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


                 Quarterly Report Pursuant to Section 13 or 15(d) of
                         the Securities Exchange Act of 1934

                       For the quarter ended September 30, 1996

                            Commission file number 0-11550


                                 Pharmos Corporation
                                 ___________________

                (Exact name of registrant as specified in its charter)



                        Nevada                            36-3207413
                        ______                            __________

            (State or other jurisdiction of        (IRS Employer Id. No.)
            incorporation or organization)



                                 2 Innovation Drive 
                                Alachua, Florida 32615
                       (Address of principal executive offices)

          Registrant's telephone number, including area code: (904) 462-1210



                 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    .
                               ---    ---



                 As of November 1, 1996, the Registrant had outstanding
        29,219,969 shares of its $.03 par value Common Stock.  




<PAGE>
<TABLE>
<CAPTION>
      Pharmos Corporation
      (Unaudited)

      Consolidated Balance Sheets                                                                   
      _______________________________________________________________________________________

                                                              September 30       December 31
                                                                  1996              1995    
       <S>                                                   <C>               <C>
       Assets

          Cash and cash equivalents                           $ 4,868,623       $ 7,442,791 

          Prepaid expenses and other current assets               637,818           477,393 
                                                              ____________      ____________

                 Total current assets                           5,506,441         7,920,184 

          Fixed assets, net                                       713,232           855,456 

          Prepaid royalties                                       573,334 

          Other assets                                            244,607           301,704 

          Intangible assets, net                                  349,417           384,310
                                                              ____________      ____________

                 Total assets                                 $ 7,387,031       $ 9,461,654
                                                              ============      ============

       Liabilities and Shareholders' Equity

          Accounts payable                                    $   741,492       $   739,356

          Accrued wages and other compensation                    259,801           205,336 

          Accrued expenses and other liabilities                  408,789           516,034 

          Current portion of long term debt                        70,115            93,684 
                                                              ____________      ____________

                 Total current liabilities                      1,480,197         1,554,410 

          Long term debt                                          121,348           181,648 

          Other liabilities                                        83,164           235,479 

          Advances against future sales                         4,000,000         1,877,141 
                                                              ____________      ____________

                 Total  liabilities                             5,684,709         3,848,678 
                                                              ____________      ____________
                                              2
<PAGE>



       Shareholders  Equity

          Preferred stock, 1,250,000 shares authorized                 57 
          Series A Convertible Preferred stock, $.03 par
          value, $1,000 Liquidation Preference, 1,900 and
          0 shares outstanding, respectively

          Common stock, $.03 par value; 50,000,000 shares         877,149           874,471 
          authorized, 29,238,325 and 29,149,039 shares
          issued, and 29,219,969 and 29,130,683 shares
          outstanding, respectively

          Paid in capital in excess of par                     60,694,062        58,763,797 

          Accumulated deficit                                 (59,868,395)      (54,024,741)
                                                              ____________      ____________

                                                                1,702,873         5,613,527 

          Less: Common stock held in treasury, at par                (551)             (551)
                                                              ____________      ____________

                 Total shareholders' equity                     1,702,322         5,612,976 
                                                              ____________      ____________

          Commitments and contingencies

                 Total liabilities and shareholders' equity   $ 7,387,031       $ 9,461,654 
                                                              ============      ============



<FN>
       The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>

















                                              3
<PAGE>

<TABLE>
<CAPTION>
       Pharmos Corporation
       (Unaudited)

       Consolidated Statements of Operations                                                                
       __________________________________________________________________________________

                                                          Three Months Ended 
                                                 ____________________________________

                                                  September 30          September 30
                                                      1996                  1995
                                                                        (see note 1)
        <S>                                       <C>                   <C>
        Expenses

          Research and development, net            $ 1,386,219           $ 1,125,691 

          Patents                                       66,118                64,422 

          General and administrative                   545,289               497,612 

          Depreciation and amortization                 77,357               123,580 
                                                  _____________         _____________

                                                     2,074,983             1,811,305 
                                                  _____________         _____________

        Loss from operations                        (2,074,983)           (1,811,305)
                                                  _____________         _____________

          Interest income                               62,233                79,708 

          Interest expense                             (13,773)              (60,901)
                                                  _____________         _____________

        Net loss                                  ($ 2,026,523)         ($ 1,792,498)
                                                  _____________         _____________

        Loss per share                                   ($.07)                ($.08)
                                                  =============         =============

        Weighted average shares outstanding         29,219,969            23,591,795 
                                                  =============         =============



<FN>
       The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>


                                              4
<PAGE>
<TABLE>
<CAPTION>
       Pharmos Corporation
       (Unaudited)

       Consolidated Statements of Operations                                                                
       ____________________________________________________________________________________

                                                             Nine Months Ended 
                                                    ____________________________________

                                                      September 30         September 30
                                                          1996                 1995
                                                                           (see note 1)
        <S>                                          <C>                 <C> 
        Revenues

          License fees, royalties, net                                     $    75,000 
                                                                          _____________
        Expenses

          Research and development, net                $ 3,975,918           3,877,558 

          Patents                                          187,504             420,118 

          General and administrative                     1,646,400           1,888,639 

          Depreciation and amortization                    240,439             321,342 
                                                      _____________       _____________

                                                         6,050,261           6,507,657 
                                                      _____________       _____________

        Loss from operations                            (6,050,261)         (6,432,657)
                                                      _____________       _____________

          Interest income                                  265,061             115,933 

          Interest expense                                 (58,453)           (133,674)
                                                      _____________       _____________

        Net loss                                      ($ 5,843,653)       ($ 6,450,398)
                                                      =============       =============

        Loss per share                                      ($0.20)              ($.33)
                                                      =============       =============

        Weighted average shares outstanding             29,216,698          19,462,141 
                                                      =============       =============

<FN>
       The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
                                              5
<PAGE>
<TABLE>
<CAPTION>
       Pharmos Corporation
       (Unaudited)

       Consolidated Statements of Cash Flows                                                                
       _______________________________________________________________________________________________

                                                                           Nine Months Ended 
                                                                  ___________________________________

                                                                    September 30       September 30
                                                                        1996               1995
                                                                                       (see note 1)
       <S>                                                         <C>                 <C>
         Net loss                                                   ($5,843,653)        ($6,450,398)
                                                                    ____________        ____________

       Adjustments to reconcile net loss to net cash flows
       used in operating activities

          Depreciation and amortization                                 240,439             321,342 

          Warrant grant to consultants                                                       48,333 

       Changes in operating assets and liabilities

          Prepaid expenses and other current assets                    (103,328)            207,056 

          Accounts payable                                                2,136            (968,051)

          Accrued expenses, wages and other liabilities                (205,095)            134,181 

          Prepaid royalties                                            (573,334)

          Advances against future sales                               2,122,859           1,577,141 
                                                                    ____________        ____________

            Total adjustments                                         1,483,677           1,320,002 
                                                                    ____________        ____________

       Net cash flows used in operating activities                   (4,359,976)         (5,130,396)
                                                                    ____________        ____________

       Cash flows from investing activities

          (Purchases) disposals of fixed assets, net                    (63,322)            (36,573)
                                                                    ____________        ____________

       Net cash flows provided by (used in) investing activities        (63,322)            (36,573)
                                                                    ____________        ____________



                                           6
<PAGE>



       Cash flows from financing activities

          Net cash proceeds from acquisition of Oculon                                    3,305,543 

          Proceeds from issuance of convertible debentures                                1,270,000 

          Proceeds from issuance of Common Stock, net                                     8,100,000 

          Proceeds from issuance of Preferred Stock, net              1,882,000 

          Proceeds from exercise of warrants                             51,000              39,000 

          Decrease in loans payable, net                                (83,870)           (106,588)
                                                                    ____________        ____________

       Net cash flows provided by (used in) financing                 1,849,130          12,607,955 
                                                                    ____________        ____________

       Net increase (decrease) in cash and cash equivalents          (2,574,168)          7,440,986 
                                                                    ____________        ____________

       Cash and cash equivalents at beginning of period               7,442,791           1,864,065 
                                                                    ____________        ____________


       Cash and cash equivalents at end of period                   $ 4,868,623         $ 9,305,051 
                                                                    ============        ============


<FN>
       The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>


















                                           7
<PAGE>


        Pharmos Corporation
        (unaudited)

        Notes to Condensed Consolidated Financial Statements                 
        _____________________________________________________________________


        1. Basis of Presentation

           Pharmos Corporation (the "Company") is a bio-pharmaceutical
           company incorporated under the laws of the state of Nevada and is
           engaged in the design and development of novel pharmaceutical
           products in various fields including: site specific drugs for
           ophthalmic indications, neuroprotective agents for treatment of 
           central nervous system ("CNS") disorders, systemic drugs designed
           to avoid CNS related side effects, and emulsion based products for
           topical and systemic applications.  The Company uses a variety of
           patented and proprietary technologies to improve the efficacy
           and/or safety of drugs.  The Company's compounds are in various
           stages of development, from preclinical to advanced clinical
           trials and in March 1995, the Company  submitted its first New
           Drug Application ("NDA") with the U.S. Food & Drug Administration
           ("FDA").  The Company conducts operations in Alachua, Florida and
           through its wholly-owned subsidiary, Pharmos, Ltd., in Rehovot
           Israel.

           The accompanying unaudited condensed consolidated financial
           statements have been prepared in accordance with generally
           accepted accounting principles for interim financial information
           and pursuant to 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, consisting of normal
           recurring accrual adjustments, considered necessary for a fair
           presentation have been included.  Operating results for the nine
           month period ended September 30, 1996, are not necessarily
           indicative of the results that may be expected for the year ended
           December 31, 1996.

           These financial statements and notes should be read in conjunction
           with the Company's audited financial statements and notes thereto
           included in the Company's Annual Report on Form 10-K for the year
           ended December 31, 1995.

           The comparative numbers for 1995 have been restated to reflect the
           adjustments made in an amendment to Form 10-Q for the quarter
           ended September 30, 1995.  In the amendment, the Company revised
           its accounting treatment for the acquisition of Oculon Corporation
           to reflect the transaction as an acquisition of net assets, rather
           than the purchase of a business with related goodwill.  Other
           minor reclassifications have been made to conform with
           presentation in the 1995 Form 10-K.

                                         8
<PAGE>


        Pharmos Corporation
        (unaudited)

        Notes to Condensed Consolidated Financial Statements                 
        _____________________________________________________________________


        2. Liquidity and Business Risks

           The Company currently has no sources of recurring revenues and has
           incurred operating losses since its inception. Such losses have
           resulted principally from costs incurred in research and
           development and from general and administrative expenses
           associated with the Company's operations.  The Company expects
           that operating losses will continue for at least the next few
           years as product development, clinical testing and other
           operations continue. The Company currently funds its operations
           principally through the use of cash obtained from third party
           financing and from advances pursuant to the Marketing Agreement
           (See Note 3).  Management believes that existing cash and cash
           equivalents combined with anticipated cash inflows from investment
           income, grants and advances pursuant to the Marketing Agreement,
           will be sufficient to support operations into the second quarter
           of 1997.  The Company is continuing to actively pursue various
           funding options, including equity offerings, commercial and other
           borrowings, strategic corporate alliances and business combination
           transactions, the establishment of product related research and
           development limited partnerships, or a combination of these
           methods for obtaining the additional financing that would be
           required to continue the research and development necessary to
           complete the development of its products and bring them to
           commercial markets.

           As described in Note 1, in March 1995, the Company submitted its
           first NDA.  It is possible that  FDA approval for this product
           candidate will not be granted on a timely basis or at all. Any
           delay in obtaining or failure to obtain such approval would
           materially and adversely affect the marketing of the Company s
           drug candidate and the Company s business, financial position and
           results of operations.

        3. Marketing Agreement 

           On June 30, 1995, the Company signed a  marketing agreement (the
           "Marketing Agreement") with Bausch & Lomb Pharmaceuticals, Inc.
           ("Bausch & Lomb") to market  Lotemax (TM), the Company's lead
           product candidate, on an exclusive basis in the United States. 
           The Marketing Agreement also includes Lotemax  line extension
           products currently being developed by the Company.  Pursuant to
           the Marketing Agreement, Bausch & Lomb will purchase the active
           drug substance (Loteprednol Etabonate) from the Company  and has
           provided the Company with $4 million in cash advances through
           September 1996.  An additional $2 million in advances may be made

                                         9
<PAGE>


        Pharmos Corporation
        (unaudited)

        Notes to Condensed Consolidated Financial Statements                 
        _____________________________________________________________________

           subject to reaching certain development milestones in the Lotemax 
           line extension products.  Bausch & Lomb will also collaborate in
           the development of such additional products by making available
           amounts up to 50% of the Phase III clinical trial costs.  The
           Company has retained certain conditional co-marketing rights to
           all of the products covered by the Marketing Agreement.

           As of September 30, 1996, the Company has received a total of  $4
           million in advances against future sales to Bausch & Lomb of the
           active drug substance needed to manufacture the drug.  Bausch &
           Lomb will be entitled to credits against such future purchases of
           the drug substance based on the advances and future advances until
           the advances have been recouped. The Company may be obligated to
           repay such advances if it is unable to supply Bausch & Lomb with
           certain specified quantities of the active drug substance.
           Advances received through September  30, 1996 are reflected as a
           long term liability in the accompanying balance sheet.

           For the nine month period ended September 30, 1996, reimbursement
           of clinical trial costs from Bausch & Lomb were $1,174,428,
           including $263,183 which was included in prepaid expenses and
           other current assets as of September 30.


        4. Financing

           On September 30, 1996, the Company completed a private placement
           of Series A Convertible Preferred Stock and warrants to purchase
           Common Stock, with institutional investors generating gross
           proceeds of $1.9 million.  The Preferred Stock is convertible into
           common shares of the Company based on the share price at the time
           of conversion.  The 50,000 warrants issued to the investors are
           exercisable at a price of $1.75 per share, commencing one year
           after the closing for a three year period.  The investors were
           granted limited rights to approve certain financing by the Company
           for 180 days from closing. 
          
           In January 1996 the Company issued 89,286 shares of its Common
           Stock as a result of the exercise of warrants to purchase shares
           of the Company s Common Stock. Of this amount 75,000 shares were
           issued at an exercise price of $.52 per share and 14,286 shares
           were issued at an exercise price of $.84 per share.




                                         10
<PAGE>


        Pharmos Corporation
        (unaudited)

        Notes to Condensed Consolidated Financial Statements                 
        _____________________________________________________________________


        5. Commitments and Contingencies

           Legal matters

           On April 26, 1996 the Company s Board of Directors approved the
           terms of a settlement of the litigation initiated by the Company
           in October 1995 against Dr. Nicholas Bodor regarding its licensing
           of its ophthalmic anti-inflammatory drug, Loteprednol Etabonate
           ("Lotemax").  The Company and Dr. Bodor agreed to discontinue
           with prejudice all pending actions in New York and Florida.  In
           connection with the settlement of the dispute with Dr. Bodor, on
           May 1, 1996, the Company paid Dr. Bodor $573,334 of advances
           received from Bausch & Lomb under the Marketing Agreement.  Such
           payment represents advances to Dr. Bodor against future royalties
           on sales of Lotemax.

           On June 6, 1996 the United States District Court, Southern
           District of New York granted Pharmos  motion to be dismissed from
           the Blech Securities class action suit.  The Company had been
           named in March 1995, as an additional co-defendent in an amended
           complaint filed in a class action suit against David Blech, D.
           Blech & Co and a number of other defendents, including, eleven
           publicly traded biotechnology companies.

           Management has reviewed with counsel all other actions and
           proceedings pending against or involving the Company.  Although
           the ultimate outcome of such actions and proceedings cannot be
           predicted with certainty at this time, management believes that
           losses, if any, in excess of amounts accrued resulting from those
           actions will not have a significant impact on the Company's
           financial position or results of operations.














                                         11
<PAGE>


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

                     The following discussion should be read in conjunction
           with the Condensed Consolidated Financial Statements and Notes
           thereto.


           OVERVIEW

                     The Company has generated limited revenues from product
           sales and is dependent upon external financing, interest income,
           and research and development contracts to pursue its intended
           business activities.  The Company has not been profitable since
           inception and has incurred a cumulative net loss of $59,868,395
           through  September 30, 1996.  Losses have resulted principally
           from costs incurred in research activities aimed at identifying
           and developing the Company's product candidates, clinical research
           studies, merger and acquisition costs, the write-off of purchased
           research and development, and general and administrative expenses. 
           The Company expects to incur additional operating losses over the
           next several years as the Company's research and development and
           clinical trials programs continue.  The Company's ability to
           achieve profitability is dependent on its ability to develop and
           obtain regulatory approvals for its products, to enter into
           agreements for product development and commercialization with
           strategic corporate partners and to develop the capacity to
           manufacture and sell its products, and to secure additional
           financing. 


           RESULTS OF OPERATIONS

           QUARTER ENDED SEPTEMBER 30, 1996 AND 1995 

                     Total operating expenses increased by $263,678, or 15%,
           from $1,811,305 in 1995 to $2,074,983 in 1996 primarily  due to
           increases in research and development expenses.

                     Research and development expenses increased by $260,528,
           or 23% primarily due to costs relating to  three phase III trials
           of  Lotemax  (one trial for Uveitis and two for Post Cataract
           Surgery). Bausch & Lomb reimbursements for clinical trials totaled
           $401,367 during the 1996 period thereby, reducing research and
           development expenses by this amount.

                     General and administrative expenses increased by $47,677
           or 10%, in 1996 due to expenses relating to the September 1996
           private placement and certain other administrative cost, 
           partially offset by consolidation of all the USA operations to
           Alachua, Florida.

                                         12
<PAGE>


                     Depreciation and amortization expenses decreased by
           $46,223 due to the absence of any such expenses in the 1996 period
           for the New York facilities following its closing in late 1995, as
           well as reduced depreciation expenses relating to the Alachua,
           Florida operation.

                     Net interest income in 1996 of $48,460 represented an
           increase of $29,653 compared to net interest income of $18,807 in
           1995.  This change reflects  lower interest expense in 1996
           relating to interest on a note that was paid in full.



           NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 

                     Total revenues decreased  by $75,000 from 1995. Revenues
           in 1995 related to fees the Company received as a result of
           sublicensing certain technologies which were not being actively
           developed by the Company. 

                     Total operating expenses decreased by $457,396, or 7%,
           from $6,507,657 in 1995 to $6,050,261 in 1996  due to decreases in 
           patent expenses, general and administrative expenses, and
           depreciation and amortization.

                     Research and development expenses increased by $98,360,
           or 3%, primarily  due to the costs of  phase III clinical trials
           of Lotemax and LE-Allergy, partially offset by cost savings
           actions taken by the Company in March 1995 that included staff
           reductions and focusing on ongoing research and development
           activities on the products of the Company which were closest to
           commercialization.  Bausch & Lomb reimbursements for clinical
           trials totaled $1,174,428 during the 1996 period thereby reducing
           research and development expenses by this amount.

                     Patent expenses decreased by $232,614 or 55%, compared
           to 1995. This decrease reflects a return to more normalized levels
           of patent expenses as mid 1995 was impacted by costs of defending
           patent challenges related to technologies licensed by the Company. 
           Further, the Company has returned to an original patent holder,
           several patents whose technologies are not being pursued,
           resulting in reduced patent maintenance costs. 

                     General and administrative expenses decreased by
           $242,239 or 13%, in 1996 primarily reflecting the impact of the
           cost savings which resulted from the Company's decisions in late
           1994 and early 1995 to eliminate staff and relocate its corporate
           headquarters from New York to Alachua, Florida.




                                         13
<PAGE>


                     Depreciation and amortization expenses decreased by
           $80,903 due to the absence of any such expenses in the 1996 period
           for the New York facilities following its closing in 1995, as well
           as reduced depreciation expenses relating to the Florida
           operation.

                     Net interest income in 1996 of $206,608 represented an
           increase of $224,349 compared to net interest expense of $17,741
           in 1995.  This change reflects the Company's higher level of
           investible funds in 1996 along with higher interest expense in
           1995 relating to interest  on the convertible debentures issued by
           the Company in February 1995 and converted into Common Stock by
           July 1995 and a note that was paid in full.


           LIQUIDITY AND CAPITAL RESOURCES  

                     The Company currently has no sources of recurring
           revenues and has incurred operating losses since its inception and
           has financed its operations with public and private offerings of
           securities, a marketing agreement with Bausch & Lomb, research
           contracts, license fees, royalties and sales, and interest income.

                     The Company had working capital of $4 million, and cash
           and cash equivalents of approximately $4.8 million as of
           September 30, 1996.  Management believes that existing cash and
           cash equivalents combined with anticipated cash inflows from
           investment income, grants and advances pursuant to the Marketing
           Agreement, will be sufficient to support operations into the
           second quarter of 1997.  Management believes that additional
           funding will be required to fund operations until, if ever,
           profitable operations can be achieved. Therefore, the Company is
           continuing to actively pursue various funding options, including
           additional equity offerings, commercial and other borrowings,
           strategic corporate alliances and business combination
           transactions, the establishment of product related research and
           development limited partnerships, or a combination of these
           methods for obtaining the additional financing that would be
           required to continue the research and development necessary to
           complete the development of its products and bring them to
           commercial markets.











                                         14
<PAGE>



                                       Part II

                                  Other Information

        Item 1   Legal Proceedings  . . . . . . . . . . . . . . . . .  NONE

        Item 2   Changes in Securities  . . . . . . . . . . . . . . .  NONE

        Item 3   Defaults upon Senior Securities  . . . . . . . . . .  NONE

        Item 4   Submission of Matters to Vote of Security Holders  .  NONE

        Item 5   Other Information  . . . . . . . . . . . . . . . . .  NONE

        Item 6   Exhibits and Reports on Form 8-K . . . . . . . . . .  NONE




































                                         15
<PAGE>




                                    SIGNATURE PAGE


                 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.


                                          PHARMOS CORPORATION

        Dated:November 14, 1996           by:    /s/ Alan M. Mark     
                                              ________________________

                                          Alan M. Mark,  
                                          Acting Chief Financial Officer



































                                         16