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 March 31, 2010





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.)





6901
Jericho Turnpike, Suite 221


Syosset,
NY 11791


(Address
of principal executive offices)(Zip Code)





(516)
855-4425


(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 No





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). Yes  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 
            Accelerated
      filer Non-accelerated
      filer 
            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). Yes 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




Number of
shares outstanding of Issuer’s common stock, $0.001 par value, outstanding on
May 13, 2010: 18,798,348





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
            4ITEM
      4.
            CONTROLS
      AND PROCEDURES
            4PART
      II: OTHER INFORMATION
            4ITEM
      1.
            LEGAL
      PROCEEDINGS
            5ITEM
      1A.
            RISK
      FACTORS
            4ITEM
      2.
            UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
            5ITEM
      3.
            DEFAULTS
      UPON SENIOR SECURITIES
            6ITEM
      4.
            REMOVED
            6ITEM
      5.
            OTHER
      INFORMATION
            6ITEM
      6.
            EXHIBITS
            6SIGNATURES
            7














PART
I: FINANCIAL INFORMATION






ITEM
      1.
            FINANCIAL
      STATEMENTS






Index
to Financial Statements




PageUnaudited
      Condensed Balance Sheet as of March 31, 2010 and Audited Balance Sheet as
      of December 31, 2009
            F-1Unaudited
      Condensed Statement of Operations for the Three Month Periods ending March
      31, 2010 and 2009
            F-2Unaudited
      Condensed Statement of Cash Flows for the Three-Month  Periods
      Ended March  31, 2010 and 2009
            F-3Notes
      to Unaudited Condensed Financial Statements
            F-4












1
 TETRAGENEX
PHARMACEUTICALS, INC.




Unaudited
Condensed Balance Sheet


as
of March 31, 2010 and Audited Balance Sheet as of December 31, 2009


December
                
                
                March31,
      2009
                
                
                31,
      2010(unaudited)ASSETSCurrent
      assetsCash
      and cash equivalents
                
                $
                21,420
                
                
                $
                71,996Other
      Receivable
                
                
                133,079
                
                
                
                -Prepaid
      insurance and other current assets
                
                
                4,034
                
                
                
                20,626158,533
                
                
                
                92,622Property
      and equipment, net
                
                
                4,933
                
                
                
                3,603Security
      Deposit
                
                
                4,188
                
                
                
                4,188Patents,
      net
                
                
                10,000
                
                
                
                9,500$
                177,654
                
                
                $
                109,913LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilitiesNotes
      payable
                
                $
                411,994
                
                
                $
                369,374Accounts
      payable and accrued expenses
                
                
                2,860,516
                
                
                
                3,024,605Accrued
      interest
                
                
                63,556
                
                
                
                74,652Total
      current liabilities
                
                
                3,336,066
                
                
                
                3,468,631Long
      term liabilityNotes
      payable
                
                
                50,000
                
                
                
                85,000Total
      liabilities
                
                
                3,386,066
                
                
                
                3,553,631Commitments and
      contingenciesStockholders'
      equityClass
      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
                
                
                
                101,840,856Accumulated
      deficit
                
                
                (105,065,194
                )
                
                
                (105,300,500
                )Total
      stockholders' equity
                
                
                (3,208,412
                )
                
                
                (3,443,718
                )$
                177,654
                
                
                $
                109,913




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


F-1
 TETRAGENEX
PHARMACEUTICALS, INC.




Unaudited
Condensed Statement of Operations


for
the Three Month Periods Ended March 31, 2010 and 2009




Three months ended March 312010
              
              
              2009(unaudited)RevenueContract
      revenue
              
              $
              -
              
              
              $
              --
              
              
              
              -Operating
      expensesResearch
      and development
              
              $
              (4,900
              )
              
              $
              -Compensation
      expense
              
              
              168,879
              
              
              
              44,356Travel
              
              
              1,576
              
              
              
              14,763General
      and administrative
              
              
              33,667
              
              
              
              27,348Professional
      fees
              
              
              10,151
              
              
              
              15,000Payroll
      taxes and employee benefits
              
              
              11,164
              
              
              
              17,229Consulting
      fees
              
              
              1,000
              
              
              
              3,183Rent
      and occupancy
              
              
              12,552
              
              
              
              11,409Depreciation
      and amortization
              
              
              785
              
              
              
              11,426Loss
      before other income(expense) and tax benefit
              
              
              (235,919
              )
              
              
              (144,714
              )Other
      income (expense)Loss
      on Disposal of Fixed asset
              
              
              1,045
              
              
              
              -Relief
      From Liabilities
              
              
              19,089
              
              
              
              -Interest
      income
              
              
              -
              
              
              
              240Interest
      expense
              
              
              (18,476
              )
              
              
              (31,188
              )Loss
      before tax benefit
              
              
              (235,306
              )
              
              
              (176,662
              )Net
      loss
              
              
              (235,306
              )
              
              
              (175,662
              )Basic
      and diluted net loss per share
              
              $
              (0.01
              )
              
              $
              (0.01
              )Weighted
      average common shares outstanding
              
              
              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
Three-Month Periods Ended March 31, 2010 and 2009


Three
      Months Ended March 31,2010
              
              
              2009Cash
      flows from operating activitiesNet
      loss
              
              $
              (235,306
              )
              
              $
              (175,662
              )Adjustments
      to reconcile net loss to net cashused
      in operating activitiesDepreciation
      and amortization
              
              
              785
              
              
              
              11,426Amortization
      of Debt Discount
              
              
              7,380
              
              
              
              6,235Loss
      on disposal of fixed asset
              
              
              1,045
              
              
              
              -Changes
      in operating assets and liabilitiesPrepaid
      insurance and other current assets
              
              
              (16,592
              )
              
              
              12,040Other Receivable
              
              
              133,079
              
              
              
              -Accounts
      payable and accrued expenses
              
              
              164,089
              
              
              
              (1,546
              )Accrued
      interest payable
              
              
              11,096
              
              
              
              24,952Net
      cash provided by (used) in operating activities
              
              
              65,576
              
              
              
              (122,555
              )Cash
      flows from investing activitiesCash
      paid for property and equipment
              
              
              -
              
              
              
              (844
              )Cash
      paid for patents
              
              
              -
              
              
              
              (5,500
              )Net
      cash used in investing activities
              
              
              -
              
              
              
              (6,344
              )Cash
      flows from financing activitiesProceeds
      from notes payable
              
              
              35,000
              
              
              
              25,000Payments
      on note payable
              
              
              (50,000
              )
              
              
              -Net
      cash (used in) provided by financing activities
              
              
              (15,000
              )
              
              
              25,000Net
      increase (decrease) in cash and cash equivalents
              
              
              50,576
              
              
              
              (103,899
              )Cash
      and cash equivalents, beginning of year
              
              
              21,420
              
              
              
              329,863Cash
      and cash equivalents, end of year
              
              $
              71,996
              
              
              $
              225,964Supplemental
      disclosures of cash flow informationCash
      paid for taxes
              
              
              -
              
              
              
              500Cash
      paid for interest
              
              
              -
              
              
              
              -






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


F-3


Notes
to the Financial Statements






1.THE COMPANY




Tetragenex
Pharmaceuticals, Inc. (the “Company” or “Tetragenex”) is headquartered in
Englewood Cliffs, 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 biotechnology company that has discovered and intends to
commercialize proprietary pharmaceutical products for use in treatment resistant
depression and other central nervous system diseases




Tetragenex
has a platform of peptides which have shown activity in the treatment of CNS
diseases.  Nemifitide, the company’s 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. Tetragenex believes that Nemifitide is active in refractory or
treatment resistant patients.  Treatment resistant patients are
typically difficult to treat and normally don’t respond to other CNS
treatments., Nemifitide has shown a rapid and robust onset of action 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.




The
Company had hoped to find a licensing partner to continue the 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.  Nemifitide is currently administered thru subcutaneous
injection and is given intermittently with 6 to 9 doses over 1 to 2 weeks.
Patients who respond tend to stay healthy for several months after the initial
dosing regimen. Due to several setbacks and difficult economic environment, it
seems unlikely that the company will be able to obtain FDA approval for
Nemifitide to be administered in the United States.   Therefore,
the company will now seek to obtain approval to sell Nemifitide in several
Central American, Eastern Eurpopean and Caribbean nations based on its current
data.  Patients will then be treated at centers located in those
countries.




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
had income of $34,285 and loss of $1,106,807 for years ended December 31, 2009
and 2008 respectively and a loss of $235,306 for the quarter ended March 31,
2010. In addition at March 31, 2010 the Company has a working capital deficiency
of $3,376,009, current liabilities of approximately $3,468,631 and a deficiency
in stockholder’s equity of $3,443,718.  As of March 31, 2010 the
Company had less than twelve months 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. 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’s ability to continue its
operations is dependent upon its ability to generate sufficient funds from
financings to meet its obligations on a timely basis and to further develop and
market its products.


F-4


Notwithstanding
the foregoing, 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
accompanying financial statements do not include any adjustments that might
result from the outcome of these uncertainties.




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.




Interim Financial
Statements




Financial
statements as of March 31, 2010, and for the three month periods ended March 31,
2010 and 2009, 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, 2009 and 2008 as
appearing in the Company’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2009, filed with the SEC on April 15, 2010.




3.           NOTES
PAYABLE




During
2008 and into 2009 the Company raised $375,000 as part of a bridge
loan.  In exchange for the funds the Company issued promissory notes
payable totaling $375,000 plus 12% interest per annum.  The notes are
due in 2 years or upon the closing of at least $2 million in
funding.  The promissory notes were accompanied
by an aggregate of 1,500,000 warrants exercisable at $0.40 per share expiring in
2013.  Due to the warrants a discount of $4,814 and $58,597 was
recorded in 2009 and 2008 respectively.  The warrants were valued
using the Black Scholes Method.




In
January 2010 we issued a secured promissory note to one of our directors, with a
principal face value of $85,000, in exchange for cash advance
payments  in the amount of $50,000 in November 2009 and $35,000 in
January 2010.  The note carries interest at a rate of 12% per annum
and matures in 2 years.
  On
January 11, 2010, the company  entered into a Settlement, Release and
Compromise Agreement (the “Settlement Agreement”) with KBC Private Equity NV
(“KBC”).   Pursuant to the Settlement Agreement, in
acknowledgement of our financial situation, KBC accepted $50,000 as settlement
(the “Settlement”) for a $2,227,000 in debt, which included accrued interest of
$345,922..  Upon payment of the Settlement, KBC released its preferred
equity interest in our intellectual property, as well as any other secured or
unsecured claim it may have against us.  As a result of the settlement
the company recorded a gain of $2,177,000 in
2009.


F-5





4.           STOCK
OPTIONS





All of
the Company’s stock options vest immediately upon issuance. The stock 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 March 31,
2010.





Options
      Outstanding and ExercisableExercise
      Price
            Number
      of Options
            Weighted
      Average Exercise Price
            Weighted
      Average Remaining Life$1.00
            11,838,253
            $1.00
            8.7





5.           PROMISSORY
NOTES/WARRANTS





On May
28, 2008, the Company issued promissory notes carrying 12% interest per annum
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,
to seven individuals.  Further and as part of the same financing, on
July 28, 2008 the Company issued promissory notes carrying 12% interest per
annum having an aggregate face value of $75,000, together with warrants to
purchase an aggregate of 150,000 shares of the Company’s common stock at $0.50
per share, to three individuals.  The Company had a third closing in
October 2008.  The Company issued promissory notes carrying 12%
interest per annum having an aggregate face value of $100,000, together with
warrants to purchase an aggregate of 400,000 shares of the Company’s common
stock at $0.40 per share, to two individuals. [Additionally, the
Company issued an aggregate of 1,000,000 warrants exercisable at $0.40 per share
expiring 5 years of issuance to the ten individuals who participated in the May
28, 2008 and July 28, 2008 closings.  These warrants replace the
previously issued 500,000 warrants exercisable at $0.50 per share expiring 5
years from issuance.  The terms of the bridge loan were changed and
thus previous investor’s holdings were adjusted to the new terms which were 4
warrants for every $1 issued.  The warrants are exercisable at $.40
per share and expire 5 years from issuance.




During
2009 an aggregate of 8,103,796 warrants expired valueless.




At
December 31, 2009, the Company had outstanding warrants to purchase 5,329,718
shares of the Company’s common stock at exercise prices of $0.40, $1.65 and $6
per share. These warrants have expirations of July 2013, March 30, 2012, and
November 30, 2011 respectively.


F-6


Additionally,
in April 2010 the Company signed a consulting agreement with a scientist to
perform an animal study on Nemifitide.   In lieu of cash
compensation, the scientist was issued warrants to purchase 150,000 shares of
the Company’s common stock at $0.03 per share expiring 5 years from
issuance.




In May
2010, one accredited investor made a direct investment into the
company.  He invested $50,000 for which he received 2,872,222 shares
of common stock and warrants to purchase an additional 750,000 shares of common
stock at $0.03 per share for the next 5 years




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 March 31,
2010.




Warrants
      OutstandingRange
      of Exercise Price
            Number
      of Warrants
            Weighted
      Average Exercise Price$1.65
            645,322
            $1.65$6.00
            3,284,396
            $6.00$0.40
            1,400,000
            $0.40$0.03
            900,000
            $0.03





6.          COMMON
STOCK TRANSACTIONS





At March
31, 2010, the Company had authorized 50,000,000 shares of common stock, $0.001
stated value. The following table represents the approximate allocation of
reserved shares at March 31, 2010:




Common
      Stock
            
            
            18,798,348Stock
      Options
            
            
            11,838,253Warrants
            
            
            6,229,71836,866,319





7.          LITIGATION





At March
31, 2010 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 $105,300,500
and $105,065,194 at March 31, 2010 and December 31, 2009,
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.


F-7


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.





Impairment
of Assets




In
February 2010 the company had its patent attorney perform a patent valuation of
its patent assts.  The valuation determined the value of the patents
is no greater than $10,000.  As a result the company recorded an
impairment loss of $409,280 on this asset.   The Company believes
this because the patents expire on the last day of 2014.  In order to
obtain FDA clearance for Nemifitide, the Company would need to immediately raise
adequate funding to commence a pivotal trial which would take longer than 18
months, at which point it would be the middle of 2011.  The Company
would then need to find a licensing partner who would need to perform additional
trials in order to file an application for approval with the FDA.  The
Company believes that meeting this time frame will be extremely difficult or
impossible.    Additionally several patents have lapsed
because the maintenance fees for these patents were too expensive for us to
maintain.


9.SUBSEQUENT
EVENTS





Since
2003, the Company has sold a portion of its tax losses through a development
program sponsored by the State of New Jersey (the “Development Plan”). The
Company applied to participate in the Development Plan in 2009 and in January
2010 we received $133,079 as part of this program.




In May
2010, one accredited investor made a direct investment into the Company of
$50,000 for which he received 2,872,222 shares of the Company’s common stock and
warrants to purchase an additional 750,000 shares of common stock at $0.03 per
share.  The warrants expire 5 years from the date of their
grant.




Additionally,
in April 2010 the Company signed a consulting agreement with a scientist to
perform an animal study on Nemifitide.   In lieu of cash
compensation, the scientist was issued warrants to purchase 150,000 shares of
the Company’s common stock at $0.03 per share expiring 5 years from
issuance.





F-8




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.  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 “Tetragenex,” “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.





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




Tetragenex
is headquartered in Englewood Cliffs, 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 biotechnology company that has discovered and intends
to commercialize proprietary pharmaceutical products for use in treatment
resistant depression and other central nervous system diseases




We have a
platform of peptides which have shown activity in the treatment of 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.  Treatment resistant patients are typically difficult to
treat and normally don’t respond to other central nervous system
treatments.  Nemifitide has shown a rapid and robust onset of action
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 drugs that are used in the treatment of major
depressive disorder currently.




We had
hoped to find a licensing partner to continue the 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.  Nemifitide is currently administered thru subcutaneous
injection and is given intermittently with 6 to 9 doses over 1 to 2 weeks.
Patients who respond tend to stay healthy for several months after the initial
dosing regimen. Due to several setbacks and the difficult economic environment,
it seems unlikely that we will be able to obtain FDA approval for Nemifitide to
be administered in the United States.   Therefore, we are now
seeking approval to sell Nemifitide in several Central American, Eastern
European and Caribbean nations based on the current data.  Patients
will then be treated at centers located in those countries.




STATE
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”). We applied to
participate in the Development Plan in 2009 and have been
approved.  In January 2010 we received $133,079 as part of this
program.


2


LIQUIDITY
AND CAPITAL RESOURCES




As of
March 31, 2010 we had approximately $70,000 in cash and have a core burn rate of
approximately $7,000 per month.  As of May 13, 2010, we have
approximately $120,000 in working capital and have a core burn rate of
approximately $7,000 per month.  We believe that $120,000 is
sufficient for 12 months of working capital (excluding the $369,374 in debt that
is due.The
$120,000 will be used primarily for operating expenses and costs associated with
obtaining registration for Nemifitide abroad.    Additional
capital will be needed to gain approval for Nemifitide in other countries and
possibly set up our own clinics in those countries.  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.  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. Upon Nemifitide’s successful clearance
in a foreign country, we will begin to treat patients in such a country, which
may be a source of cash flow for us.





As of May
13, 2010, we have aggregate liabilities of $3,553,631 consisting of bridge loans
plus interest, accrued employee and director salaries as well as accounts
payable from day to day operations.




RESULTS
OF OPERATIONS




The Three Months ended March
31, 2010 Compared to the Three Months ended March 31, 2009




Revenue – We had no revenue
from any source for the three months ending March 31, 2010 and
2009.




Compensation Expense –
Compensation expense increased by $124,523 to $168,879 for the three months
ended March 31, 2010, as compared to $44,356 for the three months ended March
31, 2009.  This increase was attributable to officers and directors
beginning to accrue salaries again.  No cash compensation was paid
during the quarter to officers or directors.


Professional Fees –
Professional fees decreased by $4,849 to $10,151 for the three months ended
March 31, 2010, as compared to $15,000 for the three months ended March 31,
2009.  This decrease was attributable to all accounting work being
done in house.




Insurance Expense – Insurance
costs decreased by $16,213 to $1133 for the three months ending March 31, 2010,
as compared to $17,346 for the three months ending March 31,
2009.  This decrease was attributable to restructuring our insurance,
our prepayment of some premiums in the fourth quarter of 2009 and our receiving
a refund from a cancelled insurance policy.




Directors Fees – Director’s
Fees expenses increased by 23,145 to 23,145 for the three months ending March
31, 2010, as compared to $0 for the three months ended March 31,
2009.  This increase was attributable to the board beginning to accrue
their stipend again.




Travel and Entertainment Fee– Travel and Entertainment expenses decreased by 13,186 to $1,576 for the
three months ending March 31, 2010, as compared to $14,763 for the three months
ended March 31, 2009.  This decrease 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 decreased by $12,712 to $18,476 for the three months
ending March 31, 2010, as compared to $31,188 for the three months ended March
31, 2009.  This decrease was attributable to the settlement of the
note we had outstanding to KBC Bank NV in January 2010 and no further interest
being accrued.
  Amortization Expense –
Amortization expense fees decreased by $10,641 to $785 for the three months
ending March 31, 2010, as compared to $11,426 for the three months ended March
31, 2009.  This decrease was attributable to our impairment of loss on
our patents.


3





ITEM
3.             
 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.




Not
applicable.




ITEM
4. 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 for
the fiscal year ended December 31, 2009, filed with the SEC on April 15,
2010.




(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 March 31, 2010 that have altered our
conclusion as to the ineffectiveness of such controls.


4




PART
II: OTHER INFORMATION




ITEM
1. LEGAL
PROCEEDINGS




In the
normal course of business, there may be various legal actions and proceedings
pending which seek damages against us. As of March 31, 2010, 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, 2009 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,
2010.





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 if 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 May
13, 2010, we had cash and cash equivalents of approximately
$120,000.  We will 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.





ITEM
2.               UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS






5




ITEM
3. DEFAULTS
ON SENIOR SECURITIES




None.




ITEM
4. REMOVED




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





6




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.May
      13, 2010
            /s/Martin
      SchackerMartin
      Schacker
              Co-Chief
      Executive Officer and Principal Financial
  Officer







7


EXHIBIT
INDEX




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