ARISTON MERGER

9 Months Ended

Sep. 30, 2011

8. ARISTON MERGER

On March 8, 2010, the Company entered into the Merger Agreement by and among the Company, Ariston and Merger Sub. Pursuant to the terms and conditions set forth in the Merger Agreement, on March 8, 2010, the Merger Sub merged with and into Ariston, with Ariston being the surviving corporation of the Merger. As a result of the Merger, Ariston became a wholly-owned subsidiary of the Company.

Under the terms of the Merger Agreement, the consideration payable by Manhattan to the stockholders and note holders of Ariston consists of the issuance of 1,412,488 shares of Manhattan’s common stock, par value $0.001 per share, ("Common Stock") at Closing (as defined in the Merger Agreement) plus the right to receive up to an additional 494,370 shares of Common Stock (the “Milestone Shares”) upon the achievement of certain product-related milestones described below. In addition, Manhattan has reserved 772,624 shares of its Common Stock for possible future issuance in connection with the conversion of $15.45 million of outstanding Ariston convertible promissory notes. The noteholders will not have any recourse to Manhattan for repayment of the notes (their sole recourse being to Ariston), but the noteholders will have the right to convert the notes into shares of the Manhattan’s Common Stock at the rate of $20.00 per share. Further, Manhattan has reserved 100,000 shares of its Common Stock for possible future issuance in connection with the conversion of the $1.0 million outstanding Ariston convertible promissory note issued in satisfaction of a trade payable. The noteholder will not have any recourse to Manhattan for repayment of the note (their sole recourse being to Ariston), but the noteholder will have the right to convert the note into shares of Manhattan’s Common Stock at the rate of $10.00 per share.

Upon the achievement of the milestones described below, Manhattan would be obligated to issue portions of the Milestone Shares to the former Ariston stockholders and noteholders:

Upon the affirmative decision of Manhattan’s Board of Directors, provided that such decision is made prior to March 8, 2011, to further develop the AST-915, either internally or through a corporate partnership, Manhattan would issue 176,561 of the Milestone Shares. This milestone was attained in January 2011 and the shares were issued in March 2011. The Company recognized approximately $220,000 of research and development expense during the nine months ended September 30, 2011 from the issuance of these shares.

Upon the acceptance by the FDA of the Ariston’s filing of the first New Drug Application for the AST-726 product candidate, Manhattan would issue 141,248 of the Milestone Shares.

Upon the Company receiving FDA approval to market the AST-726 product candidate in the United States of America, Manhattan would issue 176,561 of the Milestone Shares.

Certain members and former members of Manhattan’s board of directors and principal stockholders of Manhattan at the time of the Merger owned Ariston securities as of the closing of the Merger:

Timothy McInerney, a former director of Manhattan, owned 333 shares of Ariston common stock which represented less than 1% of Ariston’s outstanding common stock as of the closing of the Merger.

Neil Herskowitz, a director of Manhattan, indirectly owned convertible promissory notes of Ariston with interest and principal in the amount of $192,739.

Michael Weiser, a former director of Manhattan, owned 2,347 shares of Ariston common stock, which represented approximately 2.1% of Ariston’s outstanding common stock as of the closing of the Merger.

Lindsay Rosenwald, a more than 5% beneficial owner of Manhattan common stock, in his individual capacity and indirectly through trusts and companies he controls, owned 9,958 shares of Ariston common stock, which represented approximately 8.9% of Ariston’s outstanding common stock as of the closing of the Merger and indirectly owned convertible promissory notes of Ariston in the amount of $141,438.

The Company merged with Ariston principally to add new products to its portfolio. Prior to the Merger, Ariston was a private, clinical stage specialty biopharmaceutical company based in Shrewsbury, Massachusetts that in-licensed, developed and planned to market novel therapeutics for the treatment of serious disorders of the central and peripheral nervous systems.

The Merger date fair value of the total consideration paid was $1,491,937 which consisted of 141,248 shares of the Company’s common stock issued upon the Merger and 317,809 contingently issuable shares upon Ariston’s attaining certain milestones as described above. At the time of the Merger, the Company did not believe the attainment of the milestone for AST-915 was highly probable and, therefore, recorded no contingent consideration relative to it. The par value of the contingently issuable common shares is reflected in the accompanying consolidated balance sheets as of September 30, 2011 and December 31, 2010 as a component of stockholders’ deficiency, contingently issuable shares. The Company incurred $9,527 of acquisition related costs.

The following table summarizes the fair values of the assets acquired and liabilities assumed at the Merger date:

Cash and cash equivalents	$	519,365
Other assets		120,870
Total identifiable assets		640,235
Accounts payable and accrued expenses		437,615
ICON convertible note payable		1,000,000
5% convertible notes payable		15,452,793
Total identifiable liabilities		16,890,408
Net identifiable assets (liabilities)		(16,250,173	)
In-process research and development acquired		17,742,110

Net assets acquired	$	1,491,937

The following supplemental pro forma information presents the financial results as if the acquisition of Ariston had occurred on January 1, 2010 for the three and nine month periods ended September 30, 2010. This supplemental pro forma information has been prepared for comparative purposes and does not purport to be indicative of what would have occurred had the acquisition been made on January 1, 2010, nor are they indicative of future results.

Pro forma consolidated results:	Three Month Period Ended September 30, 2010		Nine Month Period Ended September 30, 2010
Revenue	$	-	$	-
Net income	$	41,247	$	104,411
Basic and diluted income per share	$	0.02	$	0.05