<PAGE>

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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-Q

(Mark One)


[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES    
         EXCHANGE ACT OF 1934 
         For the quarterly period ended March 31, 1999


                                       OR


[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934
         For the transition period from ________ to  ________


                         Commission File Number 0-20954


                                 COCENSYS, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


                DELAWARE                               33-0538836
    (STATE OR OTHER JURISDICTION OF         (I.R.S. EMPLOYER IDENTIFICATION NO.)
     INCORPORATION OR ORGANIZATION)


                     201 TECHNOLOGY DRIVE, IRVINE, CA 92618
          (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)


                                 (949) 753-6100
              (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.

                            Yes     X          No
                                 --------          --------

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.


            $.001 PAR VALUE                                4,258,829
        (CLASS OF COMMON STOCK)                 (OUTSTANDING AT MAY 10, 1999)


--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

<PAGE>


                                 COCENSYS, INC.

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                        PAGE NUMBER

PART I.       FINANCIAL INFORMATION

              <S>                                                                                       <C>                         
              ITEM 1.     FINANCIAL STATEMENTS.


                          Condensed Balance Sheets as of March 31, 1999
                          and December 31, 1998                                                            3

                          Condensed Statements of Operations for the three-month
                          periods ended March 31, 1999 and 1998 and the period
                          from inception (February 15, 1989) through
                          March 31, 1999                                                                   4

                          Condensed Statements of Cash Flows for the three-month
                          periods ended March 31, 1999 and 1998 and the period
                          from inception (February 15, 1989) through
                          March 31, 1999                                                                   5


                          Notes to Condensed Financial Statements                                          6


              ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

                          CONDITION AND RESULTS OF OPERATIONS.                                            13



PART II.      OTHER INFORMATION


              ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K.                                               22


SIGNATURES                                                                                                23
</TABLE>




                                       2

<PAGE>

1                                 COCENSYS, INC.
                          (A development stage company)

                            CONDENSED BALANCE SHEETS
               (In thousands, except share and par value amounts)

<TABLE>
<CAPTION>
                                                                               MARCH 31,           DECEMBER 31,
                                                                                 1999                  1998   
                                                                             -----------           -----------
                                                                              (Unaudited)
<S>                                                                          <C>                   <C>        
ASSETS
Current assets:

  Cash and cash equivalents                                                  $     2,802           $     2,222
  Short-term investments                                                           6,150                 9,973
  Other current assets                                                               323                   321
                                                                             -----------           -----------
TOTAL CURRENT ASSETS                                                               9,275                12,516

Property and equipment, net                                                        2,256                 2,466
Other assets, net                                                                    124                   117
                                                                             -----------           -----------
                                                                             $    11,655           $    15,099
                                                                             -----------           -----------
                                                                             -----------           -----------



LIABILITIES & STOCKHOLDERS' EQUITY Current liabilities:

  Accounts payable                                                           $       619           $       534
  Accrued compensation and benefits                                                  444                   748
  Due to corporate partners                                                        1,340                 1,322
  Other accrued liabilities                                                          832                 1,326
  Deferred revenue                                                                 3,000                 2,955
  Capital lease obligation - current portion                                         425                   316
                                                                             -----------           -----------
TOTAL CURRENT LIABILITIES                                                          6,660                 7,201

Capital lease obligation, less current portion                                       289                   366
Other liabilities                                                                     25                    26


Commitments and contingencies

Stockholders' equity:
  Preferred stock - $.001 par value,
    5,000,000 shares authorized; 205,035 shares issued and outstanding at March
    31, 1999 and 206,445
    at December 31, 1998                                                          15,261                16,386
Common stock - $.001 par value,
    75,000,000 shares authorized; 4,258,543 shares issued and outstanding at
    March 31, 1999 and
    3,422,773 at December 31, 1998                                               108,868               107,381
Deficit accumulated during the development stage                                (119,309)             (116,151)
Deferred compensation                                                               (118)                 (138)
Accumulated comprehensive income                                                     (21)                   28
                                                                             -----------           -----------
TOTAL STOCKHOLDERS' EQUITY                                                         4,681                 7,506
                                                                             -----------           -----------
                                                                             $    11,655           $    15,099
                                                                             -----------           -----------
                                                                             -----------           -----------
</TABLE>




                             See accompanying notes.

<PAGE>


                                 COCENSYS, INC.
                          (A development stage company)

                       CONDENSED STATEMENTS OF OPERATIONS
                    (In thousands, except per share amounts)
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                                                              PERIOD FROM
                                                                                                                INCEPTION
                                                                                                             (FEBRUARY 15,
                                                                                THREE MONTHS ENDED            1989) TO
                                                                                     MARCH 31,                 MARCH 31,
                                                                            ---------------------------
                                                                               1999             1998             1999
                                                                            ----------       ----------      ------------


<S>                                                                         <C>              <C>             <C>        
REVENUES

  Co-promotion revenues from corporate partners                             $        -       $      540      $    30,705
  Co-development revenues from corporate partners                                  805              596           19,544
                                                                            ----------       ----------      -----------
Total revenues                                                                     805            1,136           50,249
                                                                            ----------       ----------      -----------


OPERATING EXPENSES

  Research and development                                                       2,915            3,359          109,589
  Marketing, general and administrative                                            803            1,148           52,853
  Acquired research and development                                                  -                -           14,879
                                                                            ----------       ----------      -----------
Total operating expenses                                                         3,718            4,507          177,321
                                                                            ----------       ----------      -----------

OPERATING LOSS                                                                  (2,913)          (3,371)        (127,072)
Gain on disposition of sales division                                                -                -            5,728
Interest income                                                                    149              202            5,510
Interest expense                                                                   (35)             (24)          (1,174)
                                                                            ----------       ----------      -----------

NET LOSS                                                                        (2,799)          (3,193)        (117,008)

Dividends on preferred stock                                                       359              134            2,301
                                                                            ----------       ----------      -----------

NET LOSS APPLICABLE TO COMMON STOCKHOLDERS                                  $   (3,158)      $   (3,327)     $  (119,309)
                                                                            ----------       ----------      -----------
                                                                            ----------       ----------      -----------

Basic and fully-diluted loss per common share                               $    (0.82)      $   (1.16)
                                                                            ----------       ----------     
                                                                            ----------       ----------     
Shares used in computing net loss per share                                      3,854            2,861
                                                                            ----------       ----------     
                                                                            ----------       ----------     
</TABLE>



                            See accompanying notes.


                                       4

<PAGE>


                                 COCENSYS, INC.
                          (A development stage company)

                       CONDENSED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                   (Unaudited)


<TABLE>

                                                                                                              PERIOD FROM
                                                                                                                INCEPTION
                                                                                                              (FEBRUARY 15,
                                                                                THREE MONTHS ENDED            1989) TO
                                                                                     MARCH 31,                 MARCH 31,
                                                                            ---------------------------
                                                                               1999             1998             1999       
                                                                            ----------       ----------      ---------------


OPERATING ACTIVITIES

<S>                                                                         <C>              <C>             <C>         
Net loss                                                                    $   (2,799)      $   (3,193)     $  (117,008)
Adjustments to reconcile net loss to net cash used in operating activities:
  Depreciation and amortization                                                    224              212            7,956
  Amortization of deferred compensation                                             20               42            3,771
  Issuance of stock, stock options and warrants for services                         3              185            2,579
  Loss on sale of fixed assets                                                       -                -              100
  Gain on disposition of sales division                                              -                -           (5,728)
  Acquired research and development                                                  -                -           12,279
  Increase in other current assets                                                 (25)             (60)            (390)
  Decrease (increase) in receivables from partners                                  23              349               (5)
  Increase in amounts due to partners                                               18              952            1,340
  Increase in deferred revenue                                                      45                -            3,000
  Increase (decrease) in accounts payable and other accrued liabilities           (714)             (284)            268
                                                                            ---------------  --------------- -------------
NET CASH USED IN OPERATING ACTIVITIES                                           (3,205)           (1,797)        (91,838)
                                                                            ---------------  --------------- -------------


INVESTING ACTIVITIES

Decrease (increase) in investments                                               3,774           (3,700)          (6,171)
Purchase of property and equipment                                                 (14)            (211)          (7,680)
Decrease (increase) in other assets and notes receivable from officers              (7)              18           (1,280)
Cash received on sale of fixed assets                                                -                -               36
Cash received on disposition of sales division                                       -                -            9,000
Increase in deferred costs                                                           -                -           (2,475)
Acquisition of Acea Pharmaceuticals, net of cash acquired                            -                -              (62)
                                                                            ---------------  --------------- -------------
NET PROVIDED BY (CASH USED) IN INVESTING ACTIVITIES                              3,753           (3,893)          (8,632)
                                                                            ---------------  --------------- -------------


FINANCING ACTIVITIES

Net cash proceeds from issuance of common stock                                      -               25           61,428
Net cash proceeds from issuance of preferred stock                                   -            3,429           40,701
Proceeds from sale/leaseback of fixed assets and notes payable                     139              106            5,655
Payments on capital lease obligations and notes payable                           (107)             (72)          (4,512)
                                                                            ---------------  --------------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                                           32            3,488          103,272
                                                                            ---------------  --------------- -------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                               580           (2,202)           2,802
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                 2,222            3,410                -
                                                                            ---------------  --------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                  $    2,802       $    1,208      $     2,802
                                                                            ---------------  --------------- -------------
                                                                            ---------------  --------------- -------------


SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid for interest                                                      $       35       $       24      $       936
                                                                            ---------------  --------------- -------------
                                                                            ---------------  --------------- -------------
</TABLE>

                                       5

<PAGE>


                                 COCENSYS, INC.
                          (A development stage company)

                     NOTES TO CONDENSED FINANCIAL STATEMENTS

                                 MARCH 31, 1999
                                   (UNAUDITED)


     1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     BASIS OF PRESENTATION


     The interim financial information for the three-month periods ended March
     31, 1999 and 1998 is unaudited but includes all adjustments (consisting
     only of normal recurring entries) which the Company's management believes
     to be necessary for the fair presentation of the financial position,
     results of operations and cash flows for the periods presented. The
     accompanying interim financial statements should be read in conjunction
     with the financial statements and related notes included in the Company's
     1998 Annual Report on Form 10-K for the year ended December 31, 1998.
     Certain information and footnote disclosures normally included in financial
     statements prepared in accordance with generally accepted accounting
     principles have been condensed or omitted pursuant to Securities and
     Exchange Commission rules and regulations. Interim results of operations
     for the three-month period ended March 31, 1999, are not necessarily
     indicative of operating results to be expected for the full year.


     REVENUE AND EXPENSE RECOGNITION


     See Notes 4, 5, 6 and 7 for revenue recognition policies related to
     co-promotion and co-development revenues from corporate partners.


     NET LOSS PER SHARE


     In 1997, Statement of Financial Accounting Standards No. 128, "Earnings per
     Share" ("SFAS 128"), replaced the calculation of primary and fully diluted
     earnings per share with basic and diluted earnings per share. Unlike
     primary earnings per share, basic earnings per share excludes any dilutive
     effect of options, warrants and convertible securities. All per share
     amounts for all prior periods have been presented and, where appropriate,
     restated to conform to the SFAS 128 requirements.

     Both basic and diluted loss per share are computed using the weighted
     average number of shares of common stock outstanding. Common equivalent
     shares from stock options, warrants and convertible securities are excluded
     from the computation of diluted earnings per share, as their effect would
     be antidilutive.

     COMPREHENSIVE INCOME

     Comprehensive loss was $2,848,000 for the three-month period ended March
     31, 1999 and $3,224,000 for the three-month period ended March 31, 1998.



                                       6

<PAGE>


                                 COCENSYS, INC.
                          (A development stage company)

                     NOTES TO CONDENSED FINANCIAL STATEMENTS


     2.    SUBSEQUENT EVENTS

     REVERSE STOCK SPLIT

     At the Special Meeting of Stockholders held on January 27, 1999,
     stockholders authorized the Board of Directors to effect a reverse stock
     split within a range of one new share of common stock for every six, seven
     or eight outstanding shares of stock. The Board subsequently approved a
     reverse split of one-for-eight effective April 15, 1999. All share and per
     share amounts have been restated to reflect this reverse stock split.

     RESTRUCTURING PLAN

     On April 27, 1999, the Company announced a restructuring plan intended to
     reduce its cash burn rate and focus resources on its drug discovery efforts
     in the neurology area. The restructuring resulted in a layoff of 34
     employees in the drug development and administrative areas. The Company
     retained all members of its research and discovery staff. As a result of
     the restructuring, CoCensys will recognize a charge of approximately $1.1
     to $1.4 million in the second quarter of fiscal 1999. Approximately
     $700,000 of this reserve will relate to severance costs for terminated
     employees, with the balance to reserve for fixed assets and facility lease
     costs that will no longer be of economic benefit to the Company.

     SALE OF CYTOVIA, INC. STOCK; REPURCHASE OF SERIES E CONVERTIBLE PREFERRED
     STOCK

     By agreement dated May 6, 1999, the Company agreed to sell to certain
     entities affiliated with Domain Associates, L.L.C., all of the Company's
     stock holdings in Cytovia, Inc., for an aggregate purchase price of
     $3,325,500. James C. Blair, Ph.D., a director of the Company, is a managing
     memeber of Domain Associates, L.L.C. The transaction is subject to certain
     conditions to close, including the waiver of rights held by other investors
     in Cytovia that would allow those investors to sell a portion of their
     shares of Cytovia stock to the purchasers in place of sale of a portion of
     the Company's shares of Cytovia stock (the "Co-Sale Rights"). The Company
     anticipates closing the transaction in May 1999.

     By agreements dated April 30, 1999, the Company agreed to repurchase up to
     3,180 shares of its Series E Convertible Preferred Stock, using proceeds
     from its sale of the Cytovia shares. The repurchase price for each share
     equals the face value ($1,000) plus accrued dividends at 7.5% per annum,
     plus a 5% premium. As of April 30, 1999, the aggregate repurchase
     obligation equaled approximately $3.6 million.

     As part of the repurchase agreements with the holders of the Company's
     Series E Convertible Preferred Stock, the holders agreed not to convert
     additional shares of Series E Convertible Preferred Stock prior to July 29,
     1999, unless any of the following conditions are applicable: (i) the
     Company's common stock is trading above $1.00 per share or at least 120% of
     the then-applicable conversion price for the Series E Convertible Preferred
     Stock; (ii) the Company's common stock no longer is trading on the Nasdaq
     National Market or Nasdaq SmallCap Market; (iii) the Company has

                                       7

<PAGE>


                                 COCENSYS, INC.
                          (A development stage company)

                     NOTES TO CONDENSED FINANCIAL STATEMENTS


     announced that it is being sold pursuant to a merger or sale of all or
     substantially all of its assets; (iv) after a material adverse change in
     the Company's business; or (v) if the SEC does not declare effective by
     June 14, 1999, the Company's Registration Statement on Form S-3 filed with
     the SEC to register additional shares of common stock issuable on
     conversion of the Series E Convertible Preferred Stock.

     Based on the anticipated receipt of proceeds from sale of the portion of
     the Company's Cytovia shares that will not be affected by the Co-Sale
     Rights, the Company repurchased 1,154 shares on April 30, 1999 for
     $1,295,000, and repurchased an additional 437 shares on May 6, 1999 for
     $491,100. The Company has the right to repurchase the additional 1,589
     shares on or before May 20, 1999, upon consummation of the sale of its
     Cytovia shares. Based on the shares repurchased as of May 7, 1999, 3,444
     shares of Series E Convertible Preferred Stock remain outstanding; if the
     Company is able to repurchase the additional 1,589 shares, 1,855 shares
     will remain outstanding at that time.

     NASDAQ LISTING

     Nasdaq notified the Company by letter dated December 1, 1998, that it was
     not in compliance with the $1.00 minimum closing bid price requirement for
     the continued listing of the Company's common stock. Nasdaq provided the
     Company until February 28, 1999 to correct the non-compliance; otherwise,
     Nasdaq stated that the Company's common stock would be delisted from the
     Nasdaq National Market on March 2, 1999. By letter dated February 19, 1999,
     the Company requested a hearing with Nasdaq to consider the continued
     listing issue. Based on Nasdaq procedures, the request for hearing stayed
     delisting of the Company's common stock based on non-compliance with the
     minimum closing bid price until the date of the hearing, which was held
     April 29, 1999.

     As of May 7, 1999, Nasdaq had not delisted the Company's common stock nor
     notified the Company of the results of the hearing. As of May 7, 1999, the
     minimum closing bid price for the Company's common stock remains below
     $1.00 per share. In addition, the market value of the Company's common
     stock held by non-affiliates of the Company has fallen below the $5 million
     minimum requirement to remain listed on the Nasdaq National Market.

     Based on the outcome of the hearing, the Company's shares may continue to
     trade on the Nasdaq National Market, the Company may be granted a further
     temporary stay of delisting, the Company's shares may be moved temporarily
     or permanently to the Nasdaq SmallCap Market or the shares may be delisted
     from Nasdaq. If the shares are delisted, they likely would be quoted in the
     "pink sheets" maintained by the National Quotation Bureau, Inc. or the NASD
     Electronic Bulletin Board.


     3.    PRIVATE PLACEMENT OF PREFERRED STOCK

     In June 1998, the Company raised $8.0 million through the private placement
     of Series E Convertible Preferred Stock (the "Series E Preferred"). The
     Series E Preferred is convertible into 


<PAGE>


                                 COCENSYS, INC.
                          (A development stage company)

                     NOTES TO CONDENSED FINANCIAL STATEMENTS


     common stock on June 8, 2001, or earlier at the holder's option at a price
     which is discounted from the fair market value of the Company's common
     stock at the time of conversion, subject to a maximum price of $31.44 per
     share. The terms of the private placement included the issuance of warrants
     to purchase 43,750 shares of common stock at $36.00 per share issued in
     June 1998 and 12,500 shares at $5.00 per share in November 1998.

     The Series E Preferred carries an annual dividend of 7.5 percent of the
     face value of the outstanding shares, subject to reductions in the dividend
     rate if the market price of Company's common stock increases to certain
     levels. Dividends are payable quarterly in cash or, at the election of the
     Company, by adding the amount of the dividend to the conversion value of
     the Series E Preferred. Additionally, $390,000 of the $8.0 million in
     proceeds was allocated to the warrants and $890,000 was allocated to a
     beneficial conversion feature that allows investors to convert at 90% of
     the market price of the common stock starting 122 days after issuance.
     These two allocated amounts have been credited to additional paid in
     capital and will be treated as issuance discounts. Accordingly, the
     $890,000 was amortized over the first 122 days and the $390,000 will be
     amortized over three years, in the form of additional noncash preferred
     dividends.

     During fiscal 1998, the holders of the Series E Preferred converted
     approximately $1.6 million, including accrued dividends, into approximately
     320,000 shares of common stock. Through May 10 of fiscal 1999, the holders
     of the Series E Preferred converted an additional approximately $1.5
     million, including accrued dividends, into approximately 825,000 shares of
     common stock. As discussed more fully in Note 2 above, the Company has
     agreed to repurchase up to 3,180 shares of the Series E Preferred for an
     aggregate of approximately $3.6 million.


     4.    DISPOSITION OF SALES AND MARKETING DIVISION

     On October 8, 1997, the Company entered into an Asset Purchase Agreement
     (the "Agreement") to sell its sales and marketing division (the "Division")
     to Watson Laboratories, Inc. ("Watson"), a wholly owned subsidiary of
     Watson Pharmaceuticals, Inc. Under the terms of the Agreement, Watson
     assumed the Division's co-promotion agreements, acquired certain of its
     operating assets and received the right to hire approximately 70 employees
     of the Division. As consideration for these assets, the Company received
     $8.0 million from Watson in October 1998 with up to $1.0 million more due
     to the Company if Watson retained, as of specified future dates, certain
     percentages of the employees from the Division. Pursuant to this
     contingency arrangement, Watson paid CoCensys $750,000 in April 1998 and
     $250,000 in October 1998.

     In order to satisfy certain provisions of the Agreement, the Company
     entered into, and transferred to Watson, agreements with two pharmaceutical
     companies for marketing rights and NDAs for two drugs with an aggregate
     cost of $2.0 million. Of this total, the Company paid $1.0 million in
     October 1997. Additionally, $1.0 million of the $8.0 million of proceeds
     from the sale of the Division was placed into an escrow account to satisfy
     the future obligations related to these acquisitions. In October 1998, the
     Company made the first $500,000 payment against this obligation and will
     make the final $500,000 payment in October 1999.

                                       9


<PAGE>



                                 COCENSYS, INC.
                          (A development stage company)

                     NOTES TO CONDENSED FINANCIAL STATEMENTS


     5.    DEVELOPMENT AND COMMERCIALIZATION AGREEMENT WITH WYETH-AYERST 
           LABORATORIES

     In May 1997, the Company entered into a development and commercialization
     agreement for Co 2-6749, its lead anxiolytic compound, with the
     Wyeth-Ayerst Laboratories Division ("Wyeth-Ayerst") of American Home
     Products Corporation ("AHP"). Under the terms of the agreement,
     Wyeth-Ayerst paid CoCensys a non-refundable $5.0 million licensing fee and
     AHP paid $5.0 million to purchase 100,000 shares of the Company's Series C
     Convertible Preferred Stock. Additionally, CoCensys will receive specified
     milestone payments dependent upon the achievement of key development events
     and $750,000 per quarter for two years, with an option to extend for a
     third year, to identify back-up compounds. However, if Co 2-6749 fails to
     meet certain criteria, and the back-up program fails to produce a back-up
     compound that meets other certain criteria, Wyeth-Ayerst has the right to
     terminate the back-up program and require CoCensys to reimburse it for a
     portion of the back-up funding. As of March 31, 1999, the Company had $3.0
     million recorded as deferred revenue related to the Wyeth-Ayerst back-up
     program; this deferred amount will be recognized as revenue when Co 2-6749
     or a back-up compound meets applicable criteria for acceptance by
     Wyeth-Ayerst.

     Wyeth-Ayerst is responsible for the costs associated with developing Co
     2-6749. Wyeth-Ayerst and the Company will co-promote any resulting product
     in certain market segments in the United States, while Wyeth-Ayerst will
     have rights to develop, register and market any drugs derived from the
     collaboration in the rest of the world, subject to royalty obligations to
     CoCensys. The preferred stock is convertible into common stock after May
     12, 1999, at the election of Wyeth-Ayerst, at a conversion price based on
     the market price of the common stock at that time, subject to a minimum
     conversion price of $35.00 per share.

     6.    MARKETING AND DEVELOPMENT COLLABORATION WITH WARNER-LAMBERT COMPANY

     In October 1995, the Company entered into a collaboration with
     Warner-Lambert Company ("Warner-Lambert") and its Parke-Davis division to
     develop and market therapeutic drugs for the treatment of certain central
     nervous system disorders. This arrangement consisted of the Research,
     Development and Marketing Collaboration Agreement (the "1995 Warner
     Collaboration Agreement")` for the worldwide development and
     commercialization of a new class of neurological and psychiatric drugs,
     termed subtype selective NMDA receptor antagonists ("SSNRAs"), and the
     Parke-Davis Promotion Agreement. Pursuant to the Parke-Davis Promotion
     Agreement, the Company co-promoted Parke-Davis' central nervous system
     drug, Cognex-Registered Trademark-, until June 1997 wheN Parke-Davis 
     terminated the co-promotion agreement. In October 1997, the 1995 Warner 
     Collaboration Agreement was amended, restated and extended until October 
     1999 (the "1997 Amended Warner Collaboration Agreement").

     Under the 1997 Amended Warner Collaboration Agreement, the parties are
     obligated to devote the time of a specified number of scientists to conduct
     research directed toward the identification of SSNRAs as drug development
     candidates. Warner-Lambert is obligated to pay for all costs to develop any
     development candidates arising from the agreement, subject to CoCensys'
     right to re-engage in the development by funding a percentage of the
     development costs. Warner-Lambert is also obligated to 


                                       10


<PAGE>


                                 COCENSYS, INC.
                          (A development stage company)

                     NOTES TO CONDENSED FINANCIAL STATEMENTS


     pay for all costs to promote any product developed under the 1997 Amended
     Warner Collaboration Agreement, subject to CoCensys' right to co-promote in
     the United States (including sharing promotion costs) any product for which
     CoCensys re-engaged development rights. CoCensys will receive royalties on
     sales of any products developed under the 1997 Amended Warner Collaboration
     Agreement, at rates based in part upon whether CoCensys co-developed and
     co-promoted such product. In addition, upon achievement of certain clinical
     development and regulatory milestones, Warner-Lambert will make
     nonrefundable milestone payments to CoCensys.

     Pursuant to the 1995 Warner Collaboration Agreement, Warner-Lambert
     purchased $2.0 million of CoCensys Common Stock in October 1995 and an
     additional $2.0 million of CoCensys Common Stock in March 1997. Pursuant to
     the 1997 Amended Warner Collaboration Agreement extension of the Warner
     Collaboration Agreement, Warner-Lambert purchased 14,286 shares of the
     Company's Series C Convertible Preferred Stock for $1.0 million in October
     1997 and an additional 85,714 shares of the same series of convertible
     preferred stock for $6.0 million in January 1998.

     As part of the extension of the Warner Collaboration Agreement in October
     1997, the companies agreed to expand the collaboration to allow the
     companies to analyze and consider for collaborative development each
     company's AMPA modulator technologies. In January 1998, the parties agreed
     to return the focus of their collaboration agreement solely to SSNRAs. Each
     party retained all rights to its respective AMPA modulator technology. In
     addition, as part of removal of the AMPA modulator technology from the
     Warner Collaboration Agreement, the Company is obligated to pay to
     Warner-Lambert $1 million on December 31, 1999. The due date for this
     amount, which originally was January 1999, has been extended to December
     31, 1999 and is payable in common stock (based on the then current stock
     price) or cash at the election of Warner-Lambert and is secured by the
     Company's assets.

     7. DEVELOPMENT AND COMMERCIALIZATION AGREEMENT WITH G.D. SEARLE & CO.

     In May 1996, the Company entered into an agreement with G.D. Searle & Co.
     ("Searle") to co-develop and co-promote CCD 3693, the Company's lead
     compound for the treatment of insomnia along with its back-up compounds.
     Pursuant to the agreement, Searle paid a $3.0 million license fee and
     purchased 100,000 shares of the Company's Series B Convertible Preferred
     Stock for $7.0 million. The license fee was recognized as co-development
     revenue in 1996. In May 1998, the Series B Convertible Preferred Stock
     converted, in accordance with its terms, into 200,000 shares of common
     stock at a conversion price of $35.00 per share.

     In July 1998, Searle notified CoCensys that it had decided not to
     participate further in the development of the Company's proprietary
     compounds for the treatment of insomnia. CoCensys intends to continue
     research and development of its compounds to treat insomnia and will seek a
     new partner for the program in the future.


                                       11

<PAGE>


                                 COCENSYS, INC.
                          (A development stage company)

                     NOTES TO CONDENSED FINANCIAL STATEMENTS


     8.    SEGMENT INFORMATION

     Historically, the Company has operated in two business segments, drug
     promotion and drug development. Promotion revenues arise from contractual
     agreements under which the Company promotes other pharmaceutical companies'
     products in return for commissions. Development revenues arise from
     contractual agreements with large pharmaceuticals companies pursuant to
     which the Company licenses various commercialization or development rights
     relating to compounds or performs research activities in exchange for
     licensing fees, milestone payments or research funding. In October 1997,
     the Company sold its sales and marketing force to Watson and ceased all
     drug promotion activities, although some residual revenue was recognized in
     the first quarter of fiscal 1998. The accounting policies of these segments
     are the same as those described in the summary of significant accounting
     policies except that interest income and certain expenses are not allocated
     to the segments. Assets allocated to the segments include only other
     current and noncurrent assets and net property and equipment.

<TABLE>
<CAPTION>

                                                                                      THREE MONTHS ENDED
                                                                                           MARCH 31,          
                                                                                      ------------------
                                                                                    1999              1998    
                                                                                -------------    -------------
     <S>                                                                        <C>              <C>          
     REVENUES FROM EXTERNAL PARTNERS
     Drug promotion segment                                                     $           -    $         540
     Drug development segment                                                             805              596
                                                                                -------------    -------------
                                                                                $         805    $       1,136
                                                                                -------------    -------------
                                                                                -------------    -------------
     OPERATING INCOME
     Drug promotion segment                                                     $           -    $         540
     Drug development segment                                                          (2,913)          (3,911)
                                                                                -------------    ------------- 
                                                                                $      (2,913)   $      (3,371)
                                                                                -------------    ------------- 
                                                                                -------------    ------------- 
     ASSETS
     Drug promotion segment                                                     $           -    $           -
     Drug development segment                                                           2,703            3,588
                                                                                -------------    -------------
                                                                                $       2,703    $       3,588
                                                                                -------------    ------------- 
                                                                                -------------    ------------- 
</TABLE>


                                       12

<PAGE>





ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL                      
         CONDITION AND RESULTS OF OPERATIONS


     EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE FOLLOWING
     DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
     UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY.
     FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE
     NOT LIMITED TO, THOSE DISCUSSED BELOW AND IN THE COMPANY'S 1998 ANNUAL
     REPORT ON FORM 10-K.


     OVERVIEW


     CoCensys, Inc. is a biopharmaceutical company dedicated to the discovery,
     development, marketing and sales of small molecule drugs to treat
     neurological and psychiatric disorders. The Company's product discovery and
     development programs are focused on the exploration of novel receptors and
     enzymes and their ligands and inhibitors through three technology
     platforms: GABAA receptor modulators named Epalons; glutamate receptor
     antagonists; and sodium channel blockers.

     Since its inception in February 1989, the Company has devoted substantially
     all of its resources to the discovery and development of
     neuropharmaceutical products for the treatment of disorders affecting the
     central nervous system. The Company has incurred losses since inception and
     expects losses to continue for the foreseeable future, primarily due to the
     expansion of programs for research and development. Operating results are
     expected to fluctuate as a result of uncertainty in the timing and amount
     of revenues to be earned from achievement of research and development
     milestones, and uncertainty in the timing and amount of expenses for
     product development, including clinical trials. As of March 31, 1999, the
     Company's accumulated deficit was approximately $119.3 million.



     RESULTS OF OPERATIONS


     The Company had no co-promotion revenues for the three-month period ended
     March 31, 1999, compared to $540,000 during the same period in fiscal 1998.
     The 1998 co-promotion revenue is attributable to a bonus for fiscal 1997
     activity that was received and recognized in March 1998. In October 1997,
     the Company sold its sales and marketing division to Watson
     Pharmaceuticals, Inc. ("Watson") and is no longer involved in
     co-promotional activities.

     The Company recognized $805,000 in co-development revenues for the
     three-month period ended March 31, 1999 compared to $596,000 for the same
     period of 1998. In the first quarter of 1999, co-development revenues were
     mainly associated with the anxiolytic backup program with Wyeth-Ayerst and
     the SSNRA (subtype-selective NMDA receptor antagonists) program with
     Warner-Lambert. In 1998, co-development revenues were solely related to the
     SSNRA program.

     Research and development expenses decreased to $2.9 million for the
     three-month period ended March 31, 1999, from $3.4 million in the first
     quarter of the prior year. This decrease reflects a lower level of external
     clinical activity in the current period compared to the same period a year
     earlier.

                                       13


<PAGE>

     Marketing, general and administrative expense decreased to $803,000 in the
     first quarter of 1999 from $1.1 million in the first quarter of 1998. The
     first quarter of the prior fiscal year had higher headcount levels
     resulting in higher compensation costs and included certain nonrecurring
     expenses associated with the formation of Cytovia, Inc., an independent
     company involved in the commercialization of patented drug screening
     technology.

     Interest income was $149,000 for the three-month period ended March 31,
     1999 compared to $202,000 for the same quarter in 1998. This decrease was
     due to lower cash and short-term investment balances in the current year
     and to a general decline in interest rates.

     Preferred dividends were $359,000 in the quarter ended March 31, 1999
     compared to $134,000 in the same quarter a year earlier. The preferred
     dividends for the first quarter of fiscal 1999 include dividends on the
     Series E convertible preferred and on the Series D convertible preferred
     issued to Warner-Lambert, whereas the first quarter of the prior year only
     includes dividends on the Series D convertible preferred.

     LIQUIDITY AND CAPITAL RESOURCES

     From its inception in February 1989 through March 31, 1999, the Company has
     financed its operations primarily through private and public offerings of
     its equity securities, raising net proceeds of approximately $102.1 million
     through sales of securities. At March 31, 1999, the Company's balances of
     cash, cash equivalents and investments totaled $9.0 million, compared to
     $12.2 million at December 31, 1998.

     As of March 31, 1998, the Company had invested $7.7 million in leasehold
     improvements, laboratory and computer equipment and office furnishings and
     equipment. The Company has financed $3.6 million of these capital additions
     through capital lease lines. In addition, the Company leases its laboratory
     and office facilities under operating leases. While additional equipment
     will be needed as the Company increases its research and development
     activities, the Company has no material commitments for the acquisition of
     property and equipment.

     On June 8, 1998, the Company issued 8,000 shares of Series E Convertible
     Preferred Stock with a stated value of $1,000 per share for an aggregate of
     $8 million in a private placement pursuant to Regulation D of the
     Securities Act of 1933, as amended. See Note 2 and 3 of the Notes to
     Financial Statements "Subsequent Events" and "Private Placement of
     Preferred Stock," above.

     Pursuant to an agreement with Watson, in October 1997, the Company sold it
     sales and marketing force, related co-promotion agreements and certain
     other assets to Watson for $8.0 million in cash with an additional $1.0
     million due to CoCensys contingent upon the occurrence of specified events.
     Of this contingent amount, Watson paid the Company $750,000 in April 1998
     and $250,000 in October 1998.

     Pursuant to the 1995 collaboration agreement with Warner-Lambert, as
     amended and extended in October 1997, Warner-Lambert is obligated to make
     certain milestone payments for each compound selected for development, as
     well as pay for its share of development costs. Under the terms of the 1995
     agreement, Warner-Lambert purchased $2.0 million of CoCensys Common Stock
     in October 

                                       14

<PAGE>

     1995 and an additional $2.0 million of CoCensys Common Stock in March 1997.
     Under the terms of the 1997 amendment, Warner-Lambert purchased preferred
     stock with a face value of $7.0 million, of which Warner-Lambert paid the
     Company $1.0 million in October 1997 and $6.0 million in January 1998. Of
     this $7.0 million in total proceeds, the Company has allocated $1.6 million
     to be recognized as co-development revenue during fiscal 1998, $4.4 million
     as preferred stock and $1.0 million as a liability (payable in cash or
     common stock at the election of Warner-Lambert) due to Warner Lambert on
     December 31, 1999. The preferred stock accrues an imputed non-cash dividend
     at 12 percent per annum until its mandatory conversion date in October
     2001.

     Pursuant to the May 1997 Development and Commercialization Agreement with
     Wyeth-Ayerst, Wyeth-Ayerst paid the Company a $5.0 million license fee and
     purchased 100,000 shares of the Company's Series C Convertible Preferred
     stock for $5.0 million. Furthermore, Wyeth-Ayerst is obligated to pay all
     development costs associated with Co 2-6749, as well as make milestone
     payments upon the occurrence of certain agreed upon events and pay the
     Company $3.0 million per year for two years to identify back-up compounds.
     However, if Co 2-6749 fails to meet certain criteria, and the back-up
     program fails to produce a back-up compound that meets other certain
     criteria, Wyeth-Ayerst has the right to terminate the back-up program and
     require CoCensys to reimburse them for a portion of the back-up funding. As
     of March 31, 1999, the Company had $3.0 million of deferred revenue
     recorded on its balance sheet related to the Wyeth-Ayerst back-up program.

     Pursuant to the Company's Development and Commercialization Agreement with
     Searle, both companies were obligated to pay a portion of the development
     costs of CCD 3693 and its back-up compounds for the U.S. market. In
     addition, Searle purchased 100,000 shares of the Company's Series B
     Convertible Preferred Stock for $7.0 million during 1996. In May 1998, the
     preferred stock converted, in accordance with its terms, into 200,000
     shares of common stock at a conversion price of $35.00 per share. In July
     1998, Searle notified CoCensys that it had decided not to participate
     further in the development of the Company's proprietary compounds for the
     treatment of insomnia. CoCensys intends to continue research and
     development of its compounds to treat insomnia and will consider seeking a
     new partner for the program in the future.

     CoCensys' operations to date have consumed substantial amounts of cash.
     While the Company's cash forecasts for the twelve months ending December
     31, 1999, project a positive cash balance, certain cash inflows included in
     these forecasts are estimates and are not guaranteed. Should the Company
     not receive these anticipated payments, or should the timing or amount of
     these payments differ substantially from the forecasted amounts, or should
     the Company incur expenses in excess of those currently forecasted, the
     ability of the Company to continue funding its operations could be
     jeopardized.

     Given the context of these financial uncertainties, the restructuring plan
     announced on April, 27, 1999, is intended to reduce the Company's cash burn
     rate and re-focus the Company on drug discovery and away from drug
     development. The restructuring resulted in the termination of 34 employees
     in the development and administration areas and should produce annualized
     operating expense savings of $3.5 million. Additionally, the Company will
     reduce the amount of external clinical trials that it conducts on its own
     behalf. In the future, clinical development will be primarily paid for and
     performed by corporate partners after licensing agreements have been
     signed.

                                       15

<PAGE>

     The Company's future capital requirements will depend on many factors,
     including the progress of the Company's research and development programs,
     the scope and results of preclinical testing and clinical trials, the time
     and costs involved in obtaining regulatory approvals, the rate of
     technological advances, determinations as to the commercial potential of
     the Company's products under development, the status of competitive
     products, the establishment of third-party manufacturing arrangements and
     the establishment of additional collaborative relationships. There are no
     assurances that the Company will available to it the substantial capital
     resources necessary to continue product development and other Company
     operations.

     IMPACT OF YEAR 2000

     Some of the Company's older computer programs were written using two digits
     rather than four to define the applicable year. As a result, those computer
     programs recognize a date using "00" as the year 1900 rather than the year
     2000. This could cause a system failure or miscalculations causing
     disruptions of operations, including a temporary inability to process
     transactions or engage in normal business activities.

     The Company has developed a plan to address the Year 2000 issues. The plan
     is segregated into four phases:

                  Information collection.
                  Risk assessment and testing of mission critical systems.
                  Remediation.
                  Monitoring and contingency planning

     The Company has completed the first two phases of the project and has
     tested, upgraded or developed plans to upgrade all individual software and
     hardware applications that fall within the mission critical category. All
     of the Company's major software applications and hardware systems are
     purchased from major vendors and the Company performs little or no
     customizations to those applications and systems. The Company's major
     software providers have attested to Year 2000 compliance. The Company has
     reviewed other equipment for embedded technologies which may be Year 2000
     susceptible and has already upgraded or developed plans to upgrade all
     mission critical systems. The Company has spent less than $50,000 to date
     on hardware and software upgrades to ensure Year 2000 compliance and it
     anticipates that further upgrades will cost less than $100,000, most of
     which will be spent acquiring a Year 2000 compliant telephone system. The
     funds for these upgrades will come from current cash or new capital lease
     lines. The Company expects to be fully Year 2000 compliant by June 1999. A
     contingency plan will also be developed by that date.


     RISK FACTORS

     SOME OF THE STATEMENTS IN THIS 10-Q ARE FORWARD-LOOKING STATEMENTS. THESE
     STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES, AND OTHER
     FACTORS THAT MAY CAUSE OUR RESULTS, LEVEL OF ACTIVITY, PERFORMANCE OR
     ACHIEVEMENTS TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, LEVEL OF
     ACTIVITY, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH
     FORWARD-LOOKING STATEMENTS. 


                                       16

<PAGE>

     THESE FACTORS INCLUDE, AMONG OTHERS, THOSE DISCUSSED BELOW AND THOSE SET
     FORTH IN OUR MOST RECENT ANNUAL REPORT ON FORM 10-K FILED WITH THE SEC.

     IN SOME CASES, YOU CAN IDENTIFY FORWARD-LOOKING STATEMENTS BY TERMINOLOGY
     SUCH AS "MAY," "WILL," "SHOULD," "COULD," "EXPECTS," "PLANS,"
     "ANTICIPATES," "BELIEVES," "ESTIMATES," "PREDICTS," "POTENTIAL," OR
     "CONTINUE" OR THE NEGATIVE OF SUCH TERMS OR OTHER COMPARABLE TERMINOLOGY.

     ALTHOUGH WE BELIEVE THAT THE EXPECTATIONS REFLECTED IN THE FORWARD-LOOKING
     STATEMENTS ARE REASONABLE, WE CANNOT GUARANTEE FUTURE RESULTS, LEVEL OF
     ACTIVITY, PERFORMANCE OR ACHIEVEMENTS. WE DO NOT ASSUME RESPONSIBILITY FOR
     THE ACCURACY AND COMPLETENESS OF THE FORWARD-LOOKING STATEMENTS. WE DO NOT
     INTEND TO UPDATE THIS 10-Q AFTER IT IS FILED SO THAT THE FORWARD-LOOKING
     STATEMENTS CONFORM TO ACTUAL RESULTS.

     OUR PRODUCTS ARE IN AN EARLY STAGE OF DEVELOPMENT AND THERE IS A HIGH RISK
     OF FAILURE.

     We have no products that have received regulatory approval for commercial
     sale. All of our drug candidates are in the early stages of development,
     and our technology is unproven. The physiology of brain disorders is highly
     complex, and the causes of these disorders are not fully known. We will
     have to conduct significant research and pre-clinical (animal) and clinical
     (human) tests that demonstrate that our products are safe and effective
     before we can file applications for approval with the United States Food
     and Drug Administration and foreign regulatory authorities. Any of our
     products may fail in the testing phase or may fail to attain market
     acceptance. Competitors may develop superior products. Third parties may
     have proprietary rights that preclude us from marketing our products. If
     research and testing is not successful, our products are not commercially
     viable or we cannot compete effectively, our business, financial condition
     and results of operations will be materially adversely affected.

     THE OUTCOME OF CLINICAL DEVELOPMENT IS HIGHLY UNCERTAIN.

     Clinical trials, including pre-clinical testing, are lengthy, expensive and
     uncertain. Failure can occur at any stage. We have no products that have
     successfully completed all necessary clinical testing. Three of our drug
     candidates have undergone some clinical testing, and three currently are in
     pre-clinical testing. We do not know whether the FDA will allow us to begin
     human testing of our drug candidates that have not been tested in humans or
     to continue human testing of those candidates that have undergone some
     human testing. We cannot rely on interim results of trials to predict their
     final results, nor can we count on acceptable results at early stages of
     testing to be repeated at later stages. Any of our drug candidates could
     have undesirable or unintended side effects or other problems that may
     prevent or limit future testing, approval or use of the product.

     We have experienced safety and efficacy problems with drug candidates. In a
     clinical trial of licostinel, our drug candidate to treat stroke, crystals
     of what we presume to be licostinel occurred in the urine of some subjects,
     a potential dose-limiting side effect. Although the crystal formation
     occurred only in subjects with at least four times the blood plasma level
     of licostinel that was necessary for the drug to be effective in animals,
     our development partner, Novartis Pharma A.G., ceased its participation in
     the development of licostinel. In addition, in October 1998 we announced

                                       17


<PAGE>

     that ganaxolone, our drug candidate to treat migraine and epilepsy, was not
     effective in providing relief to patients suffering migraine headaches. The
     results of a clinical trial in which 325 migraine patients received either
     ganaxolone or a placebo drug did not show a statistically significant
     difference in migraine headache relief between those patients receiving
     ganaxolone and those patients receiving the placebo.

     We cannot assure you that any of our clinical trials will be completed
     successfully or at all, or that they will result in marketable products.
     Any significant delay or failure in the clinical development of our
     products will materially adversely affect our business, financial condition
     and results of operations.

     WE HAVE NEVER BEEN PROFITABLE, AND WE EXPECT TO CONTINUE TO GENERATE
     SIGNIFICANT LOSSES.

     Since we started business in 1989, we have spent over $177 million
     researching and developing our drug candidates. We have raised this money
     by selling stock in CoCensys to private investors and the public, licensing
     drugs and technologies to other companies and selling assets that we have
     developed at CoCensys. We have never been profitable and, through March 31,
     1999, we have incurred a cumulative deficit of approximately $119.3
     million.

     We expect to continue to incur substantial and increasing losses over the
     next several years as we continue our research and development programs. To
     achieve and sustain profitable operations in the long term, we must
     successfully develop, obtain regulatory approval for, manufacture,
     introduce, market and sell drugs from our technologies. Failure to do so
     will materially adversely affect our business, financial conditions and
     results of operations.

     WE WILL NEED SIGNIFICANT ADDITIONAL FUNDS.

     Drug development is capital intensive and requires significant funding
     commitments. We will need a substantial amount of funds to continue our
     operations both in the near term and over the next several years. If we do
     not raise additional funds by the end of 1999, we will be forced to curtail
     our operations. Our cash needs beyond 1999 will vary depending on a number
     of factors, including the following:

        -        the size and progress of our research and development programs;
        -        the results of our animal and human testing of our drugs;
        -        the time and costs of obtaining regulatory approvals for our 
                 drugs (if approvals can be achieved); 
        -        how good our drugs are compared to other drugs on the market 
                 that treat the same disorders; 
        -        the time, costs and success of establishing sales and marketing
                 capabilities; and 
        -        the time, costs and success of establishing manufacturing 
                 capabilities.

     We do not know if we will be able to raise funds on terms that are
     acceptable to us. If we sell additional stock, you may experience
     substantial dilution. If we raise cash through licensing additional drugs
     and technologies to collaboration partners, we will be required to
     relinquish rights to some of our drugs and technologies.
                                       18


<PAGE>

     If we cannot raise enough cash to fund our operations, we may be forced to
     delay, reduce the scope of or eliminate one or more of our research or
     development programs. We may have to cease all operations if we are not
     successful in obtaining funds.

     WE DEPEND ON THIRD PARTIES TO FUND OUR DRUG DEVELOPMENT.

     In order to fund the development, clinical testing, manufacturing and
     commercialization of our products, we have entered into various
     collaborations with corporate partners, licensors, licensees and others.
     Currently, we are a party to a collaboration agreement with Warner-Lambert
     Company for research and development of subtype-selective NMDA receptor
     antagonists and with Wyeth-Ayerst Laboratories, a division of American Home
     Products Corporation, for the development of epalons to treat anxiety.
     Under each agreement, we depend on the collaboration partner to provide the
     funding to develop drug candidates for potential approval and
     commercialization.

     WE MAY BE UNABLE TO FULFILL OUR OBLIGATIONS UNDER THE COLLABORATION
     AGREEMENTS.

     We do not know if we will have the substantial resources needed to fulfill
     our research and development obligations under each collaboration
     agreement. If we cannot fulfill our obligations, we may be required to
     terminate early one or both of the agreements and forfeit many of our
     rights under the agreements. In particular, our collaboration agreement
     with Wyeth-Ayerst provides that if the lead compound under development to
     treat anxiety fails to meet certain criteria, and if at that time we have
     not yet produced a back-up compound that meets another set of criteria,
     Wyeth-Ayerst can demand repayment of a portion of the funds paid to us
     under our collaboration agreement. Currently, the amount that we may be
     required to pay back could be as much as $3 million, in cash or common
     stock. Although we hope to fulfill our obligations under the collaboration
     agreement so that Wyeth-Ayerst will not be able to demand repayment, we
     cannot assure we will be able to do so.

     EITHER OF OUR COLLABORATION PARTNERS MAY CANCEL ITS COLLABORATION AGREEMENT
     WITH US AT ANY TIME.

     Each of our collaboration agreements allows either CoCensys or our
     collaboration partner to voluntarily terminate its participation in the
     collaboration at any time. If either of our current collaboration partners
     terminates its agreement with us, that partner would lose its right to
     further develop or sell drugs under that collaboration; however, that
     partner also no longer would be required to fund development of those
     drugs. If either Warner-Lambert or Wyeth-Ayerst cancels its agreement with
     us, we would have to find a new collaboration partner to pay for further
     development of our drug candidates. We cannot assure you that we would be
     able to do so. Collaboration partners have, in the past, terminated their
     agreements with us. In 1994, we entered into a development agreement with
     Novartis Pharma A.G. to develop licostinel to treat stroke patients. In
     1997, Novartis terminated its participation in the development agreement
     based on side effects seen in human trials of licostinel. Also, in 1996, we
     entered into an agreement with G.D. Searle & Co. to develop epalons to
     treat insomnia. In July 1998, Searle terminated its participation in that
     agreement, stating that the program no longer met its needs in light of its
     entire product pipeline. Since termination of those two agreements, we have
     not yet found new collaboration partners to develop those drugs, and we do
     not have the money to complete development of those drugs. We do not know
     if we will be able to find new collaboration partners for those drugs.

                                       19


<PAGE>

     WE MAY BE UNABLE TO ENTER INTO COLLABORATION AGREEMENTS IN THE FUTURE.

     We plan to continue to enter into collaboration agreements with
     pharmaceutical companies to develop, market and sell our drug candidates.
     We do not know if we will be able to find additional potential partners
     interested in developing our drugs. Also, even if we find potential
     partners interested in our drugs, we do not know if we will be able to
     enter into collaboration agreements with these partners on terms and
     conditions that we find acceptable. Even if we do enter into additional
     collaboration agreements, we do not know if the collaborations will
     successfully develop drugs for marketing and sale. If we are unable to
     secure collaboration partners, we will not be able to develop our drug
     candidates.

     OUR STOCK PRICE IS VERY VOLATILE.

     The securities markets have from time to time experienced significant price
     and volume fluctuations that may be unrelated to the operating performance
     of particular companies. In addition, the market prices of the common stock
     of many publicly traded biopharmaceutical companies, including ours, have
     in the past been, and can in the future be expected to be, especially
     volatile. Our stock price may fluctuate greatly as a result of a number of
     factors, including:

         -        announcements of technological innovations or new products by 
                  us or by our competitors;
         -        developments or disputes concerning patents or proprietary 
                  rights;
         -        publicity regarding actual or potential medical results  
                  relating to drug products that we or our competitors are
                  developing;
         -        regulatory developments in both the United States and foreign 
                  countries;
         -        public concern as to the safety of biotechnology products; and
         -        economic and other external factors, as well as period-to-
                  period fluctuations in our financial results.

     THE SALE OF A LARGE NUMBER OF SHARES OF OUR COMMON STOCK MAY FURTHER
     DEPRESS OUR STOCK PRICE.

     The sale of a large number of shares of our common stock in the public
     could depress the market price of our common stock. Substantially all of
     the outstanding shares of our common stock may be sold at any time in the
     public markets. Approximately 650,000 million freely tradable additional
     shares may be issued on exercise of vested options to purchase CoCensys
     stock. Current and former employees, consultants, officers and directors of
     CoCensys hold these options.

     We may be required to issue millions of additional shares of CoCensys
     common stock upon conversion of Series E Convertible Preferred Stock. As of
     May 7, 1999, 3,444 shares of our Series E Convertible Preferred Stock
     remained issued and outstanding. Each share of the Series E Convertible
     Preferred Stock is convertible into shares of CoCensys common stock at
     discount to the current market price of our common stock. If converted on
     May 7, 1999, based on the then-applicable conversion price of $0.52 per
     share, the remaining Series E Convertible Preferred Stock would have been
     convertible into approximately 7.1 million additional shares of CoCensys
     common stock. The number of shares of common stock that may be issued could
     prove to be significantly 


                                       20

<PAGE>

     greater if the market price of our common stock declines. CoCensys
     stockholders could experience substantial dilution from issuance of
     additional common stock on conversion of the Series E Convertible Preferred
     Stock.

     In addition, we may be required to issue additional shares of CoCensys
     common stock on fulfillment of our obligation to Warner-Lambert Company.
     Under our collaboration agreement with Warner-Lambert, we owe
     Warner-Lambert $1 million on December 31, 1999. The $1 million is payable
     in common stock or cash, at the election of Warner-Lambert. If the amount
     had been paid on April 30, 1999, and Warner-Lambert elected to receive the
     payment in stock, we would have had to issue to Warner-Lambert
     approximately 1.2 million shares of common stock. The number of shares of
     common stock that may be issued could prove to be significantly greater if
     the market price of our common stock declines. CoCensys stockholders could
     experience substantial dilution from issuance of additional common stock in
     satisfaction of our obligation to Warner-Lambert.

     FAILURE TO MAINTAIN OUR LISTING ON THE NASDAQ NATIONAL MARKET MAY ADVERSELY
     AFFECT THE LIQUIDITY OF OUR COMMON STOCK AND OUR FINANCIAL CONDITION.

     Our common stock is traded on the Nasdaq National Market under the symbol
     "COCN." In order to maintain our listing on the Nasdaq National Market, we
     must meet a number of listing requirements established by Nasdaq.
     Currently, we meet all Nasdaq National Market requirements other than the
     minimum bid price and the market value of publicly-held shares. Generally,
     we must maintain a minimum bid price of $1.00 per share; however, our bid
     price is significantly below $1.00 per share and has been below $1.00 per
     share since October 1998. In addition, the market value of our common stock
     shares held by stockholders who are not affiliated with CoCensys must be at
     least $5 million; currently, we are below that amount.

     On December 1, 1998, Nasdaq informed us that our common stock would be
     delisted on March 1, 1999 if we failed to have a closing bid price of at
     least $1.00 per share for ten consecutive days on or before February 28,
     1999. We have been unable to achieve that closing bid price; however, we
     applied for a hearing before Nasdaq to discuss our delisting, which was
     held April 29, 1999. Nasdaq has not informed us as to the result of that
     hearing.

     If we cannot maintain continued listing of our common stock on the Nasdaq
     National Market or the Nasdaq SmallCap Market, our common stock could trade
     on the OTC Bulletin Board or in the over-the-counter market in what is
     commonly referred to as the "pink sheets." If this occurs, a stockholder
     will find it more difficult to dispose of the securities or to obtain
     accurate quotations as to the price of the securities. In addition, our
     common stock could become subject to the "penny stock" regulations of the
     SEC, which impose additional restrictions on broker-dealers who trade in
     such stock and could severely limit the liquidity of our common stock. If
     we do not maintain our listing on the Nasdaq National Market or Nasdaq
     SmallCap, we may be required to redeem our Series E Convertible Preferred
     Stock. Redemption of the Series E Convertible Preferred Stock would
     significantly deplete our cash reserves and materially adversely affect our
     operations and financial condition.


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<PAGE>


                                 COCENSYS, INC.


PART II. OTHER INFORMATION

     ITEM 6.      EXHIBITS AND REPORTS ON FORM 8-K


     (a)   EXHIBITS

      10.1 Promissory Note dated January 4, 1999, made by the Company in favor
           of Warner-Lambert Company

      27.1 Financial Data Schedule

     (b)   REPORTS ON FORM 8-K.

     The Company did not file any current reports on Form 8-K for the quarterly
     period ended March 31, 1999. Subsequent to quarter end, the Company filed
     the following documents:

     (i) The Company filed a current report on Form 8-K, dated April 8, 1999,
     reporting that Nasdaq had halted trading of the Company's common stock on
     the Nasdaq National Market pending receipt and review of certain
     information.

     (ii)The Company filed a current report on Form 8-K, dated April 15, 1999,
     reporting that the Company announced a one share for eight shares reverse
     split of its common stock effective April 15, 1999.




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<PAGE>


                                 COCENSYS, INC.


                                   SIGNATURES




Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed in its behalf by the
undersigned thereunto duly authorized.





                                                                  CoCensys, Inc.

<TABLE>
<CAPTION>





<S>             <C>                                      <C>
Date:           May 10, 1999                             By:  /s/      F. Richard Nichol, Ph.D.
                -------------------                           ----------------------------------------------------
                                                                            F. Richard Nichol, Ph.D.
                                                                            Chairman, President and
                                                                            Chief Executive Officer
                                                                         (PRINCIPAL EXECUTIVE OFFICER)


Date:           May 10, 1999                             By:  /s/      Robert R. Holmen
                -------------------                           ----------------------------------------------------
                                                                               Robert R. Holmen
                                                                      Vice President and General Counsel
                                                                         (PRINCIPAL FINANCIAL OFFICER)


Date:           May 10, 1999                             By:  /s/      Thomas B. Miller
                -------------------                           ----------------------------------------------------
                                                                               Thomas B. Miller
                                                                      Director of Finance and Controller
                                                                        (PRINCIPAL ACCOUNTING OFFICER)
</TABLE>



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