacy of PTH (1-34) as a topical treatment
      for psoriasis. The topical application of PTH (1-34) resulted in complete
      clearing of the treated lesion in 60% of patients and partial clearing in 85%
      of
      patients. Additionally, there was a statistically significant improvement in
      the
      global severity score. Ten patients continued into an open label extension
      study
      in which the Psoriasis Area and Severity Index (PASI) was measured; PASI
      improvement across all 10 patients achieved statistically significant
      improvement compared to baseline. This study showed PTH (1-34) to be a safe
      and
      effective treatment for plaque psoriasis with no patients experiencing any
      clinically significant adverse events.





In
      April
      2006, the Company reported a delay in its planned Phase IIa clinical study
      of
      topical PTH (1-34) due to a formulation issue. The Company believes it has
      identified and resolved this issue. In conjunction with formulation experts,
      the
      Company has produced several alternative formulations of PTH (1-34) that have
      successfully completed preliminary testing and have shown high levels of
      activity in preclinical models. These formulations will now advance into the
      final stages of testing. Based on discoveries made during this formulation
      effort, the Company is preparing several patent applications.





To
      date,
      we have incurred $2,395,623 of project costs related to our development of
      PTH
      (1-34). These project costs have been incurred since April 1, 2005, the date
      of
      the Tarpan Therapeutics acquisition, $1,426,115 of which was incurred in the
      first nine months of 2006.





***Lingual
      spray propofol***





We
      are
      developing propofol lingual spray, the right to which we license from NovaDel
      Pharma, Inc., for light to medium sedation on a Section 505b2 bioequivalence
      regulatory pathway toward FDA approval. In January 2005, the FDA accepted our
      IND for propofol lingual spray, allowing us to commence clinical trials. The
      FDA
      has indicated to us in discussions that we may proceed to a pivotal Phase III
      trial of propofol lingual spray following completion of Phase I trials. We
      are
      actively planning the next steps for the clinical development of this product
      candidate, meeting with our scientific advisors and other formulation partners
      regarding formulation, reviewing existing data, developing trial design and
      evaluating plans to re-enter the clinic. As a result there was minimal spending
      on Propofol in the first nine months of 2006.





20


To
      date,
      we have incurred $2,920,846 of project costs related to our development of
      propofol lingual spray.





**Off-Balance
      Sheet Arrangements**





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





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





**Evaluation
      of Disclosure Controls and Procedures**





As
      of
      September 30, 2006, we carried out an evaluation, under the supervision and
      with
      the participation of our Chief Executive Officer and Chief Financial Officer,
      of
      the effectiveness of the design and operation of our disclosure controls and
      procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities
      Exchange Act of 1934, as amended). Based upon that evaluation, our Chief
      Executive Officer and Chief Financial Officer concluded that our disclosure
      controls and procedures as of that date were effective to ensure that
      information required to be disclosed in the reports we file under the Securities
      and Exchange Act is recorded, processed, summarized and reported on an accurate
      and timely basis.




The
      Company’s management, including its Chief Executive Officer and its Chief
      Financial Officer, does not expect that disclosure controls or internal controls
      over financial reporting will prevent all errors or all instances of fraud,
      even
      as the same are improved to address any deficiencies. The design of any system
      of controls is based in part upon certain assumptions about the likelihood
      of
      future events, and there can be no assurance that any design will succeed in
      achieving its stated goals under all potential future conditions. A control
      system, no matter how well designed and operated, can provide only reasonable,
      not absolute, assurance that the control system’s objectives will be met. Over
      time, controls may become inadequate because of changes in conditions or
      deterioration in the degree of compliance with policies or procedures. Further,
      the design of a control system must reflect the fact that there are resource
      constraints, and the benefits of controls must be considered relative to their
      costs. Because of the inherent limitations in all control systems, no evaluation
      of controls can provide absolute assurance that all control issues and instances
      of fraud, if any, within the Company have been detected.





Because
      of the inherent limitation of a cost-effective control system, misstatements
      due
      to error or fraud may occur and not be detected. These inherent limitations
      include the realities that judgments in decision-making can be faulty, and
      that
      breakdowns can occur because of a simple error or mistake. Controls can also
      be
      circumvented by the individual acts of some persons, by collusion of two or
      more
      people, or by management override of the controls.





**Changes
      in Internal Controls**




As
      of
      June 30, 2006, 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 a material weakness
      existed as of March 31, 2006 in the controls associated with our reporting
      of
      prepaid and research and development expenses, as well as the disclosure of
      a
      material commitment. That weakness continued to exist as of June 30, 2006.
      In
      accordance with Auditing Standard No. 2 and consistent with PCAOB Release No.
      2005-023 issued in November 2005, in determining whether a control deficiency
      existed, judgment must be applied to identify the cause of the misstatement,
      rather than merely attributing it to the period(s) affected. In this case,
      an
      error originated with respect to our recognition of a material commitment
      entered into during the first quarter ended March 31, 2006 and that weakness
      continued to exist at June 30, 2006. Accordingly, our management deemed such
      control deficiency to be a material weakness in its controls and procedures.
      A
      material weakness is a control deficiency, or combination of control
      deficiencies, that results in a more than remote likelihood that a material
      misstatement of the annual or interim financial statements will not be prevented
      or detected.





21


As
      a
      result of the weakness discussed above, during the third quarter of 2006, we
      made 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 the date of such evaluation.
      On
      July 10, 2006 we hired a new Chief Financial Officer with substantial
      Sarbanes-Oxley compliance experience.  During the third quarter of 2006, we
      initiated several projects focused on assessing potential risks, better
      understanding and documenting its processes, and implementing certain
      preventative or detective controls to address key risks. These are important
      first steps toward designing and implementing an effective compliance
      plan.  As a non-accelerated filer with a calendar year end of December 31,
      we must first begin to comply with the requirements of Section 404 for the
      fiscal year ending December 31, 2007. As part of this risk assessment, we
      undertook an extensive review of its controls associated with its research
      and
      development contract accounting process. As a result of new processes and
      controls implemented, we identified the error, discussed above, in the recording
      of a research and development contract during the quarter ended March 31, 2006.
      For this period, our research and development expense was overstated and prepaid
      expenses were understated by $416,798, and a related material commitment in
      excess of $2 million was not disclosed.





We
      have
      restated our interim financial statements and filed an amended quarterly report
      on form 10-QSB for the quarterly period ended March 31, 2006. Accordingly,
      the
      aforementioned error did not have any effect on the accompanying condensed
      consolidated financial statements in this quarterly report.





We
      believe these enhancements to our system of internal control and our disclosure
      controls and procedures are adequate to provide reasonable assurance that our
      internal controls are effective in alerting management on a timely basis to
      material information required to be disclosed in our periodic reports to the
      Securities and Exchange Commission.




Other
      than as described above , there were no changes in
      our internal control over financial reporting that occurred during the third
      quarter of 2006, that have materially affected, or are reasonably likely to
      materially affect, our internal control over financial reporting.




22


**PART
      II - OTHER INFORMATION**





**Item
      5.**  **Other
      Events.**





The
      Company’s common stock is listed on the American Stock Exchange (“AMEX”). The
      AMEX has adopted certain standards for continued listing. When a listed company
      falls below any of the continued listing standards, AMEX will review the
      appropriateness of continued listing. At September 30, 2006, the Company did
      not
      meet one of AMEX’s continued listing standards because the Company’s market
      capitalization is less than $50,000,000 and stockholders’ equity is less than
      $4,000,000. When a company falls below these standards, AMEX will generally
      issue a letter to the listed company noting that the listed company has failed
      to maintain its continued listing standards. The listed company will usually
      have an opportunity to submit a plan to AMEX outlining how it intends to regain
      compliance with its deficiency. If AMEX accepts such a plan, the listed company
      may be allowed up to eighteen months to regain compliance with respect to its
      deficiency; however, if the company does not regain compliance, then AMEX will
      proceed to delist the company’s shares from the exchange.





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





Exhibit
                  No.
              Description10.1
              Employment
                  Agreement dated July 7, 2006 between the Company and Michael G.
                  McGuinness
                  (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed
                  July 12, 2006).10.2
              Separation
                  Agreement dated July 7, 2006 between the Company and Nicholas J.
                  Rossettos
                  (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed
                  July 12, 2006).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.




23


**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, 2006
            By:
            /s/ Douglas
              AbelDouglas
                Abel
              President
                and Chief Executive Officer


Date:
              November 14, 2006
            By:
            /s/ Michael
              G. McGuinnessMichael G. McGuinness
              Chief
                Financial Officer


24


**Index
      to Exhibits Filed with this Report**





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







25