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, 2008    
|  |                                                                      
|  | OR                                                                   
|  |                                                                      
|o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT

Commission File No. 333-134987

TETRAGENEXPHARMACEUTICALS,INC.(NAMEOFSMALLBUSINESSISSUERINITSCHARTER)

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

1 Maynard Drive Suite 105 
Park Ridge, New Jersey 07656(Address of Principal Executive Offices)

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

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.

YesþNoo

|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
    filero                                                                                                                                                                                                                                                                                                           
|Non-accelerated filero                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                       

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

YesoNoþ

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

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court.

YesþNoo

Number
  of shares outstanding of registrants common stock,
  $0.001 par value, outstanding on August 12, 2008: 15,926,126.



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TABLE OF CONTENTS

|PART I: FINANCIAL INFORMATION |                                                       | 1 |  
|----------------------------- | ----------------------------------------------------- | - | -
|                              |                                                       |   |  
|ITEM 1.                       | FINANCIAL STATEMENTS                                  |   | 1
|                              |                                                       |   |  
|ITEM 2.                       | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL     |   |  
|                              | CONDITION AND RESULTS OF OPERATIONS                   |   | 2
|                              |                                                       |   |  
|ITEM 3.                       | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET |   |  
|                              | RISK                                                  |   | 4
|                              |                                                       |   |  
|ITEM 4T                       | CONTROLS AND PROCEDURES                               |   | 5
|                             
|                             
|PART II: OTHER INFORMATION    |                                                       | 6 |  
|                              |                                                       |   |  
|ITEM 1.                       | LEGAL PROCEEDINGS                                     |   | 6
|                              |                                                       |   |  
|ITEM 2.                       | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF    |   |  
|                              | PROCEEDS                                              |   | 6
|                              |                                                       |   |  
|ITEM 3.                       | DEFAULTS ON SENIOR SECURITIES                         |   | 6
|                              |                                                       |   |  
|ITEM 4.                       | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS   |   | 6
|                              |                                                       |   |  
|ITEM 5.                       | OTHER INFORMATION                                     |   | 6
|                              |                                                       |   |  
|ITEM 6.                       | EXHIBITS                                              |   | 7
|                             
|                             
|SIGNATURES                    |                                                       |   | 8

i

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PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Index to Financial Statements

|                                                                                          |  | Page
|----------------------------------------------------------------------------------------- |  | ----
|Unaudited Condensed Balance Sheet as of June 30, 2008 and Audited Balance Sheet as of     |  |     
|December 31, 2007                                                                         |  | F-1 
|                                                                                          |  |     
|Unaudited Condensed Statement of Operations for the Three and Six Month Periods           |  |     
|Ended June 30, 2008 and 2007                                                              |  | F-2 
|                                                                                          |  |     
|Unaudited Condensed Statement of Cash Flows for the Six Month Periods Ended June 30, 2008 |  |     
|and 2007                                                                                  |  | F-3 
|                                                                                          |  |     
|Notes to Unaudited Condensed Financial Statements                                         |  | F-4 

1

---

TETRAGENEX PHARMACEUTICALS, INC. 
UNAUDITED CONDENSED BALANCE SHEET
AS OF JUNE 30, 2008 AND 
AUDITED BALANCE SHEET 
AS OF DECEMBER 31, 2007

|                                                                                 | December 31, |              |   | June 30,    |  
|-------------------------------------------------------------------------------- | ------------ | ------------ | - | ----------- | -
|                                                                                 | 2007         |              |   | 2008        |  
|                                                                                 | (audited)    |              |   | (unaudited) |  
|ASSETS                                                                           |              |              |   |             |  
|Current Assets                                                                   |              |              |   |             |  
|Cash and cash equivalents                                                        | $            | 527,737      |   |             | $
|Prepaid insurance and other current assets                                       |              | 33,777       |   |             |  
|Total Current Assets                                                             |              | 561,514      |   |             |  
|                                                                                
|Property and equipment, net                                                      |              | 4,188        |   |             |  
|Security Deposit                                                                 |              | 18,958       |   |             |  
|Patents, net                                                                     |              | 429,268      |   |             |  
|TOTAL ASSETS                                                                     | $            | 1,013,928    |   |             | $
|                                                                                
|LIABILITIES AND STOCKHOLDERS EQUITY                                             |              |              |   |             |  
|Current Liabilities                                                              |              |              |   |             |  
|Accounts payable and accrued expenses                                            |              | 1,153,639    |   |             |  
|Accrued interest                                                                 |              | 178,828      |   |             |  
|Notes Payable                                                                    |              |             |   |             |  
|Total Current Liabilities                                                        |              | 1,332,467    |   |             |  
|                                                                                
|Long Term Liability                                                              |              |              |   |             |  
|Notes payable                                                                    |              | 1,882,362    |   |             |  
|Total Liabilities                                                                |              | 3,214,829    |   |             |  
|                                                                                
|Commitments and Contingencies                                                    |              |              |   |             |  
|                                                                                
|Stockholders Equity(Deficit)                                                    |              |              |   |             |  
|Class A preferred stock - $.01 par value - 5,000,000 shares authorized; 0 shares |              |              |   |             |  
|outstanding                                                                      |              |              |   |             |  
|Common stock - $.001 par value - 50,000,000 shares authorized 15,926,126 shares  |              | 15,926       |   |             |  
|issued and outstanding                                                           |              |              |   |             |  
|Additional paid-in capital                                                       |              | 101,775,845  |   |             |  
|Accumulated deficit                                                              |              | (103,992,672 | ) |             |  
|Total Stockholders (Deficit)                                                    |              | (2,200,901   | ) |             |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                       | $            | 1,013,928    |   |             | $

The Accompanying Notes are an Integral Part of the Financial Statements

F-1

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TETRAGENEX PHARMACEUTICALS, INC. 
UNAUDITED CONDENSED STATEMENT OF OPERATIONS
FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2008 AND 2007

|                                           | Three Months Ended June 30, |            |   | Six Months Ended June 30, |  
|------------------------------------------ | --------------------------- | ---------- | - | ------------------------- | -
|                                           | 2008                        |            |   | 2007                      |  
|                                           | (unaudited)                 |            |   |                           |  
|Revenue                                    |                             |            |   |                           |  
|Contract revenue                           | $                           |           |   |                           | $
|                                           |                             |           |   |                           |  
|                                           |                             |            |   |                           |  
|Operating Expenses                         |                             |            |   |                           |  
|Research and development                   | $                           | 316        |   |                           | $
|Compensation expense                       |                             | 187,058    |   |                           |  
|Travel                                     |                             | 10,095     |   |                           |  
|General and administrative                 |                             | 56,218     |   |                           |  
|Professional fees                          |                             | 43,347     |   |                           |  
|Payroll taxes and employee benefits        |                             | 15,867     |   |                           |  
|Consulting fees                            |                             | 19,032     |   |                           |  
|Rent and occupancy                         |                             | 28,043     |   |                           |  
|Depreciation and amortization              |                             | 11,329     |   |                           |  
|Loss before other income(expense) and tax  |                             |            |   |                           |  
|benefit                                    |                             | (371,305   | ) |                           |  
|                                           |                             |            |   |                           |  
|Other Income (Expense)                     |                             |            |   |                           |  
|Interest income and other                  |                             | 518        |   |                           |  
|Interest expense                           |                             | (18,091    | ) |                           |  
|Loss before Tax Benefit                    |                             | (388,878   | ) |                           |  
|Net Loss                                   | $                           | (388,878   | ) |                           | $
|                                           |                             |            |   |                           |  
|Basic and diluted net loss per share       | $                           | (0.02      | ) |                           | $
|                                           |                             |            |   |                           |  
|Weighted average common shares outstanding |                             | 15,926,126 |   |                           |  

The Accompanying Notes are an Integral Part of the Financial Statements

F-2

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TETRAGENEX PHARMACEUTICALS, INC. 
UNAUDITED CONDENSED STATEMENT OF CASH FLOWS 
FOR SIXMONTH PERIODS ENDED JUNE 30, 2008 AND 2007

|                                                                | Six months ended June 30, |         
|--------------------------------------------------------------- | ------------------------- | --------
|                                                                | 2008                      |         
|                                                                | (unaudited)               |         
|CASH FLOWS FROM OPERATING ACTIVITIES                            |                           |         
|Net loss                                                        | $                         | (771,144
|Adjustments to Reconcile Net Loss to Net Cash Used in Operating |                           |         
|Activities                                                      |                           |         
|Depreciation and amortization                                   |                           | 21,896  
|Amortization of debt discount                                   |                           | 2,258   
|Stock, option and warrant compensation                          |                           |        
|Changes in Operating Assets and Liabilities                     |                           |         
|Prepaid insurance and other current assets                      |                           | 15,107  
|Accounts payable and accrued expenses                           |                           | 436,467 
|Accrued interest payable                                        |                           | 30,429  
|NET CASH USED IN OPERATING ACTIVITIES                           |                           | (264,987
|                                                               
|CASH FLOWS FROM INVESTING ACTIVITIES                            |                           |         
|Patent cost                                                     |                           | (40,935 
|NET CASH USED IN INVESTING ACTIVITIES                           |                           | (40,935 
|                                                               
|CASH FLOWS FROM FINANCING ACTIVITIES                            |                           |         
|Proceeds from notes payable                                     |                           | 175,000 
|NET CASH PROVIDED BY FINANCING ACTIVITIES                       |                           | 175,000 
|                                                               
|Net Decrease in Cash and Cash Equivalents                       |                           | (130,922
|Cash and Cash Equivalents, Beginning of Year                    |                           | 527,737 
|Cash and Cash Equivalents, End of Period                        | $                         | 396,815 
|                                                               
|Supplemental Disclosures of Cash Flow Information               |                           |         
|Cash paid for taxes                                             |                           |         
|                                                               
|Non Cash Transactions                                           |                           |         
|Stock, options, and warrants issued for compensation            |                           |        

The Accompanying Notes are an Integral Part of the Financial Statements

F-3

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TETRAGENEX PHARMACEUTICALS, INC.NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS

1. THE COMPANY

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

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

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Going Concern and Liquidity

The Companys financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of
business. The Company incurred losses of $4,579,958 and $2,964,001 for the years ended December 31, 2007 and 2006, respectively. In addition at June 30, 2008 the Company had a working capital deficiency of $3,266,240 and deficiency in stockholder equity of
2,917,841. The Company has less than five months working capital in the bank currently and its main source of funds has been private investments. These factors raise doubt about the Companys ability to continue as a going concern.

To address its liquidity concerns, 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.

The Companys low stock price and its continuing losses may make it difficult to obtain additional 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. The accompanying financial statements do not include any adjustments that might result from the outcome of these uncertainties.

F4

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TETRAGENEX PHARMACEUTICALS, INC.NOTES
TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS (contd)

Recently Issued Accounting Standards

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

In June 2007, the FASB issued Emerging Issue Task Force
No. 07-03 (EITF 07-03), Accounting
for Non-Refundable Advance Payments for Goods or Services to Be Used in Future
Research and Development Activities. EITF 07-03 provides guidance on
whether non-refundable advance payments for goods that will be used or services
that will be performed in future research and development activities should be
accounted for as research and development costs or deferred and capitalized until
the goods have been delivered or the related services have been rendered. EITF 07-03 is effective for fiscal years beginning
after December 15, 2007. The Company does not expect that the adoption of EITF
07-03 will have a material impact on its financial position or results of operations.

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

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

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 Securities and Exchange Commissions (the SEC) approval of the Public Company Accounting Oversight Board
(PCAOB) 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.

F5

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TETRAGENEX PHARMACEUTICALS, INC.NOTES
TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS (contd)

Interim Financial Statements

Financial statements as of June 30, 2008 and for three
month periods ended June 30, 2008 and 2007, have been prepared on the same basis
as the annual financial statements and, in the opinion of the Companys
 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,  2007 and 2006 as appearing in the Companys form 10-KSB filed
with the SEC on May 14, 2008, and as amended thereafter.

Notes Payable

The Company has notes payable with an aggregate face value of $1,882,362 which carry 3% interest and are due on April 23, 2009. The notes are convertible into common shares at $0.50 per share at the discretion of the holders of
the notes. The notes are secured by the patents of the Company.

The Company issued promissory notes with an aggregate face value of 175,000 on May 28, 2008. $100,000 of the proceeds was received from related parties of the Company. For every $1.00 invested, each investor
received a promissory note for $1.00 carrying 12% interest per annum, plus a warrant to purchase two shares of the Companys common stock at $0.50 per share. The promissory notes will be paid back
upon (i) the two year maturity date, or (ii) the Companys closing of a financing equal to or greater than $2,000,000, and are convertible into securities issued in such financing at the holders discretion. The Company recorded a debt discount related to the issuance of the notes of approximately $54,000 and
amortizing the discount over the 2 year term of the notes. The amortization of the debt discount through June 30, 2008 was recorded as interest expense and amounted to approximately $2,250. The warrants issued were valued by using the black
scholes method. On June 30, 2008 the Company had outstanding notes payable in the aggregate amount of $2,005,416.

Stockholders Equity

Stock Options

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

On June 30, 2008, there were a total of 11,798,253 options outstanding all exercisable at $1.00 per share expiring between 2017 and 2020.

The following table presents information regarding
weighted-average exercise price and weighted average remaining contractual life
as of June 30, 2008:

F6

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TETRAGENEX PHARMACEUTICALS, INC.NOTES
TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS (contd)

|         | Options Outstanding |          | Options Exercisable
|-------- | ------------------- | -------- | -------------------
|         |                     | Weighted | Weighted           
|Range of |                     | Average  | Average            
|Exercise | Number of           | Exercise | Remaining          
|Price    | Options             | Price    | Life               
|1.00     | 11,798,253          | 1.00     | 10.3               

Warrants

On May 28, 2008 the Company issued 350,000 warrants exercisable at 0.50 per share expiring 5 years from issuance to certain investors.

At June 30, 2008, the Company had outstanding warrants to purchase 12,368,514 shares of the Companys common stock at exercise prices of $0.50, $1.00, $1.30, $1.65 and $6.00 per share. These warrants have expirations of May
28, 2010, 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
number of warrants outstanding and weighted-average exercise price as of June
30, 2008.

|                  |  | Warrants Outstanding
|----------------- |  | --------------------
|Range of Exercise |  | Number of           
|Price             |  | Warrants            
|$0.50             |  | 350,000             
|$1.00             |  | 7,058,796           
|$1.30             |  | 1,030,000           
|$1.65             |  | 645,322             
|$6.00             |  | 3,284,396           

Common Stock Transactions

No shares of the Companys common stock were issued during the quarter ended June 30, 2008. On June 30, 2008 there were 15,926,126 shares of common stock outstanding

At June 30, 2008, 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, 2008:

|Common Stock  |  | 15,926,126
|------------- |  | ----------
|Stock Options |  | 11,798,253
|Warrants      |  | 12,368,514
|              |  | 40,092,893

F7

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TETRAGENEX PHARMACEUTICALS, INC.NOTES
TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS (contd)

3. EMPLOYMENT AGREEMENTS

Employment Agreements

On December 15, 1999, the Company entered into a threeyear
employment agreement with its co-Chief Executive Officer and Chairman of the
Board, Martin F. Schacker (co-CEO). The agreement provided
for an annual base salary of $160,000, subject to a minimum ten percent annual increase. On February 6, 2001, in view of the executives efforts on behalf of the Company and his performance, the Companys Board of Directors (i)
increased his annual salary to $250,000 with no automatic annual increases,
and extended the term of his employment agreement for an additional two years
and (ii) granted the executive a ten-year option to acquire 125,000 shares of
the Companys common stock at an exercise price of 17 per share, one third of which vested immediately, one third of which vested on February 6, 2002, and the final third vested on February 6, 2003. On December 11, 2001, in consideration of
services provided to the Company, the Board of Directors (i) further increased his annual salary to $300,000,
(ii) further extended the term of the agreement by one year, through and including
December 15, 2005 and (iii) granted the executive an additional, immediately
vested five-year option to acquire 125,000 shares of the Companys common stock at an exercise price of $17.00 per share. On April 6, 2003, as a result of the Companys cost reduction, the executive agreed
to defer half of his $300,000 yearly salary. In December 2005 the executive agreed to convert 177,000 of his deferred salary into 177,000 options to purchase shares of Tetragenex common stock at $1.00 per share expiring December 20, 2020. On
June 30, 2008 the executive had deferred compensation totaling $397,000.
The co-CEO is the nephew of the companys other co-CEO David Abel.

All officers, Directors and employees of the Company at the time of the bankruptcy agreed to defer a portion or all of their compensation. On June 30, 2008, there were $1,123,808 deferred from officers and employees and
$193,750 from directors. It is anticipated that the majority of accrued salaries will be converted into warrants of the Companys common stock on a 1-for-1 basis. In April 2008, at the Boards request, all salaried employees of the
Company were subject to a minimum 50% temporary salary reduction while the Company sought financing for its operations.

4. LITIGATION

At June 30, 2008 the Company was not involved in any ongoing litigation.

5. RISKS AND UNCERTAINTIES

The Company is subject to risks common to companies in the biopharmaceutical industry, including, but not limited to risks associated with the 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 $104,763,817 and $101,066,053 at June 30, 2008 and 2007, respectively.

F8

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TETRAGENEX PHARMACEUTICALS, INC.NOTES
TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS (contd)

The Company plans to provide for additional working capital and funds for the continued development of its products through private or public sales of its 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 ability to successfully complete future funding.

6. LEASE OBLIGATIONS

On March 12, 2003, the Company entered into an operating lease for its current office space in Park Ridge, New Jersey. The initial lease commenced on March 31, 2003 and expired on March 31, 2007 and required monthly base
rental payments of $10,200 plus certain annual escalation. In December 2006
the Company entered into a five-year operating lease to rent different space
in the same building where its prior offices were located, which commenced on
April 1, 2007 and requires monthly base rental payments of $6,300 per month and expires on April 1, 2012.

The approximate aggregate minimum rental commitments on the lease are as follows

|Year Ending December 31,     |  |   |        |        
|---------------------------- |  | - | ------ | -------
|2008                         |  | $ | 37,800
|2009                         |  | $ | 75,600
|2010                         |  | $ | 75,600
|2011                         |  | $ | 75,600
|2012                         |  | $ | 22,000
|Total Minimum Lease Payments |  | $ |        | 286,600

The Companys rental expense was $84,249 and $124,039 for the years ended December 31, 2007 and 2006 respectively.

7. RELATED PARTY TRANSACTIONS

None.

8. SUBSEQUENT EVENTS

In July 2008 the Company issued promissory notes with an aggregate face value of $75,000. For every $1.00 invested, each investor received a promissory note for $1.00 carrying 12% interest per annum plus a warrant to
purchase two shares of the Companys common stock at $0.50 per share.

F9

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|ITEM 2. | MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS 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.

Overview

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

Operating History

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

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

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

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

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In March 2008 we slashed costs and are now operating with a core burn rate of slightly over $40,000 per month. Our current cash on hand of $200,000 is adequate operating capital for approximately four months. We
will continue to explore every possible avenue to raise additional funds to allow us to continue to operate and move our lead compound forward through the development process.

We believe that we have excellent patent protection in all the significant worldwide markets. Additionally we have patented all of the surrounding peptides to Nemifitide.

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 only 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. We will continue to submit our application for the Development Plan in the
future, although there can be no assurance that they will be accepted.

Liquidity and Capital Resources

As of June 30, 2008, we have approximately $200,000 in current assets and have a core burn rate of approximately $40,000 per month. The $200,000
will be used primarily for operations going forward. Additional funding 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 additional sales of our
common stock in the public or private markets and/or a licensing agreement with
a pharmaceutical company as well as possibly the sale of our state tax losses
through the Development Plan. Our only long-term debt consists of (1) the $1,800,000 convertible note payable to the former holders of our Series D Preferred
securities which mature in April 2009, and (2) the promissory notes issued May 28, 2008 with an aggregate face value of $175,000, which mature the sooner of (i) within two years from
the date of issuance, or (ii) our closing of a financing equal to or greater than $2,000.

The Three Months Ended June 30, 2008 Compared to the Three Months Ended June 30, 2007

Revenue We had no revenue from any source for the three months ending June 30, 2008 and 2007.

Research and Development Research and development costs increased by $1,247 to $316 for the three months ended June 30, 2008, as compared to ($931) for the three
months ended June 30, 2007. No studies have been performed during 2007 or 2008 thus there have only been incidental expenses.

Compensation Expense Compensation expense increased by $3,964 to $187,058 for the three months ended June 30, 2008, as compared to $183,094 for the three months
ended June 30, 2007. This increase was primarily attributable to a scientist being added to the payroll in June 2008.

Insurance Expense Insurance costs decreased by $8,581 to $21,600 for the three months ended June 30, 2008, as compared to $30,181 for the three months ended June
30, 2007, which was primarily attributable to a decrease in our directors and officers insurance premiums.

Consulting Fees Consulting expenses decreased by $798,478 to $19,032 for the three months ended June 30, 2008, as compared to $817,510 for the three months ended
June 30, 2007. This decrease was a result of our not issuing additional options or warrants to consultants nor conducting any offerings which

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required the payment of fees. In addition in February 2008 we ceased payments to all scientific consultants until further notice.

The Six Months Ending June 30, 2008 Compared to the Six Months Ended June 30, 2007

Revenue We had no revenue from any source for the six months ending June 30, 2008 and 2007.

Research and Development Research and development costs increased by $3,425 to $7,894 for the six months ending June 30, 2008, as compared to $4,469 for the six
months ended June 30, 2007. No studies have been performed during 2007 or 2008 thus there have only been incidental research and development expenses.

Compensation Expense Compensation expense decreased by $59,479 to $359,141 for the six months ended June 30, 2008, as compared to $419,338 for the six months ended
June 30, 2007. This was due to a reduction in salaries in April 2008 until we can obtain further financing.

Insurance Expense Insurance costs increased by $7,852 to $56,384 for the six months ended June 30, 2008, as compared to $48,532 for the six months ended June 30,
2007. The increase was primarily attributable to an increase in the premiums that we pay for directors and officers insurance now that our common shares trade on a public market.

Consulting Fees Consulting expenses decreased by $846,307 to $33,282 for the six months ended June 30, 2008, as compared to $876,589 for the six months ended June
30, 2007. This decrease was a result of our not issuing additional options or warrants to consultants nor conducting any offerings which required the payment of fees. In addition in February 2008 we ceased payments to all scientific consultants
until further notice.

Disclosure Regarding Forward Looking Statements

This quarterly report on Form 10-Q includes forward
looking statements which involve risks and uncertainties. Such statements can
be identified by the use of forward-looking language such as will likely
result, may, are expected to, is anticipated, estimate, believes, projected, or
similar words. All statements other than statements of historical fact included
in this section are forward-looking statements. Although we believe that the
expectations reflected in such forward-looking statements are reasonable,
we can give no assurance that such expectations will prove to have been correct.
Our actual results could differ materially from those anticipated in any such
forward-looking statements as a result of various risks, including, without limitation,
our dependence on a single line of business; rapid technological change; our
inability to obtain adequate financing when necessary; our inability to attract
and retain key personnel and the potential volatility of our common stock.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

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ITEM 4T CONTROLS AND PROCEDURES

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

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

Management, with the participation of our Chief Executive
Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure
controls and procedures, as of the end of the period covered by this Quarterly
Report on Form 10-Q. Based upon this evaluation, management concluded that for
our current level of activities our disclosure controls and procedures are effective.

Limitations on the Effectiveness of Internal Controls

Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material errors. Our disclosure controls and procedures are
designed to provide reasonable assurance of achieving our objectives and our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective at that reasonable assurance level. Further, the
design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple
error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The design of any system of controls also is based in part
upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of
changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

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, 2008 that have altered our conclusion as to the ineffectiveness of such controls.

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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 June 30, 2008, we were not party to any material legal proceedings, nor to our knowledge,
were there any proceedings threatened against us.

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

Between May 2008 and July 2007 we offered promissory
notes, carrying 12% interest per annum having an aggregate face value of $250,000,
and accompanied by warrants to purchase an aggregate of $500,000 shares of
our  common stock at $0.50 per share, to 10 individuals. $100,000 of
the notes were issued to related parties. For every $1.00 invested, each
investor received a promissory note for $1.00 and a warrant to purchase two
 shares of our common stock at $0.50 per share. The promissory notes shall
 be paid back the sooner of (i) upon their two year maturity date, or (ii) our
 closing of financing equal to or greater than $2,000,000, and they are convertible
into securities issued in such financing at the holders discretion.

The investors had an opportunity to ask questions of and receive answers from our executive officers and were provided with access to our documents and records in order to verify the information provided.

The foregoing issuances of securities were effected in reliance on the exemption provided by Section 4(2) of the Securities Act of 1933, as amended and Rule 506 of Regulation D promulgated thereunder based on the limited
number of purchases, their sophistication in financial matters, and their access to information concerning our business.

ITEM 3. DEFAULTS ON SENIOR SECURITIES

None.

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

No matters were submitted to a vote of security holders during the quarter ended June 30, 2008.

ITEM 5. OTHER INFORMATION

None.

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|ITEM 6. |  | EXHIBITS                                                                                                     
|------- |  | -------------------------------------------------------------------------------------------------------------
|       
|Exhibit |  |                                                                                                              
|No.     |  | Description                                                                                                  
|       
|31.1    |  | Certification of
        Co-Chief Operating Officer Pursuant to Section 302 of the Sarbanes-Oxley            
|        |  | Act of 2002                                                                                                  
|       
|31.2    |  | Certification of
        Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
        Act of
|        |  | 2002                                                                                                         
|       
|32.1    |  | Certification 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    |  | Certification of
        the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, Section
        906 
|        |  | of the Sarbanes-Oxley
        Act of 2002                                                                    

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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 14, 2008 |  | /s/Martin
        Schacker                
|                |  | Martin Schacker                           
|                |  | Co-Chief Executive
        Officer        
|               
|               
|August 14, 2008 |  | /s/Neil
        Martucci                  
|                |  | Neil Martucci                             
|                |  | Chief Financial
        Officer           

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|Exhibit
          Index
|-----------------------
|                       
|Exhibit                
|No.                    
|                       
|31.1                   
|                       
|                       
|31.2                   
|                       
|                       
|32.1                   
|                       
|                       
|32.2                   
|                       

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