UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549


FORM
10-Q




[X]
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30,
  2009




OR




[  ]
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE
  ACT




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.
      EmployerIdentification
      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
August 13, 2009: 15,926,126.




Documents
Incorporated by Reference: NONE










TABLE
OF CONTENTS







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























PART
I: FINANCIAL INFORMATION




ITEM
      1.
            FINANCIAL
      STATEMENTS




Index
to Financial Statements


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












The
Accompanying Notes are an Integral Part of the Financial Statements





1





TETRAGENEX
PHARMACEUTICALS, INC.


Unaudited
Condensed Balance Sheet


as
of June 30, 2009 and


Audited
Balance Sheet


as
of December 31, 2008





June
                                                                  
                                                                  
                                                                  December30, 2009
                                                                  
                                                                  
                                                                  
                                                                  31, 2008(unaudited)ASSETSCurrent
    assetsCash and cash
      equivalents
                                                                  
                                                                  $
                                                                  94,501
                                                                  
                                                                  
                                                                  $
                                                                  329,863Prepaid insurance and other
      current assets
                                                                  
                                                                  
                                                                  14,027
                                                                  
                                                                  
                                                                  
                                                                  18,780108,528
                                                                  
                                                                  
                                                                  
                                                                  348,643Property and equipment,
      net
                                                                  
                                                                  
                                                                  6,016
                                                                  
                                                                  
                                                                  
                                                                  6,255Security
      Deposit
                                                                  
                                                                  
                                                                  4,188
                                                                  
                                                                  
                                                                  
                                                                  4,188Patents,
net
                                                                  
                                                                  
                                                                  434,493
                                                                  
                                                                  
                                                                  
                                                                  449,671$
                                                                  553,225
                                                                  
                                                                  
                                                                  $
                                                                  808,757LIABILITIES AND STOCKHOLDERS'
      EQUITYCurrent
      liabilitiesNotes
    payable
                                                                  
                                                                  
                                                                  2,224,243
                                                                  
                                                                  
                                                                  
                                                                  1,882,362Accounts payable and accrued
      expenses
                                                                  
                                                                  
                                                                  2,472,181
                                                                  
                                                                  
                                                                  
                                                                  1,610,729Accrued
      interest
                                                                  
                                                                  
                                                                  319,508
                                                                  
                                                                  
                                                                  
                                                                  254,354Total current
      liabilities
                                                                  
                                                                  
                                                                  4,674,051
                                                                  
                                                                  
                                                                  
                                                                  3,747,445Long term
      liabilityNotes
    payable
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  308,823Total
      liabilities
                                                                  
                                                                  
                                                                  5,015,932
                                                                  
                                                                  
                                                                  
                                                                  4,056,268Commitments 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 authorized 15,926,126 shares issued and
      outstanding
                                                                  
                                                                  
                                                                  15,926
                                                                  
                                                                  
                                                                  
                                                                  15,926Additional paid-in
      capital
                                                                  
                                                                  
                                                                  101,840,856
                                                                  
                                                                  
                                                                  
                                                                  101,836,042Accumulated
      deficit
                                                                  
                                                                  
                                                                  (106,319,489
                                                                  )
                                                                  
                                                                  
                                                                  (105,099,479
                                                                  )Total stockholders'
      equity
                                                                  
                                                                  
                                                                  (4,462,707
                                                                  )
                                                                  
                                                                  
                                                                  (3,247,511
                                                                  )$
                                                                  553,225
                                                                  
                                                                  
                                                                  $
                                                                  808,757




The
Accompanying Notes are an Integral Part of the Financial Statements





F-1





TETRAGENEX
PHARMACEUTICALS, INC.


Unaudited
Condensed Statement of Operations


for
the Three and Six Month Periods Ended June 30, 2009 and 2008




Three-Months Ended June
      30
                                      
                                      
                                      Six-MonthsEnded June
302009
                                      
                                      
                                      2008
                                      
                                      
                                      2009
                                      
                                      
                                      2008Revenue
                                      
                                      
                                      (unaudited)
                                      
                                      
                                      (unaudited)Contract
      revenue
                                      
                                      $
                                      -
                                      
                                      
                                      $
                                      -
                                      
                                      
                                      $
                                      -
                                      
                                      
                                      $
                                      --
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -Operating
      expensesResearch
      and development
                                      
                                      $
                                      4,900
                                      
                                      
                                      $
                                      316
                                      
                                      
                                      $
                                      4,900
                                      
                                      
                                      $
                                      7,894Compensation
      expense
                                      
                                      
                                      776,641
                                      
                                      
                                      
                                      187,058
                                      
                                      
                                      
                                      820,997
                                      
                                      
                                      
                                      359,141Travel
                                      
                                      
                                      9,484
                                      
                                      
                                      
                                      10,095
                                      
                                      
                                      
                                      24,247
                                      
                                      
                                      
                                      36,597General
      and administrative
                                      
                                      
                                      137,519
                                      
                                      
                                      
                                      56,218
                                      
                                      
                                      
                                      164,868
                                      
                                      
                                      
                                      114,341Professional
      fees
                                      
                                      
                                      30,865
                                      
                                      
                                      
                                      43,347
                                      
                                      
                                      
                                      45,865
                                      
                                      
                                      
                                      81,934Payroll
      taxes and employee benefits
                                      
                                      
                                      16,619
                                      
                                      
                                      
                                      15,867
                                      
                                      
                                      
                                      33,848
                                      
                                      
                                      
                                      39,875Consulting
      fees
                                      
                                      
                                      2,780
                                      
                                      
                                      
                                      19,032
                                      
                                      
                                      
                                      5,963
                                      
                                      
                                      
                                      30,282Rent
      and occupancy
                                      
                                      
                                      7,372
                                      
                                      
                                      
                                      28,043
                                      
                                      
                                      
                                      18,781
                                      
                                      
                                      
                                      48,861Depreciation
      and amortization
                                      
                                      
                                      18,047
                                      
                                      
                                      
                                      11,329
                                      
                                      
                                      
                                      35,708
                                      
                                      
                                      
                                      21,896Loss
      before other income(expense) and tax benefit
                                      
                                      
                                      (1,004,227
                                      )
                                      
                                      
                                      (371,305
                                      )
                                      
                                      
                                      (1,155,177
                                      )
                                      
                                      
                                      (740,821
                                      )Other
      income (expense)Interest
      income and other
                                      
                                      
                                      82
                                      
                                      
                                      
                                      518
                                      
                                      
                                      
                                      322
                                      
                                      
                                      
                                      2365Interest
      expense
                                      
                                      
                                      (40,202
                                      )
                                      
                                      
                                      (18,091
                                      )
                                      
                                      
                                      (65,154
                                      )
                                      
                                      
                                      (32,688
                                      )Loss
      before tax benefit
                                      
                                      
                                      (1,044,347
                                      )
                                      
                                      
                                      (388,878
                                      )
                                      
                                      
                                      (1,220,009
                                      )
                                      
                                      
                                      (771,144
                                      )Net
      loss
                                      
                                      
                                      $
                                      (1,044,347
                                      )
                                      
                                      $
                                      (388,878
                                      )
                                      
                                      $
                                      (1,220,009
                                      )
                                      
                                      $
                                      (771,144
                                      )Basic
      and diluted net loss per share
                                      
                                      $
                                      (0.07
                                      )
                                      
                                      $
                                      (0.02
                                      )
                                      
                                      $
                                      (0.08
                                      )
                                      
                                      $
                                      (0.05
                                      )Weighted
      average common shares outstanding
                                      
                                      
                                      15,926,126
                                      
                                      
                                      
                                      15,926,126
                                      
                                      
                                      
                                      15,926,126
                                      
                                      
                                      
                                      15,926,126







The
Accompanying Notes are an Integral Part of the Financial Statements





F-2





TETRAGENEX
PHARMACEUTICALS, INC.


Unaudited
Condensed Statement of Cash Flows


for
the Six-Month Periods Ended June 30, 2009 and 2008




Six-Months Ended June
      30,2009
                                          
                                          
                                          2008Cash
      flows from operating activities
                                          
                                          (unaudited)Net
      loss
                                          
                                          $
                                          (1,220,009
                                          )
                                          
                                          $
                                          (771,144
                                          )Adjustments
      to reconcile net loss to net cash used
      in operating activitiesDepreciation
      and amortization
                                          
                                          
                                          22,836
                                          
                                          
                                          
                                          21,896Amortization
      of Debt Discount
                                          
                                          
                                          12,872
                                          
                                          
                                          
                                          2,258Changes
      in operating assets and liabilitiesPrepaid
      insurance and other current assets
                                          
                                          
                                          4,753
                                          
                                          
                                          
                                          15,107Accounts
      payable and accrued expenses
                                          
                                          
                                          861,450
                                          
                                          
                                          
                                          436,467Accrued
      interest payable
                                          
                                          
                                          65,155
                                          
                                          
                                          
                                          30,429Net
      cash used in operating activities
                                          
                                          
                                          (252,943
                                          )
                                          
                                          
                                          (264,987
                                          )Cash
      flows from investing activitiesCash
      paid for equipment
                                          
                                          
                                          (844
                                          )Patent
      Costs
                                          
                                          
                                          (6,575
                                          )
                                          
                                          
                                          (40,935
                                          )Net
      cash used in investing activities
                                          
                                          
                                          (7,419
                                          )
                                          
                                          
                                          (40,935
                                          )Cash
      flows from financing activitiesProceeds
      from notes payable
                                          
                                          
                                          25,000
                                          
                                          
                                          
                                          175,000Net
      cash provided by financing activities
                                          
                                          
                                          25,000
                                          
                                          
                                          
                                          175,000Net
      decrease in cash and cash equivalents
                                          
                                          
                                          (235,362
                                          )
                                          
                                          
                                          (130,922
                                          )Cash
      and cash equivalents, beginning of year
                                          
                                          
                                          329,863
                                          
                                          
                                          
                                          527,737Cash
      and cash equivalents, end of period
                                          
                                          $
                                          94,501
                                          
                                          
                                          $
                                          396,815Supplemental
      disclosures of cash flow informationCash
      paid for taxesNon
      Cash TransactionsStock,
      options, and warants issued for compensation
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -







The
Accompanying Notes are an Integral Part of the Financial Statements





F-3




TETRAGENEX
PHARMACEUTICALS, INC.


Notes
to the Financial Statements






1.
The Company




Tetragenex
Pharmaceuticals, Inc. (referred to herein as “we”, “our” or “us”) 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 after 10-14
days of treatment (10-15 subcutaneous injections) with lasting benefits of
approximately four months following treatment. Nemifitide is well tolerated,
without any current evidence of significant side effects as compared to the
current drugs that are used in the treatment of major depressive
disorder.




The
company intends 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 10 or 15 doses or 2 or 3 weeks.
Patients who respond tend to stay healthy for several months after the initial
dosing regimen.






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 $1,220,009 for the six months ended June 30,
2009. In addition at June 30, 2009 the Company had a working capital deficiency
of $4,565,523, short term debt of $1.88 million plus accrued interest and a
deficiency in stockholder’s equity of $4,462,707. The Company has less than 6
months working capital on hand 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, its continuing losses, and
the current financial market 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 has not yet filed schedules or a statement
of financial affairs.


The
Company believes that its lead compound, Nemifitide is a revolutionary treatment
for depression and should it reach the market or become licensed to a
pharmaceutical Company, could prove extremely lucrative to the Company. The
company’s ability to continue its operations is dependent upon its ability to
generate sufficient funds from financing to meet its obligations on a timely
basis and to further develop and market its products. The accompanying financial
statements do not include any adjustments that might result from the outcome of
these uncertainties.





F-4




Recently Issued Accounting
Standards




In May
2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted
Accounting Principles (“SFAS No. 162”). This statement identifies the
sources of accounting principles and the framework for selecting the principles
to be used in the preparation of financial statements of nongovernmental
entities that are presented in conformity with generally accepted accounting
principles in the United States (“GAAP”). This Statement shall be effective
sixty days following the SEC’s approval of the Public Company Accounting
Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles. The Company does not
believe the adoption of SFAS No. 162 will have a material impact on its
financial condition, results of operations or cash flows.





In April
2009, the Financial Accounting Standards Board (FASB) issued Financial Statement
of Position FAS 115−2 and FAS 124−2, “Recognition and Presentation of
Other−Than−Temporary Impairments” (“FSP FAS 115−2/124−2”).  FSP
FAS 115−2/124−2 requires entities to separate other−than−temporary impairment
(“OTTI”) of a debt security into two components when there are credit-related
losses associated with the impaired debt security for which management asserts
that it does not have the intent to sell the security, and it is more likely
than not that it will not be required to sell the security before recovery of
its cost basis.  The amount of the OTTI related to a credit loss is
recognized in earnings, and the amount of the OTTI related to other factors is
recorded in other comprehensive income (loss).  FSP FAS 115−2/124−2 is
effective for periods ending after June 15, 2009.  The Company adopted
FSP FAS 115−2/124−2 effective for the quarter ending June 30,
2009.  The adoption of FSP FAS 115−2/124−2 did not have a material
impact on the Company’s financial position or results of
operations.





In April
2009, the FASB issued FSP FAS 157−4, “Determining Fair Value When Volume
and Level of Activity for the Asset or Liability Have Significantly Decreased
and Identifying Transactions that are Not Orderly” (“FSP FAS
157−4”).  Under FSP FAS 157−4, if an entity determines that there has
been a significant decrease in the volume and level of activity for the asset or
the liability in relation to the normal market activity for the asset or
liability (or similar assets or liabilities), then transactions or quoted prices
may not accurately reflect fair value.  In addition, if there is
evidence that the transaction for the asset or liability is not orderly; the
entity shall place little, if any weight on that transaction price as an
indicator of fair value.  FSP FAS 157−4 is effective for periods
ending after June 15, 2009.  The Company adopted FSP FAS 157−4
effective for the quarter ending June 30, 2009.  The adoption of this
FSP did not have a material impact on the Company’s financial position or
results of operations.





In April
2009, the FASB issued FSP FAS 107−1 and APB 28−1, “Interim Disclosures about Fair
Value of Financial Instruments” (“FSP FAS 107−1 and APB
28−1”).  FSP FAS 107−1 and APB 28−1 require disclosures about fair
value of financial instruments in interim and annual financial
statements.  FSP FAS 107−1 and APB 28−1 is effective for periods
ending after June 15, 2009.  The Company adopted FSP FAS 107−1 and APB
28−1 effective for the quarter ending June 30, 2009.  The adoption of
FSP FAS 107−1 and APB 28−1 did not have an impact on the Company’s financial
position or results of operations.





In May
2009, the FASB issued FASB Statement No. 165, “Subsequent Events” (“FASB No.
165”).  FASB No. 165 establishes general standards of accounting for
and disclosure of events that occur after the balance sheet date but before
financial statements are issued.  The Company adopted this statement
for the quarter ending June 30, 2009. The adoption of FASB No. 165 did not have
an impact on the Company’s financial position or results of
operations.





F-5





In
June 2009, the FASB issued FASB Statement No. 166, “Accounting for Transfers of
Financial Assets — an amendment of FASB Statement No. 140,”(“FASB
Statement No. 166”) to improve the reporting for the transfer of financial
assets resulting from (1) practices that have developed since the issuance of
FASB Statement No. 140, “Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of
Liabilities,”that are not consistent with the original intent and
key requirements of that Statement, and (2) concerns of financial statement
users that many of the financial assets (and related obligations) that have been
derecognized should continue to be reported in the financial statements of
transferors.  FASB Statement No. 166 must be applied 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.  Earlier
application is prohibited. The Company will review the requirements of FASB
Statement No. 166 and comply with its requirements.  The Company does
not expect that the adoption of FASB Statement No. 166 will have a material
impact on the Company’s consolidated financial statements.





In
June 2009, the FASB issued Statement of Financial Accounting Standards
No. 167, “Amendments to
FASB Interpretation No. 46(R”(“FASB Statement No. 167”)to amend certain
requirements of FASB Interpretation No. 46 (revised December 2003),
“Consolidation of Variable
Interest Entities” to improve financial reporting by enterprises involved
with variable interest entities and to provide more relevant and reliable
information to users of financial statements.  FASB Statement No. 167 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.  Earlier application is prohibited.  The Company will
review the requirements of FASB Statement No. 167 and comply with its
requirements.  The Company does not expect that the adoption of FASB
Statement No. 167 will have a material impact on the Company’s consolidated
financial statements.





In
June 2009, the FASB issued Statement No. 168, “The FASB Accounting Standards
CodificationTMand the Hierarchy of Generally
Accepted Accounting Principles—a replacement of FASB Statement No. 162”(“FASB Statement No. 168”).Under FASB Statement
No. 168, The FASB
Accounting Standards Codification (the “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 (the “SEC”) under authority of federal
securities laws are also sources of authoritative GAAP for SEC registrants.
 On the effective date of FASB Statement No. 168, 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.  FASB Statement No. 168 is
effective for financial statements issued for interim and annual periods ending
after September 15, 2009.  In the FASB’s view, the issuance of FASB
Statement No. 168 and the Codification will not change GAAP, except for those
nonpublic nongovernmental entities that must now apply the American Institute of
Certified Public Accountants Technical Inquiry Service Section 5100,
“Revenue Recognition,” paragraphs 38–76.  The Company does not expect that
the adoption of FASB Statement No. 168 will have a material impact on the
Company’s consolidated financial statements.




Interim Financial
Statements




Financial
statements as of June 30, 2009, and for the three and six month periods ended
June 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 Form 10-K for the fiscal year ended December 31,
2008, filed with the SEC on March 31, 2009.





F-6




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 Companyissued
Bridge Noteshaving an
aggregate face value of $75,000, together withBridge Warrants to purchasean aggregate of 150,000 shares of the
Company’s common stock at $0.50 per share, to threeadditionalindividuals.  The Company
helda third closing in October
2008at which theCompany issuedBridge Noteshaving an aggregate face value of
$100,000, together withBridge Warrantsto purchase an aggregate of 400,000
shares of the Company’s common stock at $0.40 per share, to two
individuals.In
October 2008,theCompanyamended the terms of the Bridge
Loanand thus previous
investor’s holdings were adjusted to the new terms which were 4 warrants for
every $1 issued,exercisable at $.40 per share and
expiring 5 years from
issuance.  As a result of the amended terms, the Companyissued an aggregate of 1,000,000new Bridge Warrants (the
“New Bridge Warrants”) exercisableat $.40 per share expiring 5 yearsfrom the dateof issuance to the ten individuals whohadparticipated in the May 28, 2008 and
July 28, 2008 closings.The New Bridge Warrantsreplacedthe previously issued 500,000Bridge Warrants which had
beenexercisable 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.




On
October 25, 2004, the Company issued promissory notes (the “KBC Notes”) with an
aggregate face value of $2,600,000 KBC Bank N.V. and certain of its affiliates
(collectively, “KBC”). 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 the
grant.





F-7




The
following table presents information regarding weighted-average exercise price
and weighted average remaining contractual life as of June 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
                  
                  
                  9.4






5.  Warrants





Pursuant to the Bridge Loan described
above in Footnote 3“Promissory
Notes” above,the Company issuedBridge Warrants to purchase1,500,000 shares of the Company’s
common stock at $0.40 per
share, exercisable in 5 years from the date of issuance,totwelve investors.




AtJune 30, 2009, the Company had outstanding warrants to purchase13,518,514shares of the Company’s common stock at
exercise prices of $.40, $1, $1.30, $1.65 and $6 per share. These warrants have
expirations of July 2013, November 30, 2009, March 30, 2012, April 30, 2009 and
November 30, 2011 respectively.




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




Warrants
      OutstandingRange
      of
                      Exercise
      Price
                  
                  
                  Number
      of
                      Warrants
                  
                  
                  Weighted
      Average
                      Exercise
      Price$1.00
                  
                  
                  7,058,796
                  
                  
                  $1.00$1.30
                  
                  
                  1,030,000
                  
                  
                  $1.30$1.65
                  
                  
                  645,322
                  
                  
                  $1.65$6.00
                  
                  
                  3,284,396
                  
                  
                  $6.00$0.40
                  
                  
                  1,500,000
                  
                  
                  $0.40







6.  Common Stock
Transactions





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




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




Common
      Stock
                      
                      
                      15,926,126Stock
      Options
                      
                      
                      11,838,253Warrants
                      
                      
                      13,518,51441,282,893




Commitments
and contingencies





F-8




7.  Litigation




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






8.  Risks
and Uncertainties




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




As
reflected in the accompanying consolidated financial statements, the Company has
incurred significant recurring losses from operations and negative operating
cash flows, which have been financed primarily by proceeds from stock and debt
issuances. As a result, the Company had an accumulated deficit of $106,318,487
and $105,099,479 on June 30, 2009 and December 31, 2008,
respectively.




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






9.           Subsequent
Events




The
Company’s low stock price, its continuing losses, and the current financial
market 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 has not yet filed schedules or a statement of
financial affairs.  The first meeting of creditors is currently
scheduled for September 9, 2009 at 2pm at Suite 1401, One Newark Center, Newark,
New Jersey. Proofs of Claim for prepetition claims are due by December 8,
2009.





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.




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, 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




Tetragenex
Pharmaceuticals, Inc. (referred to herein as “Tetragenex,” the “Company,” “we,”
“our” or “us”) was 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.  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.




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.




We intend
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.  Nemifitide is currently administered through subcutaneous
injection and is given intermittently with 10 or 15 doses, over a 2 or 3 week
period. Patients who respond tend to stay healthy for several months after the
initial dosing regimen.





2





BANKRUPTCY





Our low
stock price, our continuing losses, and the current financial market 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.  We have not yet filed schedules or a
statement of financial affairs.  The first meeting of creditors is
currently scheduled for September 9, 2009 at 2pm at Suite 1401, One Newark
Center, Newark, New Jersey. Proofs of Claim for prepetition claims are due by
December 8, 2009.




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”). 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 have 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
expect to receive a respone by October 15, 2009.




LIQUIDITY
AND CAPITAL RESOURCES




As of
June 30, 2009 we had approximately $100,000 in cash and have a core burn rate of
approximately $25,000 per month.  As of August 13, 2009, we have
approximately $80,000 in working capital and have a core burn rate of
approximately $25,000 per month, which we believe is sufficient for 4 months of
working capital (excluding a promissory note to KBC Bank N.V. ("KBC") with an
aggregate face value of approximately $1.88 million (described in Footnote 3 to
the financial statements included in this Quarterly Report) (the "KBC Notes")
and the bridge promissory notes (the "Bridge Notes") (described in Footnote 3 to
the financial statements included in this Quarterly Report) with an aggregate
face value of $375,000). The $80,000 will be used primarily for operations going
forward. Additional funds will be needed to fund further studies required by the
FDA to bring our lead compound, Nemifide to market. Future funds will be derived
from sales of equity or debt in the public or private markets and/or a licensing
agreement with a pharmaceutical company as well as possibly the sale of our
state tax losses through the Development Plan. We have aggregate liabilities of
approximately $4,255,000 consisting of (a) the $1.88 million KBC Notes, (b) the
$375,000 Bridge Notes, and (c) approximately $2 million to certain of our
officers, directors and former employees for deferred salaries since
2003.






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




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




Research and Development –
Research and development costs increased by $4,584, to $4,900 for the three
month period ended June 30, 2009, as compared to $316 for the three months ended
June 30, 2008. No studies were performed during the second quarter of 2009 and
the increase represents incidental costs.




Compensation Expense –
Compensation expense increase by $589,583 to $776,641 for the three months ended
June 30, 2009, as compared to $187,058 for the three months ended June,
2008.  This increase was attributable to our accruing salaries for our
officers and directors since January 1, 2009.




Professional Fees –
Professional fees decreased by $12,482 to $30,865 for the three months ended
June 30, 2009, as compared to $43,347 for the three months ended June 30,
2008.  This decrease was attributable to lower legal and accounting
fees for the quarter ended June 30, 2009.





3




Insurance Expense – Insurance
costs decreased by $16,394 to $5,206 for the three months ending June 30, 2009,
as compared to $21,600 for the three months ending June 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 $16,252 to $2,780 for the three months ended June 30,
2009, as compared to $19,032 for the three months ending June 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 $20,670 to $7,372 for the three months
ending June 30, 2009, as compared to $28,042 for the three months ended June 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 $99,182 to $111,682 for the three months ending June
30, 2009, as compared to $12,500 for the three months ended June 30,
2008.  This increase was attributable to our accruing of directors’
fees beginning January 1, 2009.






The Six Months ended June
30, 2009 Compared to the Six Months ended June 30, 2008




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




Research and Development –
Research and development costs decreased by $2,996, to $4,900 for the six months
ending June 30, 2009, as compared to $7,894 for the six months ended June 30,
2008. No studies were performed during the second quarter of 2009.




Compensation Expense –
Compensation expense increase by $461,856 to $820,997 for the six months ended
June 30, 2009, as compared to $359,141 for the six months ended June 30,
2008.  This increase was attributable to our officers and directors
accruing salaries beginning January 1, 2009.




Professional Fees –
Professional fees decreased by $36,069 to $45,865 for the six months ended June
30, 2009, as compared to $81,934 for the six months ended June 30,
2008.  This decrease was attributable to lower legal and accounting
fees for the six months ended June 30, 2009.




Insurance Expense – Insurance
costs decreased by $33,831 to $22,552 for the six months ending June 30, 2009,
as compared to $56,384 for the six months ending June 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 $25,319 to $4,963 for the six months ended June 30, 2009,
as compared to $30,282 for the six months ending June 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 $30,080 to $18,781 for the six months ending
June 30, 2009, as compared to $48,861 for the six months ended June 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 $86,682  to $111,682 for the six months
ending June 30, 2009, as compared to $25,000 for the six months ended June 30,
2008.  This increase was attributable to our accruing director’s fees
beginning January 1, 2009.





4




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 are 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 the
Chief Executive Officer and the Chief Financial Officer, as appropriate, to
allow timely decisions regarding required disclosure. Management necessarily
applied its judgment in assessing the costs and benefits of such controls and
procedures, which, by their nature, can provide only reasonable assurance
regarding management’s control objectives.




Management,
with the participation of our Chief Executive Officer and Chief Financial
Officer, has evaluated the effectiveness of our disclosure controls and
procedures, as of the end of the period covered by this 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 Chief Executive Officer and Chief Financial
Officer 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 June 30, 2009 that have altered our
conclusion as to the ineffectiveness of such controls.




5




PART
II: OTHER INFORMATION




ITEM
      1.
            LEGAL
      PROCEEDINGS




Our low
stock price, our continuing losses, and the current financial market 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.  We have not yet filed schedules or a
statement of financial affairs.  The first meeting of creditors is
currently scheduled for September 9, 2009 at 2pm at Suite 1401, One Newark
Center, Newark, New Jersey. Proofs of Claim for prepetition claims are due by
December 8, 2009.




In the
normal course of business, there may be various legal actions and proceedings
pending which seek damages against us. As of June 30, 2009, we are 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




Not
applicable.




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




None.




ITEM
      3.
            DEFAULTS
      ON SENIOR SECURITIES




Our
filing for relief under Chapter 11 of the Bankruptcy Code on August 10, 2009 has
resulted in a default of the Bridge Notes, pursuant to Section 2(c)
thereof.  Consequently, all outstanding principal and accrued but
unpaid interest payable by us under the Bridge Notes has become immediately due
and payable (an aggregate of approximately $419,900 as of August 13,
2009).




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
June 30, 2009.




ITEM
      5.
            OTHER
      INFORMATION




None.





6




ITEM
      6.
            EXHIBITS




Exhibit
                        No.
                      Description10.1
                      Form
      of promissory note issued in the Company's bridge financing which
      commended in May 2008.10.2
                      Form
      of warrant issued in the Company's bridge financing which commenced in May
      2008.31.1
                      Certification of Co-Chief
      Operating Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.31.2
                      Certificationof Chief FinancialOfficerPursuant 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 2002.32.2
                      Certificationof the ChiefFinancialOfficerPursuant to 18 U.S.C. Section
      1350, Section 906 of the Sarbanes-Oxley Act of
  2002.








7




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.August
      13, 2009
              /s/Martin
      SchackerMartin
      Schacker
                Co-Chief
      Executive OfficerAugust
      13, 2009
              /s/Neil
      MartucciNeil
      Martucci
                Chief
      Financial Officer










8





EXHIBIT
INDEX




Exhibit No.
                      Description10.1
                      Form
      of  promissory note issued in the Company's bridge financing which
      commenced in May 2008.10.2
                      Form
      of warrant issued in the Company's bridge financing which commenced in May
      2008.31.1
                      Certification of Co-Chief
      Operating Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.31.2
                      Certificationof Chief FinancialOfficerPursuant 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 2002.32.2
                      Certificationof the ChiefFinancialOfficerPursuant to 18 U.S.C. Section
      1350, Section 906 of the Sarbanes-Oxley Act of
  2002.