UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                   FORM 10-KSB


[X]  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE ACT OF
     1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2007

[_]  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

                        TETRAGENEX PHARMACEUTICALS, 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
incorporation or organization)     Classification Code Number)       I.D No.)

                            1 MAYNARD DRIVE SUITE 105
                          PARK 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 [__]

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. [ X ] Yes [__] 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. [ X ]

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). [ _ ] Yes [ X ] No

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): Yes [_]; No [X]



<PAGE>


                                TABLE OF CONTENTS


                                                                            PAGE
                                                                            ----
PART I

     ITEM 1.      BUSINESS.....................................................1
     ITEM 2.      DESCRIPTION OF PROPERTY.....................................15
     ITEM 3.      LEGAL PROCEEDINGS...........................................15
     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.........................24
     ITEM 8A.     CONTROLS AND PROCEDURES.....................................24
     ITEM 8B.     OTHER INFORMATION...........................................24

PART III

     ITEM 9.      DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
                  PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE
                  EXCHANGE ACT................................................25
     ITEM 10.     EXECUTIVE COMPENSATION......................................28
     ITEM 11.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                  MANAGEMENT AND RELATED STOCKHOLDER MATTERS..................32
     ITEM 12.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..............36
     ITEM 13.     EXHIBITS AND REPORTS ON FORM 8-K............................36
     ITEM 14.     PRINCIPAL ACCOUNTANT FEES AND SERVICES......................37

SIGNATURES....................................................................38


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<PAGE>


                                     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


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<PAGE>

Study"), became available.  After three months, a customary sacrifice of certain
dogs was  performed.  This study found brain and 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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<PAGE>

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 dosing for months and often times,  years.  In contrast,
Nemifitide often requires only 10 to 15 doses via


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<PAGE>

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:

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.

MANY PATIENTS EXPERIENCE COMPLETE SYMPTOMATIC RELIEF

Many  patients  who  respond  to  Nemifitide  enter  into  remission  from their
depression.


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<PAGE>


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.

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.

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.

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.

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  vivo  studies  (studies  conducted  in live  animals),  unchanged
Nemifitide,  as well as our active  metabolite,


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<PAGE>

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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<PAGE>

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


                                       7
<PAGE>

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:

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.

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.

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.

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.


                                       8
<PAGE>

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


                                       9
<PAGE>

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
<PAGE>

ANTIDEPRESSANT PEPTIDE PATENT FAMILY STATUS
<TABLE>
<CAPTION>

                       APPLICATION        FILING           RELATED APPLICATION                             PATENT
      COUNTRY              NO.             DATE                INFORMATION                STATUS            NO.
--------------------- --------------- --------------- ------------------------------ ----------------- ---------------
<S>                     <C>              <C>         <C>                             <C>                <C>
United States           08/238,089       05/04/94                                    Granted 12/31/96    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 10/122,246        Pending
  CIP-US
Patent Cooperation    PCT/US95/05560     05/02/95     Based on US 08/238,089            Completed:
  Treaty (PCT)                                                                           entered
                                                                                      national phase
Patent Cooperation      PCT/US03/        04/10/03     Based on US 10/122,246            Completed:
  Treaty (PCT)            11403                                                          entered
                                                                                      national phase
Australia                2813995         11/04/96     Nat'l Phase of PCT/US95/05560  Granted 08/06/98      685292
Canada                  2,189,145        10/29/96     Nat'l Phase of PCT/US95/05560     Notice of            *
                                                                                        Allowance
                                                                                      issued October
                                                                                     22, 2007. Issue
                                                                                         fee paid;
                                                                                      awaiting grant
                                                                                       of patent.*
China (PRC)           CN 95193885.1      12/26/96     Nat'l Phase of PCT/US95/05560  Granted 05/19/04    CN1150028C
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          04/10/03     Regional Phase of                  Pending
  Convention           4013.2-2404                    PCT/US03/11403
Finland                 FI 964363        11/04/96     Nat'l Phase of PCT/US95/05560      Pending
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)
</TABLE>


                                       11
<PAGE>

<TABLE>
<CAPTION>

                       APPLICATION        FILING           RELATED APPLICATION                             PATENT
      COUNTRY              NO.             DATE                INFORMATION                STATUS            NO.
--------------------- --------------- --------------- ------------------------------ ----------------- ---------------
<S>                     <C>              <C>         <C>                             <C>                <C>
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 PCT/US95/05560  Granted 11/17/06     3878983
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 PCT/US95/05560  Granted 01/03/05      317919
Russia                  96 123 269       12/04/96     Nat'l Phase of PCT/US95/05560  Granted 08/28/01    2,182,910
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
</TABLE>


DERMATOLOGICAL USE OF PEPTIDES PATENT FAMILY

<TABLE>
<CAPTION>

                       APPLICATION        FILING           RELATED APPLICATION                             PATENT
      COUNTRY              NO.             DATE                INFORMATION                STATUS            NO.
--------------------- --------------- --------------- ------------------------------ ----------------- ---------------
<S>                     <C>              <C>         <C>                             <C>                <C>
Patent Cooperation      PCT/US2007/      05/12/07     Earliest priority claimed is to    Pending
  Treaty (PCT)             068827                     60/801,128 filed 05/17/06
United States            11/747,762      05/11/07     Priority claimed to: 60/801,128    Pending
                                                      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: 60/825,070    Pending
                                                      filed 09/08/06; and 60/801,128
                                                      filed 05/17/06
</TABLE>


                                       12
<PAGE>


TETRACYCLINE DERIVATIVES PATENT FAMILY STATUS

<TABLE>
<CAPTION>

                       APPLICATION        FILING           RELATED APPLICATION                             PATENT
      COUNTRY              NO.             DATE                INFORMATION                STATUS            NO.
--------------------- --------------- --------------- ------------------------------ ----------------- ---------------
<S>                     <C>              <C>         <C>                             <C>                <C>
United States                10/264,454       10/04/02    Priority to US                 Patented          7,214,669
                                                          60/327,502                                          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            Completed: entered
  Treaty (PCT)                                            60/327,502                  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                  Pending
                                                          60/327,502
China (PRC)                200610099226.7     07/21/06    Divisional of                   Pending
                                                          02819722.4 (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                   Pending
  Convention                                              02776131.1
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
Malaysia                    PI 20023717       10/04/02    Priority to US              Pending - Clear          *
                                                          60/327,502                 Report (notice of
                                                                                    allowance) issued
                                                                                    08/10/07. Issue
                                                                                    fee has been paid;
                                                                                     awaiting grant.*
Malaysia                    PI 20070863       05/31/07    Divisional of PI                Pending
                                              (design.    20023717
                                              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
                                                          PCT/US02/31730                                    380 C2
Taiwan                        91123025        10/04/02    Priority to US                  Pending
                                                          60/327,502
</TABLE>


                                       13
<PAGE>


NON-CORE PROGRAMS PATENT STATUS

<TABLE>
<CAPTION>
                                                        RELATED
                         APPLICATION     FILING       APPLICATION
        COUNTRY              NO.          DATE        INFORMATION         STATUS     PATENT NO.          TITLE
----------------------- ------------- ----------- ------------------- ------------- ------------ --------------------
<S>                       <C>           <C>       <C>                   <C>          <C>         <C>
United States             08/424,866    04/18/95                         Granted      5,721,207   Method for
                                                                         02/24/98                 treatment of pain
United States             08/531,525    09/21/95                         Granted      5,840,683   Peptides
                                                                         11/24/98                 inhibiting the
                                                                                                  oncogenic action
                                                                                                  of P21 RAS
United States             08/718,270    09/20/96   Priority to US        Granted      5,910,478   Peptidomimetics
                                                   60/004,091 filed      06/08/99                 inhibiting the
                                                   09/21/95                                       oncogenic action
                                                                                                  of P21 RAS
United States             08/807,473    02/27/97   Priority to           Granted      5,990,172   Peptidomimetics
                                                   60/012,396 filed      11/23/99                 for the treatment
                                                   02/28/96                                       of HIV infection
Canada                    2,232,750     09/20/96   Nat'l Phase of        Pending                  Peptides and
                                                   PCT/US96/15098                                 peptidomimetics
                                                   filed 09/20/96                                 inhibiting the
                                                                                                  oncogenic action
                                                                                                  of P21 RAS
</TABLE>

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.

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.


                                       14
<PAGE>


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  $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
<PAGE>


                                     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.

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


                                       16
<PAGE>

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


                                       17
<PAGE>

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.

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


                                       18
<PAGE>

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  soley 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.

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.


                                       19
<PAGE>

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.

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.


                                       20
<PAGE>

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
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



                                       21
<PAGE>


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
<PAGE>

ITEM 7. FINANCIAL STATEMENTS

                         TETRAGENEX PHARMACEUTICAL, 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-6-16


                                       23
<PAGE>


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Tetragenex 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 Jersey
May 12, 2008


                                      F-1
<PAGE>

                                 BALANCE SHEET
                             AS 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 -
       Common stock - $.001  par value - 50,000,000  shares
         authorized 15,926,126 shares issued and outstanding             15,926
       Additional paid-in capital                                   101,775,845
       Accumulated deficit                                         (103,992,672)
                                                                   ------------
                         Total stockholders' equity                  (2,200,901)
                                                                   ------------
                                                                   $  1,013,928
                                                                   ============


                                      F-2
<PAGE>

                            STATEMENTS OF OPERATIONS
                 FOR 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
                                                    ============   ============


                                      F-3
<PAGE>


                       STATEMENTS OF STOCKHOLDERS' DEFICIT
                 FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006

<TABLE>
<CAPTION>

                                            SHARES ISSUED
                                                 AND          ADDITIONAL
                                             OUTSTANDING       PAID-IN         ACCUMULATED
                                             COMMON STOCK      CAPITAL           DEFICIT           TOTAL
                                           -------------    -------------    -------------    -------------
<S>                                      <C>              <C>              <C>              <C>
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
  services                                        13,950        1,058,487                         1,058,501
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
  services                                                      2,843,251                         2,843,251
Net Loss                                                                        (4,579,958)      (4,579,958)
                                           -------------    -------------    -------------    -------------
BALANCE, DECEMBER 31, 2007                 $  15,926,126    $ 101,775,845    $(103,992,672)   $  (2,200,901)
                                           =============    =============    =============    =============
</TABLE>


                                      F-4
<PAGE>


                            STATEMENTS OF CASH FLOWS
                 FOR 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           --


                                      F-5
<PAGE>

                        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.

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.


                                      F-6
<PAGE>

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.

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.


                                      F-7
<PAGE>

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,  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.


                                      F-8
<PAGE>

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.

3. PROPERTY AND EQUIPMENT

Property 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-9
<PAGE>

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-10
<PAGE>


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
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.


                                      F-11
<PAGE>


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
                                                  OPTIONS         EXERCISE 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:
<TABLE>
<CAPTION>

                           OPTIONS OUTSTANDING                      OPTIONS EXERCISABLE
                 ---------------------------------------- -----------------------------------------
                                WEIGHTED      WEIGHTED                    WEIGHTED      WEIGHTED
                                AVERAGE       AVERAGE                     AVERAGE       AVERAGE
   RANGE OF      NUMBER OF      EXERCISE     REMAINING     NUMBER OF      EXERCISE     REMAINING
EXERCISE PRICE    OPTIONS        PRICE          LIFE        OPTIONS        PRICE          LIFE
--------------- ------------- ------------- ------------- ------------- ------------- -------------
 <C>          <C>             <C>            <C>        <C>             <C>            <C>
    $1.00        11,798,253      $1.00          10.6       11,798,253      $1.00          10.6
</TABLE>

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.


                                      F-12
<PAGE>

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.

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                                WEIGHTED AVERAGE
         PRICE             NUMBER OF WARRANTS        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.


                                      F-13
<PAGE>

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 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


                                      F-14
<PAGE>

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.

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.


                                      F-15
<PAGE>

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.

11. RELATED PARTY TRANSACTIONS

NONE.

12. SUBSEQUENT EVENTS

NONE.


                                      F-16
<PAGE>


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

Our management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Rules 13a-15(f) and
15d-15(f) of the  Exchange  Act.  Our  internal  control  system was designed to
provide reasonable  assurance  regarding the reliability of financial  reporting
and the preparation of financial statements for external purposes, in accordance
with generally accepted accounting principles.  Because of inherent limitations,
a system of internal control over financial  reporting may not prevent or detect
misstatements.  Also,  projections of any evaluation of  effectiveness to future
period are subject to the risk that controls may become inadequate due to change
in conditions,  or that the degree of compliance with the policies or procedures
may deteriorate.

Management 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 the Company's 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
Orginizations of the Treadway  Commission(COSO)  in Internal  Control-Integrated
Framework. Based on this evaluation,  our management,  with the participation of
the Chief Executive  Officer and Chief Financial Officer , concluded that, as of
December  31,  2007  there  is  a  deficiency,   or  a  combination  of  control
deficiencies,  in internal control over financial reporting such that there is a
reasonable  possibility  that a misstatement of the company's  annual or interim
financial  statements will not be prevented.  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.  Due to our size and nature,  segregation
of all conflicting duties is not possible and may not be economically feasible.

However,  to the extent  possible,  we will  implement  procedures to assure the
initiation  of  transactions,  the  custody  of  assets  and  the  recording  of
transactions will be performed by separate individuals.  In the future we intend
to rectify  the  situation  by hiring  additional  staff which will enable us to
comply with the regulations as future funds become available.

ITEM 8B. OTHER INFORMATION

None.


                                       24
<PAGE>

                                    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:

            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.


                                       25
<PAGE>

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.

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


                                       26
<PAGE>

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.
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


                                       27
<PAGE>

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.



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.


                                       28
<PAGE>


LIMITATIONS ON LIABILITY AND INDEMNIFICATION MATTERS

EXECUTIVE COMPENSATION
<TABLE>
<CAPTION>

                                                                                          NON-
                                                                            NONEQUITY  QUALIFIED
                                                                            INCENTIVE   DEFERRED    ALL
                                                                              PLAN     COMPENSA-   OTHER
                                                         STOCK     OPTION   COMPENSA-    TION     COMPENSA-
                                    SALARY     BONUS     AWARDS    AWARDS     TION      EARNINGS    TION       TOTAL
NAME AND PRINCIPAL POSITION  YEAR     ($)       ($)       ($)       ($)        ($)        ($)        ($)        ($)
            (A)              (B)      (C)       (D)       (E)       (F)        (G)        (H)        (H)        (I)
---------------------------- ----- ---------- --------- --------- ---------  ---------  ---------  --------- ----------
<S>                         <C>     <C>         <C>      <C>       <C>        <C>           <C>     <C>      <C>
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
---------------------------- ----- ---------- --------- --------- ---------  ---------  ---------  --------- ----------
</TABLE>
(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 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.


                                       29
<PAGE>

DIRECTORS COMPENSATION
<TABLE>
<CAPTION>

                                                              NONEQUITY    NONQUALIFIED
                   FEES EARNED                                INCENTIVE      DEFERRED
                    OR PAID IN                    OPTION         PLAN      COMPENSATION   ALL OTHER
      NAME             CASH       STOCK AWARD     AWARDS     COMPENSATION    EARNINGS    COMPENSATION     TOTAL
------------------ ------------- ------------- ------------- ------------- ------------- ------------- -------------
<S>                    <C>            <C>       <C>               <C>           <C>           <C>       <C>
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
------------------ ------------- ------------- ------------- ------------- ------------- ------------- -------------
</TABLE>

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,  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


                                       30
<PAGE>

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.


                                       31
<PAGE>



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.

<TABLE>
<CAPTION>

               NAME AND ADDRESS OF                     SHARES OF COMMON STOCK         PERCENTAGE OF COMMON SHARES
               BENEFICIAL OWNER(1)                      BENEFICIALLY OWNED(2)             BENEFICIALLY OWNED
-------------------------------------------------- -------------------------------- --------------------------------
<S>                                                           <C>                              <C>
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                                           1,681,088                        10.14%
Revocable Trust(13)
All Directors and officers as a group (9)                       16,026,553                        55.02%
  persons)
-------------------------------------------------- -------------------------------- --------------------------------
</TABLE>
*    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


                                       32
<PAGE>

     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 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.


                                       33
<PAGE>

(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.

COMPENSATION PLANS
OPTIONS/SAR GRANTS
<TABLE>
<CAPTION>

                               NUMBER OF       % OF TOTAL OPTIONS    % OF TOTAL OPTIONS
        NAME AND                SECURITIES          GRANTED TO           GRANTED TO       EXERCISE     EXPIRATION
    PRINCIPLE POSITION      UNDERLYING OPTIONS   EMPLOYEES IN 2007    EMPLOYEES IN 2006     PRICE         DATE
--------------------------- ------------------- -------------------- ------------------- ----------- ---------------
<S>                                 <C>              <C>                   <C>            <C>        <C>
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           300,000(4)            8.10%                              $1.00    August 2017
  the Board

Dr. John Feighner                    55,000(5)                                 6.17%         $1.00    January 2020
  Former Director/ Former                                                                    $1.00    August 2017
  President

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                  500,000(9)           13.51%                              $1.00    August 2017
  Officer/Director

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
--------------------------- ------------------- -------------------- ------------------- ----------- ---------------
</TABLE>
(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.


                                       34
<PAGE>

(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 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
<TABLE>
<CAPTION>

                               NUMBER OF           NUMBER OF
                              SECURITIES          SECURITIES
                              UNDERLYING          UNDERLYING
                              UNEXERCISED         UNEXERCISED                            OPTION         OPTION
                              OPTIONS (#)         OPTIONS (#)       EQUITY INCENTIVE    EXERCISE       EXERCISE
          NAME                EXERCISABLE         EXERCISABLE          PLAN AWARDS        PRICE          DATE
------------------------- -------------------- ------------------- -------------------- ---------- -----------------
<S>                              <C>                  <C>                 <C>            <C>            <C>
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
------------------------- -------------------- ------------------- -------------------- ---------- -----------------
</TABLE>


                                       35
<PAGE>

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 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

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

* Filed herewith.

(b) Reports on Form 8-K: N/A


EXHIBIT                           DESCRIPTION
NO.

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.


                                       36
<PAGE>

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.


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.


                                       37
<PAGE>


                                   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 14th day of May
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          May 14, 2008
---------------------------         Co-Chief Executive Officer
Martin F. Schacker

/s/ David Abel                   Vice Chairman of the Board,        May 14, 2008
---------------------------         Co-Chief Executive Officer
David Abel

/s/ Neil Martucci                Chief Financial Officer            May 14, 2008
---------------------------
Neil Martucci

/s/Robert P. Budetti             Chief Operating Officer            May 14, 2008
---------------------------        and Director
Robert P. Budetti

/s/Kenneth Cartwright            Senior Vice President of Drug      May 14, 2008
---------------------------        Developments Regulatory
Kenneth Cartwright                 Affairs and Director

/s/Alf E. F. Akerman             Director                           May 14, 2008
---------------------------
Alf E. F. Akerman

/s/Bruce J. Bergman, Esq.        Director                           May 14, 2008
---------------------------
Bruce J. Bergman, Esq.


/s/William T. Comer, Ph.D        Director                           May 14, 2008
---------------------------
William T. Comer, Ph.D

/s/Aaron Cohen                   Director                           May 14, 2008
---------------------------
Aaron Cohen



                                       38