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 March 31, 1999

                         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)

                         99 Wood Avenue South, Suite 301
                                Iselin, NJ 08830
                    (Address of principal executive offices)

       Registrant's telephone number, including area code: (732) 452-9556

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 May 1, 1999, the Registrant had outstanding  41,762,776 shares of its $.03
par value Common Stock.

<PAGE>

Part I.  Financial Information
Item 1   Financial Statements

Pharmos Corporation
(Unaudited)
Consolidated Balance Sheets

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------

                                                                                 March 31,          December 31,
                                                                                   1999                1998
                                                                               ------------        ------------
<S>                                                                             <C>                 <C>        
Assets
   Cash and cash equivalents                                                     $3,133,331          $3,452,916
   Inventory                                                                      1,681,582           1,727,096
   Grants and other receivables                                                     397,719             550,057
   Prepaid royalties                                                                270,127             259,488
   Prepaid expenses and other current assets                                        204,834             206,793
                                                                               ------------        ------------
        Total current assets                                                      5,687,593           6,196,350

   Fixed assets, net                                                              1,222,263           1,181,030
   Prepaid royalties, net of current portion                                        338,409             366,152
   Intangible assets, net                                                           233,107             244,738
   Other assets                                                                      94,742              78,400
                                                                               ------------        ------------

        Total assets                                                             $7,576,114          $8,066,670
                                                                               ============        ============

Liabilities and Shareholders' Equity
   Accounts payable                                                                $513,301            $936,899
   Accrued expenses                                                                 888,319             679,737
   Accrued wages and other compensation                                             494,631             456,575
   Advances against future sales                                                  1,908,738           1,836,231
                                                                               ------------        ------------
        Total current liabilities                                                 3,804,989           3,909,442

   Advances against future sales, net of current portion                          2,391,231           2,591,023
   Other liabilities                                                                100,000             100,000
                                                                               ------------        ------------
        Total liabilities                                                         6,296,220           6,600,465
                                                                               ------------        ------------

   Shareholders' equity
   Preferred  stock, $.03 par value, 1,250,000 shares authorized
    Series C convertible, 600 and 1,500 shares outstanding, respectively
      (liquidation preference of $600,000 and $1,500,000 respectively)                   18                  45
   Common stock, $.03 par value; 60,000,000 shares authorized,
       41,527,212 and 34,391,638 shares issued and outstanding
       (excluding  $551 in 1999 and 1998, held in Treasury)
       in 1999 and 1998, respectively                                             1,247,201           1,193,452
     Paid in capital in excess of par                                            79,221,601          78,051,783
     Accumulated deficit
                                                                                (79,188,926)        (77,779,075)
                                                                               ------------        ------------
        Total shareholders' (deficit) equity                                      1,279,894           1,466,205
                                                                               ------------        ------------

   Commitments and contingencies

        Total liabilities and shareholders' equity                               $7,576,114          $8,066,670
                                                                               ============        ============
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.


                                       2
<PAGE>

Pharmos Corporation
(Unaudited)
Consolidated Statements of Operations

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------

                                                                   Three Months Ended March 31,
                                                                      1999               1998
                                                                 ------------        ------------
<S>                                                               <C>                 <C>         
Revenues
    Product sales                                                    $332,377

Cost of Goods Sold                                                     89,258
                                                                 ------------

    Gross Margin                                                      243,119
                                                                 ------------

Expenses
    Research and development, net                                     933,674          $1,055,537
    Selling, general and administrative                               550,936             532,873
    Patents                                                            35,905              49,630
    Depreciation and amortization                                      81,335              50,339
                                                                 ------------        ------------

       Total operating expenses                                     1,601,850           1,688,379
                                                                 ------------        ------------

Loss from operations                                               (1,358,731)         (1,688,379)

Other income (expense):
    Interest income                                                    33,700             106,074
    Other income (expense), net                                       (16,177)              7,203
    Interest expense                                                   (1,369)             (2,821)
                                                                 ------------        ------------
    Other income, net                                                  16,154             110,456
                                                                 ------------        ------------

Net loss                                                           (1,342,577)         (1,577,923)

    Less: Dividend embedded in convertible preferred stock                               (590,248)
    Preferred stock dividends                                         (16,829)           (106,399)
                                                                 ------------        ------------

Net loss applicable to common shareholders                        ($1,359,406)        ($2,274,570)
                                                                 ============        ============

Net loss per share applicable
    to common stockholders - basic and diluted                         ($0.03)             ($0.06)
                                                                 ============        ============


Weighted average shares outstanding                                40,180,840          35,549,037
                                                                 ============        ============
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.


                                       3
<PAGE>

Pharmos Corporation
(Unaudited)
Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------

                                                            Three Months Ended March 31,
                                                               1999               1998
                                                           -----------        -----------
<S>                                                        <C>                <C>         
Cash flows from operating activities
  Net loss                                                 ($1,342,577)       ($1,577,923)
  Adjustments to reconcile net loss to net
    cash flow used in operating activities
       Depreciation and amortization                            81,335             50,339
  Changes in operating assets and liabilities
       Inventory                                                45,514                 --
       Accounts receivable                                     267,264                 --
       Grants receivable                                      (114,927)            38,698
       Prepaid expenses and other current assets                 1,959            (83,940)
       Advanced royalties                                       17,104                 --
       Other assets                                            (16,341)              (865)
       Accounts payable                                       (423,597)        (2,167,165)
       Accrued expenses                                        208,582             51,567
       Advances against future sales, net                     (127,285)                --
       Accrued wages                                            38,055             40,400
                                                           -----------        -----------

       Total adjustments                                       (22,337)        (2,070,964)
                                                           -----------        -----------

  Net cash flows used in operating activities               (1,364,914)        (3,648,888)

Cash flows from investing activities
     Purchases of fixed assets, net                           (110,937)           (77,644)
                                                           -----------        -----------

  Net cash flows used in investing activities                 (110,937)           (77,644)

Cash flows from financing activities
     Proceeds from issuances of common stock
         and exercise of warrants, net                              --            237,088
     Proceeds from issuances of preferred stock, net                --          4,658,494
     Proceeds from exercise of equity credit line            1,156,266                 --
     Increase (decrease) in loans payable                           --            (13,176)
                                                           -----------        -----------

  Net cash flows provided by financing activities            1,156,266          4,882,405

Net increase (decrease) in cash and cash equivalents          (319,585)         1,155,873

Cash and cash equivalents at beginning of year               3,452,916          4,423,389
                                                           -----------        -----------

Cash and cash equivalents at end of period                  $3,133,331         $5,579,262
                                                           ===========        ===========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.


                                       4
<PAGE>

Pharmos Corporation
Notes to Condensed Consolidated Financial Statements


Basis of Presentation

     The accompanying unaudited condensed consolidated financial statements have
     been prepared in accordance with generally accepted  accounting  principles
     for interim financial information 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  three-month   period  ended  March  31,  1999,  are  not
     necessarily  indicative  of the results  that may be expected  for the year
     ended December 31, 1999.


1.   The Company

     Pharmos   Corporation   (the   "Company")  is  a   pharmaceutical   company
     specializing in the modification of existing molecules through  proprietary
     techniques to reduce undesirable side effects and/or enhance efficacy.  The
     Company is developing  pharmaceuticals  in various fields  including:  site
     specific drugs for ophthalmic  indications,  neuroprotective  agents with a
     novel  mechanism  of action for the  treatment  of central  nervous  system
     ("CNS")   disorders,   newly  designed   molecules  to  treat  cancer,  and
     emulsion-based products for topical and systemic applications.  The Company
     has administrative  offices in Iselin,  New Jersey and conducts  operations
     through its wholly owned subsidiary, Pharmos, Ltd., in Rehovot, Israel.

     In March 1998,  the Company  received  approval for three separate New Drug
     Applications  ("NDA") from the U.S. Food and Drug  Administration  ("FDA").
     These approvals were for Lotemax(R) and AlrexTM.  Lotemax has been approved
     for the treatment of several  ocular  inflammatory  indications,  including
     uveitis, and for post-operative  inflammation.  Alrex has been approved for
     the treatment of seasonal allergic conjunctivitis.


2.   Liquidity and Business Risks

     While the Company has  generated  revenue  through the sale of its approved
     products  in the  market,  it  has  incurred  operating  losses  since  its
     inception.  At March 31, 1999,  the Company has an  accumulated  deficit of
     $79,188,926.  Such losses have resulted  principally from costs incurred in
     research and development and from general and administrative  expenses. The
     Company  has  funded  its  operations  through  the  use of  cash  obtained
     principally from third party financing.  Management  believes that cash and
     cash  equivalents  of $3.1  million  as of March 31,  1999,  combined  with
     anticipated  cash inflows from  revenues  derived from sales of Lotemax and
     Alrex and the obtaining of a $10 million  equity line of credit on December
     10, 1998 will be sufficient to support operations through 2000. As of March
     31, 1999, $8.2 million remained available under the equity line of credit.

     The  Company's  success  depends  upon many  factors  that are  beyond  the
     Company's  immediate  control,  including market  acceptance of Lotemax and
     Alrex,  competition,  and the ability to obtain additional  financing.  The
     Company is continuing to actively pursue various funding options, including
     equity offerings, strategic corporate alliances, business combinations, and
     the  establishment  of research and development  partnerships to obtain the
     additional  financing  necessary to complete the development of its product
     candidates and bring them to commercial markets.  There can be no assurance
     that Lotemax or Alrex will achieve  market  acceptance  or that the Company
     will be successful in obtaining additional financing or commercializing its
     product candidates.


                                       5
<PAGE>

Pharmos Corporation
Notes to Condensed Consolidated Financial Statements


3.   Significant Accounting Policies

Revenue recognition

     Sales  revenue is recognized  upon shipment of products to customers,  less
     allowances for estimated returns and discounts.  License fees and royalties
     are recognized  when earned in accordance  with the underlying  agreements.
     Revenue for contracted  research and development  services is recognized as
     performed. Revenue from these contracts is recognized as costs are incurred
     (as defined in the  contract),  generally  direct labor and  supplies  plus
     agreed overhead rates. Any advance payments on contracts are deferred until
     the related services are performed.

     All of the Company's revenues are derived from one Customer.

Inventories

     Inventories  consist of  loteprednol  etabonate,  the compound  used in the
     Company's  products,  Lotemax and Alrex, and is stated at the lower of cost
     or market with cost determined on a weighted average basis.

Reclassifications

     Certain  amounts for 1998 have been  reclassified  to conform to the fiscal
     1999  presentation.  Such  reclassifications  did not have an impact on the
     Company's financial position or results of operations.


4.   Collaborative Agreements

     In  June  1995,  the  Company  entered  into  a  marketing  agreement  (the
     "Marketing Agreement") with Bausch & Lomb Pharmaceuticals,  Inc. ("Bausch &
     Lomb") to market  Lotemax and Alrex,  on an  exclusive  basis in the United
     States  following  receipt of FDA approval.  The Marketing  Agreement  also
     covers the Company's other loteprednol etabonate based product, LE-T. Under
     the  Marketing  Agreement,  Bausch & Lomb will  purchase  the  active  drug
     substance  (loteprednol  etabonate) from the Company.  A second  agreement,
     covering  Europe,  Canada  and  other  selected  countries,  was  signed in
     December 1996 ("the New Territories Agreement").

     Through  March 31,  1999,  Bausch and Lomb has provided the Company with $5
     million in cash advances against future sales, of which  approximately $4.3
     million was  outstanding at March 31, 1999. An additional $1 million is due
     from Bausch & Lomb upon the receipt of regulatory  approval for LE-T in the
     United  States.  Bausch  & Lomb is  entitled  to  recoup  the  advances  by
     withholding  certain amounts against  payments for future  purchases of the
     active drug substance,  based on the advances made,  until all the advances
     have been repaid. 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.  The portion of advances  expected to be recouped by
     Bausch and Lomb during the following  twelve months,  based on management's
     estimate of product sales to Bausch & Lomb, has been presented as a current
     liability in the accompanying  balance sheet at March 31, 1999 and December
     31, 1998.

     Bausch & Lomb also  collaborates  in the  development of 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  and  the  New  Territories
     Agreement.


                                       6
<PAGE>

Pharmos Corporation
Notes to Condensed Consolidated Financial Statements


5.   Common and Preferred Stock Transactions

     On  February  4, 1998,  the  Company  completed  a private  placement  with
     institutional  investors of Series C Redeemable Convertible Preferred Stock
     ("Series C convertible  preferred  stock") and warrants to purchase 650,000
     shares of common stock, generating gross proceeds of $5 million. The Series
     C convertible preferred stock carries a 5% premium payable in common stock,
     and is convertible  into common shares of the Company 60 days subsequent to
     the date of  issuance.  The  conversion  price  is the  lower of 90% of the
     average  of the  low  trade  prices  of  the  Common  Stock  for  the  five
     consecutive  trading  days  ending  on the  day  immediately  prior  to the
     conversion  date (the "Variable  Conversion  Price").  Until converted into
     common  stock,  the  Series C  convertible  preferred  stock  has no voting
     rights. The warrants issued to the investor and the finders are exercisable
     at prices ranging from $2.28 to $2.67 per share,  commencing one year after
     the closing for four and five year periods.  Under  certain  circumstances,
     the holders of the Series C convertible preferred stock were initially able
     to require  the  Company to redeem the  outstanding  shares of the Series C
     convertible  preferred  stock.  In December  1998,  the Company  received a
     waiver  of  the  redemption  features  from  the  holder  of the  Series  C
     convertible preferred stock.

     During  1998,  the Company  issued  2,299,957  shares of common  stock upon
     conversion of 3,500 shares of its Series C convertible preferred stock.

     During the first  quarter of 1999,  the Company  issued  859,585  shares of
     common stock upon conversion of its Series C convertible preferred stock.

     As of March 31, 1999 and  December 31,  1998,  cumulative  dividends on the
     Company's  outstanding  Series C convertible  preferred stock were $190,500
     and  $173,671,  respectively.  The dividends are payable in common stock of
     the Company at the fair market value on the date of conversion.

     In  connection  with the  issuances  of the  Series A, B and C  convertible
     preferred stock, the Company was required to recognize, in its earnings per
     share  ("EPS")  calculation,  the  value of the  conversion  discount  as a
     dividend to the preferred stockholders. The dividend has been recognized in
     the EPS  calculation  on a pro rata basis over the  period  beginning  with
     issuance  to the  earliest  date that  conversion  can occur.  The  Company
     recorded a  preferred  stock  dividend  of  $0 and  $590,248  for the three
     months  ended March 31,  1999 and 1998,  respectively,  on the  outstanding
     shares of  convertible  preferred  stock in connection  with the conversion
     discount.

     The Company  entered into a Private  Equity Line of Credit  Agreement  (the
     "Credit Agreement") as of December 10, 1998, and as amended on December 18,
     1998, with Dominion  Capital Fund, Ltd.,  which  subsequently  assigned its
     rights to Centennial  Parkway LLC. (the "Investor").  Pursuant to the terms
     of the  Credit  Agreement,  the  Company  may,  from time to time  during a
     specified  term,  cause the  Investor  to purchase  up to an  aggregate  of
     $10,000,000  of the Company's  common stock,  par value $.03 per share (the
     "Common  Stock").  The price  per  share of Common  Stock to be paid by the
     Investor is to be determined  at the time of each  purchase  according to a
     specified  formula which is based upon the average closing bid price of the
     Common  Stock on the  principal  trading  exchange or market for the Common
     Stock (the "Principal  Market") over a prescribed,  five-day  period.  With
     each  purchase of Common  Stock,  the Investor is also to receive  warrants
     exercisable  for a number of shares of Common Stock equal to ten percent of
     the number of shares of Common  Stock  purchased  at an exercise  price per
     share  equal to 125% of the  closing  bid price of the Common  Stock on the
     Principal Market on a specified date.

     During the first quarter of 1999, under terms of the Credit Agreement,  the
     Company  issued 933,233 shares of its Common Stock and warrants to purchase
     86,162  shares of its Common  Stock to the Investor  for  consideration  of
     $1,158,000,  net of fees.  The warrants have exercise  prices  ranging from
     $1.41 to $1.99 per share and expire in the first quarter of 2002.


                                       7
<PAGE>

Pharmos Corporation
Notes to Condensed Consolidated Financial Statements


6.   Segment and Geographic Information

     The  Company  is active in one  business  segment:  designing,  developing,
     selling  and  marketing  pharmaceutical  products.  The  Company  maintains
     development  operations  in the United  States and  Israel.  The  Company's
     selling operations are maintained in the United States.

     Geographic  information for the three months ending March 31, 1999 and 1998
     are as follows:

                                    1999               1998
                                -----------        -----------
          Net revenues
            United States          $332,377                 --
            Israel                       --                 --
                                -----------        -----------
                                   $332,377                 --
                                -----------        -----------
          Net loss
            United States       ($1,308,455)       ($1,577,866)
            Israel                  (34,122)               (57)
                                -----------        ----------- 
                                ($1,342,577)       ($1,577,923)
                                ===========        ===========


                                       8
<PAGE>

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

Results of Operations

Quarters ended March 31, 1999 and 1998

Product  sales  revenue  totaled  $332,377 for the quarter ended March 31, 1999.
Product sales commenced in the second quarter of 1998, following FDA approval of
the Company's Lotemax and Alrex ophthalmic products.

Cost of goods sold for the quarter ended March 31, 1999 totaled $89,258. Cost of
goods sold includes the cost of the active drug substance and licensing costs.

As part of the Company's  efforts to achieve market  recognition  and acceptance
for its FDA approved products,  the Company's marketing partner,  Bausch & Lomb,
distributed  large numbers of product  samples to its  customers.  These samples
were in addition  to the drug  product  sold by Bausch & Lomb to its  customers.
Management believes that the distribution of samples is critically  important to
the long term  acceptance  and use of the drug  products but may have an adverse
short-term impact on the level of future sales of these products.

Total  operating  expenses  decreased  $86,529 or 5%, from $1,688,379 in 1998 to
$1,601,850 in 1999. The decrease is primarily due lower research and development
expenses,   offset  by  increased  general  and   administrative   expenses  and
depreciation expense.

Net  research and  development  expenses  decreased by $ 121,863 or 12%,  from $
1,055,537 in 1998 to $ 933,674 in 1999. The decrease in R&D expense is primarily
due to an increased level of research grants in 1999 and the absence of research
costs associated with Lotemax and Alrex, which were approved by the FDA in March
1998,  partially offset by increased spending on Phase II human clinical studies
of the Company's dexanabinol (HU-211) product.

General and administrative  expenses increased by $ 18,063 or 3 %, from $532,873
in 1998 to $550,936 in 1999. The increase is primarily due to higher spending on
investor relations activities offset by reduced insurance and travel costs.

Patent expenses decreased by $ 13,725, or 28%, from $ 49,630 in 1998 to $ 35,905
in 1999. This decrease is due principally to the timing of various patent costs.

Depreciation  and  amortization  expenses  increased  by $30,996,  or 62%,  from
$50,339 in 1998 to $81,335 in 1999,  reflecting  increased  depreciation expense
relating to laboratory equipment purchases in 1998.

Other income,  net,  decreased by $ 94,302,  or 85%, from $ 110,456 in 1998 to $
16,154 in 1999.  Interest  income  decreased  as a result of lower  average cash
balances.


                                       9
<PAGE>

Liquidity and Capital Resources

The Company  had no sources of  recurring  revenues  until the  commencement  of
product  sales in April  1998,  and has  incurred  operating  losses  since  its
inception.  At March  31,  1999,  the  Company  has an  accumulated  deficit  of
$79,188,926.  The Company has  financed its  operations  with public and private
offerings  of  securities,  advances and other  funding  pursuant to a marketing
agreement with BLP, research contracts,  license fees,  royalties and sales, and
interest income.

The  Company  had  working  capital  of $1.9  million,  including  cash and cash
equivalents  of $3.1  million,  as of March 31, 1999.  On February 4, 1998,  the
Company  completed  a  private  placement  of  convertible  preferred  stock and
warrants that generated $5 million in gross proceeds.  On December 10, 1998, the
Company obtained a $10 million equity line of credit with a single institutional
investor. As of March 31, 1999, $8.2 million remained available under the equity
line of credit.

Management  believes  that the  equity  line of credit,  existing  cash and cash
equivalents  combined with anticipated cash inflows from investment  income, R&D
grants and proceeds  from sales of the drug  substance  for Lotemax and Alrex to
BLP will be  sufficient  to support  operations  through  2000.  The  Company is
continuing to actively  pursue various  funding  options,  including  additional
equity offerings,  strategic corporate alliances,  business combinations and the
establishment of product related research and development limited  partnerships,
to obtain the  additional  financing  that would be  required  to  continue  the
development of its products and bring them to commercial markets.  The Company's
success  depends  upon many  factors  that are  beyond the  Company's  immediate
control, including market acceptance of Lotemax and Alrex, competition,  and the
ability  to obtain  additional  financing.  There can be no  assurance  that the
Company will be successful in obtaining  additional financing or commercializing
its product candidates, or that Lotemax or Alrex will achieve market acceptance.

Statements made in this document related to the  development,  commercialization
and market expectations of its drug products,  to the establishment of corporate
collaborations, and to the Company's operational projections are forward-looking
and are made pursuant to the safe harbor provisions of the Securities Litigation
Reform Act of 1995. Such statements  involve risks and  uncertainties  which may
cause  results to differ  materially  from those set forth in these  statements.
Among the factors that could result in a  materially  different  outcome are the
inherent   uncertainties   accompanying  new  product  development,   action  of
regulatory  authorities and the results of further trials.  Additional economic,
competitive, governmental, technological, marketing and other factors identified
in Pharmos'  filings with the  Securities and Exchange  Commission  could affect
such results.


                                       10
<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


                                       11
<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: May 13, 1999                 by:  /s/ Robert W. Cook
                                         --------------------------------
                                             Robert W. Cook
                                             Vice President Finance and 
                                             Chief Financial Officer
                                             (Principal Accounting and
                                             Financial Officer)


                                       12