UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-Q





(Mark
One)


þ
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For the
period ended September 30, 2009





OR





o
            TRANSITION
      REPORT PURSUANT TO 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.




(Exact name of
registrant as specified in its charter)




DELAWARE
            
            22-3781895(State
      or other jurisdiction of
              incorporation
      or organization)
            
            (I.R.S.
      Employer
              Identification
      No.)





560
Sylvan Ave


Englewood
Cliffs, New Jersey 07632


(Address
of principal executive offices)(Zip Code)





(201)
408-5335


(Registrant’s
telephone number, including area code)





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.


þYes oNo





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). þYes o No





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.





Large
      accelerated filer o
            Accelerated
      filer oNon-accelerated
      filer o
            Smaller
      reporting company þ





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





APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE
YEARS:


Check
whether the registrant filed all documents and reports required to be filed by
Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities
under a plan confirmed by a court. Yes þNo o




Number of
shares outstanding of Issuer’s common stock, $0.001 par value, outstanding on
November 13, 2009: 15,926,126





TABLE
OF CONTENTS




PART
      I: FINANCIAL INFORMATION
            1ITEM
      1.
            FINANCIAL
      STATEMENTS
            1ITEM
      2.
            MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
            2ITEM
      3.
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
            6ITEM
      4T.
            CONTROLS
      AND PROCEDURES
            6PART
      II: OTHER INFORMATION
            7ITEM
      1.
            LEGAL
      PROCEEDINGS
            7ITEM
      1A.
            RISK
      FACTORS
            7ITEM
      2.
            UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
            8ITEM
      3.
            DEFAULTS
      UPON SENIOR SECURITIES
            8ITEM
      4.
            SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS
            8ITEM
      5.
            OTHER
      INFORMATION
            8ITEM
      6.
            EXHIBITS
            8SIGNATURES
            
            9











PART
I: FINANCIAL INFORMATION




ITEM
1. FINANCIAL
STATEMENTS




Index
to Financial Statements




PageUnaudited
      Condensed Balance Sheet as of September 30, 2009 and Audited Balance Sheet
      as of December 31, 2008
            F-1Unaudited
      Condensed Statement of Operations for the Three and Nine Month Periods
      ending September 30, 2009 and 2008
            F-2Unaudited
      Condensed Statement of Cash Flows for the Nine-Month  Periods
      Ended September  30, 2009 and 2008
            F-3Notes
      to Unaudited Condensed Financial Statements
            F-4












1


TETRAGENEX
PHARMACEUTICALS, INC.


Unaudited
Condensed Balance Sheet


as
of September 30, 2009 and Audited Balance Sheet as of December 31,
2008




September
            
            
            DecemberASSETS
            
            
            30,
      2009
            
            
            31,
      2008(unaudited)Current
      assetsCash
      and cash equivalents
            
            $
            5,935
            
            
            $
            329,863Prepaid
      insurance and other current assets
            
            
            8,747
            
            
            
            18,78014,682
            
            
            
            348,643Property
      and equipment, net
            
            
            5,474
            
            
            
            6,255Security
      Deposit
            
            
            4,188
            
            
            
            4,188Patents,
      net
            
            
            50,000
            
            
            
            449,671$
            74,344
            
            
            $
            808,757LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilitiesAccounts
      payable and accrued expenses
            
            
            2,612,275
            
            
            
            1,882,362Post
      Petition Accounts Payable
            
            
            5,748Accrued
      interest
            
            
            363,798
            
            
            
            1,610,729Notes
      Payable
            
            
            1,882,362
            
            
            
            254,354Total
      current liabilities
            
            
            4,864,183
            
            
            
            3,747,445Long
      term liabilityNotes
      payable
            
            
            348,518
            
            
            
            308,823Total
      liabilities
            
            $
            5,212,701
            
            
            
            4,056,268Commitments and
      contingenciesStockholders'
      equity(deficit)Class
      A preferred stock - $.01 par value - 5,000,000 shares
      authorized; 0 shares outstanding
            
            
            
            
            
            
            -Common
      stock - $.001 par value - 50,000,000 shares authorized15,926,126
      shares issued and outstanding
            
            
            15,926
            
            
            
            15,926Additional
      paid-in capital
            
            
            101,840,856
            
            
            
            101,836,042Accumulated
      deficit
            
            
            (106,995,139
            )
            
            
            (105,099,479
            )Total
      stockholders' (deficit)
            
            
            (5,138,357
            )
            
            
            (3,247,511
            )$
            74,344
            
            
            $
            808,757


The
accompanying footnotes are an integral part of the financial
statements.




F-1





TETRAGENEX
PHARMACEUTICALS, INC.


Unaudited
Condensed Statement of Operations


for
the Three and Nine Month Periods Ended September 30, 2009 and 2008







Three
      months ended
              September
      30,
            
            
            Nine
      months ended
              September
      30,2009
            
            
            2008
            
            
            2009
            
            
            2008(unaudited)
            
            
            (unaudited)RevenueContract
      revenue
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            --
            
            
            
            -
            
            
            
            -
            
            
            
            -Operating
      expensesResearch
      and development
            
            $
            -
            
            
            
            -
            
            
            $
            4,900
            
            
            $
            7,894Compensation
      expense
            
            
            137,135
            
            
            
            239,838
            
            
            
            958,132
            
            
            
            598,979Travel
            
            
            15,011
            
            
            
            8,079
            
            
            
            39,258
            
            
            
            44,675General
      and administrative
            
            
            35,574
            
            
            
            47,486
            
            
            
            194,563
            
            
            
            161,829Professional
      fees
            
            
            26,388
            
            
            
            5,931
            
            
            
            72,253
            
            
            
            102,865Payroll
      taxes and employee benefits
            
            
            16,262
            
            
            
            17,789
            
            
            
            53,273
            
            
            
            57,663Consulting
      fees
            
            
            -
            
            
            
            -
            
            
            
            5,963
            
            
            
            15,282Rent
      and occupancy
            
            
            8,917
            
            
            
            22,982
            
            
            
            27,698
            
            
            
            71,843Depreciation
      and amortization
            
            
            20,650
            
            
            
            20,121
            
            
            
            56,358
            
            
            
            44,276Loss
      before other income(expense) and tax benefit
            
            
            (259,937
            )
            
            
            (362,226
            )
            
            
            (1,412,398
            )
            
            
            (1,105,306
            )Other
      income (expense)Impairment
      of Patent
            
            
            (371,661
            )
            
            
            
            
            
            
            (371,661
            )Interest
      income and other
            
            
            11
            
            
            
            432
            
            
            
            332
            
            
            
            2797Interest
      expense
            
            
            (44,290
            )
            
            
            (21,566
            )
            
            
            (111,945
            )
            
            
            (51,995
            )Loss
      before tax benefit
            
            
            (675,877
            )
            
            
            (383,360
            )
            
            
            (1,895,672
            )
            
            
            (1,154,504
            )Net
      loss
            
            
            $
            (675,877
            )
            
            $
            (383,360
            )
            
            $
            (1,895,672
            )
            
            $
            (1,154,504
            )Basic
      and diluted net loss per share
            
            $
            (0.04
            )
            
            $
            (0.02
            )
            
            $
            (0.12
            )
            
            $
            (0.07
            )Weighted
      average common shares outstanding
            
            
            15,926,126
            
            
            
            15,926,126
            
            
            
            15,926,126
            
            
            
            15,926,126







The accompanying
footnotes are an integral part of the financial statements.


F-2


TETRAGENEX
PHARMACEUTICALS, INC.


Unaudited
Condensed Statement of Cash Flows


for
Nine-Month Periods Ended September 30, 2009 and 2008






Nine
      months ended September 30,2009
            
            
            2008(unaudited)Cash
      flows from operating activitiesNet
      loss
            
            $
            (1,895,672
            )
            
            $
            (1,154,504
            )Adjustments
      to reconcile net loss to net cash used in operating
    activitiesDepreciation
      and amortization
            
            
            36,850
            
            
            
            33,557Amortization
      of debt discount
            
            
            19,509
            
            
            
            10,720Impairment
      of Asset-Patent
            
            
            371,661
            
            
            
            -Changes
      in operating assets and liabilitiesPrepaid
      insurance and other current assets
            
            
            10,033
            
            
            
            20,176Accounts
      payable and accrued expenses
            
            
            1,007,294
            
            
            
            566,072Accrued
      interest payable
            
            
            109,444
            
            
            
            51,996Net
      cash used in operating activities
            
            
            (340,881
            )
            
            
            (471,983
            )Cash
      flows from investing activitiesCash
      paid for property and equipment
            
            
            (844
            )
            
            
            (1,409
            )Patent
      cost
            
            
            (7,215
            )
            
            
            (52,349
            )Net
      cash used in investing activities
            
            
            (8,059
            )
            
            
            (53,758
            )Cash
      flows from financing activitiesProceeds
      from notes payable
            
            
            25,000
            
            
            
            250,000Net
      cash provided by financing activities
            
            
            25,000
            
            
            
            250,000Net
      decrease in cash and cash equivalents
            
            
            (323,940
            )
            
            
            (275,741
            )Cash
      and cash equivalents, beginning of year
            
            
            329,875
            
            
            
            527,737Cash
      and cash equivalents, end of period
            
            $
            5,935
            
            
            $
            251,996







The accompanying
footnotes are an integral part of the financial statements.


F-3


Notes
to the Financial Statements






1.     
THE COMPANY




Tetragenex
Pharmaceuticals Inc. (“Tetragenex” or the “Company”) was incorporated in 2000 in
the State of Delaware. Innapharma, Inc., the Company’s former parent company and
predecessor, was incorporated in 1989 also in the State of Delaware. Innapharma
filed for protection under Chapter 11 of the United States Bankruptcy Code on
April 15, 2003.  As part of the bankruptcy restructuring, Innapharma
merged with and into Tetragenex.  Effective November 23, 2004 the
combined company emerged from bankruptcy under the name Tetragenex
Pharmaceuticals, Inc.   As part of the merger, all existing
shares, options and warrants of Innapharma converted into securities of
Tetragenex on a 1-for-4 basis.  The Company’s corporate headquarters
are located in Englewood Cliffs, New Jersey.





The
Company is a biopharmaceutical Company working to discover, develop and
commercialize proprietary pharmaceutical products that treat serious diseases
for which current therapies are inadequate. The Company 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. 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 $1,106,807 and $4,579,958 for years ended December 31, 2008
and 2007 respectively and another $1,895,672 for the nine months ended
September 30, 2009. In addition at September 30, 2009 the Company has a working
capital deficiency of $4,830,439, current liabilities of approximately
$4,864,183 plus accrued interest and a deficiency in stockholder’s equity of
$5,138,357.  As of September 30, 2009, the Company has less
than one month working capital in the bank 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. Further, the Company’s continuing losses,
and the current market conditions have made it difficult for the Company to
obtain either equity or debt financings, and despite the Company’s diligent
efforts to raise capital, on August 10, 2009, the Company filed for relief under
Chapter 11 of the Bankruptcy Code in the Bankruptcy Court for the District of
New Jersey, Case No. 09-30775.





The
Company is considering all strategic options which may provide working capital
to fund its continuing business operations including equity offerings and debt
financings; however; the Company can offer no assurance that it will be
successful in identifying, obtaining or negotiating financing
terms.  If adequate funds are not available or are not available on
terms acceptable to the Company, the Company will likely not be able to take
advantage of unanticipated opportunities, further develop its products, or
continue as a going concern.


F-4




Recently Issued Accounting
Standards




In
October 2009, the Financial Accounting Standards Board (the “FASB”) issued
Accounting Standards Update (“ASU”) 2009-14, “Certain Revenue Arrangements that
Include Software Elements,”an update to ASC 985-605, “Software-Revenue Recognition,”and formerly known as EITF 09-3, “Revenue Arrangements that Include
Software Elements”(“ASU 2009-14”). ASU 2009-14 amends ASC
Subtopic 985-605 to exclude from its scope tangible products that contain both
software and non-software components that function together to deliver a
product’s essential functionality. ASU 2009-14 will be effective prospectively
for revenue arrangements entered into or materially modified in fiscal years
beginning on or after June 15, 2010. Early adoption is permitted. The
Company is currently evaluating the impact of adopting ASU 2009-14 on its
financial position, results of operations and cash flows, but has yet to
complete its assessment.





In
October 2009, the FASB issued ASU 2009-13, “Multiple Deliverable Revenue
Arrangements,”an update to ASC Topic 605, “Revenue Recognition,”and
formerly known as EITF 08-1, “Revenue Arrangements with Multiple
Deliverables”(“ASU 2009-13”).ASU 2009-13 amends ASC
650-25 to eliminate the requirement that all undelivered elements have
vendor-specific objective evidence (“VSOE”) or third-party evidence
(“TPE”) before an entity can recognize the portion of an overall
arrangement fee that is attributable to items that already have been delivered.
The overall arrangement fee will be allocated to each element (both delivered
and undelivered items) based on their relative selling prices, regardless of
whether those selling prices are evidenced by VSOE or TPE or are based on the
entity’s estimated selling price. ASU 2009-13 will be effective prospectively
for revenue arrangements entered into or materially modified in fiscal years
beginning on or after June 15, 2010. Early adoption is permitted. The
Company is currently evaluating the impact of adopting ASU 2009-13 on its
financial position, results of operations and cash flows, but has yet to
complete its assessment.




In
August 2009, the FASB issued ASU 2009-05, “Fair Value Measurements and
Disclosures (Topic 820) – Measuring Liabilities at Fair Value”(“ASU
2009-05”).ASU
2009-05 amends ASC Topic 820, “Fair Value Measurements.”The update addresses practice difficulties caused by tension between
fair-value measurements based on the price that would be paid to transfer a
liability to a new obligor and contractual or legal requirements that prevent
such transfers from taking place. ASU 2009-05 is effective for interim and
annual periods beginning
after August 27, 2009, and applies to all fair value measurements of
liabilities required by U.S. Generally Accepted Accounting Principles (“GAAP”).
No new fair-value requirements are required by the standard. The Company does
not expect the adoption of ASU 2009-05 to have a material impact on its
financial position, results of operations and cash flows.




In
June 2009, the FASB issued an update to ASC 105, previously referred to as
SFAS No. 168, “The FASB
Accounting Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles—a replacement of FASB Statement No. 162” (“ASC
105”). The FASB
Accounting Standards Codification (“Codification”) will become the source of
authoritative GAAP recognized by the FASB to be applied by nongovernmental
entities. Rules and interpretive releases of the Securities and Exchange
Commission (“SEC”) under authority of federal securities laws are also
sources of authoritative GAAP for SEC registrants. On the effective date of the
update to ASC 105, the Codification will supersede all then-existing non-SEC
accounting and reporting standards. All other non-grandfathered non-SEC
accounting literature not included in the Codification will become
non-authoritative. Following the update to ASC 105, the FASB will not issue new
standards in the form of Statements, FASB Staff Positions, or Emerging Issues
Task Force Abstracts. Instead, it will issue Accounting Standards Updates. The
FASB will not consider Accounting Standards Updates as authoritative in their
own right. Accounting Standards Updates will serve only to update the
Codification, provide background information about the guidance, and provide the
bases for conclusions on the change(s) in the Codification. The update to ASC
105 is effective for financial statements issued for interim and annual periods
ending after September 15, 2009. The Company does not expect the adoption
of ASC 105 to have a material impact on its financial position, results of
operations and cash flows.


F-5





In
June 2009, the FASB issued an update to ASC 810, previously referred to as
SFAS No. 167, “Amendments
to FASB Interpretation No. 46(R),”which requires an enterprise to
perform an analysis to determine whether the enterprise’s variable interest or
interests give it a controlling financial interest in a variable interest entity
(“ASC 810”). The update to ASC 810 is effective as of the beginning of each
reporting entity’s first annual reporting period that begins after
November 15, 2009, for interim periods within that first annual reporting
period, and for interim and annual reporting periods thereafter. The Company
does not expect the adoption of ASC 810 to have a material impact on its
financial position, results of operations and cash flows.





In
May 2009, the FASB issued an update to ASC 855, previously referred to as
SFAS No. 165, “Subsequent
Events,”which establishes general standards of accounting for and
disclosure of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued (“ASC 855”). In
particular, ASC 855 sets forth the period after the balance sheet date during
which management of a reporting entity should evaluate events or transactions
that may occur for potential recognition or disclosure in the financial
statements; the circumstances under which an entity should recognize events or
transactions occurring after the balance sheet date in its financial statements;
and the disclosures that an entity should make about events or transactions that
occurred after the balance sheet date. The update to ASC 855 is effective for
interim or annual financial periods ending after June 15, 2009. The impact
of adopting the update to ASC 855 was not material to the Company’s financial
position, results of operations and cash flows.




Interim Financial
Statements




Financial
statements as of September 30, 2009, and for the three and nine month periods
ended September 30, 2009 and 2008, have been prepared on the same basis as the
annual financial statements and, in the opinion of management, reflect all
adjustments, which include only normal recurring adjustments, necessary to
present fairly the Company’s financial position, results of operations and cash
flows for the periods shown. The results of operations for such periods are not
necessarily indicative of the results expected for a full year or for any future
period. The interim condensed financial statements should be read in conjunction
with the audited financial statements for the years ended December 31, 2008 and
2007 as appearing in the Company’s Annual Report on Form 10-K for the fiscal
year ended December 31, 2008, filed with the SEC on March 31, 2009.




3.     
NOTES PAYABLE




On May
28, 2008, as part of a bridge loan financing (the “Bridge Loan”), the Company
issued promissory notes carrying 12% interest per annum (the “Bridge Notes”)
having an aggregate face value of $175,000, together with warrants to purchase
an aggregate of 350,000 shares of the Company’s common stock at $0.50 per share
(the “Bridge Warrants”), to seven individuals.  Further and as part of
the same financing, on July 28, 2008 the Company issued Bridge Notes having an
aggregate face value of $75,000, together with Bridge Warrants to purchase an
aggregate of 150,000 shares of the Company’s common stock at $0.50 per share, to
three additional individuals.  The Company held a third closing in
October 2008 at which the Company issued Bridge Notes having an aggregate face
value of $100,000, together with Bridge Warrants to purchase an aggregate of
400,000 shares of the Company’s common stock at $0.40 per share, to two
individuals.  In October 2008, the Company amended the terms of the
Bridge Loan and thus previous investor’s holdings were adjusted to the new terms
which were 4 warrants for every $1 issued in Bridge Notes, exercisable at $.40
per share and expiring 5 years from issuance.  As a result of the
amended terms, the Company issued an aggregate of 1,000,000 new Bridge Warrants
(the “New Bridge Warrants”) exercisable at $.40 per share expiring 5 years from
the date of issuance to the ten individuals who had participated in the May 28,
2008 and July 28, 2008 closings.  The New Bridge Warrants replaced the
previously issued 500,000 Bridge Warrants which had been exercisable at $.50 per
share.  In February 2009, the Company held a fourth closing, pursuant
to which the Company issued another Bridge Note with a face value of $25,000 to
one of the Company’s directors, together with an aggregate of 100,000 Bridge
Warrants exercisable at $.40 per share expiring 5 years from
issuance.


F-6





On
October 25, 2004, the Company issued promissory notes (the “KBC Notes”) with an
aggregate face value of $2,600,000 to KBC Bank N.V. and certain of its
affiliates (collectively, “KBC”). The Company has made payments of approximately
$720,000 under the KBC Notes.  The KBC Notes are convertible into
common shares at $5 per share at the discretion of KBC. The KBC Notes are
secured by Company’s patents which were issued prior to October 25,
2004.  On April 23, 2009, the Company was required to repay the KBC
Notes plus accrued interest of $249,407 (the “Sum”) to KBC.   The
Company did not remit the Sum to KBC on April 23, 2009, and as a result is in
default pursuant to Section 5(b) of the KBC Notes (“Default”).  The
KBC Notes are currently accruing default interest of 7% per annum. The Company
is seeking to negotiate with KBC.





4.     STOCK
OPTIONS





On
December 31, 2008 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 exercisable at $1 per share expiring 10 years from
issuance.  Expenses totaling $1,600 were charged to “Board Expense” in
2008.





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 their grant.





The
following table presents information regarding weighted-average exercise price
and weighted average remaining contractual life as of September 30,
2009.





Options
      Outstanding and ExercisableRange
      of
                Exercise
      Price
            
            Number
      of
                Options
            
            Weighted
      Average
                Exercise
      Price
            
            Weighted
      Average
                Remaining
      Life$1.00
            
            11,838,253
            
            $1.00
            
            9.1





5.     WARRANTS





Pursuant
to the Bridge Loan described above in Footnote 3“Promissory Notes”, the
Company issued Bridge Warrants to purchase 1,500,000 shares of the
Company’s common stock at $0.40 per share, exercisable within 5 years from the
date of issuance, to twelve investors.





During
the third quarter of 2009, 1,045,000 warrants exercisable at $1.30 expired
unexercised.




At
September 30, 2009, the Company had outstanding warrants to purchase 12,488,514
shares of the Company’s common stock at exercise prices of $.40, $1, $1.65 and
$6 per share. These warrants have expirations of July 2013, November 30, 2009,
March 30, 2012, and November 30, 2011 respectively.


F-7




The
following table presents, for each of the following classes of warrants as
determined by range of exercise price, information regarding warrants
outstanding and weighted-average exercise price as of  September 30,
2009.




Warrants
      OutstandingRange
      of
                Exercise
      Price
            
            Number
      of
                Warrants
            
            Weighted
      Average
                Exercise
      Price$1.00
            
            7,058,796
            
            $1.00$1.65
            
            645,322
            
            $1.65$6.00
            
            3,284,396
            
            $6.00$0.40
            
            1,500,000
            
            $0.40





6.     COMMON
STOCK TRANSACTIONS





On
September 30, 2009, there were 15,926,126 shares of the Company’s common stock,
$0.001 par value, outstanding.





At
September 30, 2009, the Company had authorized 50,000,000 shares of common
stock, $0.001 par value per share. The following table represents the
approximate allocation of reserved shares at September 30, 2009.





Common
      Stock
            
            
            15,926,126Stock
      Options
            
            
            11,838,253Warrants
            
            
            12,488,514TOTAL
            
            
            40,252,893





7.    LITIGATION




At
September 30, 2009 the Company was not involved in any ongoing
litigation.




8.     RISKS
AND UNCERTAINTIES





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 $106,995,139
and $105,099,479 at September 30, 2009 and December 31, 2008,
respectively.





The
Company is considering all strategic options which may provide working capital
to fund its continuing business operations including equity offerings and debt
financings; however; the Company can offer no assurance that it will be
successful in identifying, obtaining or negotiating financing
terms.  If adequate funds are not available or are not available on
terms acceptable to the Company, the Company will likely not be able to take
advantage of unanticipated opportunities, further develop its products, or
continue as a going concern.





The
Company is also 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.


F-8





Impairment
of Assets




The
Company’s patents  were carried at a value of $424,283 on the
Company’s balance sheet.  Due to the short remaining life and
nonutilization of certain patents we have taken an impairment loss of
$376,661.  The Company’s patents expire on December 31,
2014.  In order for the Company to obtain approval from the Food and
Drug Administration (the “FDA”) for Nemifitide, the Company will
need  to perform a pivotal trial which will take in excess of 18
months.  After the pivotal trial, the Company will need to find a
licensing partner who would then need to perform additional trials in order to
file an application for approval with the FDA.  It will be extremely
difficult for the Company to meet this time frame and obtain the required
approvals prior to the expiration of the patents.  However, if the
Company is successful, it may file an application for a five year extension on
patents.  Further, several of the Company’s patents have lapsed as a
result of the patent maintenance fees being too costly for the Company to
maintain.   Therefore, the Company has attributed a value of
$50,000 to the patents.








9.     SUBSEQUENT
EVENTS





The
Company’s continuing losses, the current financial market, and the KBC Notes
which are currently in default have made it difficult for the Company to obtain
either equity or debt financings, and despite the Company’s diligent efforts to
raise capital, on August 10, 2009, the Company filed for relief under Chapter 11
of the Bankruptcy Code in the Bankruptcy Court for the District of New Jersey,
Case No. 09-30775.  On November 2, 2009, the Company’s bankruptcy case was
dismissed due to, among other things, a denial of the Company’s debtor in
possession financing motion.




F-9




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




The
following discussion and analysis should be read in conjunction with the
Financial Statements and notes thereto appearing elsewhere in this quarterly
report on Form 10-Q.





Certain
statements contained herein may constitute forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as
amended, Section 21E of the Exchange Act of 1934, as amended and the
Private Securities Litigation Reform Act of 1995.  Because such
statements include risks and uncertainties, actual results may differ materially
from those expressed or implied by such forward-looking
statements.  Factors that could cause actual results to differ
materially include, but are not limited to, Tetragenex Pharmaceuticals, Inc.’s
(referred to herein as “we,” “our,” or


us”)
ability to obtain financing in the short term,  risks associated with
our clinical trials, our lack of revenue, and our inability to maintain working
capital requirements to fund future operations or our inability to attract and
retain highly qualified management.





You
should read the following discussion and analysis in conjunction with the
Financial Statements and Notes attached thereto, and the other financial
information appearing elsewhere in this Annual Report




OVERVIEW




We were a
wholly owned subsidiary of Innapharma, Inc. (“Innapharma”). Innapharma was
founded in 1989 in the State of Delaware as a biotechnology company that
discovered and intended to commercialize proprietary pharmaceutical products for
use in treatment resistant depression and other central nervous system
diseases.  Innapharma filed for protection under Chapter 11 of the
United States Bankruptcy Code on April 15, 2003.  As part of the
bankruptcy restructuring, Innapharma merged into and with
Tetragenex.  Effective November 23, 2004 the combined company emerged
from bankruptcy under the name Tetragenex Pharmaceuticals,
Inc.   We are headquartered in Englewood Cliffs, New Jersey, with
small satellite offices in Melville, New York and Syosset, New York which incur
minimal expenses.





We have a
platform of peptides which have shown activity in the treatment of central
nervous system (“CNS”) diseases.  Nemifitide, our lead compound, was
initially entered into human clinical trials in the late 1990’s.  Over
12 clinical trials have been conducted with Nemifitide for various types of
depression. We believe that Nemifitide is active in refractory or
treatment-resistant patients, who are typically difficult to treat and normally
don’t respond to other CNS treatments., 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 generally 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 disorders.





Management
intends to find a licensing partner to continue our development of Nemifitide,
primarily in treatment-resistant patients which currently represents
approximately 5 to 10 percent of the overall patient population suffering from
the disease.  Additionally, management intends to obtain regulatory
approval to sell Nemifitide in foreign jurisdictions which management believes
will lead to revenue generation.  We can offer no assurance that we
will be successful in identifying a licensing partner or obtaining regulatory
approval in the United States or any foreign jurisdiction.




2




BANKRUPTCY





Our
continuing losses, the current financial market and the KBC Notes which are
currently in default have made it difficult for us to obtain either equity or
debt financings, and despite our diligent efforts to raise capital, on August
10, 2009, we filed for relief under Chapter 11 of the Bankruptcy Code in the
Bankruptcy Court for the District of New Jersey, Case No. 09-30775.  On
November 2, 2009, our bankruptcy case was dismissed due to, among other things,
a denial of our debtor in possession financing motion.





SATE
OF NEW JERSEY DEVELOPMENT PLAN





Since
2003, we have sold a portion of our tax losses through a development program
sponsored by the State of New Jersey (the “Development Plan”). The Development
Plan generated a net check to us in 2003 in excess of $200,000; a check of over
$400,000 in December of 2004 and an additional $315,000 in December 2005. In
2006, due to our merger with Innapharma, we received $5,000 as part of the
Development Plan.  Although we applied to sell a portion of our tax
losses, due to a change in the standards of the Development Plan, our
application was declined in 2007. In 2008, we were approved to sell a portion of
our New Jersey tax losses and we received approximately $280,000 in December
2008.  We have applied to be part of the program again in 2009 and
have been approved.  We expect to receive notice of the amount of the
approval in November 2009 with funds to be received by year’s end.




LIQUIDITY
AND CAPITAL RESOURCES




As of
September 30, 2009 we had approximately $6,000 in cash and have a core burn rate
of approximately $7,000 per month.  As of November 15, 2009, we have
approximately $20,000 in working capital and have a core burn rate of
approximately $7,000 per month, which we believe is sufficient for 3 months of
working capital (excluding the current debt that is due). The $20,000 will be
used primarily for operations going forward. Additional capital will be needed
to fund further studies required by the U.S. Food and Drug Administration to
bring our lead compound, Nemifide, to market.  We are considering all
strategic options which may provide working capital to fund our continuing
business operations including equity offerings and debt financings; however, we
can offer no assurance that we will be successful in identifying, obtaining or
negotiating financing terms. We are also seeking to enter into a
licensing agreement with a pharmaceutical company as well as selling our state
tax losses through the Development Plan (described above).  If
adequate funds are not available or are not available on terms acceptable to us,
we will likely not be able to take advantage of unanticipated opportunities,
further develop our products, or continue as a going concern.





We have
aggregate liabilities of $5,212,701 consisting of (a) approximately $1,880,000
plus accrued interest owed to KBC Bank N.V. (described in Footnote 3 to the
financial statements included in this Quarterly Report), (b) the $375,000 Bridge
Notes (described in Footnote 3 to the financial statements included in this
Quarterly Report), and (c) approximately $2 million to certain of our officers,
directors and former employees for deferred salaries since 2003.




3




The Three Months ended
September 30, 2009 Compared to the Three Months ended September 30,
2008




Revenue – We had no revenue
from any source for the three months ending September 30, 2009 and
2008.




Compensation Expense –
Compensation expense decreased by $102,703 to $137,135 for the three months
ended September 30, 2009, as compared to $239,838 for the three months ended
September 30, 2008.  This decrease was attributable to our continued
cost cutting efforts which have included a reduction in workforce.




Professional Fees –
Professional fees increased by $5,457 to $26,388 for the three months ended
September 30, 2009, as compared to $20,930 for the three months ended September
30, 2008.  This decrease was attributable to increased legal fees for
the quarter ended September 30, 2009 due to our bankruptcy filing.




Insurance Expense – Insurance
costs decreased by $12,357 to $11,925 for the three months ending September 30,
2009, as compared to $24,282 for the three months ending
September  30, 2008.  This decrease was attributable to (i)
the elimination of product liability insurance, which management decided to
eliminate until we commence additional human trials and the return of some of
the prepaid premiums and (ii) our negotiating a better premium for our directors
and officer insurance.




Rent and Occupancy Fees–Rent
and occupancy expenses decreased by $14,064 to $8,918 for the three months
ending September 30, 2009, as compared to $22,982 for the three months ended
September 30, 2008. This decrease was attributable to our relocating into
smaller office space at a reduced monthly rental fee.




Directors Fees – Director’s
Fees expenses increased by $3,125 to $15,325 for the three months ending
September 30, 2009, as compared to $12,500 for the three months ended September
30, 2008.  This increase was attributable to one of the directors
becoming an outside director which makes him eligible for the accrued board
stipend.




Travel and Entertainment Fee– Travel and Entertainment expenses increased by $6,914 to $15,011 for
the three months ending September 30, 2009 as compared to $8,079 for the three
months ended September 30, 2008.  This increase was attributable to
our prepayment of a car lease, which was required by the leasing company upon
our filing for bankruptcy.




Interest Expense Fee –
Interest expense fees increased by $22,724 to $44,290 for the three months
ending September  30, 2009, as compared to $21,566 for the
three  months ended September 30, 2008.  This increase was
attributable to the interest rate on the KBC Note increasing from 3% to the
default rate of 7%.  The KBC Note is described further in footnote 4
to the financial statements included in this quarterly report on Form
10-Q.


4




The Nine Months ended
September 30, 2009 Compared to the Nine Months ended September 30,
2008
  Revenue – We had no revenue
from any source for the nine months ending September 30, 2009 and
2008.
  Research and Development –
Research and development costs decreased by $2,994, to $4,900 for the nine
months ending September 30, 2009, as compared to $7,894 for the nine months
ended September 30, 2008. The decrease was attributable to our not performing
any studies during the third quarter of 2009.


Compensation Expense –
Compensation expense increase by $359,153 to $958,132 for the nine months ended
September 30, 2009, as compared to $598,979 for the nine months ended September
30, 2008.  This increase was attributable to our officers and
directors accruing salaries again beginning January 1,
2009.  Additionally, effective August 15, 2009 all of our employees
ceased receiving cash compensation until further notice.




Professional Fees –
Professional fees decreased by $30,612 to $72,253 for the nine months ended
September 30, 2009, as compared to $102,865 for the nine months ended September
30, 2008.  This decrease was attributable to lower legal and
accounting fees for the nine months ended September 30, 2009.




Insurance Expense – Insurance
costs decreased by $65,251 to $15,415 for the nine months ending September 30,
2009, as compared to $80,666 for the nine months ending September 30,
2008.  This decrease was attributable to (i) the elimination of
product liability insurance, which management decided to eliminate until we
commence additional human trials, and (ii) our negotiating a better premium for
our directors and officer insurance.




Consulting Fees – Consulting
expenses decreased by $9,319 to $5,963 for the nine months ended September 30,
2009, as compared to $15,282 for the nine months ending September 30,
2008.  This decrease was attributable to our terminating payments to
all scientific consultants until further notice.




Rent and Occupancy Fees–Rent
and occupancy expenses decreased by $44,145 to $27,698 for the nine months
ending September 30, 2009, as compared to $71,843 for the nine months ended
September 30, 2008. This decrease was attributable to our relocating into
smaller office space at a reduced monthly rental fee.




Directors Fees - Director’s
fees expense increased by $89,807 to $127,307 for the nine months ending
September  30, 2009, as compared to $37,500 for the
nine  months ended September 30, 2008.  This increase was
attributable to our re-accruing director’s fees beginning January 1,
2009.




Interest Expense Fee -
Interest expense fees expenses increased by $59,950 to $111,945 for the nine
months ending September 30, 2009, as compared to $51,995 for the nine months
ended September 30, 2008.  This increase was attributable to the
interest rate on the note increasing from 3% to the default rate of
7%.




Printing and Reproduction Fee
- Printing and reproduction fee expense decreased by $9,459 to $1,580 for the
nine months ending September 30, 2009, as compared to $11,039 for the nine
months ended September 30, 2008.


5




ITEM
3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.
  Not
applicable.


ITEM
4T. CONTROLS
AND PROCEDURES




(A)
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES




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




Management,
with the participation of our Co-Chief Executive Officers (one of whom currently
also serves as our Principal Financial Officer), has evaluated the effectiveness
of our disclosure controls and procedures, as of the end of the period covered
by this Quarterly Report on Form 10-Q. Based upon this evaluation, management
concluded that our disclosure controls and procedures were not effective as of
the end of the fiscal quarter. In making this evaluation, the Co-Chief Executive
Officers considered, among other matters, the material weakness in our internal
control over financial reporting described in our Annual Report on Form 10-K,
filed with the SEC on March 31, 2009.




(C)
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING




There
have been no significant changes in our internal controls over financial
reporting during the quarter ended September 30, 2009 that have altered our
conclusion as to the ineffectiveness of such controls.




6




PART
II: OTHER INFORMATION






ITEM
1. LEGAL
PROCEEDINGS




Our
continuing losses, the current financial market and the KBC Notes which are
currently in default have made it difficult for us to obtain either equity or
debt financings, and despite our diligent efforts to raise capital, on August
10, 2009, we filed for relief under Chapter 11 of the Bankruptcy Code in the
Bankruptcy Court for the District of New Jersey, Case No. 09-30775.  On
November 2, 2009, our bankruptcy case was dismissed due to, among other things,
a denial of our debtor in possession financing motion.




In the
normal course of business, there may be various legal actions and proceedings
pending which seek damages against us. As of September 30, 2009, we were not
party to any material legal proceedings not listed above, nor to our knowledge,
are there any proceedings threatened against us.




ITEM
1A. RISK FACTORS





Our
auditors have expressed doubt regarding our ability to continue as a going
concern.





The
report of our independent registered public accounting firm on our consolidated
financial statements for the fiscal year ended December 31, 2008 contains an
explanatory paragraph regarding our ability to continue as a going concern based
upon our history of net losses.  We have had recurring annual operating
losses since our fiscal inception.  We expect that such losses will
continue at least through our fiscal year ending December 31,
2011.





We cannot offer assurances that any
of the options that we are considering to provide us with working capital will
occur or be successful.





We are
considering a variety of strategic options to provide us with working
capital.  These options include equity offerings, debt financings,
identifying a licensing partner to continue our development of Nemifitide, and
obtaining regulatory approval to sell Nemifitide in foreign
jurisdictions.   However, there can be no assurance that we will
be successful in negotiating or concluding any of these
transactions.  If we are unable to consummate one or more of these
transactions, and adequate funds are not available to us or are not available on
acceptable terms, we will likely not be able to continue as a going
concern.





We
may not be able to continue our operations without additional
funding.





As of
September 30, 2009, we had cash and cash equivalents of approximately
$5,935.  We require additional financing, which we may obtain through
issuance of debt and/or equity. Such financing, may not be forthcoming. As
widely reported, the domestic financial markets have been extremely volatile in
recent months.  If such conditions and constraints continue, we may
not be able to acquire additional funds either through credit markets or through
equity markets. Even if additional financing is available, it may not be
available on terms we find favorable. Failure to secure the needed
additional financing will have an adverse effect on our ability to remain in
business.




7




ITEM
2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
  None.


ITEM
3. DEFAULTS
ON SENIOR SECURITIES




None.




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




No
matters were submitted to a vote of security holders during the quarter ended
September 30, 2009.




ITEM
5. OTHER
INFORMATION




None.




ITEM
6. EXHIBITS




Exhibit
      No.
            Description31.1
            Certification
      of Co-Chief Operating Officer Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200232.1
            Certification
      of the Co-Chief Executive Officer Pursuant to 18 U.S.C. Section 1350,
      Section 906 of the Sarbanes-Oxley Act of
2002





8




SIGNATURES




Pursuant
to the requirements of Section 13(a) and 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.




TETRAGENEX
      PHARMACEUTICALS, INC.November
      16, 2009
            /s/Martin
      SchackerMartin
      Schacker
              Co-Chief
      Executive Officer and Principal Financial
  Officer







9


EXHIBIT
INDEX




Exhibit
      No.
            Description31.1
            Certification
      of Co-Chief Operating Officer Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.32.1
            Certification
      of the Co-Chief Executive Officer Pursuant to 18 U.S.C. Section 1350,
      Section 906 of the Sarbanes-Oxley Act of
2002.








10