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, 1997

                         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 May 5, 1997, the Registrant had outstanding  31,464,302 shares of its $.03
par value Common Stock.



<PAGE>



Pharmos Corporation
(Unaudited)

Consolidated Balance Sheets

<TABLE>
<CAPTION>

                                                                                                  March 31,            December 31,
                                                                                                    1997                 1996
Assets
<S>                                                                                             <C>                    <C>         
      Cash and cash equivalents                                                                 $ 10,503,316           $  5,132,906
      R & D reimbursements receivable                                                                122,786                359,019
      Prepaid expenses and other current assets                                                      338,725                247,363
                                                                                                ------------           ------------
               Total current assets                                                               10,964,827              5,739,288
      Fixed assets, net                                                                              606,376                629,413
      Prepaid royalties                                                                              716,667                573,334
      Intangible assets, net                                                                         326,155                337,786
      Other assets                                                                                   178,402                188,472
                                                                                                ------------           ------------

              Total assets                                                                      $ 12,792,427           $  7,468,293
                                                                                                ============           ============

Liabilities and Shareholders' Equity
      Accounts payable                                                                          $  1,369,830           $    847,415
      Accrued expenses and other liabilities                                                         799,220                451,136
      Accrued wages and other compensation                                                           434,338                357,981
      Current portion of long term debt                                                              127,406                115,244
                                                                                                ------------           ------------
              Total current liabilities                                                            2,730,794              1,771,776


      Advances against future sales                                                                5,000,000              4,000,000
      Long term debt                                                                                 130,806                157,133
      Other liabilities                                                                               71,076                 51,119
                                                                                                ------------           ------------
              Total  liabilities                                                                   7,932,676              5,980,028
                                                                                                ------------           ------------


Shareholders' Equity
      Preferred stock, $.03 par value, 1,250,000 shares authorized. 

      Series A convertible, with a $1,000 liquidation preference,                                         44                     57
      1,460 and 1,900 shares outstanding, respectively. 
      Series B convertible, with a $1,000 liquidation preference,                                        180                      0
      6,000 and 0 shares outstanding, respectively. 
      Common stock, $.03 par value; 50,000,000 shares authorized,
      31,121,366 and 30,727,525 shares issued, and 31,103,010 and
      30,709,169 shares outstanding, respectively.                                                    933,641                921,825
      Paid in capital in excess of par                                                            68,497,686             62,668,886
      Accumulated deficit                                                                        (64,571,249)           (62,101,952)
                                                                                                ------------           ------------
                                                                                                   4,860,302              1,488,816
      Less: Common stock held in treasury, at par                                                       (551)                  (551)
                                                                                                ------------           ------------
                Total shareholders' equity                                                         4,859,751              1,488,265
                                                                                                ------------           ------------

                Total liabilities and shareholders' equity                                      $ 12,792,427           $  7,468,293
                                                                                                ============           ============

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


</TABLE>

                                        2


<PAGE>




Pharmos Corporation
(Unaudited)

Consolidated Statements of Operations


                                                          Three Months Ended
                                                     March 31,        March 31,
                                                       1997             1996


Expenses
                                                 
      Research and development, net                $ 1,181,600      $ 1,138,738
      Drug substance purchase(see note 2)              569,981                0
      Patents                                           32,388           52,370
      General and administrative                       638,533          537,139
      Depreciation and amortization                     70,570           86,333
                                                    ----------       ----------
                                                     2,493,072        1,814,580
                                                    ----------       ---------- 


Loss from operations                                (2,493,072)      (1,814,580)
                                                    ----------       ---------- 

      Interest income, net of interest
      expense of $4,399 and
      $18,598, respectively                             57,056           60,003
                                                    ----------       ----------
Net loss                                          ($ 2,436,016)    ($ 1,754,577)
                                                  ============     ============ 



Loss per share                                    ($       .08)    ($       .06)
                                                  ============     ============ 
Weighted average shares outstanding                 31,016,871       29,210,048




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,             March 31,
                                                                                                    1997                  1996
<S>                                                                                           <C>                      <C>         
Cash flows from operating activities

Net loss                                                                                      ($ 2,436,016)            ($ 1,754,577)
                                                                                              ------------             ------------ 

Adjustments to reconcile net loss to net cash flow
provided by (used in) operating activities
      Depreciation and amortization                                                                 70,570                   86,333

Changes in operating assets and liabilities
      Prepaid expenses and other current assets                                                    154,941                  (93,520)

      Accounts payable                                                                             522,417                  (77,961)

      Accrued expenses, wages and other liabilities                                                444,398                   11,526

      Prepaid royalties                                                                           (143,333)
      Advances against future sales                                                              1,000,000                2,122,859
                                                                                              ------------             ------------ 
              Total adjustments                                                                  2,048,993                2,049,237
                                                                                              ------------             ------------
Net cash flows used in operating activities                                                       (387,023)                 294,660
                                                                                              ------------             ------------ 
Cash flows from investing activities
      (Purchases) disposal of fixed assets, net                                                    (35,901)                 (40,394)
                                                                                              ------------             ------------ 
Net cash flows provided by (used in) investing activities                                          (35,901)                 (40,394)
                                                                                              ------------             ------------ 
Cash flows from financing activities
      Proceeds from issuance of Preferred Stock, net                                             5,740,000
      Proceeds from exercise of warrants                                                            67,500                   51,000

      Decrease in loans payable, net                                                               (14,166)                 (32,725)
                                                                                              ------------             ------------ 
Net cash flows provided by (used in) financing                                                   5,793,334                   18,275
                                                                                              ------------             ------------ 

Net increase (decrease) in cash and cash equivalents                                             5,370,410                  272,541

Cash and cash equivalents at beginning of period                                                 5,132,906                7,442,791
                                                                                              ------------             ------------ 

Cash and cash equivalents at end of period                                                    $ 10,503,316             $  7,715,332
                                                                                              ============             ============

</TABLE>


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


                                        4


<PAGE>


Pharmos Corporation
(Unaudited)

Notes to Condensed Consolidated Financial Statements


1.   The Company

     Pharmos Corporation (the "Company") is an emerging  pharmaceutical  company
     incorporated  under the laws of the state of Nevada  and is  engaged in the
     discovery,  design, development and commercialization of pharmaceuticals to
     meet  significant  therapeutic  needs  in major  markets.  The  Company  is
     developing pharmaceuticals in various fields including: site specific drugs
     for ophthalmic indications, neuroprotective agents for treatment of central
     nervous system ("CNS") disorders, newly designed molecules to treat cancer,
     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.  The
     Company has  submitted  two separate New Drug  Applications  ("NDA") to the
     U.S. Food & Drug Administration  ("FDA"):  Lotemax(TM) for the treatment of
     several ocular inflammatory  diseases and LE-A, a product for the treatment
     of seasonal  allergic  conjunctivitis.  The Company conducts  operations in
     Alachua, Florida and through its wholly-owned subsidiary, Pharmos, Ltd., in
     Rehovot, Israel.

2.   Basis of Presentation

     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 three month  period  ended March 31,
     1997,  are not  necessarily  indicative of the results that may be expected
     for the year ended December 31, 1997.

     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, 1996.

     In the first quarter of 1997, the Company,  in  anticipation of approval by
     the FDA of  either  or  both  of the  NDAs  submitted  (see  note 1) and in
     accordance with its obligations under the Marketing Agreements (see note 4)
     to supply  Bausch & Lomb with certain  specified  quantities  of the active
     drug substance  ("Loteprednol  etabonate"),  purchased  bulk  quantities of
     Loteprednol  etabonate  in the amount of $569,981.  However,  until the FDA
     approves either of the Company's NDAs that use  Loteprednol  etabonate (see
     note 3), the Company has taken a valuation  allowance  of $569,981  against
     these purchases to the lower of cost


                                        5


<PAGE>


Pharmos Corporation
(Unaudited)

Notes to Condensed Consolidated Financial Statements


     or  market  value as  there  are  currently  no  alternative  uses for such
     quantities of this drug substance.

3.   Liquidity and Business Risks

     The Company currently has no sources of recurring revenues and has incurred
     operating losses since its inception. At March 31, 1997, the Company has an
     accumulated deficit of $64,571,249  (unaudited).  Such losses have resulted
     principally  from costs  incurred  in  research  and  development  and from
     general and  administrative  expenses.  The Company  expects that operating
     losses will  continue as product  development,  clinical  testing and other
     normal  operations  continue.  The Company  currently  funds its operations
     through the use of cash obtained  principally  from third party  financing.
     Management  believes that cash and cash  equivalents of $10.5 million as of
     March 31, 1997,  combined  with  anticipated  cash inflows from  investment
     income and research &  development  grants,  will be  sufficient to support
     operations  into the first  quarter of 1998.  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.

     As described in Note 1, the Company has  submitted  two NDAs to the FDA. It
     is possible  that FDA approval  for these  product  candidates  will not be
     granted on a timely  basis or at all.  Any delay in  obtaining  approval or
     failure to obtain such approvals would  materially and adversely affect the
     Company's business, financial position and results of operations.

4.   Collaborative Agreements

     The  Company  has  entered  into  marketing   agreements   (the  "Marketing
     Agreements") granting Bausch & Lomb Pharmaceuticals, Inc. ("Bausch & Lomb")
     rights to market Lotemax(TM),  the Company's lead product candidate,  on an
     exclusive basis in the United States and in certain  territories outside of
     the U.S.  The  Marketing  Agreements  also  cover the  Company's  two other
     Loteprednol  etabonate  based  products,  which are referred to as LE-A and
     LE-T.  Under the  Marketing  Agreements,  Bausch & Lomb will  purchase  the
     active drug substance (Loteprednol etabonate) from the Company and, through
     March 31, 1997,  has provided the Company with $5 million in cash  advances
     against future sales. Bausch & Lomb also collaborates in the development of
     products by making  available  amounts up to 50% of the Phase III  clinical
     trial costs.

     Bausch & Lomb will be entitled to credits  against future  purchases of the
     active drug substance  based on the advances and future  advances until the
     advances  have been  repaid.  The  Company may be  obligated  to repay such
     advances if it is unable to supply Bausch &


                                        6


<PAGE>


Pharmos Corporation
(Unaudited)

Notes to Condensed Consolidated Financial Statements


     Lomb with  certain  specified  quantities  of the  active  drug  substance.
     Advances  received  through  March 31,  1997 are  reflected  as a long term
     liability in the accompanying balance sheet.

     For the  three  month  periods  ended  March  31,  1997 and  1996,  net R&D
     reimbursements from Bausch & Lomb were $15,080 and $133,104,  respectively,
     and  were  offset  against   research  and   development   expense  in  the
     accompanying consolidated statement of operations.

5.   Common & Preferred Stock Transactions

     On February 12, 1997, the Company issued  warrants to purchase an aggregate
     of 1,055,000 shares of common stock at an exercise price of $1.59 per share
     to 17  employees  of the  Company.  Such  warrants  become  exercisable  in
     increments  of 25% each on February 12, 1998,  February 12, 1999,  February
     12, 2000 and February 12, 2001. All of such warrants expire on February 12,
     2007. Also on February 12, 1997, the Company issued warrants to purchase an
     aggregate of 100,000  shares of common stock at an exercise  price of $1.59
     per share to the Company's five outside  directors.  These warrants  become
     exercisable  on the same basis as the  warrants  issued to  employees,  but
     expire on February 12, 2003. Upon  termination of employment or termination
     as a director,  all warrants held by such employee or director will expire,
     except that any warrant  that was  exercisable  on the date of  termination
     may, to the extent then  exercisable,  be  exercised  within  three  months
     thereafter  (or one year  thereafter  if the  termination  is the result of
     death or permanent disability of such employee or director).

     On March 31, 1997,  the Company  completed a private  placement of Series B
     Convertible  Preferred  Stock and warrants to purchase  common stock,  with
     institutional  investors  generating  gross  proceeds  of $6  million.  The
     preferred stock carries a 5% dividend rate payable in cash or common stock,
     at the option of the Company,  and is convertible into common shares of the
     Company based on the share price at the time of conversion  less  discounts
     ranging from 17% to 20%. Until  converted into common stock,  the preferred
     stock has no voting rights.  The 159,000  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.  The Company  will also issue  approximately  240,000  warrants to
     certain  parties who assisted in the  completion of the private  placement.
     The warrants  will be  immediately  vested and each warrant is estimated by
     the Company to possess a fair market  value of $.88.  These  warrants  will
     expire in 2008.

     During the first quarter of 1997,  the Company issued 330,884 shares of its
     common  stock  upon  conversion  of 440  shares of the  Company's  Series A
     convertible preferred stock. The


                                        7


<PAGE>


Pharmos Corporation
(Unaudited)

Notes to Condensed Consolidated Financial Statements


     shares were issued at  conversion  prices  ranging  from $1.27 per share to
     $1.46 per share.  The Company also issued  25,457 shares of common stock in
     payment of dividends on the Series A convertible preferred stock. As of the
     date of such issuances, these dividends are valued at $33,282.

     During the first quarter of 1997,  the Company  issued 37,500 shares of its
     common stock upon exercise of warrants to purchase  shares of the Company's
     common stock at $1.80 per share.

6.   Legal Proceedings

     Management  has reviewed with counsel all 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.


                                        8


<PAGE>



     Management's  Discussion and Analysis of Financial Condition and Results of
     Operations

     Results of Operations

     Quarters ended March 31, 1997 and 1996

     Total operating  expenses  increased  $678,492,  or 37%, from $1,814,580 in
     1996 to $2,493,072 in 1997 primarily due to the purchases of drug substance
     for the manufacture of  Lotemax(TM),  as well as an increase in general and
     administrative expenses and research and development costs. Excluding those
     purchases,  operating expenses increase by $108,511, or 6%, from $1,814,580
     in 1996 to $1,923,091 in 1997.

     Net research and  development  expenses  increased by $42,862,  or 4%, from
     $1,138,738 in 1996 to $1,181,600 in 1997.  The increase in R & D expense is
     mainly due to  clinical  trial  costs,  including  the  preparation  of the
     Company's NDAs submissions.

     In 1997, the Company,  in  anticipation of approval by the FDA of either or
     both of the NDAs submitted and in accordance with its obligations under the
     Marketing  Agreements  to  supply  Bausch  & Lomb  with  certain  specified
     quantities  of the active  drug-substance,  purchased  bulk  quantities  of
     Loteprednol  etabonate  in the amount of $569,981.  However,  until the FDA
     approves either of the Company's NDAs that use Loteprednol  etabonate,  the
     Company has taken a valuation allowance of $569,981 against these purchases
     to lower of cost or market value as there are currently no alternative uses
     for such quantities of this drug substance.

     Patent  expenses  decreased  by $19,982,  or 38%,  from  $52,370 in 1996 to
     $32,388 in 1997.  This  decrease is due in part to the timing of completion
     of  certain  patent  applications  and due to the fact  that the  Company's
     in-house patent counsel  undertakes  work  previously  executed by external
     patent attorneys.

     General and  administrative  expenses  increased by $101,394,  or 19%, from
     $537,139 in 1996 to $638,533 in 1997, due to certain administrative costs.

     Depreciation and amortization  expenses decreased by $15,763,  or 18%, from
     $86,333 in 1996 to $70,570 in 1997, reflecting reduced depreciation expense
     relating to the Alachua, Florida operation.

     Net interest  income  decreased  by $2,947,  or 5%, from $60,003 in 1996 to
     $57,056 in 1997.  Interest  income  decreased as a result of lower  average
     cash balances partially offset by lower interest expense.


                                        9


<PAGE>


     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,  advances  and other  funding
     pursuant to marketing and  co-development  agreements with Bausch and Lomb,
     research contracts, license fees, royalties and sales, and interest income.

     The Company has working  capital of $8.3 million,  including  cash and cash
     equivalents of $10.5  million,  as of March 31, 1997. On March 31, 1997 the
     Company completed a $6 million private  placement of convertible  preferred
     stock  and  warrants.  Management  believes  that  existing  cash  and cash
     equivalents  combined with additional  cash inflows from investment  income
     and R&D grants  will be  sufficient  to support  operations  into the first
     quarter  of 1998.  Management  believes  that  additional  funding  will be
     required to fund operations  until, if ever,  profitable  operations can be
     achieved.  Therefore,  the Company will continue 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  required to continue the  development  of its products and bring
     them to commercial markets.

     Pursuant to the U.S.  Marketing  agreement with Bausch & Lomb and following
     the NDA  submission  for LE-A,  the  Company  received  in March  1997,  an
     additional $1 million in advances  against  future sales of the active drug
     substance (needed to manufacture the drug),  $143,333 of which was advanced
     to the license holder.  Cumulative  advances from Bausch & Lomb as of March
     31,  1997 total $5  million.  Bausch & Lomb will be  entitled to recoup the
     advances  by way of  credits  from  future  sales of  Lotemax(TM)  and line
     extension products.  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.


                                       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 14, 1997                        by:   /s/ Alan M. Mark
                                                 ------------------------------
                                                 Alan M. Mark
                                                 Acting Chief Financial Officer


                                       12

<PAGE>