UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

FORM 10-KSB/A
      (AMENDMENT NO. 2)


|  |  |                                                                                   
|- |  | ----------------------------------------------------------------------------------
|  |  |                                                                                   
|þ |  | ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
|  |  | FOR THE FISCAL YEAR ENDED DECEMBER 31, 2007                                       
|  |  |                                                                                   
|o |  | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|  |  | FOR THE TRANSITION PERIOD FROM
      ________________ TO ________________         

COMMISSION FILE NO. 333-134987

TETRAGENEXPHARMACEUTICALS,INC.(Name of Small Business Issuer in its Charter)

|                                |  |                              |  |                          
|------------------------------- |  | ---------------------------- |  | -------------------------
|DELAWARE                        |  | 0-2834                       |  | 22-3781895               
|(State or other jurisdiction of |  | (Primary Standard Industrial |  | (I.R.S. Employer I.D No.)
|incorporation or organization)  |  | Classification Code Number)  |  |                          

1 MAYNARD DRIVE SUITE 105PARK RIDGE, NEW JERSEY 07656(Address of Principal Executive Offices)

(201) 505-1300(Issuer’s Telephone Number)

Securities registered under Section 12(b) of the Exchange Act: NONE

Securities registered under Section
    12(g) of the Exchange Act: NONE

Check whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.o

Check whether the registrant (1)
    filed  all reports required to be filed under Section 13 or 15(d) of the
    Exchange Act, during the past 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.þYeso No

Check if there is no disclosure
    of delinquent filers in response to Item 405 of Regulation S-B contained
    in this form, and no disclosure will be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this
  Form 10-KSB.þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).oYesþNo

The issuer’s revenues for the fiscal year ended December 31, 2007 were $0.

The aggregate market value of the voting and non-voting common equity held by non-affiliates as of May 13, 2008, based on the closing price of the Over-The-Counter Bulletin Board of $0.55 per share was $7,150,000.

Number of shares outstanding of Issuer’s common stock, $0.001 par value, outstanding on May 10, 2008: 15,926,126.

Documents Incorporated by Reference: NONE

Transitional Small Business Disclosure Format (Check
one): Yeso;
Noþ

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Explanatory Note

This Annual Report on Form 10-KSB/A (“Amendment No.2”)
is filed as the second amendment to the Annual Report on Form 10-KSB for the
year ended December 31, 2007 filed by Tetragenex Pharmaceuticals, Inc. (the “Company”)
on  May 14, 2008 (the “Original 10-KSB”). The Company is further amending
Item 8A, Controls and Procedures, to disclose the Companys revised conclusion on the effectiveness of its disclosure controls and procedures,
mainly that its disclosure controls and procedures were not effective as of December 31, 2007.
This Amendment No. 2 has not been updated or modified in any other way and speaks only as of the
date of the Original 10-KSB.

























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TABLE OF CONTENTS

|                 |    |                                                                |     
|---------------- | -- | -------------------------------------------------------------- | ----
|                 |    |                                                                | Page
|                
|PART I           |    |                                                                |     
|ITEM
        1.  |    | BUSINESS                                                       | 1   
|ITEM
        2.  |    | DESCRIPTION OF
        PROPERTY                                | 14  
|ITEM
        3.  |    | LEGAL PROCEEDINGS                                              | 14  
|ITEM
        4.  |    | SUBMISSION OF
        MATTERS TO A VOTE OF SECURITY HOLDERS    | 15  
|                
|PART II          |    |                                                                |     
|ITEM
        5.  |    | MARKET FOR COMMON
        EQUITY AND RELATED STOCKHOLDER       |     
|                 |    | MATTERS                                                        | 16  
|ITEM
        6.  |    | MANAGEMENT’S
        DISCUSSION AND ANALYSIS OF FINANCIAL      |     
|                 |    | CONDITION OR
        PLAN OF OPERATIONS                        | 16  
|ITEM
        7.  |    | FINANCIAL STATEMENTS                                           | 23  
|ITEM
        8.  |    | CHANGES IN AND
        DISAGREEMENTS WITH ACCOUNTANTS ON       |     
|                 |    | ACCOUNTING AND
        FINANCIAL DISCLOSURE                    | 23  
|ITEM
        8A. |    | CONTROLS AND
        PROCEDURES                                | 23  
|ITEM
        8B. |    | OTHER INFORMATION                                              | 23  
|                
|PART III         |    |                                                                |     
|ITEM
        9.  |    | DIRECTORS, EXECUTIVE
        OFFICERS, PROMOTERS AND CONTROL   |     
|                 |    | PERSONS; COMPLIANCE
        WITH SECTION 16(A) OF THE EXCHANGE |     
|                 |    | ACT                                                            | 24  
|ITEM
        10. |    | EXECUTIVE COMPENSATION                                         | 28  
|ITEM
        11. |    | SECURITY OWNERSHIP
        OF CERTAIN BENEFICIAL OWNERS AND    |     
|                 |    | MANAGEMENT AND
        RELATED STOCKHOLDER MATTERS             | 31  
|ITEM
        12. |    | CERTAIN RELATIONSHIPS
        AND RELATED TRANSACTIONS         | 34  
|ITEM
        13. |    | EXHIBITS AND
        REPORTS ON FORM 8-K                       | 36  
|ITEM
        14. |    | PRINCIPAL ACCOUNTANT
        FEES AND SERVICES                 | 37  
|                
|SIGNATURES       | 38
|                 |   













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PART I

ITEM 1.      BUSINESS

GENERAL

Tetragenex Pharmaceuticals, Inc. is headquartered in Park Ridge, New Jersey, and we were a wholly owned subsidiary of Innapharma, Inc. (“Innapharma”). Innapharma was founded in 1989 in the State of Delaware as a
biopharmaceutical company to discover, develop and commercialize proprietary pharmaceutical products that would treat serious diseases for which current therapies are inadequate.

In light of the results of a certain dog study and the difficult financial market conditions at the time, which had hampered our fund-raising efforts, on April 15, 2003, Innapharma filed for protection under Chapter 11 of
the United States Bankruptcy Code. At or about the time of the filing, we took measures to drastically reduce our monthly overhead and other costs, which included terminating non-essential employees, rehiring some employees as consultants, and
deferring salaries of all remaining employees. We closed our Florida office that year but continue to maintain our headquarters in Park Ridge, New Jersey, with a small satellite office in Melville, New York.

From the filing of the bankruptcy to November 2004, we filed a plan, negotiated settlements with both the creditor’s committee and the preferred shareholders and got our plan of reorganization confirmed in Bankruptcy
Court in the Eastern District with an effective date of November 26, 2004.

Effective November 24, 2004, Innapharma merged with and into us pursuant to an Agreement and Plan of Merger (the “Merger Agreement”). Innapharma was merged with and into us upon confirmation of
Innapharma’s proposed Plan of Reorganization as filed with the United States Bankruptcy Court for the Eastern District of New York on February 19, 2004 (the “Merger”). As a result of the Merger, the outstanding shares of capital
stock of Innapharma were converted or canceled in the manner provided by the Merger Agreement, which generally provided for a conversion of four shares of common stock of Innapharma into one share of our common stock and reciprocal terms for the
conversion of securities exercisable for common stock of each company, the separate corporate existence of Innapharma ceased, and we continued as the surviving corporation in the Merger.

Although we have several product candidates in different stages of development for the treatment of various categories of disease, our major focus is on our lead antidepressant compound, Nemifitide. In double blind,
placebo-controlled clinical trials, Nemifitide has shown a rapid and robust onset of action after 10-14 days of treatment (10-15 subcutaneous injections) with lasting benefits of approximately four months following treatment. Nemifitide is well
tolerated, without any current evidence of significant side effects as compared to the current drugs that are used in the treatment of major depressive disorder.

We have conducted extensive testing of Nemifitide in both animals (preclinical) and human (clinical) studies over the last ten years. Early preclinical animal studies demonstrated the powerful potential of Nemifitide as a
treatment for human patients suffering from depression. These preclinical results have been supported by the clinical studies that we have conducted in over 500 subjects in which Nemifitide were administered to over 400 subjects. In January 2003, we
were conducting Phase 2 clinical trials (studies in depressed patients), in order to demonstrate proof-of-principle in patients. At that time, results of a 3-month toxicology study performed by Huntingdon Life Sciences, Inc.
(“Huntingdon”) wherein dogs, in accordance with the requirements of the Food & Drug Administration (the “FDA”), were given extremely high daily doses of Nemifitide over a 3-month period (the “Dog Study”),
became available. After three months, a customary sacrifice of certain dogs was performed. This study found brain and

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muscle lesions in the dogs. We notified the FDA and all human clinical trials were placed on hold by the FDA. We then engaged a panel of leading scientists in the field of neurotoxicology, neuropathology and regulatory
affairs to evaluate all of the data and to address the feasibility of resolving the clinical hold. Following a recommendation from the FDA, our scientific team implemented two additional animal studies consisting of one primate study and one dog
study. The independent expert panel thought that these studies would generate appropriate data for the FDA to address and remove the clinical hold. These studies are now completed. In the new dog study with a more sophisticated evaluation of the
target organs, there was less toxicity observed than with the previous study with an improved risk-benefit safety profile. The primate study, with similar sophisticated evaluation, did not show any treatment-related toxicity due to Nemifitide at any
of the doses investigated, which would suggest species specificity to the dog. The FDA confirmed on March 29, 2006, that they had completed their review our complete response to the clinical hold and that the clinical hold had been lifted. This
permits us to re-enter human clinical trials.

FINANCIAL CONDITION

As of the date of the filing, we currently have approximately $275,000 in liquid funds available to us. Our current core burn rate is approximately $40,000 per month. Future funds will be derived from additional sales of
our common stock in the public or private markets and/or a licensing agreement with a pharmaceutical company as well as the potential sale of our state tax losses through the New Jersey Development Plan. Our only long term debt consists of the $1.8
million convertible note payable to the former holders of our Preferred D securities in April 2009.

TETRACYCLINE DEVELOPMENT PROGRAM

The continuing emergence of antibiotic resistance threatens to reverse the progress made during the latter half of the twentieth century to effectively treat bacterial and other infectious diseases. In 2001, the problem of
antimicrobial resistance posed a global threat to the effective treatment of many bacterial diseases. The tetracyclines are a group of broad-spectrum antibiotics, which, even 60 years after their discovery, have retained a prominent position in the
treatment of infectious diseases, exhibiting activity against a wide range of microorganisms including gram-positive and gram-negative bacteria. We have initiated a program to develop new chemically-modified tetracyclines that we believe may be
active against both resistant and sensitive organisms. This is a rapid development program once efficacy has been demonstrated. A recent report on the world antibiotic market projects sales for a new antibiotic to quickly reach $100 to $300 million
per year.

ANTIDEPRESSANT DEVELOPMENT PROGRAM (“CNS”)

DEPRESSION

The Diagnostic and Statistical Manual of Mental Disorders (Fourth Edition) defines depression as a common psychobiological disorder that manifests itself through symptoms such as a pervasive low mood and loss of ability to
enjoy usual activities, a change in weight, a change in appetite and/or sleep activity, a decrease in energy, a feeling of worthlessness or guilt, difficulty in thinking or making decisions, and/or recurring thoughts of death or suicide. Recent
studies conducted by the World Health Organization (“WHO”), indicate that up to 20% of the world’s population will suffer from severe depression at one point in their lifetime of sufficient degree to require medical and/or
psychotherapeutic intervention. According to the National Depressive and Manic Depressive Association, it is estimated that more than 22,000,000 American adults suffer from depression and result in approximately 30,000 suicides annually.

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The United States government estimates that depression costs approximately $17 billion in lost work days each year.

Both the WHO and the National Institutes of Mental Health (“NIMH”) recognize that depression is a major global health problem and they have encouraged increasing resources to be devoted to improving currently
available treatments, as only about 20% to 30% of patients with major depressive disorder are appropriately diagnosed and adequately treated. The United States Preventative Task Force, a group sponsored by an office of the United States Department
of Health and Human Services, has recommended that physicians formally screen patients for depression during routine physical examinations and establish appropriate systems to ensure treatment and follow-up.

ANTIDEPRESSANT MARKET

According to the WHO, an estimated 121 million people around the world suffer from a depressive disorder for which they require treatment. More women than men suffer from depression. It is estimated that 5.8% of all men and
9.5% of all women will suffer from a depressive disorder in any given year. Many people will be afflicted by a depressive disorder at some point in their lives. The WHO projects that 17% of all men and women will suffer from a depressive disorder at
some point in their lives. Depression is a major health problem and the WHO predicts that by 2020 depression will be the second largest cause of the global health burden. Major depressive disorder accounts for 4.4 percent of the total overall global
disease burden, a contribution similar to that of ischemic heart disease or diarrheal diseases.

Over the next five years, generic forms of nearly all the leading branded antidepressants will emerge. As a result of patent expiries, Research and Markets Magazine expect the value of the U.S. antidepressant market to
decline by 2.1% per year between 2004 and 2009.

According to LeadDiscovery Ltd., the antidepressant market is set to undergo a period of rapid change as seven out of the eight leading brands suffer US patent expiries by 2008. With only a handful of new products
anticipated to replace these blockbuster products, the market is expected to decrease by 21.5% to $13.5 billion by 2011, as physicians are encouraged to utilize cheaper generics. Brand players must look towards maximizing revenues through product
differentiation and innovative lifecycle strategies.

According to the Journal of Clinical Psychiatry (J.F. Greden), treatment is often challenging; an estimated 20%-40% of patients do not benefit sufficiently from existing antidepressant interventions including trials of
medication and psychotherapy. Because of the clinical profile of Nemifitide which shows rapid onset of action, minimal side effects, maintenance of efficacy of 2-4 months following initial dosing period, and level of response in serious depressive
disorder, the Company feels that it will have rapid entry into this market.

NEMIFITIDE

Although we have a number of product candidates in different stages of development for the treatment of various categories of disease, our major focus is on our lead antidepressant compound, Nemifitide. Nemifitide has shown
the potential for a rapid onset of action with long-lasting benefits. Minimal side effects have been observed to date in clinical trials with a similar incidence when compared to placebo in our placebo-controlled double-blind trials. We believe this
may represent a major paradigm shift for the treatment of major depressive disorder because currently available anti-depressants: (i) require two to six weeks before the patient begins to experience significant symptomatic relief; (ii) have a large
number of side effects that often result in the premature discontinuation of treatment (almost half of all patients for whom anti-depressants are currently prescribed never fill their second prescription); and (iii) require daily

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dosing for months and often times, years. In contrast, Nemifitide often requires only 10 to 15 doses via subcutaneous injection over a two to three-week period for a sustained clinical effect (approximately 4 months). It is
our belief that Nemifitide will become the treatment of choice for a broad spectrum of depressive disorders, including patients who do not respond to available antidepressants (refractory patients).

We completed preclinical testing necessary for the conduct of our clinical program, Phase 1 clinical testing (testing for safety and tolerance in healthy volunteers), and substantial Phase 2 clinical testing (small-scale
testing for safety and efficacy in depressed patients) of Nemifitide and are anticipating large scale, multicenter Phase 3 studies. Removal of the clinical hold allows us to expand our Phase 2/3 clinical trials program during the course of the year
2007. The only significant drug-related side effect observed to date for Nemifitide was an allergic reaction in one patient, which resulted in the subject being withdrawn from the study. All other side effects observed to date in the over 400
subjects dosed to date in our clinical trials have been non-serious as defined by the FDA.

Nemifitide was discovered and developed by our scientists and is based upon a model of naturally occurring brain peptide. By modifying these naturally occurring substances, we have been able to develop a platform of unique
synthetic peptides, which we believe has a rapid onset of action with minimal side effects as compared to the current drugs that treat depression. The side effects of Nemifitide observed in human clinical trials are reported to be minimal and of
short duration, and include dizziness, mild headaches, transient drowsiness, constipation, a metallic taste and mild skin irritation at the site of the injection, with a similar incidence when compared to placebo.

We continue to synthesize, test and add peptides to our platform. To date, we have evaluated more than 200 of these compounds, and our efforts are ongoing. This work has already identified several drug candidates that show
even greater activity in preclinical testing than did Nemifitide, and these compounds have been designated as second-generation drugs. We have been granted patents that cover our extensive library of peptides and we will continue to seek additional
patent protection as new peptides are developed.

OVERVIEW OF NEMIFITIDE

In April 2003 the FDA informed us that they were placing Nemifitide on clinical hold due to brain and muscle lesions found during a routine 3-month dog study. We completed additional canine and monkey studies which prompted
the FDA to remove the clinical hold. The clinical hold may hinder our ability to obtain a licensing agreement with a pharmaceutical company as well as attract additional investment into the company. To date we have seen no evidence of similar
problems in the 400 humans who have received Nemifitide. We believe Nemifitide has shown several advantages over the drugs currently marketed to treat depression. These advantages include:

| | 1. | RAPID ONSET OF ACTION AND SYMPTOMATIC RELIEF                                                                                                                                                                                                                                                                                                                                                                                             
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |    | The initial effects of Nemifitide are observable within the first three to five days of treatment. Peak effects of Nemifitide occur within two to three weeks, versus four to eight weeks for other current
antidepressant therapeutics. Nemifitide may be used to treat severely depressed patients who require rapid symptomatic relief, as effectiveness can be clinically measured within three to five days of initiating treatment.
|
| | 2. | MANY PATIENTS EXPERIENCE COMPLETE SYMPTOMATIC RELIEF                                                                                                                                                                                                                                                                                                                                                                                     
|
| |    | Many patients who respond to Nemifitide enter into remission from their depression.                                                                                                                                                                                                                                                                                                                                                      
|

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| | 3. | FREEDOM FROM REGULAR DAILY TREATMENT                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |    | Nemifitide is administered via ten subcutaneous injections on average over a two to three-week period and has a long duration of effective action (approximately 4 months). This allows for intermittent
clinical treatment versus regular daily treatment required with existing medications.                                                                                                                                                                                                        
|
| | 4. | MINIMAL SIDE EFFECTS IN PHASE 1 AND 2 STUDIES                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |    | Nemifitide has been administered to over 400 subjects without any evidence of the problematic adverse side effects commonly exhibited by currently available therapies, such as anxiety and sexual
dysfunction. The only significant side effect observed to date has been an allergic reaction in one patient, which caused withdrawal from the study. All other side effects listed have been minor or inconsequential and most of them were not different
from placebo in our double-blind studies.
|
| | 5. | LITTLE OR NO POTENTIAL FOR ADVERSE INTERACTIONS WITH OTHER DRUGS                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |    | Based on in vitro (in test tubes) studies conducted to date, Nemifitide is not expected to show significant drug-drug interaction in human beings. This is especially beneficial in the treatment of
geriatric depression or other patients who take multiple medications.                                                                                                                                                                                                                            
|
| | 6. | POTENTIAL FOR ALTERNATIVE FORMS OF ADMINISTRATION                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |    | Evidence from a Phase 1 clinical study indicates that Nemifitide may be administered through needle less injection devices. We intend to explore other forms of delivery, such as transdermal patch (through
the skin by way of a patch), intranasal spray and other methods of administration.                                                                                                                                                                                                       
|
| | 7. | POTENTIAL TO TREAT OTHER CNS DISORDERS                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |    | In addition to treating major depressive disorder, preclinical animal data with Nemifitide and other peptide analogs demonstrated the potential for treating anxiety disorders. We intend to pursue other
CNS indications as well.                                                                                                                                                                                                                                                                    

TREATMENT OF SEVERELY REFRACTORY PATIENTS

Results from an open-label (a clinical trial without the use of a placebo) pilot study in severely refractory depressed patients (patients who have not responded to available antidepressants) have shown a 44% response rate.
These results have generated a considerable amount of interest among the clinical/scientific community and the FDA. We believe this reflects the novel activity of Nemifitide and the potential to treat this debilitating disorder. According to the
National Institute of Mental Health, approximately 5% to 10% of patients suffering from major depressive disorder have the refractory form of the illness.

UNIQUE MECHANISM OF ACTION

We believe that the mechanism of action of Nemifitide is different from that of other antidepressants. Studies regarding specific aspects of the mechanism of action of Nemifitide are part of the development program. The
results of rat studies conducted to date indicate that Nemifitide crosses the blood brain barrier rapidly and is concentrated in key brain areas related to depression, especially the hippocampus, amygdala and pre-frontal cortex. In vitro studies
(studies conducted in the laboratory rather than in animals) show that Nemifitide is not significantly metabolized by the brain tissue of rats. Following in

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vivo studies (studies conducted in live animals), unchanged Nemifitide, as well as our active metabolite, were found in the brains of the rats. This data suggests that the antidepressant activity of Nemifitide is due, at
least in part, to unchanged Nemifitide in the brain.

In vitro studies were conducted to determine the specific brain receptors to which Nemifitide binds. The results indicate that Nemifitide binds to certain serotonin receptors, such as 5HT2A and 5HTT. Other in vivo studies
in rats confirmed these results. This is a strong indication that Nemifitide is interacting with the serotonergic pathway in the body, in a manner that differs from that of the selective serotonin reuptake inhibitors (SSRIs), such as Prozac, Paxil,
Zoloft and others. This unique mechanism of action, in conjunction with the advantages of Nemifitide observed in the clinic, supports management’s belief that Nemifitide represents a new treatment paradigm for depression.

CLINICAL AND PRECLINICAL DEVELOPMENT PROGRAMS

CLINICAL TRIALS - NEMIFITIDE

Our clinical trial program has been designed to produce information about the efficacy and safety of Nemifitide. Patients who desired to participate in our trials were first screened by trained physicians and determined to
be eligible. Many eligibility criteria were evaluated during the screening, with an emphasis on the degree of depression, as measured by standardized tests, and the appropriate depressive diagnosis, as determined by the screening physicians. Those
patients found to be suffering from major depressive disorders and who met standard, well-defined inclusion and exclusion criteria were included in our studies.

Our lead compound, Nemifitide, is well advanced in Phase 2 clinical trial testing in depressed patients and has demonstrated potential significant advantages over existing therapies. These include a rapid onset of action
(3-5 days vs. weeks), a long-acting response (approximately 4 months), and minimal side effects when compared with placebo (with none of the sexual dysfunction and weight gain that often make current antidepressants intolerable).

We have, to date, performed five blinded, placebo-controlled Phase 2 clinical trials and two unblinded trials with Nemifitide. We have performed both blinded and open-label studies. Blinded trials include a group of
patients who are randomly assigned to receive either placebo (sugar) or Nemifitide. During a blinded trial, neither the patient nor the examining physician knows which patients are receiving the placebo and which are receiving Nemifitide. Upon
completion of the study, the study is unblinded and the effectiveness of the treatment is determined. Placebo-controlled studies provide the most reliable information about the efficacy of a new antidepressant and are required by the FDA and other
international regulatory agencies in order to approve the commercialization of a new drug.

The data from our first two blinded studies provided evidence indicating that Nemifitide is an active antidepressant that is safe and well tolerated in human patients. The data from the two blinded studies gave us
information regarding the optimal doses and treatment regimen (i.e., daily doses, alternate day dosing, 10 doses, 15 doses, etc.), as well as demonstrating a dose response. Since the FDA recently lifted the clinical hold imposed on our research, we
may proceed with expansion of our Phase 2/Phase 3 pivotal clinical programs required for FDA approval during the course of the year 2008. In our most recent blinded study, one treatment group received ten doses of 30 mg of Nemifitide, the second
treatment group received ten doses of 45 mg of Nemifitide and the third group received ten doses of matching placebo over a two-week period. There were 78 patients in the study (approximately 26 patients per treatment group). Patients receiving
Nemifitide did significantly better than patients receiving placebo. A dose-response was observed, as well, with the 45 mg patients responding better than the 30 mg patients. In

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addition, further data analysis revealed that the more depressed a patient was upon entering the study, the stronger their response.

In the other blinded study, patients received either 9 or 15 doses of 160 mg of Nemifitide (or a placebo) over a three-week period. The purpose was to evaluate the efficacy of the 160 mg dose and compare daily dosing
(Monday-Friday) to every-other-day dosing (Monday/Wednesday/Friday) for three weeks. Results of this study showed a sustained significant response for the patients receiving the Monday/Wednesday/Friday dosing regimen, while patients who received the
daily dosing regimen did not separate from placebo patients.

The Monday/Wednesday/Friday dosing regimen is supported by earlier animal studies performed by Dr. David Overstreet at the University of North Carolina in his Flinders sensitive rat models.

In addition to the placebo-controlled blinded studies, we conducted two open-label trials. These studies, in which the patient knows they are getting a drug, are typically used when data is needed quickly and/or we wish to
compare a range of doses. The first open-label study involved 27 patients who had completed treatment in one of our double-blinded, placebo-controlled studies. In this study all patients received Nemifitide (18-160 mg for up to three years).
Sixty-seven percent (18 of 27) experienced a prolonged therapeutic response and the drug was well tolerated with no significant drug-related side effects.

CLINICAL TRIALS-REFRACTORY DEPRESSION

Our second open-label trial was conducted in a patient population with severe refractory depression, who had not responded to available antidepressant therapy. Refractory patients make up 5% to 10% of the total depressed
patient population. Management believes that any medication that would help this population would be of great clinical utility and would become the treatment of choice almost immediately. In this 25 patient study there was a significant improvement
in 11 of the patients, representing a 44% response rate. As a result of this positive data, we plan to expand our late Phase 2 and 3 programs and to include a placebo-controlled study in refractory depression. Management estimates that the projected
date of submission of the New Drug Application for Nemifitide to the FDA is the year 2009/2010.

Our clinical studies are being conducted under internationally accepted protocols that will enable us to submit the results to regulatory authorities in all important world marketplaces, including the United States, Europe
and Japan.

PRECLINICAL STAGES OF DEVELOPMENT

Preclinical studies are performed to generate the data that is necessary before the FDA will grant permission to start clinical trials. Four general types of preclinical information are required safety, pharmacology,
pharmacokinetics/metabolism and manufacturing.

Safety and pharmacokinetic studies are performed in animals, usually rats and dogs, at doses that far exceed those expected to be utilized in human beings. After treatment, the animals are carefully autopsied and the toxic
effects of the drug are noted. From this data, a determination is made regarding the maximum dose that can be utilized in human trials.

Pharmacological activity studies are designed to provide evidence that the candidate drug is active in the target disorder. There are many different types of activity models available, depending on the target disorder. In
general, activity studies are also performed in rodents because they are readily available, inexpensive and have consistently predicted clinical effects in human beings. We have available rodent

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models that are highly effective in identifying candidate antidepressant, anti-cancer and antibacterial drugs, which will be used in order to evaluate our drugs in preclinical development.

Manufacturing studies are performed in order to demonstrate that the drug candidate can be prepared in sufficient purity and stability to meet FDA requirements for human administration.

We have the following other product candidates currently in preclinical stages:

| | 1. | NEW CENTRAL NERVOUS SYSTEM ACTIVE PEPTIDES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |    | We currently have under development a large number of central nervous systems active peptides that the Company believes may have clinical utility. Two of these compounds, INN 01134 and INN 00955, are
shown to be more active in preclinical models than Nemifitide. INN 01134 is a pharmacologically active metabolite of Nemifitide. It is our goal to pursue the development of these compounds as second-generation medications for the treatment of
depression, anxiety and other major psychiatric disorders. Depression is a heterogeneous disorder and as a result patients often respond very differently to psychotropic drugs (drugs that are active in psychiatric disorders) that even have a similar
mechanism of action. Physicians are aware of this possibility and commonly utilize several drugs of a given class when treating individual patients. The availability of alternate therapeutics related to Nemifitide would therefore greatly improve the
likelihood of central nervous system peptides becoming the treatment of choice among physicians.
|
| |    | The methods we use to evaluate the activity and toxicity of Nemifitide are equally applicable to the testing of other central nervous system active peptides. Accordingly, the development of a
second-generation antidepressant peptide is greatly facilitated by our previous experience. Several drug candidates are currently under evaluation in animal models.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| | 2. | ANTI-CANCER AND ANTIBIOTIC RESISTANCE DEVELOPMENT PROGRAM                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |    | Tetracyclines were discovered in the mid 1940’s. Initially, they were used as highly effective antibiotics in the treatment of a variety of infectious diseases. In the early 1980’s, it was
discovered that tetracyclines were also effective inhibitors of MMPs (matrix metalloproteinases), key enzymes in the promotion of many human disorders. The first application of tetracyclines as Matrix Metal/opportunities MMP inhibitors was in the
treatment of periodontal disease. However, management believes that the most promising area for tetracyclines is in the treatment of cancer. Cancer cells utilize MMPs for many of the processes associated with growth, proliferation and metastasis.
Tetracyclines, which are usually of limited toxicity, can often be administered to patients in high doses for extended periods of time. This makes them particularly attractive candidates as anti-cancer drugs, where the toxicity of currently
available therapeutics often limits the dose and duration of their utilization.                                    
|
| | 3. | CHEMICALLY-MODIFIED TETRACYCLINE-BASED COMPOUNDS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |    | Tetracyclines belong to a family of naturally occurring antibiotics that have been demonstrated to be potent inhibitors of matrix metalloproteinases (enzymes which are key in the promotion of many human
disorders). We are currently developing a platform of new and unique chemically modified tetracycline molecules to be used in the treatment of certain types of cancer (prostate and breast,) and antibiotic-resistant bacterial infections.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|

8

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A project is currently underway
      to synthesize and evaluate new chemically modified tetracycline molecules
      for the treatment of cancer and antibiotic-resistant bacterial infections.
      To date, 100 new compounds have been synthesized by our company, and many
      more will be available in the near future. All of these compounds are in
      the process of being screened for pharmacological activity, and several
      of them have already been identified as promising candidates. Our tetracycline-based drugs
      are in the preclinical development stage. Our IN VITRO studies have identified
      a series of chemically modified tetracyclines, which we believe can be
      used in the treatment of cancer and antibiotic resistant infections. To
      date, we have prepared and developed approximately 100 tetracycline-based
      derivatives. We filed a patent application on October 5, 2002 covering
      our tetracycline product candidates. The preclinical IN VITRO and
      IN VIVO models used for preclinical testing of antibacterial drugs are
      highly predictive of clinical activity. In addition, the development program
      to establish confirmation of concept in the clinic is of a relatively short
      term, with appropriate financing for this program made available to do
      the short-term clinical work. We have identified two of these derivatives
      to have activity IN VITRO against tetracycline-resistant bacterial strains.
      The next phase will be a rapid development of the preclinical program to
      take us into clinical studies. Preliminary animal studies with
      two of our tetracycline derivatives, INN 01137 and INN 01147, have demonstrated
      activity in two prostate cancer models. Further studies will be carried
      out to confirm these results.


MANUFACTURING

We do not own or operate any manufacturing facilities. We contract with qualified third parties for the manufacture of bulk active pharmaceutical ingredients and production of clinical and commercial supplies. The
ingredients and supplies comply with current good manufacturing practices reviewed by the FDA. We have entered into agreements with three overseas manufacturers for production of clinical and commercial supplies of Nemifitide. We believe the prices
charged by these overseas manufacturers are competitive. We plan to continue to outsource the manufacture of our products throughout the stages of commercialization and expect the cost of purchasing them will be significantly reduced as they are
manufactured in bulk.

We maintain confidentiality agreements with potential and existing contract manufacturers for both active drug and formulated product in order to protect our proprietary rights. We currently synthesize our early stage
chemical compounds (the chemical compounds used for study prior to our preclinical testing). However, scale-up quantities and materials for preclinical toxicology evaluations are manufactured by qualified third parties in strict compliance with
current good manufacturing practices.

MARKETING AND DISTRIBUTION STRATEGY

To avoid the costs of establishing a sales force and to allow management to direct its energies to the formulation of new products, we intend to develop strategic relationships with one or more major pharmaceutical
companies on a worldwide basis in order to market and distribute our products. This will also allow us to benefit from the marketing experience of such partner. Pursuant to such strategic relationships, we may grant such companies the right to
market and distribute our antidepressant products in consideration for an up-front payment, milestone payments, development cost sharing, and a percentage of the revenues from the sale of the marketed product. Prior to the imposition of the clinical
hold, we were in discussions with several pharmaceutical companies to market and distribute our products

9

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and will enter into one or more co-development agreements with such companies in the course of this year.

STRATEGIC COLLABORATIONS

On June 5, 2001, Quintiles, through its corporate ventures group PharmaBio Development, purchased $1,500,000 of our common stock. Simultaneously with the investment, we entered into a non-exclusive preferred provider
agreement, pursuant to which Quintiles will be our preferred provider of outsourced clinical development and commercialization services and will work with us in planning and implementing a clinical program for Nemifitide. Under the agreement,
Quintiles will provide us with access to its experts in the areas of central nervous system disorders and will become our clinical research provider of choice. We are under no obligation to retain Quintiles with respect to the provision of clinical
research services unless Quintiles’ bid is competitively priced and it has the capacity and expertise to perform such services.

PATENTS AND PROPRIETARY INFORMATION

CORE PROGRAM IN ANTIDEPRESSANT THERAPEUTICS

We currently hold four issued patents in the United States and eight issued patents abroad, including a European patent, which relate to our core program in peptide-based neurological therapeutics. In addition, nine
applications are pending abroad in connection with this program. We were issued United States Patent No. 5,589,460 for our primary platform of peptide-based compounds on December 31, 1996, from an application filed in 1994. This patent includes
claims directed at both compounds (compositions of matter) and methods of treating depression using the compounds. The expiration date of this patent is May 4, 2014. However, the patent term may be extended by as much as five years pursuant to the
Patent Term Restoration Act, 35 United States Code ss.156, providing that the appropriate conditions are met, a timely application is made and the provisions of the act are not changed.

Further to our initial patent, we sequentially filed three continuation-in-part (“CIP”) applications that have also been issued as United States patents. We filed a first CIP application in 1995 to cover
additional peptide-based compounds and issued as United States Patent No. 5,767,083 on June 16, 1998. We filed a second CIP application in 1997 to cover additional new peptide derivatives and issued as United States Patent No. 6,093,797 on July 25,
2000. We filed a third CIP application in 2002 to cover the use of the compounds in treating additional neurological and psychiatric disorders and new routes of administration for our compounds and issued as U.S. Patent No. 6,767,897 on July 27,
2004.

CORE PROGRAM IN TETRACYCLINE DERIVATIVE THERAPEUTICS

We currently has two pending patent applications in the United States and ten pending patent applications abroad, which relate to its core program in tetracycline derivative therapeutics. The U.S. and non-US applications
are directed toward compositions and/or methods for treating cancer and microbial infections.

NON-CORE PROGRAMS

We currently hold four issued United States patents and one pending Canadian patent application that do not relate to our core programs. We are not currently pursuing development of the subject matter of these four U.S.
patents and the referenced Canadian application.

10

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ANTIDEPRESSANT PEPTIDE PATENT FAMILY STATUS

|                   |  |                |  |          |  |                                    |  |                          |  |                     
|------------------ |  | -------------- |  | -------- |  | ---------------------------------- |  | ------------------------ |  | --------------------
|                   |  | Application    |  | Filing   |  | Related Application                |  |                          |  |                     
|Country            |  | No.            |  | Date     |  | Information                        |  | Status                   |  | Patent
          no.
|United States      |  | 08/238,089     |  | 05/04/94 |  |                                    |  | Granted 12/31/9          |  | 5,589,460           
|1st CIP-US         |  | 08/432,651     |  | 05/02/95 |  | Continuation-in-part of
        US |  | Granted 06/16/98         |  | 5,767,083           
|                   |  |                |  |          |  | 08/238,089                         |  |                          |  |                     
|2nd CIP-US         |  | 08/962,962     |  | 11/04/97 |  | Continuation-in-part of
        US |  | Granted 07/25/00         |  | 6,093,797           
|                   |  |                |  |          |  | 08/432,651                         |  |                          |  |                     
|3rd CIP-US         |  | 10/122,246     |  | 04/11/02 |  | Continuation-in-part of
        US |  | Granted 07/27/04         |  | 6,767,897           
|                   |  |                |  |          |  | 08/962,962                         |  |                          |  |                     
|Divisional of 3rd  |  | 10/900,026     |  | 07/27/04 |  | Divisional of US                   |  | Pending                  |  |                     
|CIP-US             |  |                |  |          |  | 10/122,246                         |  |                          |  |                     
|Patent Cooperation |  | PCT/US95/05560 |  | 05/02/95 |  | Based on US 08/238,089             |  | Completed: entered       |  |                     
|Treaty (PCT)       |  |                |  |          |  |                                    |  | national phase           |  |                     
|Patent Cooperation |  | PCT/US03/11403 |  | 04/10/03 |  | Based on US 10/122,246             |  | Completed: entered       |  |                     
|Treaty (PCT)       |  |                |  |          |  |                                    |  | national phase           |  |                     
|Australia          |  | 2813995        |  | 11/04/96 |  | Nat’l Phase of                     |  | Granted 08/06/98         |  | 685292              
|                   |  |                |  |          |  | PCT/US95/05560                     |  |                          |  |                     
|Canada             |  | 2,189,145      |  | 10/29/96 |  | Nat’l Phase of                     |  | Notice of Allowance      |  | *                   
|                   |  |                |  |          |  | PCT/US95/05560                     |  | issued October 22,       |  |                     
|                   |  |                |  |          |  |                                    |  | 2007. Issue fee paid;    |  |                     
|                   |  |                |  |          |  |                                    |  | awaiting grant of        |  |                     
|                   |  |                |  |          |  |                                    |  | patent.*                 |  |                     
|China (PRC)        |  | CN 95193885.1  |  | 12/26/96 |  | Nat’l Phase of                     |  | Granted 05/19/04         |  | CN1150028C          
|                   |  |                |  |          |  | PCT/US95/05560                     |  |                          |  |                     
|European Patent    |  | 95 92 3659.7   |  | 11/04/96 |  | Regional Phase of                  |  | Granted 01/21/04         |  | EP0759772           
|Convention         |  |                |  |          |  | PCT/US95/05560                     |  | Validated in AT, BE,     |  |                     
|                   |  |                |  |          |  |                                    |  | CH, DE, DK, ES, FR,      |  |                     
|                   |  |                |  |          |  |                                    |  | GB, IE, IT, LI, LX,      |  |                     
|                   |  |                |  |          |  |                                    |  | MN, NL, PT, and SE       |  |                     
|European Patent    |  | 03 72 4013.2-  |  | 04/10/03 |  | Regional Phase of                  |  | Pending                  |  |                     
|Convention         |  | 2404           |  |          |  | PCT/US03/11403                     |  |                          |  |                     
|Finland            |  | FI 964363      |  | 11/04/96 |  | Nat’l Phase of                     |  | Pending                  |  |                     
|                   |  |                |  |          |  | PCT/US95/05560                     |  |                          |  |                     
|India              |  | 198CAL2001     |  | 04/04/01 |  | Priority to US 08/432,651          |  | Granted 12/06/03         |  | 191479              
|                   |  |                |  |          |  | (Divisional of 786CAL96)           |  |                          |  |                     
|India              |  | 237CAL2001     |  | 04/20/01 |  | Priority to US 08/432,651          |  | Pending                  |  |                     
|                   |  |                |  |          |  | (Divisional of 786CAL96)           |  |                          |  |                     
|India              |  | 483CAL2002     |  | 08/16/02 |  | Divisional of 198CAL2001           |  | Pending – agent          |  | *                   
|                   |  |                |  |          |  |                                    |  | reported Patent Office   |  |                     
|                   |  |                |  |          |  |                                    |  | indication of            |  |                     
|                   |  |                |  |          |  |                                    |  | allowability June 2007.  |  |                     
|                   |  |                |  |          |  |                                    |  | The formalities required |  |                     
|                   |  |                |  |          |  |                                    |  | for grant are currently  |  |                     
|                   |  |                |  |          |  |                                    |  | taking place.*           |  |                     
|Indonesia          |  | P-9526222      |  | 12/08/95 |  | Based on US 08/432,651             |  | Pending                  |  |                     
|Indonesia          |  | P-00200500377  |  | 07/11/05 |  | Divisional of Indonesian           |  | Pending                  |  |                     
|                   |  |                |  |          |  | Application No. P-9526222          |  |                          |  |                     
|                   |  |                |  |          |  | (Priority to US 08/432,651)        |  |                          |  |                     
|Japan              |  | 529076/1995    |  | 11/05/95 |  | Nat’l Phase of                     |  | Granted 11/17/06         |  | 3878983             
|                   |  |                |  |          |  | PCT/US95/05560                     |  |                          |  |                     
|Malaysia           |  | PI 9503240     |  | 10/27/95 |  | Based on PCT/US95/05560            |  | Granted 02/28/02         |  | MYI13407 A          
|Malaysia           |  | PI 20031342    |  | 04/10/03 |  | Based on US 10/122,246             |  | Pending                  |  |                     
|Norway             |  | P964561        |  | 11/04/96 |  | Nat’l Phase of                     |  | Granted 01/03/05         |  | 317919              
|                   |  |                |  |          |  | PCT/US95/05560                     |  |                          |  |                     

11

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|                                                        |  |                |  |          |  |                                      |  |                    |  |                     
|------------------------------------------------------- |  | -------------- |  | -------- |  | ------------------------------------ |  | ------------------ |  | --------------------
|                                                        |  | Application    |  | Filing   |  | Related Application                  |  |                    |  |                     
|Country                                                 |  | No.            |  | Date     |  | Information                          |  | Status             |  | Patent
          no.
|Russia                                                  |  | 96 123 269     |  | 12/04/96 |  | Nat’l Phase of                       |  | Granted 08/28/01   |  | 2,182,910           
|                                                        |  |                |  |          |  | PCT/US95/05560                       |  |                    |  |                     
|Taiwan (ROC)                                            |  | 84111543       |  | 11/01/95 |  | Based on PCT/US95/05560              |  | Granted 10/11/02   |  | 167954              
|Taiwan (ROC)                                            |  | 92108419       |  | 04/11/03 |  | Based on US 10/122,246               |  | Granted 03/11/07   |  | I 275398            
|                                                       
|                                                       
|                                                       
|DERMATOLOGICAL
          USE OF PEPTIDES PATENT FAMILY  |  |                |  |         
|                                                        |  | Application    |  | Filing   |  | Related Application                  |  |                    |  |                     
|Country                                                 |  | No.            |  | Date     |  | Information                          |  | Status             |  | Patent
          no.
|Patent Cooperation                                      |  | PCT/US2007/068 |  | 05/12/07 |  | Earliest priority claimed
        is |  | Pending            |  |                     
|Treaty (PCT)                                            |  | 827            |  |          |  | to 60/801,128 filed                  |  |                    |  |                     
|                                                        |  |                |  |          |  | 05/17/06                             |  |                    |  |                     
|United States                                           |  | 11/747,762     |  | 05/11/07 |  | Priority claimed to:                 |  | Pending            |  |                     
|                                                        |  |                |  |          |  | 60/801,128 filed 05/17/06;           |  |                    |  |                     
|                                                        |  |                |  |          |  | 60/825,070 filed 09/08/06;           |  |                    |  |                     
|                                                        |  |                |  |          |  | and 60/825,077 filed                 |  |                    |  |                     
|                                                        |  |                |  |          |  | 09/08/06, and CIP of                 |  |                    |  |                     
|                                                        |  |                |  |          |  | 10/900,026                           |  |                    |  |                     
|United States                                           |  | 11/747,748     |  | 05/11/07 |  | Priority claimed to:                 |  | Pending            |  |                     
|                                                        |  |                |  |          |  | 60/825,070 filed 09/08/06;           |  |                    |  |                     
|                                                        |  |                |  |          |  | and 60/801,128 filed                 |  |                    |  |                     
|                                                        |  |                |  |          |  | 05/17/06                             |  |                    |  |                     
|                                                       
|                                                       
|                                                       
|TETRACYCLINE
          DERIVATIVES PATENT FAMILY STATUS |  |                |  |         
|                                                        |  | Application    |  | Filing   |  | Related Application                  |  |                    |  |                     
|Country                                                 |  | No.            |  | Date     |  | Information                          |  | Status             |  | Patent
          no.
|United States                                           |  | 10/264,454     |  | 10/04/02 |  | Priority to US 60/327,502            |  | Patented           |  | 7,214,669 B2        
|United States                                           |  | 11/673,589     |  | 02/11/07 |  | Divisional of US                     |  | Pending            |  |                     
|                                                        |  |                |  |          |  | 10/264,454                           |  |                    |  |                     
|United States                                           |  | 11/679,744     |  | 02/22/07 |  | Divisional of US                     |  | Pending            |  |                     
|                                                        |  |                |  |          |  | 10/264,454                           |  |                    |  |                     
|Patent Cooperation                                      |  | PCT/US02/31730 |  | 10/04/02 |  | Priority to US 60/327,502            |  | Completed: entered |  |                     
|Treaty (PCT)                                            |  |                |  |          |  |                                      |  | national phases    |  |                     
|Australia                                               |  | 2002341970     |  | 04/01/04 |  | Nat’l Phase of                       |  | Pending            |  |                     
|                                                        |  |                |  |          |  | PCT/US02/31730                       |  |                    |  |                     
|Canada                                                  |  | 2,462,572      |  | 10/04/02 |  | Priority to US 60/327,502            |  | Pending            |  |                     
|China (PRC)                                             |  | 200610099226.7 |  | 07/21/06 |  | Divisional of 02819722.4             |  | Pending            |  |                     
|                                                        |  |                |  |          |  | (Nat’l Phase of                      |  |                    |  |                     
|                                                        |  |                |  |          |  | PCT/US02/31730), now                 |  |                    |  |                     
|                                                        |  |                |  |          |  | abandoned.                           |  |                    |  |                     
|European Patent                                         |  | 02776131.1     |  | 04/23/04 |  | Regional Phase of                    |  | Pending            |  |                     
|Convention                                              |  |                |  |          |  | PCT/US02/31730                       |  |                    |  |                     
|European Patent                                         |  | 07117753.9     |  | 10/02/07 |  | Divisional of 02776131.1             |  | Pending            |  |                     
|Convention                                              |  |                |  |          |  |                                      |  |                    |  |                     
|Hong Kong                                               |  | 07109104.7     |  | 08/21/07 |  | HK extension of China                |  | Pending            |  |                     
|                                                        |  |                |  |          |  | (PRC) application no.                |  |                    |  |                     
|                                                        |  |                |  |          |  | 200610099226.7                       |  |                    |  |                     
|Indonesia                                               |  | W -00200400639 |  | 04/06/04 |  | Nat’l Phase of                       |  | Pending            |  |                     
|                                                        |  |                |  |          |  | PCT/US02/31730                       |  |                    |  |                     
|Japan                                                   |  | 2003-533853    |  | 04/05/04 |  | Nat’l Phase of                       |  | Pending            |  |                     
|                                                        |  |                |  |          |  | PCT/US02/31730                       |  |                    |  |                     

12

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|                   |  |             |  |           |  |                           |  |                        |  |                       
|------------------ |  | ----------- |  | --------- |  | ------------------------- |  | ---------------------- |  | ----------------------
|                   |  | Application |  | Filing    |  | Related Application       |  |                        |  |                       
|Country            |  | No.         |  |           |  | Information               |  | Status                 |  | Patent
            no.
|Malaysia           |  | PI 20023717 |  | 10/04/02  |  | Priority to US 60/327,502 |  | Pending – Clear Report |  | *                     
|                   |  |             |  |           |  |                           |  | (notice of allowance)  |  |                       
|                   |  |             |  |           |  |                           |  | issued 08/10/07. Issue |  |                       
|                   |  |             |  |           |  |                           |  | fee has been paid;     |  |                       
|                   |  |             |  |           |  |                           |  | awaiting grant.*       |  |                       
|Malaysia           |  | PI 20070863 |  | 05/31/07  |  | Divisional of PI 20023717 |  | Pending                |  |                       
|                   |  |             |  | (design.  |  |                           |  |                        |  |                       
|                   |  |             |  | 10/04/02) |  |                           |  |                        |  |                       
|Norway             |  | 2004-1272   |  | 03/26/04  |  | Nat’l Phase of            |  | Pending                |  |                       
|                   |  |             |  |           |  | PCT/US02/31730            |  |                        |  |                       
|Russian Federation |  | 2004109986  |  | 03/29/04  |  | Nat’l Phase of            |  | Patented               |  | RU
          2 300 380
|                   |  |             |  |           |  | PCT/US02/31730            |  |                        |  | C2                    
|Taiwan             |  | 91123025    |  | 10/04/02  |  | Priority to US 60/327,502 |  | Pending                |  |                       
|                   |  |             |  |           |  |                           |  |                        |  |                       
|                   |  |             |  |           |  |                           |  |                        |  |                       

|NON-CORE PROGRAMS PATENT STATUS |  |             |  |          |  |                 
|------------------------------- |  | ----------- |  | -------- |  | ----------------
|                                |  |             |  |          |  | Related         
|                                |  | Application |  | Filing   |  | Application     
|Country                         |  | No.         |  | Date     |  | Information     
|United States                   |  | 08/424,866  |  | 04/18/95 |  |                 
|                                |  |             |  |          |  |                 
|United States                   |  | 08/531,525  |  | 09/21/95 |  |                 
|                                |  |             |  |          |  |                 
|                                |  |             |  |          |  |                 
|United States                   |  | 08/718,270  |  | 09/20/96 |  | Priority to US  
|                                |  |             |  |          |  | 60/004,091 filed
|                                |  |             |  |          |  | 09/21/95        
|                                |  |             |  |          |  |                 
|United States                   |  | 08/807,473  |  | 02/27/97 |  | Priority to     
|                                |  |             |  |          |  | 60/012,396 filed
|                                |  |             |  |          |  | 02/28/96        
|Canada                          |  | 2,232,750   |  | 09/20/96 |  | Nat’l Phase of  
|                                |  |             |  |          |  | PCT/US96/15098  
|                                |  |             |  |          |  | filed 09/20/96  
|                                |  |             |  |          |  |                 
|                                |  |             |  |          |  |                 



EMPLOYEES AND CONSULTANTS

As of April 30, 2008, we had a workforce of 12, seven full-time employees and five part-time scientific consultants, six of whom hold Ph.D. or M.D. degrees, or both, and three of whom hold other advanced degrees. Of our
total employee and consultant workforce, eight are engaged in research and development, five are engaged in business development and finance and two are engaged in administration and support capacities. None of our employees are represented by a
collective bargaining agreement, nor have we experienced work stoppages.

13

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FACILITIES

We lease approximately 2,300 square feet of office space at 1 Maynard Drive, Suite 105, Park Ridge, New Jersey, under a lease terminating in March 2012. We also have office space at 200 Broad Hollow Road, Melville, New
York, but incur no rental expense from these premises. Management believes our existing facilities are adequate to meet our requirements through the year 2007. On March 1, 2007 the Company entered into an operating lease for its current office space
in Park Ridge, New Jersey. The lease commenced on March 1, 2007 and expires on March 1, 2012 and requires monthly base rental payments of $6,300 plus certain annual escalation.

The approximate aggregate minimum rental commitments on these leases are as follows:

|                         |  |   |       
|------------------------ |  | - | ------
|Year Ending December 31, |  |   |       
|2008                     |  | $ | 75,600
|2009                     |  |   | 75,600
|2010                     |  |   | 75,600
|2011                     |  |   | 75,600
|2012                     |  |   | 22,000
|                         |  | $ | 32,400

Our rental expense was $91,670 and $132, for the years ended December 31, 2007 and 2006, respectively.

ITEM 2.      DESCRIPTION OF PROPERTY

Effective March 1, 2007 we entered into a new lease to rent approximately 2,300 square feet in our current multi-tenant building in Park Ridge, New Jersey. The lease extends for five years with a monthly rent of
approximately $6,300. We believe this space should be adequate for our needs for the duration of our lease. We also maintains a small satellite office in Melville, New York but do not incur any rental expense.

ITEM 3.      LEGAL PROCEEDINGS

HISTORIC LEGAL EVENTS

Due to the clinical hold being placed on our lead compound, Nemifitide which increased our expenditures and eliminated our ability to raise additional funds, we filed for protection under Chapter 11 of the bankruptcy code
in the Eastern District of Long Island on April 15, 2003. During the bankruptcy process we reached an agreement with our creditors which allowed us to satisfy our obligations with two distributions totaling approximately 57% of the amount owed. We
brought suit against two entities in bankruptcy court. The first being Huntington Life Sciences in reference to the studies performed. The suit was settled out of court. Secondly, we brought a lawsuit against our lead class D preferred shareholder
KBC Securities and a countersuit was brought against us. The case was eventually settled through the bankruptcy court. In May 2004, the company entered into an agreement with the holders of the 725 shares of Class D preferred stock to eliminate the
class D preferred shares in exchange for cash payments of $600,000 on the effective date of the bankruptcy and $600,000 one year from the effective date. They were also issued a $2.6 million convertible note payable 53 months from the effective date
plus accrued interest at the rate of 3% per annum. On November 23, 2004 three of the entities that comprise the preferred D shareholders agreed to convert their portion of the $600,000 payment into equity. A total of

14

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$143,967.60 was converted into 179,960 shares of Tetragenex common stock and the remaining balance was paid. They agreed as well to convert $165,480 of the amount due one year from the effective date into 206,850 shares of
common stock and on or about November 23, 2005 the remaining balance of the second $600,000 was paid. In addition $717,241 of the $2.6 million note plus accrued interest was converted into 679,912 shares of common stock. An aggregate of 1,066,722
shares of common stock was issued to the former note holders and approximately $1,800,000 plus interest is due in May 2009. The long-term note due to the former Preferred D holders is secured by the patents of the company. Our third and final plan
of reorganization was affirmed by the court and on November 23, 2004 we emerged from bankruptcy as Tetragenex Pharmaceuticals, Inc. Having previously filed for bankruptcy may hinder our ability to obtain future financing or obtain credit with a
lender of our vendors.

A suit was brought against us by one of our former Directors claiming he was improperly removed from the Board, amongst other things. The suit was ultimately dismissed in court.

All suits formerly brought against us are finalized and not subject to further litigation. We believe we have no further threats to our company from such claims.

ITEM 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted for stockholders’ vote during the fiscal year 2007.

























15

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PART II

ITEM 5.      MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION

Shares of our common stock are currently quoted on the bulletin board under the symbol “TTRX.”

There is a limited trading market for our common stock. There is no assurance that a regular trading market for our common stock will develop or if developed that it will be sustained. A shareholder in all likelihood,
therefore, may not be able to resell his securities should he or she desire to do so when eligible for public resale. Furthermore, it is unlikely that a lending institution will accept our securities as pledged collateral for loans unless a regular
trading market develops.

Below is the market information pertaining to the range of the high and low bid quotations of our common stock for each quarter since year 2006. The quotations reflect inter-dealer prices, without retail markup, markdown or
commission and may not represent actual transactions.

|               |  |     |      |      |  |   |      | 
|-------------- |  | --- | ---- | ---- |  | - | ---- | 
|Period         |  | Low |      | High
|2007           |  |     |      |      |  |   |      | 
|Fourth Quarter |  | $   | 0.20 |      |  | $ | 0.51 | 
|Third Quarter  |  | $   | 0.35 |      |  | $ | 1.40 | 
|Second Quarter |  | $   | 1.25 |      |  | $ | 1.52 | 
|First Quarter  |  |     | NA   |      |  |   |      | 
|2006           |  |     |      |      |  |   |      | 
|Fourth Quarter |  |     | NA   |      |  |   | NA   | 
|Third Quarter  |  |     | NA   |      |  |   | NA   | 
|Second Quarter |  |     | NA   |      |  |   | NA   | 
|First Quarter  |  |     | NA   |      |  |   | NA   | 

HOLDERS

On APRIL 28,2008 there were 762 holders of record of our common stock.

DIVIDENDS

No cash dividend was declared in 2006 or in 2007 through the date of this Annual Report.

ITEM 6.      MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATIONS

The following discussion and analysis should be read in conjunction with the Financial Statements and notes thereto appearing elsewhere in this Report.





16

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OVERVIEW

We are a biopharmaceutical company. We discovered and are developing several novel compounds to address unmet needs in the area of depression, antibiotic resistance and anticancer. We are the successor company to Innapharma
through a reverse merger, which was completed upon Innapharma’s emergence from Chapter 11 in 2004. Innapharma was founded in 1989 and has insignificant operating revenues to date.

OPERATING HISTORY: PLAN OF OPERATION

We are currently developing an antidepressant compound, Nemifitide, which is in late Phase 2 human clinical trials. During Phase 2, clinical development of our flagship antidepressant compound was put on clinical hold by
the Food and Drug Administration (the “FDA”) as a result of some toxicity issues in a Beagle dog study that was completed in 2003. The FDA asked us to repeat the animal study and generate additional preclinical data with regard to the
toxicity issue. We completed a subsequent a dog study and a primate study to address the concerns of the FDA. After the final reports from these studies were submitted to the FDA, the FDA confirmed that this was a complete response to the clinical
hold and therefore, the clinical hold was lifted on March 29, 2006. In our preclinical development plans, we will evaluate the potential of other patented neuropeptides to treat other disorders, such as anorexia, bulimia, panic disorder, anxiety
disorders and post-traumatic stress disorder. We currently have three GMP manufacturers synthesizing our compound, all of whom are located in Europe. We believe that we have sufficient Nemifitide bulk to meet our requirements for the foreseeable
future. We intend to either license Nemifitide out for the final stage of development or raise additional capital and continue the Phase 2/3 development of Nemifitide. We had designed a protocol which we believe, if positive, would satisfy one of
the two required pivotal trials by the FDA for drug approval. We are currently trying to secure the necessary financing to undertake a Phase 2/3 study of Nemifitide. We estimate the study to cost approximately $2,500,000 million.

We are currently also developing a platform of new and unique chemically modified tetracycline molecules to be used in the treatment of certain types of cancer (prostate and breast) and antibiotic-resistant bacterial
infections.

Our tetracycline-based drugs are in the preclinical development stage. Our in vitro studies have identified a series of chemically modified tetracyclines, which we believe can be used in the treatment of cancer and
antibiotic-resistant infections. To date, we have prepared and developed approximately 100 tetracycline-based derivatives. We filed a patent application on October 5, 2002, covering our tetracycline product candidates. We intend to complete some
additional in-vivo and in-vitro studies, prepare an IND and attempt to license both the anti-cancer compound and the treatment resistant bacteria compound out for development.

In addition to the in-house development program, we intend to research and acquire existing compounds and replatform them for other therapeutic uses, and pursue a licensing agreement with the original inventor.

Our most recent financing was completed in May 2006 at which time we raised approximately $700,000 at $1.30 per share. Our core burn rate had been approximately $80,000 a month. In mid 2007 we sought to reduce costs and
were able to lower our burn rate to slightly over $60,000 per month. The fundraising market for small company’s has been extremely limited in recent times and despite seeking additional financings, to date we have been unable to secure the
necessary funds. In March 2008 we further slashed costs and are now operating with a core burn rate of slightly over $40,000 per month. Our current cash on hand of $275,000 is adequate operating capital for approximately five to six. We will
continue to explore

17

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every possible avenue to raise additional funds to allow us to continue to operate and move our lead compound forward through the development process.

The Company has excellent patent protection in all the significant worldwide markets. Additionally the company has patented all of the surrounding peptides to Nemifitide as well.

RESULTS OF OPERATIONS AND FINANCIAL CONDITION

Innapharma successfully emerged from bankruptcy and merged with its subsidiary, Tetragenex, in November 2004. The Company raised over $4 million in equity throughout the Chapter 11 process and had significant expenses
directly and indirectly relating to the bankruptcy from April of 2003 to November of 2004. A significant portion of the proceeds from its Private Placement was committed to general and administrative overhead and implementing the preclinical studies
requested by the FDA for removal of the clinical hold

The Company successfully converted close to 30% of the debt that remained from the bankruptcy back into equity. The Company currently has approximately $1.8 million in long-term debt due in April 2009. The Company
successfully paid the $430,000 in short-term debt that had become due in November 2005.

For the past four years the Company has sold a portion of its tax losses through a program sponsored by the State of New Jersey. The program generated a net check to the company in 2003 in excess of $200,000; it generated a
check of over $400,000 in December of 2004 and an additional $315,000 in December 2005. In 2006 due to the elimination of Innapharma we only received $5,000 as part of the program, however going forward we will be applying for Tetragenex’ tax
losses. Unfortunately, due to a change in the focus of approved companies, the company’s application for tax loss sale was declined in the year 2007. We will continue to attempt to take part in this program in the future.

As of the date of this filing, we currently have approximately $275,000 million in liquid funds available to us. We believe this is sufficient to last us between 5 and 6 months from the date of filing. Our current core burn
rate is approximately $40,000 per month.

Our only debt consists of the $1.8 million convertible note payable to the former holders of our Preferred D securities due in April 2009.

THE YEAR ENDED DECEMBER 31, 2007 AS COMPARED TO THE PERIOD OF THE YEAR-END DECEMBER 31, 2006.

REVENUE-We had no revenue from any source during fiscal years 2006 and 2007.

RESEARCH AND DEVELOPMENT-Our R&D costs decreased to $22,000 from $41,000 during fiscal year 2007 as compared to 2006. During 2007 no additional studies were performed as the protocols for the upcoming study were being
designed.

COMPENSATION EXPENSE- Our compensation expense decreased to $1.59 million in 2007 as compared to $1.8 million in 2006. This is the result of the passing of Dr. Feighner in 2006 along with a reduction in the value of options
grants in 2007 as compared to 2006, which were valued and expensed using the black scholes method.





18

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PROFESSIONAL FEES- Professional fees decreased to $133,000 in 2007 as compared to $165,000 in 2006. This was mainly attributed to a reduction in legal fees in 2007 as a result of our not having undertaken any financings and
more work having been completed in-house.

CONSULTING FEES- Consulting expenses increased to $1.1 million in 2007 as compared to $333,000 in 2006. This was largely attributable to the warrants issued to Dr. Stephen Stahl for (i) agreeing to Chair the company’s
Scientific Advisory Board and (ii) becoming our Chief Scientific Consultant. In addition warrants were issued to the new members of our Scientific Advisory Board as well as several other scientific consultants who are assisting with our licensing
efforts.

DIRECTORS FEES- Directors fees increased to $1.1 million as compared to $96,000 in 2006. This increase was attributable solely to the issuance of options to all Directors. The options were valued using the black scholes
method.

PRINTING AND REPRODUCTION- Printing and reproduction expenses increased to $56,000 in 2007 as compared to $8,000 in 2006. This was attributable to costs associated with filing of periodic and annual reports with the
Securities and Exchange Commission.

LEGAL CONTINGENCY

We may be subject to proceedings, lawsuits and other claims, including proceedings under laws and government regulations related to the environment, labor, products and other matters. We are required to assess the
likelihood of any adverse judgments or outcomes to these matters, as well as potential ranges of probable losses. A determination of the amount of reserves required, if any, for these contingencies is based on a careful analysis of each individual
issue with the assistance of outside legal counsel. The required reserves may change in the future due to new developments in each matter or changes in approach such as a change in settlement strategy in dealing with these matters. On December 31,
2007, there are no outstanding legal proceedings, nor are there any reserves established.

LIQUIDITY AND CAPITAL RESOURCES

As of April 30, 2008 we have approximately $275,000 in cash and have a core burn rate of approximately $40,000 per month. The $275,000 will be used primarily for operations going forward. Additional funds will be needed to
fund further studies required by the FDA to bring its lead compound, Nemifide to market. Future funds will be derived from additional sales of our common stock in the public or private markets and/or a licensing agreement with a pharmaceutical
company as well as possibly the sale of our state tax losses through the New Jersey Development Plan. Our only long-term debt consists of the $1,800,000 convertible note payable to the former holders of our Series D Preferred securities which mature
in April 2009.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.



19

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FINANCIAL INSTRUMENTS

Our financial instruments include cash and cash equivalents, restricted cash, accounts payable and accrued expenses and notes payable. These financial instruments are carried at cost, which unless otherwise disclosed,
approximates fair value due to their short maturities.

CASH AND CASH EQUIVALENTS

We consider all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents.

Our cash and cash equivalents are held principally at one financial institution and at times may exceed insured limits.

PROPERTY AND EQUIPMENT

Our property and equipment are stated at cost and are depreciated on a straight-line basis over the estimated useful lives of the related assets, which is generally five years. Expenditures for maintenance and repairs are
charged to operations at the time the expense is incurred. Expenditures determined to represent additions are capitalized.

IMPAIRMENT OF LONG-LIVED ASSETS

We periodically review our long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Impairment is determined to exist if estimated
undiscounted future cash flows are less than the carrying amount of the asset. If such assets are considered to be impaired, the impairment recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the
assets. We have determined that there was no impairment of long-lived assets in 2006 and 2007 and thus we did not take impairment in those years.

PATENTS

We capitalize our expenditures relating to the filing and maintenance of our patents and amortize such costs over the estimated useful life of the patent, which generally approximates fifteen years. Accumulated amortization
was $399,261 at December 31, 2007. Amortization expense related to patents was $38,947 and $34,538 for the years ended December 31, 2007 and 2006, respectively.

INCOME TAXES

We account for income taxes using the liability method. The liability method requires the determination of deferred tax assets and liabilities based on the differences between the financial statements and income tax bases
of assets and liabilities, using enacted tax rates. Additionally, net deferred tax assets are adjusted by a valuation allowance, if, based on the weight of available evidence, we are uncertain whether some portion or all of the net deferred tax
assets will be realized.









20

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RESEARCH AND DEVELOPMENT

We expend funds on research and development to develop new products or processes, to improve present products, and to discover new knowledge that may be valuable at some future date. Costs incurred for research and
development activities are expensed as incurred.

BASIC AND DILUTED LOSS PER COMMON SHARE

We display earnings per share in a dual presentation of basic and diluted earnings per share. Basic earnings per share includes no dilution and is computed by dividing net income or loss available to common shareholders by
the weighted average number of common shares outstanding for the period.

Outstanding common stock options, warrants, convertible preferred shares and convertible notes payable have not been considered in the computation of diluted earnings per share amounts, since the effect of their inclusion
would be antidilutive. Accordingly, basic and diluted earnings per share are identical.

STOCK-BASED COMPENSATION

On December 16, 2004 immediately following the revised pronouncement 123-R we adopted the provisions of SFAS 123-R retroactively to January 1, 2003. We applied the provisions of the standard by directly expensing the fair
value of options and warrants under the black scholes method to the statement of operations. This enabled us to treat employees and others on an equal basis. Had we not adopted 123-R we would have had to calculate employee options differently which
management felt would lead to an inconsistency in the reflection of the value of options and warrants. We account for stock based grants issued to non-employees at fair value in accordance with SFAS 123 and EITF 96-18

RECENTLY ISSUED ACCOUNTING STANDARDS

In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes - An Interpretation of FASB Statement No. 109, (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in
income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. FIN 48 also prescribes a recognition threshold and measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a tax return that results in a tax benefit. Additionally, FIN 48 provides guidance on de-recognition, income statement classification of interest and penalties,
accounting in interim periods, disclosure, and transition. This interpretation is effective for fiscal years beginning after December 15, 2006. The Company does not expect the application of FIN 48 to have a material affect on its financial
statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS No. 159”). SFAS No. 159 allows companies to choose to measure certain
financial instruments and certain other items at fair value. The statement requires that unrealized gains and losses are reported in earnings for items measured using the fair value option and establishes presentation and disclosure requirements.
SFAS No. 159 is effective July 1, 2008 for the Company. The Company does not believe the adoption of SFAS No. 159 will have a material effect on our consolidated financial statements.

In June 2007, the FASB issued Emerging Issue Task Force (EITF) No. 07-03 (EITF 07-03), ACCOUNTING FOR NON-REFUNDABLE ADVANCE PAYMENTS FOR GOODS OR SERVICES TO BE USED IN FUTURE RESEARCH AND DEVELOPMENT ACTIVITIES. EITF
07-03 provides



21

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guidance on whether non-refundable advance payments for goods that will be used or services that will be performed in future research and development activities should be accounted for as research and development costs or
deferred and capitalized until the goods have been delivered or the related services have been rendered. EITF 07-03 is effective for fiscal years beginning after December 15, 2007. The Company does not expect that the adoption of EITF 07-03 will
have a material impact on its financial position or results of operations.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements - an amendment of ARB No. 151.” (“SFAS 160”). SFAS 160 requires all entities to report
noncontrolling (minority) interests in subsidiaries as equity in the consolidated financial statements. Its intention is to eliminate the diversity in practice regarding the accounting for transactions between an entity and noncontrolling interests.
This Statement is effective for the Company as of January 1, 2009. Earlier adoption is prohibited. The Company is has no noncontrolling interests and thus will not have an impact, on its consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141R, “Business Combinations” (“SFAS 141R”). SFAS 141R provides guidance to improve the relevance, representational faithfulness, and comparability of the
information that a reporting entity provides in its financial reports about its business combinations and its effects. SFAS 141R establishes principles and requirements for how the acquirer recognizes and measures in its financial statements the
identifiable assets acquired, liabilities assumed, the goodwill acquired and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141R is
effective for acquisitions beginning in our fiscal year beginning December 1, 2009 and earlier application is prohibited.

FORWARD LOOKING STATEMENTS

INFORMATION BOTH INCLUDED AND INCORPORATED BY REFERENCE IN THIS PROSPECTUS MAY CONTAIN FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE EXCHANGE ACT OF 1934, AS
AMENDED. THIS INFORMATION MAY INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE OUR ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS TO BE MATERIALLY DIFFERENT FROM FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR
IMPLIED BY ANY FORWARD- LOOKING STATEMENTS. FORWARD-LOOKING STATEMENTS, WHICH INVOLVE ASSUMPTIONS AND DESCRIBE OUR FUTURE PLANS, STRATEGIES AND EXPECTATIONS, ARE GENERALLY IDENTIFIABLE BY USE OF THE WORDS “MAY,” “WILL,”
“SHOULD,” “EXPECT,” “ANTICIPATE,” “ESTIMATE,” “BELIEVE,” “INTEND” OR “PROJECT” OR THE NEGATIVE OF THESE WORDS OR OTHER VARIATIONS ON THESE WORDS OR COMPARABLE
TERMINOLOGY. THIS PROSPECTUS ALSO CONTAINS FORWARD-LOOKING STATEMENTS REGARDING OUR INDUSTRY AND BUSINESS. THESE FORWARD-LOOKING STATEMENTS ARE BASED ON ASSUMPTIONS THAT MAY BE INCORRECT. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
EXPRESSED OR IMPLIED BY THE FORWARD-LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS, INCLUDING THE RISK FACTORS DESCRIBED ABOVE AND ELSEWHERE IN THIS PROSPECTUS. WE UNDERTAKE NO OBLIGATION TO UPDATE PUBLICLY ANY FORWARD-LOOKING STATEMENTS FOR ANY
REASON, EVEN IF NEW INFORMATION BECOMES AVAILABLE OR OTHER EVENTS OCCUR IN THE FUTURE.







22

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ITEM 7.      FINANCIAL STATEMENTS

TETRAGENEX PHARMACEUTICALS, INC.INDEX

|                                                                                   |  |     
|---------------------------------------------------------------------------------- |  | ----
|                                                                                   |  | Page
|                                                                                   |  |     
|Report of Independent Registered Public Accounting Firm                            |  | F–1 
|                                                                                   |  |     
|Balance Sheet as of December 31, 2007                                              |  | F–2 
|                                                                                   |  |     
|Statements of Operations for the Years Ended December 31, 2007 and 2006            |  | F–3 
|                                                                                   |  |     
|Statements of Stockholders’ Deficit for the Years Ended December 31, 2007 and 2006 |  | F–4 
|                                                                                   |  |     
|Statements of Cash Flows for the Years Ended December 31, 2007 and 2006            |  | F–5 
|                                                                                   |  |     
|Notes to the Financial Statements                                                  |  | F–6 



















23

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders ofTetragenex Pharmaceuticals, Inc.

We have audited the accompanying balance sheet of Tetragenex Pharmaceuticals, Inc. as of December 31, 2007, and the related statements of operations, changes in stockholders’ deficit, and cash flows for each of the
two years in the periods ended December 31, 2007. Tetragenex Pharmaceuticals, Inc’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits. We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Tetragenex Pharmaceuticals, Inc. as of December 31, 2007, and the results of its operations and
its cash flows for each of the years in the two-year period ended December 31, 2007, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in the notes to the financial statements, the Company has suffered recurring
operating losses and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also disclosed in the notes. The financial statements do not
include any adjustments that might result from the outcome of these uncertainties.

/s/ DEMETRIUS & COMPANY, L.L.C.

Wayne, New JerseyMay 12, 2008















F–1

---



TETRAGENEX PHARMACEUTICALS, INC.BALANCE SHEETAS OF DECEMBER 31, 2007

|                                                                                               |  |   |              |  
|---------------------------------------------------------------------------------------------- |  | - | ------------ | -
|ASSETS                                                                                         |  |   |              |  
|CURRENT ASSETS                                                                                 |  |   |              |  
|Cash and cash equivalents                                                                      |  | $ | 527,737      |  
|Prepaid insurance and other current assets                                                     |  |   | 33,777       |  
|                                                                                               |  |   | 561,514      |  
|                                                                                              
|Property and equipment, net                                                                    |  |   | 4,188        |  
|Security Deposit                                                                               |  |   | 18,958       |  
|Patents, net                                                                                   |  |   | 429,268      |  
|                                                                                               |  | $ | 1,013,928    |  
|                                                                                              
|LIABILITIES AND STOCKHOLDERS’ EQUITY                                                           |  |   |              |  
|CURRENT LIABILITIES                                                                            |  |   |              |  
|Accounts payable and accrued expenses                                                          |  |   | 1,153,639    |  
|Accrued interest                                                                               |  |   | 178,828      |  
|Total Current Liabilities                                                                      |  |   | 1,332,467    |  
|                                                                                              
|LONG TERM LIABILITY                                                                            |  |   |              |  
|Notes payable                                                                                  |  |   | 1,882,362    |  
|Total Liabilities                                                                              |  |   | 3,214,829    |  
|                                                                                              
|COMMITMENTS AND CONTINGENCIES                                                                  |  |   |              |  
|                                                                                              
|STOCKHOLDERS’ EQUITY                                                                           |  |   |              |  
|Class A preferred stock - $.01 par value - 5,000,000 shares authorized; 0 shares outstanding - |  |   | 15,926       |  
|Common stock - $.001 par value - 50,000,000 shares authorized 15,926,126 shares issued and     |  |   |              |  
|outstanding                                                                                    |  |   |              |  
|Additional paid-in capital                                                                     |  |   | 101,775,845  |  
|Accumulated deficit                                                                            |  |   | (103,992,672 | )
|Total Stockholders’ Equity                                                                     |  |   | (2,200,901   | )
|                                                                                               |  | $ | 1,013,928    |  















Please See Notes to the Financial Statements

F–2

---



TETRAGENEX PHARMACEUTICALS, INC.STATEMENTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006

|                                                    |  |              |            |      |  |   |            |  
|--------------------------------------------------- |  | ------------ | ---------- | ---- |  | - | ---------- | -
|                                                    |  | YEAR ENDED  
|                                                    |  | DECEMBER 31,
|                                                    |  | 2007         |            | 2006
|REVENUE                                             |  |              |            |      |  |   |            |  
|Contract revenue                                    |  |              | –          |      |  |   | –          |  
|                                                    |  |              | –          |      |  |   | –          |  
|                                                   
|OPERATING EXPENSES                                  |  |              |            |      |  |   |            |  
|Research and development                            |  | $            | 22,154     |      |  | $ | 41,068     |  
|Compensation expense                                |  |              | 1,593,610  |      |  |   | 1,818,029  |  
|Travel                                              |  |              | 83,701     |      |  |   | 90,507     |  
|General and administrative                          |  |              | 1,405,034  |      |  |   | 305,059    |  
|Professional fees                                   |  |              | 133,203    |      |  |   | 165,981    |  
|Payroll taxes and employee benefits                 |  |              | 81,675     |      |  |   | 80,920     |  
|Consulting fees                                     |  |              | 1,112,810  |      |  |   | 333,841    |  
|Rent and occupancy                                  |  |              | 91,671     |      |  |   | 120,561    |  
|Depreciation and amortization                       |  |              | 44,406     |      |  |   | 43,854     |  
|LOSS BEFORE OTHER INCOME (EXPENSE)
 AND TAX BENEFIT |  |              | (4,568,264 | )    |  |   | (2,999,820 | )
|                                                   
|OTHER INCOME (EXPENSE)                              |  |              |            |      |  |   |            |  
|Interest income                                     |  |              | 46,178     |      |  |   | 88,053     |  
|Interest expense                                    |  |              | (57,872    | )    |  |   | (57,872    | )
|LOSS BEFORE TAX BENEFIT                             |  |              | (4,579,958 | )    |  |   | (2,969,639 | )
|Sales of tax losses                                 |  |              | –          |      |  |   | 5,638      |  
|Net loss                                            |  | $            | (4,579,958 | )    |  |   | (2,964,001 | )
|                                                   
|Basic and diluted net loss per share                |  | $            | (0.29      | )    |  | $ | (0.19      | )
|                                                   
|Weighted average common shares outstanding          |  |              | 15,926,126 |      |  |   | 15,490,298 |  

















Please See Notes to the Financial Statements

F–3

---



TETRAGENEX PHARMACEUTICALS, INC.STATEMENTS OF STOCKHOLDERS’ DEFICITFOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006

|                                         |  |             |            |            |  |             |             |       |  |   |              |   |  |   |            |  
|---------------------------------------- |  | ----------- | ---------- | ---------- |  | ----------- | ----------- | ----- |  | - | ------------ | - |  | - | ---------- | -
|                                         |  | Shares      |            |            |  |             |             |       |  |   |              |   |  |  
|                                         |  | Issued and  |            |            |  |             |             |       |  |   |              |   |  |  
|                                         |  | Outstanding |            | Additional |  |             |             |       |  |   |              |  
|                                         |  | Common      |            | Paid-in    |  | Accumulated |             |       |  |  
|                                         |  | Stock       |            | Capital    |  | Deficit     |             | Total
|BALANCE, DECEMBER 31, 2005               |  | $           | 14,638,038 |            |  | $           | 96,501,887  |       |  | $ | (96,448,713  | ) |  | $ | 67,812     |  
|Issuance of common stock for cash        |  |             | 1,249,138  |            |  |             | 1,372,245   |       |  |   |              |   |  |   | 1,373,494  |  
|Issuance of common stock and options for |  |             | 13,950     |            |  |             | 1,058,487   |       |  |   |              |   |  |   | 1,058,501  |  
|services                                 |  |             |            |            |  |             |             |       |  |   |              |   |  |   |            |  
|Net loss                                 |  |             |            |            |  |             |             |       |  |   | (2,964,001   | ) |  |   | (2,964,001 | )
|BALANCE, DECEMBER 31, 2006               |  | $           | 15,901,126 |            |  | $           | 98,932,619  |       |  | $ | (99,412,714  | ) |  | $ | (464,194   | )
|Stock issued to correct stock records    |  |             | 25,000     |            |  |             | (25         | )     |  |   |              |   |  |   |            |  
|Issuance of common stock and options for |  |             |            |            |  |             | 2,843,251   |       |  |   |              |   |  |   | 2,843,251  |  
|services                                 |  |             |            |            |  |             |             |       |  |   |              |   |  |   |            |  
|Net Loss                                 |  |             |            |            |  |             |             |       |  |   | (4,579,958   | ) |  |   | (4,579,958 | )
|BALANCE, DECEMBER 31, 2007               |  | $           | 15,926,126 |            |  | $           | 101,775,845 |       |  | $ | (103,992,672 | ) |  | $ | (2,200,901 | )















Please See Notes to the Financial Statements

F–4

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TETRAGENEX PHARMACEUTICALS, INC.STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006

|                                                                           |  |                         |            |      |  |   |            |  
|-------------------------------------------------------------------------- |  | ----------------------- | ---------- | ---- |  | - | ---------- | -
|                                                                           |  | YEAR ENDED DECEMBER 31,
|                                                                           |  | 2007                    |            | 2006
|CASH FLOWS FROM OPERATING ACTIVITIES:                                      |  |                         |            |      |  |   |            |  
|Net loss                                                                   |  | $                       | (4,579,958 | )    |  | $ | (2,964,001 | )
|Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities |  |                         |            |      |  |   |            |  
|Depreciation and amortization                                              |  |                         | 44,406     |      |  |   | 43,854     |  
|Stock, option and warrant compensation                                     |  |                         | 2,843,251  |      |  |   | 1,097,368  |  
|Changes in Operating Assets and Liabilities                                |  |                         |            |      |  |   |            |  
|Prepaid insurance and other current assets                                 |  |                         | (15,608    | )    |  |   | 57,403     |  
|Accounts payable and accrued expenses                                      |  |                         | 280,434    |      |  |   | 132,413    |  
|Accrued interest payable                                                   |  |                         | 57,872     |      |  |   | 57,872     |  
|NET CASH USED IN OPERATING ACTIVITIES                                      |  |                         | (1,369,603 | )    |  |   | (1,575,091 | )
|                                                                          
|CASH FLOWS FROM INVESTING ACTIVITIES:                                      |  |                         |            |      |  |   |            |  
|Acquisition of property and equipment                                      |  |                         | –          |      |  |   | (3,485     | )
|Patent costs                                                               |  |                         | (68,620    | )    |  |   | (63,793    | )
|NET CASH USED IN INVESTING ACTIVITIES                                      |  |                         | (68,620    | )    |  |   | (67,278    | )
|                                                                          
|CASH FLOWS FROM FINANCING ACTIVITIES:                                      |  |                         |            |      |  |   |            |  
|Proceeds from issuance of common stock                                     |  |                         | –          |      |  |   | 1,334,627  |  
|NET CASH PROVIDED BY FINANCING ACTIVITIES                                  |  |                         | –          |      |  |   | 1,334,627  |  
|NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                       |  | $                       | (1,438,223 | )    |  | $ | (307,742   | )
|                                                                          
|CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                               |  |                         | 1,965,960  |      |  |   | 2,273,702  |  
|CASH AND CASH EQUIVALENTS, END OF YEAR                                     |  | $                       | 527,737    |      |  | $ | 1,965,960  |  
|                                                                          
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION                          |  |                         |            |      |  |   |            |  
|Cash paid for taxes                                                        |  |                         | –          |      |  |   | –          |  
|Cash paid for interest                                                     |  |                         | –          |      |  |   | –          |  
|                                                                          
|NON CASH TRANSACTIONS                                                      |  |                         |            |      |  |   |            |  
|Stock, options, and warrants issued for compensation                       |  | $                       | 2,843,251  |      |  | $ | 1,097,368  |  
|Stock issued to correct stock records                                      |  |                         | 20,000     |      |  |   | –          |  















Please See Notes to the Financial Statements

F–5

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TETRAGENEX PHARMACEUTICALS, INC.  NOTES TO THE FINANCIAL STATEMENTS


1. THE COMPANY

Tetragenex Pharmaceuticals Inc. (“Tetragenex” or the “Company”) was incorporated in 2000 in the State of Delaware while Innapharma, Inc., the Company’s predecessor, was incorporated in 1989
also in the State of Delaware. The corporate headquarters for Tetragenex are located in Park Ridge, New Jersey. On November 23, 2004 Innapharma, Inc. merged into its wholly owned subsidiary Tetragenex. As part of the merger all existing shares,
options and warrants converted into securities of Tetragenex on a 1-for-4 basis.

Tetragenex is a biopharmaceutical company working to discover, develop and commercialize proprietary pharmaceutical products that treat serious diseases for which current therapies are inadequate. Innapharma developed and
patented a novel platform of pharmaceutical “small chain” peptides that treat depression, anxiety and other central nervous system disorders, which were subsequently assigned to the Company upon the merger. The Company’s leading
product candidate, the antidepressant compound Nemifitide, is currently in human clinical trials.

Tetragenex has also discovered, synthesized and is currently developing a platform of new and unique chemically modified tetracycline molecules to be used in the treatment of certain types of cancer and treatment resistant
bacterial infections. These tetracycline-based product candidates are currently in the pre-clinical development stage.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

GOING CONCERN AND LIQUIDITY

The financial statements of the Company have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of
business. The Company incurred losses of $4,579,958 and $2,964,001 for years ended December 31, 2007 and 2006 respectively. In addition at December 31, 2007 the company has a working capital deficiency of $770,953, long term debt of $1.8 million and
deficiency in stockholder equity of $2,200,901. The Company has less than 5 months working capital in the bank currently and its main source of funds has been private investments. These factors raise doubt about the Company’s ability to
continue as a going concern. To address the company’s immediate cash requirements which are necessary for the Company to continue in business, the board of directors is making investments into a bridge loan to the company. Several other
individuals may participate as well. Subsequently the company will commence an offering of its company stock in an effort to raise funds. The Company’s low stock price and its continuing losses may make it difficult to obtain either equity or
debt financing, and, there can be no assurances that additional financing which is necessary for the company to continue its business will be available to the company on acceptable terms, or at all. The Company believes that its lead compound,
Nemifitide is a revolutionary treatment for depression and should it reach the market or become licensed to a pharmaceutical company, could prove extremely lucrative to the company. The company’s ability to continue its operations is dependent
upon its ability to generate sufficient funds from financing to meet its obligations on a timely basis and to further develop and market its products. The accompanying financial statements do not include any adjustments that might result from the
outcome of these uncertainties.





F–6

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TETRAGENEX PHARMACEUTICALS, INC.  NOTES TO THE FINANCIAL STATEMENTS (cont’d)


USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

FINANCIAL INSTRUMENTS

The Company’s financial instruments include cash and cash equivalents, accounts payable and accrued expenses and notes payable. These financial instruments are carried at cost, which unless otherwise disclosed,
approximates fair value due to their short maturities.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. The Company’s cash and cash equivalents are held principally at one financial
institution and at times may exceed insured limits.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost and depreciated on a straight-line basis over the estimated useful lives of the related assets, which is generally five years. Expenditures for maintenance and repairs are charged
to operations at the time the expense is incurred. Expenditures determined to represent additions are capitalized.

IMPAIRMENT OF LONG-LIVED ASSETS

The Company periodically reviews its long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Impairment is determined to exist if
estimated undiscounted future cash flows are less than the carrying amount of the asset. If such assets are considered to be impaired, the impairment recognized is measured by the amount by which the carrying amount of the assets exceeds the fair
value of the assets. The Company has determined that there was no impairment of long-lived assets in 2006 and 2007 and thus no impairment loss was taken in those years.

PATENTS

The Company capitalizes its expenditures relating to the filing and maintenance of its patents and amortizes such costs over the estimated useful life of the patent, which generally approximates fifteen years. Accumulated
amortization was $399,261 at December 31, 2007. Amortization expense related to patents was $38,947 and $34,538 for the years ended December 31, 2007 and 2006 respectively.

F–7

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TETRAGENEX PHARMACEUTICALS, INC.  NOTES TO THE FINANCIAL STATEMENTS (cont’d)


INCOME TAXES

The Company accounts for income taxes using the liability method. The liability method requires the determination of deferred tax assets and liabilities based on the differences between the financial statements and income
tax bases of assets and liabilities, using enacted tax rates. Additionally, net deferred tax assets are adjusted by a valuation allowance, if, based on the weight of available evidence, it is uncertain whether some portion or all of the net deferred
tax assets will be realized.

RESEARCH AND DEVELOPMENT

The Company expends funds on research and development to develop new products or processes, to improve present products, and to discover new knowledge that may be valuable at some future date. Costs incurred for research
and development activities are expensed as incurred.

BASIC AND DILUTED LOSS PER COMMON SHARE

The Company displays earnings per share in a dual presentation of basic and diluted earnings per share. Basic earnings per share includes no dilution and is computed by dividing net income or loss available to common
shareholders by the weighted average number of common shares outstanding for the period. Outstanding common stock options, warrants, convertible preferred shares and convertible notes payable have not been considered in the computation of diluted
earnings per share amounts, since the effect of their inclusion would be antidilutive. Accordingly, basic and diluted earnings per share are identical.

STOCK BASED COMPENSATION

On December 16, 2004 immediately following the revised pronouncement 123-R the Company early adopted the provisions of SFAS 123-R retroactively to January 1, 2003. The Company applied the provisions of the standard by
directly expensing the fair value of options and warrants under the black scholes method to the statement of operations. This enabled the Company to treat employees and others on an equal basis. Had the Company not adopted 123-R it would have had to
calculate employee options differently which the Company felt would lead to an inconsistency in the reflection of the value of options and warrants. The Company accounts for stock based grants issued to non-employees at fair value in accordance with
SFAS 123 and EITF 96-18 “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or In Conjunction with Selling, Goods or Services.”

RECENTLY ISSUED ACCOUNTING STANDARDS

In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes - An Interpretation of FASB Statement No. 109, (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in
income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. FIN 48 also prescribes a recognition threshold and measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a tax return that results in a tax benefit. Additionally, FIN 48 provides guidance on de-recognition, income statement classification of interest and penalties,
accounting in interim periods, disclosure, and transition. This interpretation is effective for fiscal years beginning after December 15,

F–8

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TETRAGENEX PHARMACEUTICALS, INC.  NOTES TO THE FINANCIAL STATEMENTS (cont’d)


2006. Tetragenex does not expect the application of FIN 48 to have a material affect on its financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS No. 159”). SFAS No. 159 allows companies to choose to measure certain
financial instruments and certain other items at fair value. The statement requires that unrealized gains and losses are reported in earnings for items measured using the fair value option and establishes presentation and disclosure requirements.
SFAS No. 159 is effective July 1, 2008 for the Company. The Company does not believe the adoption of SFAS No. 159 will have a material effect on our consolidated financial statements.

In June 2007, the FASB issued Emerging Issue Task Force (EITF) No. 07-03 (EITF 07-03), ACCOUNTING FOR NON-REFUNDABLE ADVANCE PAYMENTS FOR GOODS OR SERVICES TO BE USED IN FUTURE RESEARCH AND DEVELOPMENT ACTIVITIES. EITF
07-03 provides guidance on whether non-refundable advance payments for goods that will be used or services that will be performed in future research and development activities should be accounted for as research and development costs or deferred and
capitalized until the goods have been delivered or the related services have been rendered. EITF 07-03 is effective for fiscal years beginning after December 15, 2007. The Company does not expect that the adoption of EITF 07-03 will have a material
impact on its financial position or results of operations.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements - an amendment of ARB No. 151.” (“SFAS 160”). SFAS 160 requires all entities to report
noncontrolling (minority) interests in subsidiaries as equity in the consolidated financial statements. Its intention is to eliminate the diversity in practice regarding the accounting for transactions between an entity and noncontrolling interests.
This Statement is effective for the Company as of January 1, 2009. Earlier adoption is prohibited. The Company is currently assessing the impact, if any, of SFAS 160 on its consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141R, “Business Combinations” (“SFAS 141R”). SFAS 141R provides guidance to improve the relevance, representational faithfulness, and comparability of the
information that a reporting entity provides in its financial reports about its business combinations and its effects. SFAS 141R establishes principles and requirements for how the acquirer recognizes and measures in its financial statements the
identifiable assets acquired, liabilities assumed, the goodwill acquired and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141R is
effective for acquisitions beginning in our fiscal year beginning December 1, 2009 and earlier application is prohibited.

F–9

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TETRAGENEX PHARMACEUTICALS, INC.  NOTES TO THE FINANCIAL STATEMENTS (cont’d)


3. PROPERTY AND EQUIPMENTProperty and equipment are summarized as follows:

|                              |  |              |         | 
|----------------------------- |  | ------------ | ------- | 
|                              |  | December 31,
|                              |  | 2007        
|Furniture and fixtures        |  | $            | 82,995  | 
|Machinery and equipment       |  |              | 78,761  | 
|                              |  |              | 161,756 | 
|Less accumulated depreciation |  |              | 157,568 | 
|                              |  | $            | 4,188   | 

Depreciation expense for the years ended December 31, 2007 and 2006 was $5,459 and $9,315 respectively. The decrease was due to certain assets becoming fully depreciated.

4. INCOME TAXES

The income tax benefit for the year ended, December 31, 2007 and 2006, includes

|         |  |      |  |      |       | 
|-------- |  | ---- |  | ---- | ----- | 
|         |  | 2007 |  | 2006
|Federal  |  | –    |  |      | –     | 
|State    |  | $ –  |  | $    | 5,638 | 
|         |  | $ –  |  | $    | 5,638 | 
|DEFERRED |  |      |  |      |       | 
|Federal  |  | –    |  |      | –     | 
|State    |  | –    |  |      | –     | 
|         |  | $ –  |  | $    | 5,638 | 

There is no current provision for corporate income taxes for the years ended December 31, 2007, and 2006 as the Company generated net losses for income tax purposes. At December 31, 2007, the Company had available for
federal income tax purposes net operating loss carry forwards of approximately $70,924,000 that expire through 2026. At December 31, 2007, the Company had credits for increasing research activities of approximately $825,000 that expire through the
years 2015 through 2022.

F–10

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TETRAGENEX PHARMACEUTICALS, INC.  NOTES TO THE FINANCIAL STATEMENTS (cont’d)


The tax effects of temporary differences that give rise to deferred tax assets and liabilities are summarized as follows:

|                                  |  |   |              |  
|--------------------------------- |  | - | ------------ | -
|                                  |  |   | DECEMBER 31, |  
|                                  |  |   | 2007         |  
|DEFERRED TAX ASSETS:              |  |   |              |  
|Net operating loss carry forwards |  | $ | 25,211,000   |  
|Research and development credits  |  |   | 825,000      |  
|TOTAL DEFERRED TAX ASSETS         |  |   | 26,036,000   |  
|Valuation allowance               |  |   | (26,036,000  | )
|Net deferred tax assets           |  |   | $ –          |  

The net change in the valuation allowance was an increase of $594,000 and $601,638 respectively.

The reconciliation of estimated income taxes attributed to operations at the statutory tax rates to the reported income tax benefit is as follows:

|                                       |  |   |          |   |  |   |          |  
|-------------------------------------- |  | - | -------- | - |  | - | -------- | -
|                                       |  |   | 2007     |   |  |   | 2006     |  
|Expected federal tax at statutory rate |  | $ | (470,000 | ) |  | $ | (520,100 | )
|State taxes, net of federal tax rate   |  |   | (124,000 | ) |  |   | (86,900  | )
|Change in valuation allowance          |  |   | 594,000  |   |  |   | 601,362  |  
|                                       |  |   | $       |   |  | $ | (5,638   | )

As of December 31, 2007 we had net operating loss carry forwards for federal income tax purposes of approximately $70,924,000 which expire in the years 2008 through 2026 and federal research and development tax credits of
approximately $825,000 which expire in the years 2015 through 2022.

As of December 31, 2007 we had net operation loss carry forwards for state income tax purposes of approximately $6,623,000 which expire through 2012.

Utilization of our net operating loss and credit carry forwards may be subject to substantial annual limitation due to the ownership change imitations provided by the Internal Revenue Code and similar state provisions. Such
an annual limitation could result in the expiration of the net operating loss and credits before utilization

During 2006 the Company participated in the Technology Tax Certificate Transfer Program sponsored by the New Jersey Economic Development Authority. Through the Program the Company was able to transfer a portion of its State
operating loss carry forwards in exchange for $5,638.

5. NOTES PAYABLE

The Company has a $1,882,362 notes payable plus 3% interest due on April 23, 2009. The notes are convertible into common shares at $5 per share at the discretion of the holders of the notes. The notes are secured by the
patents of the company.

F–11

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TETRAGENEX PHARMACEUTICALS, INC.  NOTES TO THE FINANCIAL STATEMENTS (cont’d)


6. STOCKHOLDERS’ EQUITY

STOCK OPTIONS

TETRAGENEX STOCK OPTIONS

On April 6, 2005 in connection with the Company’s warrant conversion all options issued prior to 2005 were converted into Tetragenex warrants exercisable either at $1 or $6. The Company incurred compensation expense
due to the conversion of existing options into warrants. It was accounted for as a two-step process. The value of the existing options being converted was valued immediately before the modification using the black scholes method and the value was
credited to reduce compensation expense. The warrants, which the options converted into, were also valued using the black scholes method and expensed to compensation. The net amounts charged and credited to compensation expense ultimately represents
the incremental compensation cost measured as the excess of the fair value of the modified options/warrants determined in accordance with SFAS 123(R) over the fair value of the original options/warrants immediately before their terms were modified.

On January 5, 2005 the Company issued an aggregate of 3,787,500 options to officers, Directors and employees of the Company. The options have an exercise price of $1 per share and expire April 6, 2021. On August 23, 2005 an
aggregate of 1,777,000 options were granted to officers, Directors and employees of the Company also with an exercise price of $1 per share and an expiration date of April 6, 2021. Additionally in December 2005 several members of the management
team, employees and Directors agreed to convert either all or some of their deferred salaries or deferred payments due into options of the Company. An aggregate of $1,581,753 of accrued salaries was converted into 1,581,753 options to purchase
Tetragenex common stock at $1 per share expiring December 2020. On December 31, 2005 there were 7,146,253 options outstanding. Expenses totaling $5,882,003 were charged to “Compensation Expense” representing the Black Scholes valuation
of the options issued. A credit of $597,216 was entered to “Compensation Expense” resulting from the cancellation of the existing 2,698,189 options during 2005.

On July 11, 2006 the Board authorized the issuance of 852,000 options exercisable at $1 per share with an expiration of January 2020 to existing Directors, officers and employees of the company for services performed. They
also authorized the granting of 10,000 options per year to any Director who is part of a committee payable at the end of the year. On December 31, 2006 a total of 40,000 options were granted. In July 2007 the Board granted 3,720,000 options to
existing Board members, offices and employees of the Company for services performed. All options have an exercise price of $1 per share and expire 10 years from issuance.

In 2006 an aggregate of 892,000 options were granted to officers, Directors and employees of the Company. Expenses totaling $1,028,965.74 was charged to compensation expense and Board expense in 2006.

On July 26, 2007 the Board unanimously approved the granting of 3.72 million options, which was approved on May 29, 2007, to officers, Directors, employees and consultants of the Company outside of 2007 Stock Option Plan
(the “Plan”) in the event the Plan was not approved by the Company’s stockholders for unforeseen reasons. All options are exercisable at $1 per share and expire 10 years from

F–12

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TETRAGENEX PHARMACEUTICALS, INC.  NOTES TO THE FINANCIAL STATEMENTS (cont’d)


issuance. The options were valued using the black scholes method and total charges of $2,001,999 were applied to the appropriate accounts.

On December 31, 2007 a total of 40,000 options were granted to Bruce Bergman, Aaron Cohen, William Comer and Alf Akerman (10,000 each) for participation on board committees under the same terms as the July 26, 2007 options.
In 2007 an aggregate of 3,760,000 options were granted to officers, Directors and employees of the Company. Expenses totaling $2,011,839 were charged to “Compensation Expense” and “Board Expense” in 2007.

All options are vested immediately. The options are not actively trading and the fair market value is not readily ascertainable, the options are taxable at the time of exercise as opposed to the time of the grant.

The following table presents the combined activity of the plan and non-plan stock option issuances for the years ended December 31, 2006 and 2007:

|                                 |         |            |       |          |          |       | 
|-------------------------------- | ------- | ---------- | ----- | -------- | -------- | ----- | 
|                                 |         |            |       |          | WEIGHTED
|                                 |         |            |       | AVERAGE 
|                                 |         |            |       | EXERCISE
|                                 | OPTIONS |            | PRICE
|OUTSTANDING AT DECEMBER 31, 2004 |         | 2,698,189  |       |          | $        | 13.20 | 
|Granted in 2005                  |         | 7,146,253  |       |          | $        | 1.00  | 
|Converted to equity              |         | 2,698,189  |       |          | $        | 13.20 | 
|OUTSTANDING AT DECEMBER 31, 2005 |         | 7,146,253  |       |          | $        | 1.00  | 
|Granted during 2006              |         | 892,000    |       |          | $        | 1.00  | 
|OUTSTANDING AT DECEMBER 31, 2006 |         | 8,038,253  |       |          | $        | 1.00  | 
|Granted during 2007              |         | 3,760,000  |       |          | $        | 1.00  | 
|OUTSTANDING AT DECEMBER 31, 2007 |         | 11,798,253 |       |          | $        | 1.00  | 

The following table presents, for each of the following classes of options, as determined by range of exercise price, the information regarding weighted-average exercise price and weighted average remaining contractual life
as of December 31, 2007:

|               |  |                     |  |                         |  |           |  |            |  |                |  |          
|-------------- |  | ------------------- |  | ----------------------- |  | --------- |  | ---------- |  | -------------- |  | ---------
|               |  | Options Outstanding |  | Options
    Exercisable
|               |  |                     |  |                         |  | Weighted  |  |            |  |                |  | Weighted 
|               |  |                     |  | Weighted                |  | Average   |  |            |  | Weighted       |  | Average  
|Range of       |  | Number of           |  | Average                 |  | Remaining |  | Number of  |  | Average        |  | Remaining
|Exercise Price |  | Options             |  | Exercise Price          |  | Life      |  | Options    |  | Exercise Price |  | Life     
|$1.00          |  | 11,798,253          |  | $1.00                   |  | 10.6      |  | 11,798,253 |  | $1.00          |  | 10.6     



F–13

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TETRAGENEX PHARMACEUTICALS, INC.  NOTES TO THE FINANCIAL STATEMENTS (cont’d)


The grant-date fair values of options granted were estimated using the Black-Scholes option-pricing model with the following weighted average assumptions for the years ended December 31:

|                        |  |        |  |        |  | 
|----------------------- |  | ------ |  | ------ |  | 
|                        |  | 2007   |  | 2006  
|Expected life (years)   |  | 13.3   |  | 13.3  
|Risk-free interest rate |  | 5.102% |  | 4.840%
|Volatility              |  | 96%    |  | 75%   

WARRANTS

On April 6, 2005 as part of the Company’s private placement and a warrant exchange all existing employee options and all existing warrants that were not previously converted, were converted into warrants to purchase
Tetragenex common shares either at $1 per share expiring November 30, 2009 or at $6 per share expiring November 30, 2011. An aggregate expense was issued to warrant restructuring totaling $3,030,256 to reflect the cancellation of existing warrants
and issuance of new warrants based on the Black Scholes calculation.

On April 6, 2005 the Company agreed to issue 100,000 warrants exercisable at $1 per share expiring 11/30/2009 to two separate law firms in connection with work performed on the Company’s pending Registration Statement
on Form SB-2 as well as the settlement with its former patent attorneys. An expense to “Legal Fees” of $123,400 was entered to reflect the value of these warrants based on the Black Scholes calculation.

In May 2005 the Company issued a total of 150,000 warrants to certain individuals to purchase the Company’s common stock at $1 per share expiring November 30, 2009 as compensation for consulting with the Company as
well as introducing potential investors to the Company. An expense to “Consulting Fees” of $99,750 was entered to reflect the value of these warrants based on the Black Scholes calculation.

In the fourth quarter of 2006 a total of 86,055 warrants were issued to consultants for aiding in the Company’s fundraising process. As a result a total of $54,452 was expensed to “Consulting Expenses” for
the quarter based on the black scholes calculation.

An aggregate of 925,000 warrants were issued during the 2nd quarter of 2007 to several prominent scientific consultants in exchange for future services to the company. The warrants are exercisable at $1.30 per share and
expire 5 years from issuance. As a result an expense of $772,517 was charged to scientific consulting. The calculation was done using the black scholes method.

An aggregate of 155,000 warrants were issued during the 3rd quarter of 2007 to several financial consultants and to members of the company’s scientific advisory board. The warrants were valued using the black scholes
method and total charges of $58,893 were applied to the appropriate accounts.

At December 31, 2007, the Company had outstanding warrants to purchase 12,018,514 shares of the Company’s common stock at exercise prices of $1, $1.30, $1.65 and $6 per share. These warrants have expirations of
November 30, 2009, March 30, 2012, April 30, 2009 and November 30, 2011 respectively.

F–14

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TETRAGENEX PHARMACEUTICALS, INC.  NOTES TO THE FINANCIAL STATEMENTS (cont’d)


The following table presents, for each of the following classes of warrants as determined by range of exercise price, the information regarding warrants outstanding and weighted-average exercise price as of December 31,
2007

|                        |  |                      |  |                                 |      
|----------------------- |  | -------------------- |  | ------------------------------- | -----
|                        |  | Warrants Outstanding
|Range of Exercise Price |  | Number of Warrants   |  | Weighted Average Exercise Price
|$1.00                   |  | 7,058,796            |  |                                 | $1.00
|$1.30                   |  | 1,030,000            |  |                                 | $1.30
|$1.65                   |  | 645,322              |  |                                 | $1.65
|$6.00                   |  | 3,284,396            |  |                                 | $6.00

COMMON STOCK TRANSACTIONS

During the third quarter 2007, 25,000 shares of common stock were issued to an existing shareholder for stock purchased in the past and not in the stock records due to a clerical error. On September 30, 2007 there were
15,926,126 common shares outstanding.

At December 31, 2007, the Company has authorized 50,000,000 shares of common stock, $.001 stated value. The following table represents the approximate allocation of reserved shares at December 31, 2006:

|              |  |           
|------------- |  | ----------
|Common Stock  |  | 15,926,126
|Stock Options |  | 11,798,253
|Warrants      |  | 12,018,514
|              |  | 39,742,893

Commitments and contingencies

7. EMPLOYMENT AGREEMENTS

EMPLOYMENT AGREEMENTS

On December 15, 1999, the Company entered into a three-year employment agreement with its co-Chief Executive Officer and Chairman of the Board, Martin F. Schacker (“co-CEO”). The agreement provided for an annual
base salary of $160,000, subject to a minimum ten percent annual increase. On February 6, 2001, in view of the executive’s efforts on behalf of the Company and his performance, the Company’s Board of Directors (i) increased his annual
salary to $250,000 with no automatic annual increases, and extended the term of his employment agreement for an additional two years and (ii) granted the executive a ten-year option to acquire 125,000 shares of the Company’s common stock at an
exercise price of $17 per share, one third of which vested immediately, one third of which vested on February 6, 2002, and the final third vested on February 6, 2003. On December 11, 2001, in consideration of services provided to the Company, the
Board of Directors (i) further increased his annual salary to $300,000, (ii) further extended the term of the agreement by one year, through and including December 15, 2005 and (iii) granted the executive an additional, immediately vested five-year
option to acquire 125,000 shares of the Company’s common stock at an exercise price of $17 per share. On April 6, 2003, as a result of the Company’s cost reduction, the executive agreed to defer half of his $300,000 yearly salary. In
December

F–15

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TETRAGENEX PHARMACEUTICALS, INC.  NOTES TO THE FINANCIAL STATEMENTS (cont’d)


2005 the executive agreed to convert $177,000 of his deferred salary into 177,000 options to purchase shares of Tetragenex common stock at $1 per share expiring December 20, 2020. On September 30, 2007 the executive had
deferred compensation totaling $301,707. The executive was granted an aggregate of 1,420,000 options exercisable at $1 per share and expiring in 2020 during 2005 and another 115,000 in 2006 under the same terms. In the 3rd Quarter 2007 he was issued
an aggregate of 850,000 options exercisable at $1 per share expiring 10 years from issuance for services to the company as Co-CEO and Chairman. The co-CEO is the nephew of the company’s other co-CEO David Abel.

All officers, Directors and employees of the Company at the time of the bankruptcy agreed to defer a portion or all of their compensation. On September 30, 2007, there was $866,857 deferred from officers and employees and
$156,250 from Directors. During 2006, additional salaries and compensation in the amounts of $341,124 was accrued from officers and employees, and $50,000 from Directors. It is anticipated that the majority of accrued salaries will be converted into
warrants of the Company on a 1-for-1 basis.

CONSULTING AGREEMENTS

The Company had entered into an agreement with an individual to serve as a Senior Medical Consultant to the Company for a period of one year commencing October 21, 1999. The consultant receives a fee of $3,000 per month,
plus an additional non-accountable expense reimbursement of $500 per month for his services. In connection with the agreement, the consultant received an immediately vested ten-year option to acquire 10,000 shares of the Company’s common stock
at an exercise price of $12.00 per share. On December 10, 1999, for services provided to the Company, the Company’s Board of Directors granted the consultant an additional five-year option to acquire 10,000 shares of the Company’s common
stock at an exercise price of $12.00 per share, 2,500 of which vested on December 10, 1999, and 2,500 of which vested each year thereafter, provided that the consulting agreement is extended beyond its original term. The Company extended the term of
the consulting agreement in both 2000 and 2001, upon the same terms and conditions, for an additional year, to October 21, 2001 and 2002, respectively. The Company again extended the term of the consulting agreement in 2002 until October 21, 2003,
at a fee of $4,000 per month, plus an additional non-accountable expense reimbursement of $500 per month for his services. The Company extended the contract until October 21, 2004 at a rate of $3,250 per month. He is currently consulting on a
month-to-month basis for no compensation.

On April 6, 2003 several employees of the Company resigned as employees to become part time consultants for the company. They are currently consulting on a month-to-month basis for no compensation.

On April 6, 2003 the Company entered into an ongoing agreement with the five members of its scientific blue ribbon panel to be paid hourly fees ranging from $300 to $500 per hour for work performed for the Company as well
as reimbursement for expenses.

Several individuals were retained as consultants for the Company to assist in its fundraising efforts during 2006. Each individual was compensated in cash and warrants based on performance in aiding the fundraising process.
An aggregate of $52,429 was paid to consultants as well as warrants as part of the fundraising process during 2006. The Company did not undertake any financings in 2007 and therefore no payments to these consultants were made.

F–16

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TETRAGENEX PHARMACEUTICALS, INC.  NOTES TO THE FINANCIAL STATEMENTS (cont’d)


8. LITIGATION

At December 31, 2006 and December 31, 2007 the Company was not involved in any ongoing litigation.

9. RISKS AND UNCERTAINTIES

The Company is subject to risks common to companies in the biopharmaceutical industry, including, but not limited to, successful commercialization of product candidates, protection of proprietary technology and compliance
with Food and Drug Administration regulations.

As reflected in the accompanying consolidated financial statements, the Company has incurred significant recurring losses from operations and negative operating cash flows, which have been financed primarily by proceeds
from stock and debt issuances. As a result, the Company had an accumulated deficit of $103,993,304 and $99,412,714 at December 31, 2007 and 2006, respectively.

The Company plans to provide for additional working capital and funds for the continued development of its products through private or public sale of the Company’s common stock. The Company’s ability to obtain
such financing is contingent upon continued progress in its drug development efforts and its ability to access capital resources. The Company is also attempting to enter into an agreement with a major pharmaceutical company to co-develop its
antidepressant drug, which may generate significant cash flows for the Company. No assurance can be given as to the Company’s ability to enter into such an agreement or successfully complete future funding.

10. LEASE OBLIGATIONS

On March 12, 2003 the Company entered into an operating lease for its current office space in Park Ridge, New Jersey. The initial lease commenced on March 31, 2003 and expired on March 31, 2007 and required monthly base
rental payments of $10,200 plus certain annual escalation. In December 2006 the company entered into a 5-year lease-operating lease to rent different space in the same building as it resides now and requires monthly base rental payments of $6,300
per month and expires in December 2011.

The approximate aggregate minimum rental commitments on these leases are as follows:

|                         |  |   |         | 
|------------------------ |  | - | ------- | 
|YEAR ENDING DECEMBER 31, |  |   |         | 
|2007                     |  | $ | 87,300  | 
|2008                     |  |   | 75,600  | 
|2009                     |  |   | 75,600  | 
|2010                     |  |   | 75,600  | 
|2011                     |  |   | 75,600  | 
|2012                     |  |   | 22,000  | 
|TOTAL MINIMUM LEASE      |  |   |         | 
|PAYMENTS                 |  | $ | 324,400 | 

Rental expense was $84,249 and $124,039 for the years ended December 31, 2007 and 2006 respectively.

F–17

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TETRAGENEX PHARMACEUTICALS, INC.  NOTES TO THE FINANCIAL STATEMENTS (cont’d)


11. RELATED PARTY TRANSACTIONS

NONE.

12. SUBSEQUENT EVENTS

NONE.



F–18

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|        |                                                     
|------- | ----------------------------------------------------
|ITEM 8. | CHANGES IN AND DISAGREEMENTS
    WITH ACCOUNTANTS ON
|        | ACCOUNTING
    AND FINANCIAL DISCLOSURE             

There have been no changes or disagreements with our accountants on accounting and financial disclosure.

ITEM 8A.  CONTROLS AND PROCEDURES

(A) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

We maintain a system of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure
that information required to be disclosed in our Securities and Exchange Commission reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and to
ensure that such information is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Management necessarily
applied its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding management’s control objectives.

Management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures, as of the end of the period covered by this Annual
Report on Form 10-KSB. Based upon this evaluation, management concluded that our disclosure controls and procedures were not effective as of the end of the fiscal year.
In making this evaluation, the Chief Executive Officer and Chief Financial Officer considered, among other matters, the material weakness in our internal control over financial reporting described below.

(B) MANAGEMENTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management with the participation of the Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our internal control over financial reporting as of December 31, 2007. In making this
assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on this evaluation, our management, with the participation of our
Chief Executive Officer and Chief Financial Officer, concluded that, as of December 31, 2007 we did not maintain effective internal controls over financial reporting due to our limited number of employees which resulted in our inability to
effectively segregate all conflicting duties. Currently we employ one individual who is in charge of our accounting and financial duties on a day-to-day basis and we also use one consultant to assist in the preparation of the financial statements
and accompanying footnotes.

To remedy this material weakness, we will, to the extent possible, implement procedures to assure the initiation of transactions, the custody of assets and the recording of transactions will be performed by separate
individuals. Further, concurrent with having sufficient resources we will engage additional individuals to assist us in remedying this material weakness.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our
registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in the Annual Report.

23

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LIMITATIONS ON THE EFFECTIVENESS OF INTERNAL CONTROLS

Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material errors. Our disclosure controls and procedures are
designed to provide reasonable assurance of achieving our objectives and our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective at that reasonable assurance level. 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, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple
error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The design of any system of controls also 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. Over time, control may become inadequate because of
changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

(C) CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING

There have been no significant changes in our internal controls over financial reporting during the quarter ended December 31, 2007 that have altered our conclusion as to the ineffectiveness of such controls.

ITEM 8B.   OTHER INFORMATION

None.

PART III

|ITEM 9. | DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
      AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE
    ACT
|------- | -------------------------------------------------------------------------------------------------------------------------

DIRECTORS AND EXECUTIVE OFFICERS

Our officers and Directors and further information concerning them, are as follows:

24

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|                       |  |     |  |                                                                  
|---------------------- |  | --- |  | -----------------------------------------------------------------
|NAME                   |  | AGE |  | POSITION                                                         
|Martin F. Schacker     |  | 51  |  | Chairman of the Board and Co-Chief Executive Officer             
|David Abel             |  | 65  |  | Vice Chairman of the Board, Co-Chief Executive Officer           
|Neil Martucci          |  | 35  |  | Chief Financial Officer                                          
|Robert P. Budetti      |  | 65  |  | Chief Operating Officer and Director                             
|Kenneth Cartwright     |  | 72  |  | Senior Vice President of Drug Developments Regulatory Affairs and
|                       |  |     |  | Director                                                         
|Alf E. F. Akerman      |  | 44  |  | Director                                                         
|Bruce J. Bergman, Esq. |  | 62  |  | Director                                                         
|William T. Comer, Ph.D |  | 71  |  | Director                                                         
|Aaron Cohen            |  | 71  |  | Director                                                         

MARTIN F. SCHACKER currently serves as Chairman of the Board and Co-CEO. Mr. Schacker served as our Co-Chairman of the Board of Directors from 1998 to 2004 and as Chairman of the Board since 2004. He has served as Co-Chief
Executive Officer since March 1999. Mr. Schacker was appointed as a Director in November 1994. With extensive biotechnology and investment banking experience, Mr. Schacker has helped raise approximately $60,000,000 for us to date. From August 1991
through February 2001, Mr. Schacker served as Chairman of the Board of M.S. Farrell & Co., Inc., an investment banking and brokerage firm, and was its Chief Executive Officer from 1991 to 2000. From June 1987 through December 1991, Mr. Schacker
was a Senior Vice President of D.H. Blair & Company, Inc., an investment banking and brokerage firm that focuses on biotechnology companies. From 1982 to May 1987, Mr. Schacker was employed in various capacities, including as Senior Vice
President at Shearson Lehman Brothers, an international investment banking and brokerage firm. Mr. Schacker received a B.A. in Business from Hofstra University in 1982. Mr. Schacker is the nephew of David Abel.

DAVID ABEL has served as our Co-Chief Executive Officer since March 1998 and as Vice Chairman of the Board since 2004. He was Co-Chairman of the Board from 1999 through 2004. Mr. Abel has served as a Director since November
1994. Mr. Abel is the President and Founder of United Realty, Inc., a commercial and industrial real estate company headquartered in Melville, New York, and is a general partner of Triangle Properties, a partnership that owns and operates over 50
commercial properties throughout the greater New York metropolitan area. Mr. Abel received a B.B.A. from City College of New York (C.C.N.Y.) in 1962. Mr. Abel is the uncle of Martin F. Schacker.

NEIL MARTUCCI has served as the Company’s Chief Financial Officer since 2004. In 2003, he joined Innapharma, Inc. as Controller and was appointed Chief Financial Officer in 2004. From 2001 through 2003 Mr. Martucci
served as Vice President of Investments for Kirlin Securities, a publicly traded investment bank. From 1994 through 2001, Mr. Martucci served as Vice President of Investments for M.S. Farrell and Co, a small Wall Street Investment firm. In addition,
he served as an investment banker for M.S. Farrell and Co. from 1999 through 2001. Mr. Martucci graduated from Miami (Ohio) University with a degree in finance in 1994. ROBERT P. BUDETTI has served as our Chief Operating Officer and a Director since
October 1999. Mr. Budetti served as our Chief Financial Officer from October 1999 to December 2000. Since 1979, Mr. Budetti has served as the Chief Executive Officer of the Feighner Research Institute, a clinical neuropsychopharmacologic research
center. From 1984 to 1992, Mr. Budetti served as the Chief Operating Officer and Chief Financial Officer of ICR, of which he was one of the founders. In 1992, ICR was sold to Quintiles. From 1992 to 1994, Mr. Budetti served as the Chief Financial
Officer of the ICR division of Quintiles. Mr. Budetti received a BA in Engineering Sciences and Applied Physics from Harvard College in 1963 and a MBA from Harvard Business School in 1968.

25

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KENNETH CARTWRIGHT, M.B., CH.B., M.R.C.P. has served as our Director since 1989 and Senior Vice President, Drug Development and Regulatory Affairs since 2003. Dr. Cartwright is currently President of CMRC Consulting
Services, an independent scientific consulting firm. Dr. Cartwright served as Senior Vice President of Development and Regulatory Affairs of Alteon, Inc., a biopharmaceutical company, from 1994 until he retired in 1999. During his tenure at Alteon,
Dr. Cartwright served as a member of the management committee and was involved in the initial IPO. In addition Dr. Cartwright was responsible for overall product development including strategic clinical development planning, subsequent compilation
of NDAs and product registration and maintaining compliance within our company and interaction with the FDA. Prior to joining Alteon, he served as the Director of Clinical Research (U.S.A.) and as Vice President of Global Clinical Research of
American Cyanamid Company, Lederle Laboratories from 1982 to 1989. During his tenure with American Cyanamid, Dr. Cartwright was responsible for overall global strategic clinical plans and worldwide clinical development of phase 1, 2 and 3 programs.
He subsequently established a worldwide clinical research organization with regional offices in Australia, Canada, and England. Prior to joining American Cyanamid, Dr. Cartwright held the positions of Medical Director, Directory of Marketing and
Deputy Vice President of the Pharmaceutical Division of Ciba-Geigy, Canada. Dr. Cartwright received his M.B., Ch.B. in 1959 from Liverpool University Medical School, his D.P.M. from Wessex Regional Post-Graduate School of Psychiatry in 1969, his
M.F.C.M. from the Faculty of Community Medicine, Royal College of Physicians in 1971 and his M.R.C., Psych from the Royal Colleges of Psychiatrists in 1973.

ALF E. F. AKERMAN has served as our Director of the Company since March 1999. Mr. Akerman served as the Director of Business Integration of Volvo Car Finance, a subsidiary of Ford Motor Company, based in Belgium from 1994
to 2000. From December 1997 through June 1999, Mr. Akerman served as the Risk Manager of Volvo Car Finance Holdings. Mr. Akerman received a B.Sc. in Banking and Finance at Loughborough University in England. Mr. Akerman currently works for a
financial institution in Sydney, Australia.

BRUCE J. BERGMAN, ESQ. has served as our Director since November 1994. He is a member of the New York law firm of Berkman, Henoch, Peterson & Peddy, P.C., where he practices real estate litigation and mortgage
foreclosure. Previously, Mr. Bergman was a Deputy Attorney for Nassau County and a Deputy Bureau Chief for Special Litigation in Nassau County. Mr. Bergman currently serves as an adjunct associate professor of real estate at New York University Real
Estate Institute and a special lecturer in law at Hofstra Law School. He is a member of the American College of Real Estate Lawyers, the American College of Mortgage Attorneys and was three times elected City Councilman in Long Beach, New York,
serving in that capacity from 1980 through 1988. His biography appears in WHO’S WHO IN AMERICAN LAW and he is listed in AMERICA’S BEST LAWYERS. Mr. Bergman received a B.S. from Cornell University in 1966 and a J.D. from Fordham Law
School in 1969.

WILLIAM T. COMER, PH.D. has served as our Director since February 2001. Since 2000 Dr. Comer has also served as Director of TorreyPines Therapeutics (formerly known as Neurogenetics Inc.), a company which he founded. From
1991 through 1999, Dr. Comer served as President, CEO and Director of SIBIA Neurosciences, Inc., a company focusing on drug discovery and the development of neurodegenerative disease therapeutics, which was acquired by Merck & Co. From 1961
through 1981 he served in various capacities at Mead Johnson & Co., including as scientist and Vice President of Research. From 1982 through 1990 he served in various capacities at Bristol-Meyers, including President of Research and Licensing,
and from 1990 - 1991 he was Senior Vice President, Strategic Management for Bristol-Myers Squibb. Dr. Comer was a member of the Board of Directors of Epimmune (formerly Cytel Corporation) from 1994 through 2005, and Trega Biosciences (formerly
Houghton Pharmaceuticals) from 1993 through 1996. He has served on the Board of the University of California San Diego Foundation since 1993 and the Board of La Jolla Institute of Molecular Medicine since 2000.

26

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Dr. Comer received a B.A. in Chemistry from Carleton College in 1957, and a Ph.D. in Organic Chemistry and Pharmacology from University of Iowa in 1961.

AARON COHEN has served as a Director since February 2001. Mr. Cohen, founded National Technical Systems in 1961, a publicly traded company and is currently a Vice-Chairman of the Board of Directors; Mr. Cohen has served as
the President of Smithway Associates, Inc., a property management company, since 1991. He is the Chief Financial Officer and Director of Intelligent Optical Systems. . Mr. Cohen is a Member of the Deans Adivsory Board of the Henry Samueli UCLA
School of Engineering and Applied Sciences, the American Society of Quality Control, the Institute of Environmental Sciences and a Professional Member of the International Conference of Building Officials. In addition, Mr. Cohen is a Director of the
Sephardic Education Center and the Vice President of Sephardic Temple Tifereth Israel. Mr. Cohen is a Registered Professional Engineer in the State of California, and received his B.S. in Engineering from UCLA in 1958. There are no family
relationships among any of our Directors or executive officers, other than David Abel is Martin Schacker’s uncle.

COMPOSITION AND ELECTION OF DIRECTORS AND EXECUTIVE OFFICERS

Our Board of Directors currently consists of nine members. In June 2004, our Board of Directors was divided into three classes, designated as Class I, Class II and Class III. The Board of Directors currently consists of
three Class I Directors (William T. Comer, Ph.D., Aaron Cohen and Alf E. Akerman), three Class II Directors (Bruce J. Bergman, Esq., Kenneth Cartwright and Robert P. Budetti), and three Class III Directors (Martin F. Schacker, David Abel and John P.
Feighner, M.D.). The Class I Directors shall serve as Directors for an initial term of one year, the Class II Directors for an initial term of two years and the Class III Directors for an initial term of three years. The initial term for each class
of Directors commenced in June 2004. After the initial term expires, each Director shall then serve for a staggered three-year term. At each annual meeting of stockholders, a class of Directors will be elected for a three-year term to succeed the
Directors of the same class whose terms are then expiring. A Director holds office until the annual meeting for the year in which such Director’s term expires and until such Director’s successor shall be duly elected and qualified,
subject, however to prior death, resignation, retirement, disqualification or removal from office.

Our executive officers are appointed by our Board of Directors.

CODE OF ETHICS

We have adopted a Code of Ethics within the meaning of Item 406(b) of Regulation S-B. This Code of Ethics applies to our principal executive officer, our principal financial officer and principal accounting officer, as well
as all other employees, and is filed herewith. The Code of Ethics increases the fiduciary duties of our financial management team. If we make substantive amendments to this Code of Ethics or grant any waiver, including any implicit waiver, we will
disclose the nature of such amendment or waiver on our website or in a current report within four days of such amendment or waiver.

BOARD COMMITTEES

The audit committee is comprised of Akerman, Bruce Bergman, Aaron Cohen. Our audit committee financial expert is Mr. Akerman.

The compensation committee is comprised of Aaron Cohen, David Abel and Bruce Bergman. Mr. Cartwright serves as an advisor to the compensation committee.

27

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ITEM 10. EXECUTIVE COMPENSATION

The following table sets forth the aggregate cash compensation paid by the Company to: (i) its Chief Executive Officer, Chairman and Chief Financial Officer; and (ii) its most highly compensated officers whose cash
compensation exceeded $100,000 for services performed during the year ended December 31, 2007. Effective January 1, 2002, each non-employee and non-consultant member of our Board of Directors received the following annual compensation in
consideration for services rendered as a Director: (i) a five-year option to purchase up to 40,000 shares of our common stock, which options vest quarterly and were issued annually in arrears, and were exercisable at an exercise price equal to (a) a
15% discount to the fair market value at the end of the year in which such option is granted, if our common stock is publicly traded, unless such percentage reduction shall have a deleterious tax consequence upon us, in which event the exercise
price shall be equal to the fair market value, or (b) such dollar amount as is set by our Board of Directors at the end of the year in which such option is granted, if our common stock is not publicly traded; (ii) a cash stipend of $12,500 per
annum, paid on a quarterly basis; and (iii) reimbursement of reasonable and ordinary expenses incurred in connection with such member’s attendance at Board or committee meetings. In 2005 all existing options were converted into Tetragenex
warrants exercisable at either $1 per share or $6 per share expiring either in November 2009 or 2011. At the Board’s request all Board stipends were deferred to a later date. In December 2005 all deferred Board stipends were converted into
Tetragenex options. In July 2006 it was decided that all Board members serving on a Board committee would be entitled to an additional $10,000 per year to be paid options until it was determined that we had sufficient funds to pay the fee in cash.

If Directors provide additional consulting services outside of their duties as Board members, they may receive additional compensation above their cash stipend. In 2005 we issued employees, officers, and Directors a
one-time option grant of approximately 25% of our fully diluted outstanding shares of common stock. The amount and breakdown was determined by the Board.

LIMITATIONS ON LIABILITY AND INDEMNIFICATION MATTERS

Executive Compensation

|                          |  |      |  |         |  |        |  |        |  |         |  |           |  |           |  |           |  |        
|------------------------- |  | ---- |  | ------- |  | ------ |  | ------ |  | ------- |  | --------- |  | --------- |  | --------- |  | -------
|                          |  |      |  |         |  |        |  |        |  |         |  | Non-      |  | Non-      |  |           |  |        
|                          |  |      |  |         |  |        |  |        |  |         |  | equity    |  | qualified |  |           |  |        
|                          |  |      |  |         |  |        |  |        |  |         |  | Incentive |  | Deferred  |  |           |  |        
|                          |  |      |  |         |  |        |  |        |  |         |  | Plan      |  | Compen-   |  | All Other |  |        
|                          |  |      |  |         |  |        |  | Stock  |  | Option  |  | Compen-   |  | sation    |  | Compen-   |  |        
|Name and                  |  |      |  | Salary  |  | Bonus  |  | Awards |  | Awards  |  | sation    |  | Earnings  |  | sation    |  | Total  
|Principal Position        |  | Year |  | ($)     |  | ($)    |  | ($)    |  | ($)     |  | ($)       |  | ($)       |  | ($)       |  | ($)    
|(A)                       |  | (B)  |  | (C)     |  | (D)    |  | (E)    |  | (F)     |  | (G)       |  | (H)       |  | (H)       |  | (I)    
|Martin Schacker(1)        |  | 2007 |  | 300,000 |  | 45,000 |  | –      |  | 459,918 |  | –         |  | –         |  | 14,000    |  | 818,918
|Co-CEO/ Chairman          |  | 2006 |  | 300,000 |  | 45,000 |  | –      |  | 132,627 |  | –         |  | –         |  | 14,000    |  | 491,627
|David Abel(2)             |  | 2007 |  | 110,000 |  | –      |  | –      |  | 162,324 |  | –         |  | –         |  | –         |  | 272,324
|Co-CEO/Vice-Chairman      |  | 2006 |  | 110,000 |  | –      |  | –      |  | 126,860 |  | –         |  | –         |  | –         |  | 236,860
|Robert Budetti(3)         |  | 2007 |  | –       |  | –      |  | –      |  | 189,378 |  | –         |  | 43,000    |  | 232,378   |  |        
|Board Member              |  | 2006 |  | –       |  | –      |  | –      |  | 172,992 |  | 172,992   |  |           |  |           |  |        
|Neil Martucci(4)          |  | 2007 |  | 100,000 |  | 20,000 |  | –      |  | 162,324 |  | –         |  | –         |  | –         |  | 282,324
|Chief Financial Officer   |  | 2006 |  | 95,000  |  | –      |  | –      |  | 63,430  |  | –         |  | –         |  | –         |  | 158,430
|Dr. Kenneth Cartwright(5) |  | 2007 |  | 60,000  |  | –      |  | –      |  | 270,540 |  | –         |  | –         |  | 6,000     |  | 396,540
|Chief Scientific Officer  |  | 2006 |  | 60,000  |  | –      |  | –      |  | 63,430  |  | –         |  | –         |  | –         |  | 123,430

|(1) | As per his employment agreement, Mr. Schacker is due an annual salary of $300,000 per year. As part of cost cutting measures at the time of the bankruptcy, Mr. Schacker, at the Board’s request,
agreed to defer 50% of his annual salary and is still doing so. During 2006, Mr. Schacker received an aggregate of 115,000 options exercisable at $1 per share exercisable
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   

28

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|    | 15 years from issuance as part of
    an executive option grant. During the 2007 fiscal year, Mr. Schacker received
    850,000 additional options exercisable at $1 per share expiring 10 years
    from  issuance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) | Mr. Abel is due to receive an annual salary of $110,000 per year. As part of cost cutting measures at the time of the bankruptcy, Mr. Abel at the Board’s request agreed to defer 100% of his annual
salary and has thus received no cash compensation since then. During 2006, Mr. Abel received an aggregate of 110,000 options exercisable at $1 per share exercisable 15 years from issuance. The options were granted for services provided. The options
are fully vested. In 2007 Mr. Abel received an additional 300,000 options, exercisable at $1 per share expiring 10 years from issuance.                                                                                                                                                                                                                              
|   
|(3) | Robert Budetti is the former Chief
    Operating Officer of the company and is currently a Board member. He is paid
    as a consultant on a task-by-task basis. In 2006, he received an aggregate
    of 150,000  options exercisable at $1 per share expiring 15
    years from issuance for services provided. In 2007 he received an additional
    350,000 options exercisable at $1 per share expiring 10 years from issuance.                                                                                                                                                                                                                                                                                                                                                                                               
|   
|(4) | Neil Martucci is the Chief Financial Officer. He received an aggregate of 55,000 options in 2006, exercisable at $1 per share expiring 15 years from issuance. He received an additional 300,000 options in
2007, exercisable at $1 per share expiring 10 years from issuance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|(5) | Dr. Ken Cartwright is our Chief Scientific Officer and a Board member. In 2006 he received an aggregate of 55,000 options exercisable at $1 per share expiring 15 years from issuance for services provided
to us. In 2007 he received an additional 500,000 options exercisable at $1 per share expiring 10 years from issuance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|(6) | The remuneration described in the above table does not include our cost of benefits furnished to the named executive officers, including premiums for health insurance and other personal benefits provided
to such individuals that are extended to all of our employees in connection with their employment. Perquisites and other personal benefits, securities, or property received by an executive officer are either the lesser of $50,000 or 10% of the total
salary and bonus reported for each named executive officer, except as otherwise disclosed. All options issued to employees were valued for the purposes of this table using the black scholes method as described in SFAS 123(r). All assumptions used in
calculating the value of the options are contained in the footnotes which accompany the financials.

DIRECTORS COMPENSATION

|              |  |             |  |             |  |          |  |                |  |              |  |              |  |         
|------------- |  | ----------- |  | ----------- |  | -------- |  | -------------- |  | ------------ |  | ------------ |  | --------
|              |  |             |  |             |  |          |  |                |  | Nonqualified |  |              |  |         
|              |  | Fees Earned |  |             |  |          |  | Non-equity     |  | Deferred     |  |              |  |         
|              |  | or Paid in  |  |             |  | Option   |  | Incentive Plan |  | Compensation |  | All Other    |  |         
|Name          |  | Cash        |  | Stock Award |  | Awards   |  | Compensation   |  | Earnings     |  | Compensation |  | Total   
|William Comer |  | $12,500     |  | 0           |  | $124,203 |  | 0              |  | 0            |  | 0            |  | $136,703
|Aaron Cohen   |  | $12,500     |  | 0           |  | $124,203 |  | 0              |  | 0            |  | 0            |  | $136,703
|Alf Akerman   |  | $12,500     |  | 0           |  | $124,203 |  | 0              |  | 0            |  | 0            |  | $136,703
|Bruce Bergman |  | $12,500     |  | 0           |  | $124,203 |  | 0              |  | 0            |  | 0            |  | $136,703

Each outside Board member is due to receive an annual stipend of $12,500 per year for serving on the Board. In 2003 all Board members agreed to defer such payments until we felt we could reinstate the payments. In 2005 all
members agreed to convert all accrued payments into company options. In 2007 each Board member received 225,000 options exercisable at $1 expiring in August 2017 for serving on the Board. They additionally earned 10,000 warrants on the same term if
they served on one or more committee which each member does. Robert Budetti is currently an outside Director but does not receive the Board stipend.

EMPLOYMENT AGREEMENTS AND CONSULTING AGREEMENTS

EMPLOYMENT AGREEMENTS

On December 15, 1999, we entered into a three-year employment agreement with our co-Chief Executive Officer and co-Chairman of the Board, Mr. Martin Schacker. The agreement provided for an annual base salary of $160,000,
subject to a minimum ten percent annual increase. On February 6, 2001, in view of Mr. Schacker’s efforts on our behalf and his performance, our Board of Directors: (i) increased his annual salary to $250,000 with no automatic annual increases,
and extended the term of his employment agreement for an additional two years, and (ii) granted Mr. Schacker a ten-year option to acquire 125,000 shares of our common stock at an exercise price of $17 per share, one third of which vested
immediately,

29

---



one third of which vested on February 6, 2002, and the final third vested on February 6, 2003. On December 11, 2001, in consideration of services provided to us, the Board of Directors: (x) further increased his annual
salary to $300,000, (y) further extended the term of the agreement by one year, through and including December 15, 2005, and (z) granted the executive an additional, immediately vested five-year option to acquire 125,000 shares of our common stock
at an exercise price of $17 per share. In December 2005, the executive’s contract was extended by an additional 3 years by the Board under the same terms as the previous agreement. On April 6, 2003 as a result of our cost reduction, Mr.
Schacker agreed to defer half of his $300,000 yearly salary. In December 2005, Mr. Schacker agreed to convert $177,000 of his deferred salary into 177,000 options to purchase shares of Tetragenex common stock at $1 per share expiring December 20,
2020. At December 31, 2007, Mr. Schacker had deferred compensation totaling $326,982. Mr. Schacker was granted an aggregate of 850,000 options exercisable at $1 per share and expiring in 2017 during 2007. Mr. Schacker is Mr. Abel’s nephew.

CONSULTING AGREEMENTS

We had entered into an agreement with an individual to serve as a Senior Medical Consultant for a period of one year commencing on October 21, 1999. The consultant received a fee of $3,000 per month, plus an additional
non-accountable expense reimbursement of $500 per month for his services. In connection with the agreement, the consultant received an immediately vested ten-year option to acquire 10,000 shares of our common stock at an exercise price of $12.00 per
share. On December 10, 1999, for services provided to us up to such date, our Board of Directors granted the consultant an additional five-year option to acquire 10,000 shares of our common stock at an exercise price of $12.00 per share, 2,500 of
which vested on December 10, 1999, and 2,500 of which vested each year thereafter, provided that the consulting agreement was extended beyond its original term. We extended the term of the consulting agreement in both 2000 and 2001, upon the same
terms and conditions, for an additional year, to October 21, 2001 and 2002, respectively. We further extended the term of the consulting agreement in 2002 until October 21, 2003, at a fee of $4,000 per month, plus an additional non-accountable
expense reimbursement of $500 per month for his services. We extended the contract again until October 21, 2004 at a rate of $3,250 per month. Thereafter, the consultant was offering his services on a month-to-month basis at a rate of $2,250 per
month. In late 2007 in an effort to curtail costs the consulting fees were eliminated until further notice.

On April 6, 2003, members of the scientific team, Dr. Joseph Hlavka, Dr. Gabriella Nicolau, and Dr. Richard Ablin resigned as employees and became our part-time consultants. Each was paid a consulting fee on a
month-to-month basis ranging from $1,000 to $5,000 per month. In late 2007, in an effort to curtail costs we ceased consulting payments until further notice.

In April 2003 we entered into ongoing agreement with the five members of our scientific blue ribbon panel to be paid hourly fees of between $300 and $500 per hour for work performed for us as well as reimbursement for
expenses.

Several individuals were retained as consultants to assist with our plans and to make introductions to us during 2005. Each individual was compensated in cash and warrants. An aggregate of $44,850 in cash was paid to
consultants as well as warrants during 2005. In 2007, an aggregate of $5,000 was paid to such consultants as well as some warrants.

30

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|         |                                                                
|-------- | ---------------------------------------------------------------
|ITEM 11. | SECURITY
            OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
|         | MANAGEMENT
            AND RELATED STOCKHOLDER MATTERS         

The following tables set forth certain information regarding beneficial ownership of our capital stock as of the date of the filing April 28, 2008 by (i) each person whom we know to beneficially own more than five percent
of any class of our common stock, (ii) each of our Directors, (iii) each of the executive officers, and (iv) all our Directors and executive officers as a group. Unless otherwise indicated, each of the persons listed below has sole voting and
investment power with respect to the shares beneficially owned.

Our total authorized capital stock consists of 50,000,000 shares of common stock, $.001 par value per share, and 5,000,000 shares of preferred stock, $.01 par value per share. As of April 28, 2008, there were 15,926,126
shares of our common stock outstanding, all of which were fully paid, non-assessable and entitled to vote. Each share of our common stock entitles its holder to one vote on each matter submitted to our stockholders. As of the date hereof, there were
no shares of preferred stock issued and outstanding.

|                                                   |  |                        |  |                           |       |  
|-------------------------------------------------- |  | ---------------------- |  | ------------------------- | ----- | -
|                                                   |  | Shares of Common Stock |  | Percentage of Common     
|Name and Address of Beneficial Owner(1)            |  | Beneficially Owned(2)  |  | Shares Beneficially Owned
|Martin F. Schacker(3)                              |  | 2,748,679              |  |                           | 14.70 | %
|David Abel(4)                                      |  | 2,443,622              |  |                           | 13.76 | %
|John P. Feighner, M.D.(5)                          |  | 2,765,306              |  |                           | 15.48 | %
|Robert P. Budetti(6)                               |  | 1,492,817              |  |                           | 8.58  | %
|Alf E. F. Akerman(7)                               |  | 667,708                |  |                           | 4.02  | %
|Bruce J. Bergman, Esq.(8)                          |  | 695,521                |  |                           | 4.18  | %
|Kenneth Cartwright(9)                              |  | 1,233,925              |  |                           | 7.2   | %
|William T. Comer(10)                               |  | 915,089                |  |                           | 5.48  | %
|Aaron Cohen(11)                                    |  | 775,155                |  |                           | 4.68  | %
|Neil Martucci(12)                                  |  | 607,643                |  |                           | 3.68  | %
|The William Shenk 1996 Revocable Trust(13)         |  | 1,681,088              |  |                           | 10.14 | %
|All Directors and officers as a group (9) persons) |  | 16,026,553             |  |                           | 55.02 | %
|* less than one percent                            |  |                        |  |                           |       |  

|(1) | Unless otherwise indicated, the address of each person listed below is c/o Tetragenex Pharmaceuticals, Inc., 1 Maynard Drive, Suite 205, Park Ridge, New Jersey.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) | Pursuant to the rules and regulations of the Securities and Exchange Commission, shares of common stock that an individual or group has a right to acquire within 60 days pursuant to the exercise of
options or warrants are deemed to be outstanding for the purposes of computing the percentage ownership of such individual or group, but are not deemed to be outstanding for the purposes of computing the percentage ownership of any other person
shown in the table.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|(3) | Martin Schacker is our Chairman and Co-CEO. His holdings consist of 49,833 common shares which represents .31% of our total outstanding common stock as of 4/29/08, based on 15,926,126 shares outstanding,
which was received from acting as a placement agent during our early stage financing as Chairman of M.S. Farrell. Additionally, 2,562,000 options exercisable at $1 per share expiring at different times between 2017 to 2020 were granted to Mr.
Shacker as consideration for services provided to us as well as the forgiveness of accrued salaries due to Mr. Schacker. Additionally, Mr. Schacker currently owns 62,169 warrants to purchase shares of our common stock at $1 per share expiring
November 30, 2009, and 74,677 non- voting warrants to purchase shares of our common stock at $6 per share expiring November 30, 2011. The warrants consist of options for services provided which were converted into warrants as well as for acting as a
placement agent over the years in our private placements. Mr. Schacker is the nephew of David Abel.
|   
|(4) | Mr. Abel is our Vice Chairman and Co-CEO. His holdings consist of 606,341 shares of our common stock which represents 3.8% of our total outstanding common stock as of 4/29/08 , based on 15,926,126 shares
outstanding, and was obtained from investments in several of our private placements. Additionally, Mr. Abel holds 1,438,187 non voting immediately vesting options exercisable at $1 per share expiring at different times between 2017 to 2020 which
were granted for services rendered to us as our Vice Chairman and Co-CEO as well as the forgiveness of accrued salaries due to him. Mr. Abel also holds 262,864 non-voting warrants to purchase shares of our common stock at $1 per share, expiring
November 30, 2009, and 136,230 non voting warrants to purchase shares of our common stock at $6 per share, expiring November 30, 2011                                                                                                                                                                                                                   
|   

31

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|     | which were obtained from various investments in our private placements as well as for being a partial owner in the investment bank which was the placement agent for several of the our offerings. David
Abel is the uncle of Martin Schacker                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|(5)  | Dr. Feighner was a consultant for us and a member of our Board prior to his passing in 2006. His holdings, which are now the holdings of his estate, consist of 807,816 shares of our common stock that
represents 5.06% of our total outstanding common shares as of 4/29/08 based on15,926,126 shares outstanding, which he received from several investments in our private placements. Secondly he holds 1,010,976 non-voting immediately vested options to
purchase shares of our common stock at $1 per share, expiring in the year 2020 which he received for services provided to us as our President and Director as well as for forgiveness of accrued salaries due to Dr. Feighner. He holds 691,438
non-voting warrants to purchase shares of our common stock at $1 per share expiring November 30, 2009, and 255,076 non-voting warrants to purchase shares of our common stock at $6 per share expiring November 30, 2011 that were obtained as part of
investments made in the our common stock in several private placements as well as from the conversion of previous options granted to Dr. Feighner for services rendered to us as our President.
|    
|(6)  | Consists of 35,000 common shares of our common stock which represents .22% of our total outstanding common shares as of 4/29/08, based on 15,926,126 shares outstanding, as well as 1,179,588 non-voting
options exercisable at $1 per share expiring at different times between 2017 to 2020, 10,000 non-voting warrants to purchase shares of our common stock at $1 per share expiring November 30, 2009, and 268,229 non voting warrants to purchase shares of
our common stock at $6 per share expiring November 30, 2011. Mr. Budetti is a member of our Board.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    
|(7)  | Alf Akerman serves as our Director and his holdings consist of options to 653,125 non-voting options exercisable at $1 per share expiring at different times between 2017 to 2020 granted to Mr. Akerman for
services provided to us as our Director, and 14,583 non-voting warrants to purchase shares of our common stock at $6 per share, expiring November 30, 201, received from converting previously issued options received for service provided as our
Director.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    
|(8)  | Bruce Bergman is serves as our Director
    and his holdings consist of 643,125 non-voting options exercisable at $1
    per share expiring at different times between 2017 to 2020 granted to Mr.
    Bergman for  services provided to us as our Director. Additionally, he holds
    20,000 warrants exercisable at $1 per share, which expire November 30, 2009,
    and 32,396 non-voting warrants to purchase shares of our common stock at
    $6 per share, expiring November 30, 2011 received from converting previously
    issued options received for service provided as our Director.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    
|(9)  | Dr. Cartwright is our Chief Scientific Officer and a Board member and his holdings consist of 27,500 common shares of our common stock which represents .17% of our total outstanding common shares as of
4/29/08, based on 15,926,126 shares outstanding, obtained from an investment in our start-up period. He also holds 1,037,500 non-voting options exercisable at $1 per share expiring in the year 2020 received for services provided as our Director and
Chief Scientific Officer as well as 135,502 non-voting warrants to purchase shares of our common stock at $1 per share, expiring November 30, 2009, and 33,423 non-voting warrants to purchase shares of our common stock at $6 per share expiring
November 30, 2011, received from converting previously issued options received for service he provided as our Director.                                                                                                                                                                                                                                                                                                                         
|    
|(10) | William Comer is our Board member and his holdings consist of 147,172 shares of common stock which represents .92% f our total outstanding common shares as of 4/29/08, based on 15,926,126 shares
outstanding, which were received from investments in our private placements, as well as 653,125 non voting options exercisable at $1 per share expiring at different times between 2017 to 2020, for services provided out Director. Additionally he
holds 112,500 non-voting warrants to purchase shares of our common stock at $1 per share expiring November 30, 2009, and 2,292 non-voting warrants to purchase shares of our common stock at $6 per share, expiring November 30, 2011 and received from
several investments he made in our securities as well as for converting previously issued options granted to him as a Director.                                                                                                                                                                                                                                                                                                                       
|    
|(11) | Aaron Cohen serves as our Director and his holdings consist of 151,092 common shares of our common stock, which represents .95% of our total outstanding common shares as of 4/29/08, based on 15,926,126
shares outstanding, which he received from investments in our private placements as well as 528,125 non voting options exercisable at $1 per share expiring in the years 2017- 2020 issued for services provided to us as our Director. Additionally he
holds 91,250 non-voting warrants to purchase shares of our common stock at $1 per share expiring November 30, 2009, and 4,688 non-voting warrants to purchase shares of our common stock at $6 per share expiring November 30, 2011.                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    
|(12) | Neil Martucci our CFO and his holdings consist of 2,750 common shares of our common stock, which represents .01% of our total outstanding common shares as of 4/29/08, based on 15,926,126 shares
outstanding, received from assisting with our private placements as a representative of M.S. Farrell, as well as 595,000 non-voting options exercisable at $1 per share expiring at different times between 2017 to 2020, received for services provided
to us as CFO. Additionally, he holds 9,893 non-voting warrants to purchase shares of our common stock at $6 per share, expiring November 30, 2011 for assisting us in various fund raisings as a representative of our placement agent in several of our
financings.                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    
|(13) | William Shenk, P.O. Box 1991 La Jolla, CA, is our beneficial owner and his holdings consist of 1,000,000 shares of common stock which represents 6.28% of our total outstanding common shares as of 4/29/08,
based on 15,926,126 shares outstanding, as well as 650,000 non-voting warrants exercisable at $1 per share expiring November 30, 2009, 667 non- voting warrants to purchase shares of our common stock at $6 per share, expiring November 30, 2011, and
30,421 non- voting warrants to purchase shares of our common stock at $1.65 per share expiring November 30, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    

32

---



COMPENSATION PLANS

Options/SAR Grants

|                                  |  |            |      |            |            |            |            |          |            |  |       |  |             
|--------------------------------- |  | ---------- | ---- | ---------- | ---------- | ---------- | ---------- | -------- | ---------- |  | ----- |  | ------------
|                                  |  |            |      |            | % of Total |            | % of Total |          |            |  |      
|                                  |  | Number of  |      | Options    |            | Options    |            |          |            | 
|                                  |  | Securities |      | Granted to |            | Granted to |            |          |            | 
|Name and                          |  | Underlying |      | Employees  |            | Employees  |            | Exercise | Expiration
|Principal Position                |  | Options    |      | in 2007    |            | in 2006    |            | Price    | Date      
|Martin Schacker                   |  | 115,000    | (1)  |            |            |            |            | 12.90    | %          |  | $1.00 |  | January 2020
|Chairman/Co-CEO                   |  | 850,000    | (2)  |            | 23.00      | %          |            |          |            |  | $1.00 |  | August 2017 
|David Abel                        |  | 110,000    | (3)  |            |            |            |            | 12.33    | %          |  | $1.00 |  | January 2020
|Co-CEO/Vice Chairman of the Board |  | 300,000    | (4)  |            | 8.10       | %          |            |          |            |  | $1.00 |  | August 2017 
|Dr. John Feighner                 |  | 55,000     | (5)  |            |            |            |            | 6.17     | %          |  | $1.00 |  | January 2020
|Former Director/Former President  |  |            |      |            |            |            |            |          |            |  | $1.00 |  | August 2017 
|Robert Budetti                    |  | 150,000    | (6)  |            |            |            |            | 16.82    | %          |  | $1.00 |  | January 2020
|Director                          |  | 350,000    | (7)  |            | 9.46       | %          |            |          |            |  | $1.00 |  | August 2017 
|Dr. Kenneth Cartwright            |  | 55,000     | (8)  |            |            |            |            | 6.17     | %          |  | $1.00 |  | January 2020
|Chief Scientific Officer/Director |  | 500,000    | (9)  |            | 13.51      | %          |            |          |            |  | $1.00 |  | August 2017 
|Neil Martucci                     |  | 55,000     | (10) |            |            |            |            | 6.17     | %          |  | $1.00 |  | January 2020
|Chief Financial Officer           |  |            |      |            | 8.1        | %          |            |          |            |  | $1.00 |  | August 2017 
|Other Employees and Board         |  | 451,000    |      |            |            |            |            | 50.56    | %          |  | $1.00 |  | January 2020
|                                  |  | 1,400,000  |      |            | 37.83      | %          |            |          |            |  | $1.00 |  | August 2017 

|(1) | In 2006 we issued 115,000 options to acquire shares of our common stock to Mr. Schacker. These options were issued to Mr. Schacker for services rendered by him as the Chairman of our Board of Directors
and as Co-CEO. These options are exercisable at a price of $1.00 per share. Each option is convertible into one share of common stock. These options are vested immediately and expire 15 years after issuance.                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) | In 2007, we issued 850,000 options to acquire shares of our common stock to Mr. Schacker. These options were issued to Mr. Schacker for services rendered by him as the Chairman of our Board of Directors
and as Co-CEO. These options are exercisable at a price of $1.00 per share. Each option is convertible into one share of common stock. These options are vested immediately and expire 10 years after issuance.                                                                        
|   
|(3) | In 2006 we issued 110,000 options to purchase shares of our common stock to Mr. Able. These options were issued to Mr. Able for services rendered by him as Vice Chairman of our Board of Directors and as
Co-CEO. These options are exercisable at a price of $1.00 per share. Each option is convertible into one share of stock. These options are vested immediately and expire 15 years after issuance.                                                                                      
|   
|(4) | In 2007, we issued 300,000 options to acquire shares of our common stock to Mr. Able. These options were issued to Mr. Abel for services rendered by him as our Vice Chairman of our Board of Directors and
as Co-CEO. These options are exercisable at a price of $1.00 per share. Each option is convertible into one share of stock. These options are vested immediately and expire 10 years after issuance which is August 2017                                                              
|   
|(5) | In 2006 the company issued 55,000 options to acquire shares of our common stock to Dr. Feighner. These options were issued to Dr. Feighner for services rendered by him as our President and as a member of
the Board. These options are exercisable at a price of $1.00 per share. Each option is convertible into one share of stock. These options are vested immediately and expire 15 years after issuance.                                                                                  
|   
|(6) | In 2006, we issued 150,000 options to acquire shares of our common stock to Mr. Budetti. These options were issued to Mr. Budetti for services rendered by him as our Chief Operating officer and as
Director. These options are exercisable at a price of $1.00 per share. Each option is convertible into one share of stock. These options are vested immediately and expire 15 years after issuance.                                                                                          
|   
|(7) | In 2007, we issued 350,000 options to acquire shares of our common stock to Mr. Budetti. These options were issued to Mr. Budetti for services rendered by him as our Chief Operating officer, as a
Director, and for his efforts to license Nemifitide to a pharmaceutical company. These options are exercisable at a price of $1.00 per share. Each option is convertible into one share of stock. These options are vested immediately and expire 10
years after issuance which is August 2017
|   
|(8) | In 2006, we issued 55,000 options to acquire shares of our common stock to Dr. Cartwright. These options were issued to Dr. Cartwright for services rendered by him as our Chief Scientific officer and as
Director. These options are exercisable at                                                                                                                                                                                                                                             
|   

33

---



|     | a price of $1.00 per share. Each option is convertible into one share of stock. These options are vested immediately and expire 15 years after issuance.                                                                                                                                                                                                                                                                                
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|(9)  | In 2007, we issued 500,000 options to acquire shares of our common stock to Dr. Cartwright. These options were issued to Dr. Cartwright for services rendered by him as our Chief Scientific officer and as
our Director. These options are exercisable at a price of $1.00 per share. Each option is convertible into one share of stock. These options are vested immediately and expire 10 years after issuance which is August 2017.
|    
|(10) | In 2006, we issued 55,000 options to acquire shares of our common stock to Mr. Martucci. These options were issued to Mr. Martucci for services rendered by him as our Chief Financial Officer. These
options are exercisable at a price of $1.00 per share. Each option is convertible into one share of stock. These options are vested immediately and expire 15 years after issuance.                                               
|    
|(11) | In 2007, we issued 300,000 options to acquire shares of our common stock to Mr. Martucci. These options were issued to Mr.Martucci for services rendered by him as our Chief Financial Officer. These
options are exercisable at a price of $1.00 per share. Each option is convertible into one share of stock. These options are vested immediately and expire 10 years after issuance.                                               
|    

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END

The following table sets forth certain information concerning unexercised stock options held by the named executive officers as of December 31, 2007. None of the named executive officers exercised any of their stock options
during the period from inception.

|                   |  |             |  |             |  |                |  |                |  |                
|------------------ |  | ----------- |  | ----------- |  | -------------- |  | -------------- |  | ---------------
|Option Awards      |  |             |  |             |  |                |  |                |  |                
|                   |  | Number of   |  | Number of   |  |                |  |                |  |                
|                   |  | Securities  |  | Securities  |  |                |  |                |  |                
|                   |  | Underlying  |  | Underlying  |  |                |  |                |  |                
|                   |  | Unexercised |  | Unexercised |  | Equity         |  |                |  |                
|                   |  | Option (#)  |  | Options (#) |  | Incentive Plan |  | Option         |  | Option         
|Name               |  | Exercisable |  | Exercisable |  | Awards         |  | Exercise Price |  | Exercise Date  
|Martin Schacker    |  | 1,712,000   |  | 0           |  | 0              |  | $1.00          |  | January 6, 2020
|                   |  | 850,000     |  | 0           |  | 0              |  | $1.00          |  | August 2017    
|David Abel         |  | 1,138,187   |  | 0           |  | 0              |  | $1.00          |  | January 6, 2020
|                   |  | 300,000     |  | 0           |  | 0              |  | $1.00          |  | August 2017    
|Kenneth Cartwright |  | 437,502     |  | 0           |  | 0              |  | $1.00          |  | January 6, 2020
|                   |  | 500,000     |  | 0           |  | 0              |  | $1.00          |  | August 2017    
|Neil Martucci      |  | 295,000     |  | 0           |  | 0              |  | $1.00          |  | January 6, 2020
|                   |  | 300,000     |  | 0           |  | 0              |  | $1.00          |  | August 2017    

ITEM 12.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On May 2004, we entered into an agreement with the holders of the 725 shares of Class D preferred stock to eliminate the Class D preferred shares in exchange for our cash payments of $600,000 on the effective date of the
bankruptcy, and $600,000 one year from the effective date. They were also issued a $2.6 million convertible note payable 53 months from the effective date plus accrued interest at the rate of 3% per annum. On November 23, 2004, three of the entities
that comprise the Class D preferred shareholders agreed to convert their portion of the $600,000 payment into equity. A total of $143,967.60 was converted into 179,960 shares of our common stock and the remaining balance was paid. They agreed as
well to convert $165,480 of the amount due one year from the effective date into 206,850 shares of our common stock and on or about November 23, 2005 the remaining balance of the second $600,000 was paid. In addition $717,241 of the $2.6 million
note, plus accrued interest, was converted into 679,912 shares of our common stock. An aggregate of 1,066,722 shares of our common stock was issued to the former note

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holders and approximately $1,800,000 plus interest is due in May 2009. The long-term note due to the former Series D preferred holders is secured by our patents.

Our Co-CEO and Chairman of the Board, Martin Schacker is the nephew of the Co-CEO and Vice Chairman, David Abel.

We utilize office space and personnel at the Feigner Research Institute (“Institute”), which is owned by John P. Feighner MD, Inc. for which we reimbursed the Institute under a cost reimbursement agreement. We
also utilize the Institute to perform our contract research. Our former President was also an owner and a Director of the Institute. In 2007 and 2006 we reimbursed John P. Feighner MD, Inc. $0 and $8,773, respectively, for rent and insurance. As of
December 31, 2006, we are no longer leasing facilities from John P. Feighner MD, Inc.

There are no arrangements or understandings between any two or more of our Directors or executive officers. There is no arrangement or understanding between any of our Directors or executive officers and any other person
pursuant to which any Director or officer was or is to be selected as a Director or officer, and there is no arrangement, plan or understanding as to whether non-management shareholders will exercise their voting rights to continue to elect the
current Board of Directors. There are also no arrangements, agreements or understanding between non-management shareholders that may directly or indirectly participate in or influence the management of our affairs

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ITEM 13.     EXHIBITS AND REPORTS ON FORM 8-K

|         |  |                                                                                            
|-------- |  | -------------------------------------------------------------------------------------------
|         |  |                                                                                            
|Exhibit  |  |                                                                                            
|No.      |  | Description                                                                                
|1.1(1)   |  | Placement Agent Agreement between Equity Source Partners, LLC and Tetragenex               
|         |  | Pharmaceuticals, Inc.                                                                      
|         |  |                                                                                            
|2.1(1)   |  | Final order of the bankruptcy of Innapharma, Inc.                                          
|         |  |                                                                                            
|3.1.1(1) |  | Amended and Restated Certificate of Incorporation of Tetragenex Pharmaceuticals, Inc.      
|         |  |                                                                                            
|3.1.2(1) |  | Amended and Restated By-laws of Tetragenex Pharmaceuticals, Inc.                           
|         |  |                                                                                            
|3.2(1)   |  | Certificate of Authority to do business in the State of New Jersey of Tetragenex           
|         |  | Pharmaceuticals, Inc.                                                                      
|         |  |                                                                                            
|3.2.1(1) |  | Certificate of Correction of Certificate of Merger                                         
|         |  |                                                                                            
|4.1(1)   |  | Promissory Note                                                                            
|         |  |                                                                                            
|10.1(1)  |  | Employment Agreement with Martin Schacker dated October 28, 1999, as amended.              
|         |  |                                                                                            
|10.2(2)  |  | Definitive Agreement with Dr. Stephen Stahl, dated May 29, 2007.                           
|         |  |                                                                                            
|14(1)    |  | Code of Ethics                                                                             
|         |  |                                                                                            
|16(1)    |  | Letter from Former Auditor                                                                 
|         |  |                                                                                            
|31.1     |  | Certification of Co-Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley  
|         |  | Act of 2002.                                                                               
|         |  |                                                                                            
|31.2     |  | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act 
|         |  | of 2002.                                                                                   
|         |  |                                                                                            
|32.1     |  | Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
|         |  | Sarbanes-Oxley Act of 2002.                                                                
|         |  |                                                                                            
|32.2     |  | Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
|         |  | Sarbanes-Oxley Act of 2002.                                                                
|         |  |                                                                                            
|99.1(1)  |  | Patent Security Agreement.                                                                 

|(1) | Previously filed with our Registration Statement on Form SB-2 filed with the Securities and Exchange Commission on June 13, 2006, and declared effective on January 26, 2007.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) | Previously filed with our Current Report on Form 8-K, filed with the Commission on May 31, 2007.                                                                             
|   

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ITEM 14.     PRINCIPAL ACCOUNTANT FEES AND SERVICES

We have appointed Demetrius & Company, LLC as our independent auditors to audit our financial statements. The aggregate fees billed for services rendered by Demetrius & Company, LLC for 2007 and 2006 are described
below:

AUDIT FEES. Fees from audit services totaled approximately $52,000 and $58,000 for 2007 and 2006, respectively. Fees also include fees for the reviews of the company’s quarterly financials.

OTHER AUDIT FEES: Registration Statement totaled $10,000 and $8,000 for 2007 and 2006 resprectively

TAX FEES. Fees for tax services totaled approximately $10,000 and 13,000 for 2007 and 2006, respectively.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended, the Company has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized
on the 8th day of September 2008.



| |                                      |                                  | 
| | ------------------------------------ | -------------------------------- | 
| | TETRAGENEX PHARMACEUTICALS,
    INC.
|
|
| | By:                                  | /s/ MARTIN F. SCHACKER           | 
| |                                      | Martin F. Schacker, Chairman and | 
| |                                      | Co-Chief Executive Officer       | 



Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed by the following persons in the capacities and on the dates indicated.

|                          |  |                               |  |                  
|------------------------- |  | ----------------------------- |  | -----------------
|NAME                      |  | TITLE                         |  | DATE             
|/s/ Martin F. Schacker    |  | Chairman of the Board and     |  | September 8, 2008
|Martin F. Schacker        |  | Co-Chief Executive Officer    |  |                  
|                         
|/s/ David Abel            |  | Vice Chairman of the Board,   |  | September 8, 2008
|David Abel                |  | Co-Chief Executive Officer    |  |                  
|                         
|/s/ Neil Martucci         |  | Chief Financial Officer       |  | September 8, 2008
|Neil Martucci             |  |                               |  |                  
|                         
|/s/Robert P. Budetti      |  | Chief Operating Officer and   |  | September 8, 2008
|Robert P. Budetti         |  | Director                      |  |                  
|                         
|/s/Kenneth Cartwright     |  | Senior Vice President of Drug |  | September 8, 2008
|Kenneth Cartwright        |  | Developments Regulatory       |  |                  
|                          |  | Affairs and Director          |  |                  
|                         
|/s/Alf E. F. Akerman      |  | Director                      |  | September 8, 2008
|Alf E. F. Akerman         |  |                               |  |                  
|                         
|/s/Bruce J. Bergman, Esq. |  | Director                      |  | September 8, 2008
|Bruce J. Bergman, Esq.    |  |                               |  |                  
|                         
|/s/William T. Comer, Ph.D |  | Director                      |  | September 8, 2008
|William T. Comer, Ph.D    |  |                               |  |                  
|                         
|/s/Aaron Cohen            |  | Director                      |  | September 8, 2008
|Aaron Cohen               |  |                               |  |                  

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