FORM 10Q
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934

    For the quarterly period ended September 30, 1998
                                    

                         Commission file number 0-16005

                           Unigene Laboratories, Inc.
             -----------------------------------------------------
             (Exact name of registrant as specified in its charter)

           Delaware                                         22-2328609
-------------------------------                         -------------------
(State or other jurisdiction of                          (I.R.S. Employer
 incorporation or organization)                         Identification No.)

110 Little Falls Road, Fairfield, New Jersey                  07004
--------------------------------------------                ---------
(Address of principal executive offices)                    (Zip Code)

Registrant's telephone number, including area code: (973) 882-0860
                                                     -------------

--------------------------------------------------------------------------------
(Former  name,  former  address and former  fiscal year,  if changed  since last
report.)

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 [  ]

                      APPLICABLE ONLY TO CORPORATE ISSUERS

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

Common Stock, $.01 Par Value - 38,928,698 shares as of November 1, 1998
<PAGE>
                                      INDEX


                           UNIGENE LABORATORIES, INC.




PART I.  FINANCIAL INFORMATION                                           

Item 1. Financial Statements (Unaudited)
               
         Condensed balance sheets- September 30, 1998 and December 31, 1997

         Condensed statements of operations-  Three months and nine months ended
               September 30, 1998 and 1997

         Condensed  statements  of cash flows- Nine months ended  September  30,
               1998 and 1997

         Notes to condensed financial statements- September 30, 1998

Item 2. Management's Discussion and Analysis of Financial
        Condition and Results of Operations                                  


PART II. OTHER INFORMATION

Item 2.  Changes in Securities and Use of Proceeds                       


Item 6.  Exhibits and Reports on Form 8-K                                


SIGNATURES                                                               
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 1.   Financial Statements
<TABLE>
<CAPTION>
                                    UNIGENE LABORATORIES, INC.
                                     CONDENSED BALANCE SHEETS

                                                                     Sept. 30           Dec. 31
                                                                        1998              1997
                                                                   -------------     ------------
                                                                    (Unaudited) 
<S>                                                                <C>               <C>         
ASSETS
Current assets:
    Cash and cash equivalents ................................     $  3,343,554      $  2,126,327
    Prepaid expenses and other current assets ................          650,644           834,245
                                                                   ------------      ------------
         Total current assets ................................        3,994,198         2,960,572

Property, plant and equipment-net
    of accumulated depreciation and amortization .............        8,427,456         9,298,445
Patents and other assets .....................................        1,733,655         1,432,883
                                                                   ------------      ------------
                                                                   $ 14,155,309      $ 13,691,900
                                                                   ============      ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Accounts payable .........................................     $  1,386,293      $  1,041,529
    Accrued expenses .........................................          912,455           999,212
    Notes payable - stockholders .............................          385,000           610,000
                                                                   ------------      ------------
  Total current liabilities ..................................        2,683,748         2,650,741

Note payable - stockholders ..................................          655,000           655,000
5% convertible debentures (Note B) ...........................        4,000,000              --
9.5% convertible debentures ..................................          502,694           502,694
10% convertible debentures ...................................             --             450,000

Stockholders' equity:
    Common stock-par value $.01 per share;
       authorized 60,000,000 shares, issued
       38,935,988 shares in 1998 and 38,517,722 shares in 1997          389,360           385,177
    Additional paid-in capital ...............................       63,972,600        63,499,439
    Accumulated deficit ......................................      (58,047,062)      (54,450,120)
    Less: Treasury stock, at cost, 7,290 shares ..............           (1,031)           (1,031)
                                                                   ------------      ------------
         Total stockholders' equity ..........................        6,313,867         9,433,465
                                                                   ------------      ------------
                                                                   $ 14,155,309      $ 13,691,900
                                                                   ============      ============
</TABLE>

See notes to condensed financial statements.
<PAGE>
<TABLE>
<CAPTION>
                                          UNIGENE LABORATORIES, INC.
                                      CONDENSED STATEMENTS OF OPERATIONS
                                                  (Unaudited)



                                                 Three Months Ended                 Nine Months Ended
                                                    September 30                       September 30
                                          ------------------------------      ------------------------------
                                               1998              1997              1998              1997
                                          ------------      ------------      ------------      ------------
<S>                                       <C>               <C>               <C>               <C>         
Licensing and other revenue .........     $  3,008,795      $  3,000,346      $  5,020,652      $  3,001,830
                                          ------------      ------------      ------------      ------------
Operating expenses:

    Research and development ........        2,384,413         2,585,444         6,791,085         6,988,975
    Settlement of contractual right .             --                --                --           1,669,063
    General and administrative ......          494,585           519,940         1,552,113         1,514,537
                                          ------------      ------------      ------------      ------------

                                             2,878,998         3,105,384         8,343,198        10,172,575
                                          ------------      ------------      ------------      ------------

Operating income (loss) .............          129,797          (105,038)       (3,322,546)       (7,170,745)
                                          ------------      ------------      ------------      ------------

Other income (expense):
   Interest/other income ............           37,290            67,394            81,384           154,801
   Interest expense .................         (103,692)          (59,643)         (211,970)         (190,943)
                                          ------------      ------------      ------------      ------------

                                               (66,402)            7,751          (130,586)          (36,142)
                                          ------------      ------------      ------------      ------------

Income (loss) before
   extraordinary item ...............           63,395           (97,287)       (3,453,132)       (7,206,887)

Extraordinary item-loss
   on extinguishment of debt (Note D)         (143,810)             --            (143,810)             --
                                          ------------      ------------      ------------      ------------

Net loss ............................     $    (80,415)     $    (97,287)     $ (3,596,942)     $ (7,206,887)
                                          ============      ============      ============      ============

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                          UNIGENE LABORATORIES, INC.
                                      CONDENSED STATEMENTS OF OPERATIONS
                                                  (Unaudited)
                                                  (continued)



                                                 Three Months Ended                 Nine Months Ended
                                                    September 30                       September 30
                                          ------------------------------      ------------------------------
                                               1998              1997              1998              1997
                                          ------------      ------------      ------------      ------------
<S>                                       <C>               <C>               <C>               <C>         
Earnings per share:
    Basic:
     Income (loss) before
       extraordinary item ...........     $       --        $       --        $       (.09)     $       (.19)
     Extraordinary item .............             --                --                --                --
                                          ------------      ------------      ------------      ------------
     Net loss .......................     $       --        $       --        $       (.09)     $       (.19)
                                          ============      ============      ============      ============
    Diluted:
     Income (loss) before
       extraordinary item ...........     $       --        $       --        $       (.09)     $       (.19)
     Extraordinary item .............             --                --                --                --
                                          ------------      ------------      ------------      ------------
     Net loss .......................     $       --        $       --        $       (.09)     $       (.19)
                                          ============      ============      ============      ============
Weighted average number of shares
 outstanding ........................       38,647,682        37,934,674        38,562,591        37,041,158
                                          ============      ============      ============      ============
</TABLE>
See notes to condensed financial statements.
<PAGE>
<TABLE>
<CAPTION>
                                          UNIGENE LABORATORIES, INC.
                                      CONDENSED STATEMENTS OF CASH FLOWS
                                                  (Unaudited)



                                                                                      Nine Months Ended
                                                                                         September 30
                                                                              -------------------------------
                                                                                  1998                1997
                                                                              -----------         -----------
<S>                                                                           <C>                 <C>         
Net cash used for operating activities ...............................        $(2,085,805)        $(4,246,738)
                                                                              -----------         -----------
Investing activities:

    Purchase of equipment and furniture ..............................           (261,927)           (343,143)
    Increase in patents and other assets .............................           (122,474)            (92,224)
    Construction of leasehold improvements ...........................             (5,284)            (18,298)
                                                                              -----------         -----------
                                                                                 (389,685)           (453,665)
                                                                              -----------         -----------
Financing activities:

    Issuance of debt, net of related expenses ........................          3,751,919                --
    Sales of stock, net of related expenses ..........................               --             2,936,895
    Exercise of stock options and warrants ...........................             47,969           1,471,260
    Redemption of convertible debentures .............................           (107,171)               --
                                                                              -----------         -----------
                                                                                3,692,717           4,408,155
                                                                              -----------         -----------

Net increase (decrease) in cash and cash equivalents .................          1,217,227            (292,248)

Cash and cash equivalents at beginning of year .......................          2,126,327           4,491,386
                                                                              -----------         -----------
Cash and cash equivalents at end of period ...........................        $ 3,343,554         $ 4,199,138
                                                                              ===========         ===========
Supplemental cash flow information:

Conversion of convertible debentures and
   accrued interest, net of related offering expenses
   into common stock .................................................        $   204,375         $ 1,181,136

Conversion of notes payable - stockholders into common stock .........        $   225,000         $   200,000

Interest paid ........................................................        $    43,455         $    48,415


</TABLE>
See notes to condensed financial statements.
<PAGE>
                           UNIGENE LABORATORIES, INC.
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1998

NOTE A-BASIS OF PRESENTATION

The accompanying  unaudited condensed financial statements have been prepared in
accordance with generally accepted  accounting  principles for interim financial
information and with the  instructions to Form 10-Q and Article 10 of Regulation
S-X.  Accordingly,  they do not include  all of the  information  and  footnotes
required by generally  accepted  accounting  principles  for complete  financial
statements.  In the opinion of management,  all adjustments considered necessary
for a fair presentation have been included. Operating results for the nine month
period ended  September 30, 1998 are not  necessarily  indicative of the results
that  may be  expected  for the  year  ended  December  31,  1998.  For  further
information,  please refer to the Company's  financial  statements and footnotes
thereto  included in the Company's annual report on Form 10-K for the year ended
December 31, 1997.

NOTE B - DEBT FINANCING

In June 1998,  the  Company  completed a private  placement  of $4 million of 5%
Convertible Debentures (the "5% Debentures").  The Company received net proceeds
of approximately $3.75 million as a result of this placement.  The 5% Debentures
mature  December 31, 2001.  Interest on the 5% Debentures is payable in cash or,
at the option of the Company, in Common Stock. Beginning January 1, 1999, the 5%
Debentures  are  convertible  into (i) Common Stock at a  conversion  price (the
"Conversion Price") equal to the lower of (a) 110% of the average of the closing
bid prices of the  Common  Stock on the Nasdaq  Stock  Market  during the fourth
quarter of 1998 (the "Cap Price") and (b) the average of the four lowest closing
bid prices of the Common  Stock  during the 18 trading days prior to the date of
conversion (the "Market Price") and (ii) warrants,  expiring five years from the
date of issuance,  to purchase a number of shares of Common Stock equal to 4% of
the number of shares issuable upon conversion at an exercise price equal to 125%
of the Conversion  Price. Up to 15% of the original  principal  amount of the 5%
Debentures  may be  converted  per month on a  non-cumulative  basis;  provided,
however,  that if the Market  Price is greater  than or equal to 120% of the Cap
Price on the last conversion  date in any month,  then up to 20% of the original
principal amount may be converted in such month. If a Debenture holder submits a
Debenture for  conversion and the Market Price is less than or equal to $1.1156,
the Company may redeem the Debenture in  consideration of (i) an amount equal to
the  principal  amount  thereof  plus a premium of 12% per year from the date of
issuance and (ii)  warrants,  expiring five years from the date of issuance,  to
purchase a number of shares of Common Stock equal to 25% of the number of shares
that would have been  issuable  upon  conversion of the Debenture at an exercise
price equal to 135% of the  Conversion  Price at the time of  redemption.  In no
event will the  Company  issue more than an  aggregate  of  3,852,500  shares of
Common Stock (the "Share  Limit") upon  conversion of all of the 5%  Debentures,
upon  exercise of all warrants  issued upon  conversion  or  redemption,  and as
payment of interest on the 5% Debentures.  If conversion of any 5% Debentures or
exercise of any warrants  would  require the issuance of shares in excess of the
Share Limit,  the Company will, as the case may be, redeem such  debentures at a
price  equal  to  120%  of the  principal  amount  thereof  or pay in  cash  the
difference  between the market price and exercise  price of the number of shares
that would have been  issuable  upon exercise of such warrants but for the Share
Limit.
<PAGE>
NOTE C - CONVERSION OF NOTES PAYABLE TO STOCKHOLDERS INTO COMMON STOCK

In 1995,  executive  officers of the Company,  Warren Levy,  Ronald Levy and Jay
Levy,  and another  member of the Levy family loaned to the Company an aggregate
of $1,905,000.  A total of $440,000 of these loans was repaid in 1996. On May 2,
1997, an aggregate of $200,000 in principal  amount of these loans was converted
into 57,200  shares of Common Stock at a conversion  price of $3.4965 per share.
The closing  price of the Common Stock on May 1, 1997, as reported by the Nasdaq
Stock  Market,  was  $3.21875  per share.  On August 6, 1998,  an  aggregate  of
$225,000 in principal amount of these loans was converted into 163,635 shares of
Common Stock at a conversion price of $1.375 per share. The closing price of the
Common  Stock on August 5, 1998,  as reported by the Nasdaq  Stock  Market,  was
$1.31 per share.

NOTE D - CONVERTIBLE DEBENTURES

During  September  1998,  $178,515  of  principal  amount of the  Company's  10%
Convertible  Debentures due March 4, 1999, plus $44,060 of accrued interest, was
converted into 214,131 shares of Common Stock.  Due to restrictions on the total
number of shares which could be issued upon  conversion of the  Debentures,  the
Company  redeemed  an  additional  $271,485  of  principal,  and  in  connection
therewith  paid to the holder  $68,899  of  accrued  interest  and  $143,810  in
redemption  premiums,  for an  aggregate  payment of  $484,194.  The  premium of
$143,810 was recorded as an extraordinary loss in September 1998.


MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS

Revenue for the three months and nine months ended  September 30, 1998 consisted
primarily of milestone payments of $3 million and $5 million, respectively, from
Warner-Lambert  Company, under a July 1997 licensing agreement, as the result of
the  achievement of various  benchmarks in the development of an oral calcitonin
product for treating osteoporosis.  Revenue for the three months and nine months
ended  September 30, 1997 consisted  primarily of a $3 million  license fee from
Warner-Lambert, under the aforementioned agreement.

Research and  development,  the  Company's  largest  expense,  decreased 8% from
$2,585,000 to  $2,384,000  and 3% from  $6,989,000  to $6,791,000  for the three
months and nine months ended  September 30, 1998,  respectively,  as compared to
the same periods in 1997. The decreases were primarily attributable to decreased
expenditures  for  production  supplies,   laboratory  supplies  and  regulatory
expenses, partially offset by increased personnel expenditures.

In February  1997,  the Company  issued an  aggregate  of 490,000  shares of its
Common Stock to the holders of the  Company's  9.5% Senior  Secured  Convertible
Debentures  (the  "Debentures")  in  consideration  for the  cancellation  of an
obligation  of the Company to pay to the holders a fee equal to 2% of the sum of
the market  value as of December  31, 1998 of all of the  Company's  outstanding
shares of Common Stock plus the principal  amount of all outstanding debt of the
Company,  less its cash on  deposit,  up to a  maximum  fee of  $3,000,000.  The
expense  associated with this  transaction was valued at $1,669,063,  based on a
closing price of the Common Stock of $3.40625 on February 7, 1997.
<PAGE>
General and  administrative  expenses decreased 5% from $520,000 to $495,000 and
increased 2% from  $1,515,000 to $1,552,000 for the three months and nine months
ended September 30, 1998, respectively, as compared to the same periods in 1997.
The three month  decrease was  primarily  due to reduced  legal fees,  partially
offset  by  higher  public  relations  expenses.  The nine  month  increase  was
primarily due to higher public relations and travel  expenses,  partially offset
by reduced legal fees.

Interest and other income decreased $30,000 and $73,000 for the three months and
nine months  ended  September  30, 1998,  respectively,  as compared to the same
periods in 1997, due to reduced funds available for investment in 1998.

Interest  expense  increased  $44,000 and $21,000 for the three  months and nine
months ended September 30, 1998,  respectively,  as compared to the same periods
in 1997.  The  increases  were due to the $4 million  private  placement in June
1998,  partially offset by a reduction in other  outstanding debt from the prior
year as a result  of  partial  conversions  in 1997  and  1998 of the  Company's
convertible debentures and notes payable to stockholders into Common Stock.

Extraordinary  item, loss on  extinguishment  of debt, was $144,000 for both the
three month and nine month periods ended September 30, 1998. The loss was due to
redemption at a premium of a portion of the Company's 10% Convertible Debentures
in September 1998. See Note D to Condensed Financial Statements.

As a result of decreased operating expenses,  offset by a loss on extinguishment
of debt, net loss decreased  $17,000 or 17% for the three months ended September
30,  1998,  as  compared  to the  corresponding  period in 1997.  As a result of
increased revenue, as well as decreased  operating expenses,  net loss decreased
$3,610,000  or 50% for the nine months ended  September 30, 1998, as compared to
the corresponding period in 1997.

As of December  31, 1997,  the Company had  available  for income tax  reporting
purposes  net  operating  loss   carryforwards  in  the  approximate  amount  of
$53,300,000,  expiring  from 1998 through  2012,  which are  available to reduce
future earnings that would otherwise be subject to federal income taxes. For the
nine months ending September 30, 1998, the Company accumulated additional losses
of approximately $3,600,000. In addition, the Company has investment tax credits
and research and  development  credits in the amounts of $50,000 and $2,014,000,
respectively,  which are available to reduce the amount of future federal income
taxes. These credits expire from 1998 through 2012.

The Company follows  Statement of Financial  Accounting  Standards No. 109 (FASB
109),  "Accounting  for  Income  Taxes".  Given the  Company's  past  history of
incurring  operating losses, any deferred tax assets that are recognizable under
FASB 109 have been fully  reserved.  As of January 1, 1998,  under FASB 109, the
Company  had  deferred  tax assets of  approximately  $23,400,000,  subject to a
valuation  allowance of  $23,400,000.  The  deferred  tax assets were  generated
primarily as a result of the Company's  net  operating  losses and available tax
credits.  For the  nine-month  period ended  September  30, 1998,  the Company's
deferred tax assets and valuation  allowances  each  increased by  approximately
$1,470,000.
<PAGE>
The Company  adopted the  provisions  of SFAS No. 128,  "Earnings  Per Share" on
December 31, 1997. SFAS 128  establishes  standards for computing and presenting
earnings per share  ("EPS") and  supersedes  APB Opinion No. 15,  "Earnings  Per
Share".  It also  requires  presentation  of both basic and  diluted EPS for net
income on the face of the income statement and a separate reconciliation of both
EPS amounts.  Basic EPS is computed using the weighted  average number of common
shares outstanding during the period being reported on. Diluted EPS reflects the
potential  dilution that could occur if  securities or other  contracts to issue
common stock were  exercised or converted  into common stock at the beginning of
the period being  reported on. The adoption of SFAS 128 has had no effect on the
Company's reported per share results.

LIQUIDITY AND CAPITAL RESOURCES

The Company has constructed a cGMP peptide production  facility in Boonton,  New
Jersey in a shell building that is being leased under a ten-year net lease which
began in February 1994. The Company has two ten-year  renewal options as well as
an option to purchase the facility. The total cost of leasehold improvements and
process equipment for this facility,  including  current  validation costs, have
totaled approximately $12 million. The improvements and equipment were primarily
financed from the remainder of the $17 million of proceeds  received as a result
of the exercise by the warrant holders of the Company's Class A Warrants in 1991
and the  proceeds  of $2.2  million  from the sale of stock in 1994.  There  are
currently no material commitments  outstanding for capital expenditures relating
to either the Boonton  facility or the  Company's  research  and  administrative
facility in Fairfield, New Jersey.

The Company, at September 30, 1998, had cash and cash equivalents of $3,344,000,
an increase of $1,217,000 from December 31, 1997.

The Company's  ability to generate cash from  operations  will depend  primarily
upon signing research or licensing  agreements,  achieving defined benchmarks in
such agreements,  receiving  regulatory approval for its licensed products,  and
the commercial sale of these products.

In July 1997,  the Company  entered into an agreement  under which it granted to
the Parke-Davis  division of  Warner-Lambert  Company a worldwide license to use
the Company's oral calcitonin technology.  Upon execution of the agreement,  the
Company received $6 million in payments from Warner-Lambert,  consisting of a $3
million  licensing  fee and a $3 million  equity  investment  by  Warner-Lambert
(695,066 shares of Common Stock were purchased at a price of approximately $4.32
per share). Under the terms of the license agreement, the Company is eligible to
receive up to an  additional  $48.5  million in  milestone  payments  during the
course of the  development  program if specified  milestones  are achieved.  The
first of these milestones was achieved in February 1998,  resulting in a payment
to the Company of $2 million and other  milestones  were  achieved in August and
September  1998  resulting  in a payment  of $3 million in  September  1998.  An
additional  $10.5  million  would be received if certain  other  milestones  are
achieved  prior to the  commencement  of Phase I  clinical  studies  in the U.S.
Early-stage   milestones   primarily   relate  to  the   product's   performance
characteristics,  while the  latter-stage  milestones  are primarily  related to
regulatory   activities   and   approvals.   If  the  product  is   successfully
commercialized, the Company also would receive revenue from royalties on product
sales by Warner-Lambert  and its affiliates and from the sale of raw material to
Warner-Lambert.  The  Company has  retained  the right to license the use of its
technologies for injectable and nasal  formulations of calcitonin on a worldwide
basis. The Company is actively seeking other licensing and/or supply  agreements
with  pharmaceutical  companies for  injectable  and nasal forms of  calcitonin.
However, there is no assurance that any additional revenue-generating agreements
will be signed.
<PAGE>
In June 1998,  the  Company  completed a private  placement  of $4 million of 5%
Convertible Debentures. The Company received net proceeds of approximately $3.75
million as a result of this  placement.  These  debentures  mature  December 31,
2001.  Interest on the 5% Debentures is payable in cash or, at the option of the
Company,  in Common Stock.  Beginning  January 1, 1999,  the 5%  Debentures  are
convertible into (i) Common Stock at a conversion price (the "Conversion Price")
equal to the lower of (a) 110% of the  average of the  closing bid prices of the
Common Stock on the Nasdaq Stock Market  during the fourth  quarter of 1998 (the
"Cap  Price") and (b) the  average of the four lowest  closing bid prices of the
Common  Stock during the 18 trading  days prior to the date of  conversion  (the
"Market  Price")  and  (ii)  warrants,  expiring  five  years  from  the date of
issuance,  to  purchase  a number of shares of Common  Stock  equal to 4% of the
number of shares  issuable upon conversion at an exercise price equal to 125% of
the  Conversion  Price.  Up to 15% of the  original  principal  amount of the 5%
Debentures  may be  converted  per month on a  non-cumulative  basis;  provided,
however,  that if the Market  Price is greater  than or equal to 120% of the Cap
Price on the last conversion  date in any month,  then up to 20% of the original
principal amount may be converted in such month. If a Debenture holder submits a
Debenture for  conversion and the Market Price is less than or equal to $1.1156,
the Company may redeem the Debenture in  consideration of (i) an amount equal to
the  principal  amount  thereof  plus a premium of 12% per year from the date of
issuance and (ii)  warrants,  expiring five years from the date of issuance,  to
purchase a number of shares of Common Stock equal to 25% of the number of shares
that would have been  issuable  upon  conversion of the Debenture at an exercise
price equal to 135% of the  Conversion  Price at the time of  redemption.  In no
event will the  Company  issue more than an  aggregate  of  3,852,500  shares of
Common Stock (the "Share  Limit") upon  conversion of all of the 5%  Debentures,
upon  exercise of all warrants  issued upon  conversion  or  redemption,  and as
payment of interest on the 5% Debentures.  If conversion of any 5% Debentures or
exercise of any warrants  would  require the issuance of shares in excess of the
Share Limit,  the Company will, as the case may be, redeem such  debentures at a
price  equal  to  120%  of the  principal  amount  thereof  or pay in  cash  the
difference  between the market price and exercise  price of the number of shares
that would have been  issuable  upon exercise of such warrants but for the Share
Limit.

The Company's  operating cash  requirements  are  approximately  $10 million per
year. In addition,  the Company has scheduled principal and interest obligations
over the next several years on its  outstanding  5%  convertible  debentures due
December  2001, on its 9.5%  convertible  debentures  due November  1998, and on
other  indebtedness.  However,  because of the current  below-market  conversion
prices of the 9.5% debentures, $2,797,300 in principal amount of such debentures
has been,  and the Company  expects that a substantial  portion of the remaining
$502,700 in principal amount of debentures will be, converted into Common Stock,
thereby  decreasing  the amount of cash  required  for  principal  and  interest
payments  thereon.  Interest payments on the 5% Debentures may, at the Company's
discretion, be made in cash or stock.

After  receipt of net  proceeds  of $3.75  million  from the  aforementioned  5%
Debenture  financing  in  June  1998,  as well as the $3  million  in  milestone
payments  received from  Warner-Lambert in September 1998,  management  believes
that the Company  currently has  sufficient  financial  resources to sustain its
operations  at the  current  level  into the first  quarter  of 1999.  While the
Company  expects  to  achieve  additional  milestones  under the  Warner-Lambert
agreement, which will result in further payments, the timing of such payments is
uncertain  and the Company may have to rely on outside  sources for financing to
sustain the Company's operations after that time. However, there is no assurance
as to the terms on which such  additional  funds would be  available  or that in
such circumstances sufficient funds could be obtained.
<PAGE>
Satisfying  the  Company's  long-term  liquidity  requirements  will require the
successful commercialization of the product licensed to Warner-Lambert or one of
its other calcitonin  products.  In addition,  the  commercialization of an oral
calcitonin  product  will  require  the  Company  to  incur  additional  capital
expenditures,   including  expenditures  to  expand  or  upgrade  the  Company's
manufacturing   operations   to  satisfy  its  supply   obligations   under  the
Warner-Lambert  license agreement.  However,  neither the cost or timing of such
capital expenditures are determinable at this time.

YEAR 2000

The Company has  established a Year 2000  taskforce  that will review all of the
Company's  internal  computer  systems  for  Year  2000  compliance,   including
workstations,  its accounting  system,  and control systems for equipment in the
Company's manufacturing and laboratory facilities.  The Company expects that the
taskforce  will  commence its  compliance  review in November  1998 and that the
review will be completed  during the first quarter of 1999.  After the review is
completed,   the  taskforce  will  determine  how  to  address  any  remediation
necessary.  The Company intends to repair or replace any noncompliant systems in
a timely manner so that the business of the Company will not be interrupted.

Because  most  of the  principal  hardware  and  software  used  by the  Company
(including its accounting system and most of the equipment control systems) were
acquired by the Company within the last several years,  the Company expects that
most of its systems will be Year 2000  compliant.  However,  until the taskforce
completes  its  review,  the  Company  will not be able to  assess  the level of
compliance or make an accurate estimate of the costs of any remediation.

The Company has no material  relationships  with third party  suppliers  and its
obligations  to  its  sole  material  customer,  Warner-Lambert,  would  not  be
significantly affected by Year 2000 noncompliance on the part of Warner-Lambert.
However,  the  loss  of the  electricity  supply  to the  Company's  laboratory,
production  and  administrative  facilities  would  cause a shut  down of  those
facilities  which,  depending  on the  duration  of the  shut  down,  may have a
material  adverse  impact on the Company's  business.  In addition,  the loss of
telecommunications  services and banking services would, as is the case with all
businesses, adversely affect the Company.
<PAGE>
                SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain  statements in this Form 10-Q  constitute  "forward-looking  statements"
within the meaning of the Private Securities  Litigation Reform Act of 1995 (the
"Reform Act"). Such forward-looking  statements involve known and unknown risks,
uncertainties  and other factors that may cause the actual results,  performance
or activities of the Company,  or industry results,  to be materially  different
from any future results,  performance or activities expressed or implied by such
forward-looking  statements. Such factors include: general economic and business
conditions, the financial condition of the Company,  competition,  the Company's
dependence on other  companies to  commercialize,  manufacture and sell products
using the Company's technologies,  the uncertainty of results of preclinical and
clinical testing, the risk of product liability and liability for human clinical
trials,  the  Company's  dependence  on patents  and other  proprietary  rights,
dependence on key management  officials,  the  availability and cost of capital,
the  availability of qualified  personnel,  changes in, or the failure to comply
with,  governmental  regulations,  the failure to obtain regulatory approvals of
the  Company's  products and other factors  discussed in the  Company's  various
filings with the Securities and Exchange Commission.

PART II. OTHER INFORMATION

ITEM 2.  Changes in Securities and Use of Proceeds

         (a)       Not applicable.

         (b)       Not applicable.

         (c)       Recent Sales of Unregistered Securities.


On August 6, 1998,  the Company  issued  163,635 shares of Common Stock upon the
conversion  of  $225,000  in  principal  amount of loans made by officers of the
Company.  All of such shares were issued by the Company without  registration in
reliance on an exemption under Section 4 (2) of the Securities Act.

In the third quarter of 1998,  the Company issued 214,131 shares of Common Stock
upon the conversion of $222,575 in principal  amount of and accrued  interest on
the Company's 10%  Convertible  Debentures due March 4, 1999. All of such shares
were  issued by the Company  without  registration  in reliance on an  exemption
under Section 3(a) (9) of the Securities Act.


         (d)      Not applicable.

ITEM 6   EXHIBITS AND REPORTS ON FORM 8-K

                  (a)       Exhibits: None

                  (b)      Reports on Form 8-K:

The Company did not file any reports on Form 8-K during the three  months  ended
September 30, 1998.
<PAGE>

                                   SIGNATURES

Pursuant  to the  requirements  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.


                                                UNIGENE LABORATORIES, INC.
                                                -----------------------
                                                      (Registrant)


                                                /s/ Warren P. Levy
November 13, 1998                               -----------------------
                                                Warren P. Levy, President
                                                (Chief Executive Officer)


                                                /s/ Jay Levy
November 13, 1998                               -----------------------
                                                Jay Levy, Treasurer
                                                (Chief Financial Officer and
                                                 Chief Accounting Officer)