PHARMOS CORP, S-3/A, 1995-12-29

PHARMOS CORP
S-3/A, 1995-12-29
PHARMACEUTICAL PREPARATIONS

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As filed with the Securities and Exchange Commission on December 29, 1995

Registration No. 33-64289

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

AMENDMENT NO. 1 TO FORM S-3

REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, AS AMENDED

PHARMOS CORPORATION
-------------------
(Exact name of registrant as specified in its charter)

Nevada 36-3207413
------ ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)

2 Innovation Drive
Alachua, Florida 32615
(904) 462-1210

(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)

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

S. COLIN NEILL
2 Innovation Drive
Alachua, Florida 32615
(904) 462-1210
(Name, address, including zip code, and telephone
number, including area code, of agent for service)

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

Copies to:
ADAM D. EILENBERG, ESQ.
Fitzpatrick Eilenberg & Zivian
666 Third Avenue, 30th Floor
New York, New York 10017

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

Approximate date of commencement of proposed sale to public: As soon as
practicable after the effective date of the registration statement

If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. | |
---

If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered in connection with dividend or interest
reinvestment plans, check the following box. | X |
---

<PAGE>

CALCULATION OF REGISTRATION FEE
-------------------------------
<TABLE><CAPTION>

Proposed
Maximum Proposed
Offering Maximum Amount of
Title of Each Class of Amount to be Price Per Aggregate Registration
Securities to be Registered Registered Unit Price Fee
- ----------------------------------------------------------------------------------------------

<S> <C> <C> <C> <C>
Shares of Common stock to be 6,000,000 $1.84(2) $11,040,000 $3807
sold by Selling Security
holders(1)

Shares of Common Stock 900,000 $1.80 $1,620,000 $559
issuable upon exercise of
Warrants to purchase 900,000
Shares at $1.80 per share*
Shares of Common Stock 10,000 $0.78 $7,800 $3
issuable upon exercise of
Warrants to purchase 10,000
Shares at $.78 per share*

Shares of Common Stock 50,000 $0.75 $37,500 $13
issuable upon exercise of
Warrants to purchase 50,000
Shares at $.75 per share*

Shares of Common Stock 50,000 $1.00 $50,000 $17
issuable upon exercise of
Warrants to purchase 50,000
Shares at $1.00 per share*
Shares of Common Stock 50,000 $1.50 $75,000 $26
issuable upon exercise of
Warrants to purchase 50,000
Shares at $1.50 per share*

Shares of Common Stock 10,000 $1.88 $18,800 $6
issuable upon exercise of
Warrants to purchase 10,000
Shares at $1.88 per share*
- ----------------------------------------------------------------------------------------------
Total Registration Fee $12,849,100 $4,431

</TABLE>

(1) To be offered by selling security holders, at their discretion,
from time to time over a period of three years from the effective
date of this Registration Statement, at prevailing market prices
at time of sale.

(2) Estimated solely for the purpose of calculating the registration
fee. Proposed maximum offering price per share is estimated
based upon the average of the high and low prices of the
Company's Common Stock listed on the Nasdaq SmallCap Market on
November 10, 1995.

* The amount of shares issuable upon exercise of the Warrants may
be increased solely to account for applicable anti-dilution
adjustments, if any.

The registrant hereby amends the registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine. 2

<PAGE>

PHARMOS CORPORATION

Cross Reference Sheet Showing Location in Prospectus of Information Required
Therein by
Item 1 through 13 of Form S-3

Registration Statement Prospectus Caption
Item and Heading of Location
----------------------- -------------------

1. Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus . . . . . Outside Front Cover

2. Inside Front and Outside Back
Cover Pages and Prospectus . . . . Inside Front Cover Page

3. Summary Information,
Prospectus Summary
and Ratio of Earnings to Outside Front Cover,
Fixed Charges . . . . . . . . . . . Risk Factors

4. Use of Proceeds . . . . . . . . . . Use of Proceeds

5. Determination of Offering Price . . Cover Page

6. Dilution . . . . . . . . . . . . . Dilution

7. Selling Security Holders . . . . . Selling Security Holders

8. Plan of Distribution . . . . . . . Cover Page, Plan of
. . . . . . . . . . . . . . . . . Distribution

9. Description of the Securities to
be Registered . . . . . . . . . . . Description of Securities

10. Interest of Named Experts and
Counsel . . . . . . . . . . . . . . Experts

11. Material Changes . . . . . . . . . Recent Developments

12. Incorporation of Certain
Information by Reference . . . . . Incorporation of Certain
Documents by Reference

13. Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities . . . . . . . . . . Commission's Policy on
Indemnification for Securities
Act Liabilities
3

<PAGE>

SUBJECT TO COMPLETION,
DATED DECEMBER 29, 1995

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY INTO BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE.

PHARMOS CORPORATION

6,000,000 SHARES OF COMMON STOCK,
$.03 PAR VALUE, TO BE SOLD BY
SELLING SECURITY HOLDERS

900,000 SHARES OF COMMON STOCK ISSUABLE
UPON EXERCISE OF WARRANTS TO PURCHASE SHARES
AT AN EXERCISE PRICE OF $1.80 PER SHARE

10,000 SHARES OF COMMON STOCK ISSUABLE
UPON EXERCISE OF WARRANTS TO PURCHASE SHARES
AT AN EXERCISE PRICE OF $0.78 PER SHARE

50,000 SHARES OF COMMON STOCK ISSUABLE
UPON EXERCISE OF WARRANTS TO PURCHASE SHARES
AT AN EXERCISE PRICE OF $0.75 PER SHARE

50,000 SHARES OF COMMON STOCK ISSUABLE
UPON EXERCISE OF WARRANTS TO PURCHASE SHARES
AT AN EXERCISE PRICE OF $1.00 PER SHARE

50,000 SHARES OF COMMON STOCK ISSUABLE
UPON EXERCISE OF WARRANTS TO PURCHASE SHARES
AT AN EXERCISE PRICE OF $1.50 PER SHARE

10,000 SHARES OF COMMON STOCK ISSUABLE
UPON EXERCISE OF WARRANTS TO PURCHASE SHARES
AT AN EXERCISE PRICE OF $1.88 PER SHARE

This Prospectus covers the proposed offer and resale of up to 6,000,000
shares (the "Shares") of common stock, par value $.03 ("Common Stock") of
Pharmos Corporation (the
<PAGE>

"Company") held by stockholders (the "Selling Stockholders") who purchased such
Shares in a private placement transaction in September 1995 (the "Private
Placement Transaction").

This Prospectus also covers the offer and proposed sale by the Company of
up to (i) 900,000 shares of Common Stock issuable upon the exercise by
the holders thereof of warrants to purchase 900,000 shares (which amount may
increase solely to account for applicable anti-dilution adjustments, if any) at
an exercise price of $1.80 per share issued to the Selling Stockholders and to
two finders in connection with the Private Placement Transaction; (ii) 10,000
shares of Common Stock issuable upon the exercise by the holder thereof of
warrants to purchase 10,000 shares at an exercise price of $0.78 per share
issued to the Company's financial advisor in connection with the Company's
acquisition of Oculon Corporation in April 1995; (iii) 150,000 shares of Common
Stock issuable upon the exercise by the holder thereof of warrants to purchase
150,000 shares issued to the Company's investment banker\financial consultant
and exercisable as follows: 50,000 of such warrants are exercisable at a price
of $0.75 per share, 50,000 of such warrants are exercisable at a price of $1.00
per share, and 50,000 of such warrants are exercisable at a price of $1.50 per
share; and (iv) 10,000 shares of Common Stock issuable upon the exercise by the
holder thereof of warrants to purchase 10,000 shares at an exercise price of
$1.88 per share issued to the Company's Acting Chief Financial Officer in
connection with his efforts on behalf of the Company in the Private Placement
Transaction. (All of the warrants set forth above are hereinafter separately
and collectively referred to as the "Warrants" and the shares of Common Stock
issuable upon the exercise of the Warrants are hereinafter separately and
collectively referred to as the "Warrant Shares.")

In connection with this offering, the Selling Stockholders and certain
holders of the Warrants who may be deemed to be "affiliates" of the Company, as
that term is defined under the Securities Act of 1933, as amended (the "Act"),
may be deemed to be an "underwriter," as that term is defined under the Act, of
the Shares or Warrant Shares offered hereby. It is anticipated that the Selling
Stockholders and such affiliates intend to sell the Shares or Warrant Shares
offered hereby from time to time for their own respective accounts in the open
market at the prices prevailing therein or in individually negotiated
transactions at such prices as may be agreed upon. Each Selling Stockholder and
such affiliate will bear all expenses with respect to the offering of the Shares
or Warrant Shares offered hereby by him except the costs of legal counsel and
costs associated with registering such shares under the Act and preparing and
printing this Prospectus.

The net proceeds from Shares to be sold by the Selling Stockholders (and by
holders of Warrant Shares who exercise their Warrants) will inure entirely to
their benefit and not that of the Company; however the Company will receive
proceeds from the exercise of the Warrants.

The Company's Common Stock is traded on the over-the-counter market and is
quoted on the Nasdaq SmallCap Market under the symbol "PARS" The closing price
of the Company's Common Stock on December 28, 1995 was $1.44.

(ii)

<PAGE>

THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SUBSTANTIAL DILUTION AS
DESCRIBED HEREIN (SEE "RISK FACTORS" AND "DILUTION").

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.

The date of this Prospectus is ____________________, 1995.

(iii)

<PAGE>

The laws of many states provide exemptions from registration, particularly
for sales of securities by persons other than issuers, such as the certain of
the Selling Stockholders and holders of the Warrants, who do not have a control
relationship with the issuer, and for the subsequent resale of such securities
by purchasers thereof. Purchasers hereunder should consult with their broker
and/or attorney to determine whether applicable state laws permit such purchases
and resales by them.

With respect to the proposed sale of the Shares offered hereby by the
Selling Stockholders and the sale of the Warrant Shares by the Company upon
exercise of the Warrants, the Company is taking steps to register these
securities or permit such sales pursuant to exemption from registration only
under the laws of California, Colorado, Connecticut, Florida, Georgia, Illinois,
Kentucky, Pennsylvania, New Jersey and New York. However, if holders of the
Shares are not residents of the aforementioned states, such holders will not be
able to resell their Shares in any other states, including the states in which
they reside. In such event, such holders must arrange either (i) to sell their
Shares (through a broker/dealer or otherwise) only to a resident of one of the
aforementioned states or to an entity, such as a broker/dealer registered in
such state, which may be exempt under applicable state laws, or (ii) pursuant to
another applicable exemption. In such event, the Company will only permit the
transfer of the Shares if its transfer agent receives a certification from the
holder that the sale was made to a resident of one of the aforementioned states
or to a state registered broker/dealer or the Company receives an opinion of
counsel, satisfactory to the Company's counsel, that the resale of the Shares is
otherwise exempt from registration under applicable state law.

With respect to the proposed sale of the Warrant Shares, if holders of the
Warrants are not residents of the aforementioned states, the Company will not be
-----------------------
able to permit them to exercise Warrants held by them, unless such holders
- ----------------------------------------------------------
obtain an opinion of counsel, satisfactory to the Company's counsel, that such
transaction is exempt from registration. Under such circumstances, their only
alternatives may be to sell their Warrants and/or Common Stock to a resident of
the aforementioned states or to sell their Warrants and/or Warrant Shares to an
entity, such as a registered broker-dealer in such state, which may be exempt
under applicable state laws.

Holders of the Warrants and/or Warrant Shares should consult with their
broker and/or attorney to determine what actions should be taken to comply with
the laws of their state with respect to any Warrants and/or Warrant Shares held
by them and, specifically with respect to the Warrants, ensure that such action
is taken well prior to the respective expiration dates of the Warrants, if
necessary.

The Company will furnish to each person to whom this Prospectus is
delivered, upon written request, a copy of any or all of the documents referred
to by reference, other than exhibits to such documents unless such exhibits are
specifically incorporated herein by reference. Requests should be addressed to:
Mr. S. Colin Neill, Acting Chief Financial Officer, Pharmos Corporation, 2
Innovation Drive, Alachua, Florida 32615, (904) 462-1210.
(iv)

<PAGE>

NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS. ANY INFORMATION OR REPRESENTATION NOT HEREIN CONTAINED, IF GIVEN OR
MADE, MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN RESPECT OF THE
SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE
UNLAWFUL. DELIVERY OF THIS PROSPECTUS SHALL NOT, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE OF THIS PROSPECTUS.

(v)

<PAGE>

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission, 450
Fifth Street, Washington, D.C. 20549, a Registration Statement on Form S-3 under
the Securities Act of 1933 with respect to the securities offered hereby. This
Prospectus filed as part of such Registration Statement does not contain all the
information set forth in, or annexed as exhibits to, the Registration Statement.
For further information pertaining to the securities offered hereby and the
Company, reference is made to the Registration Statement and the exhibits
thereto. The Registration Statement and exhibits thereto may be inspected at
the Headquarters Office of the Securities and Exchange Commission located at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at certain of the
Commission's regional offices at the following addresses: 75 Park Place, New
York, New York; Room 1204, S. Dearborn Street, Chicago, IL 60604; and Suite 500
East, 5757 Wilshire Blvd., Los Angeles, CA 90036. Copies of such material may
be obtained from the Public Reference Section of the SEC, at 450 Fifth Street,
N.W., Room 1024, Washington, D.C. at prescribed rates. The statements contained
in this Prospectus concerning the contents of any contract or document referred
to are not necessarily complete, and in each instance, reference is made to such
contract or document filed as an exhibit to the Registration Statement, each
statement being qualified in all respects by provisions of such exhibit to which
reference is hereby made for a full statement of the provisions thereof.
(vi)

<PAGE>

THE COMPANY

The Company is engaged in the development of novel pharmaceuticals based on
innovative drug delivery technologies targeting diseases of the eye, principally
ocular inflammation, and the brain, principally stroke and head trauma.

Its leading product, LotemaxTM, is an ophthalmic anti-inflammatory drug
designed with the Company's proprietary "site active" delivery system and has
demonstrated significant efficacy in a series of completed Phase III clinical
trials and a uniquely superior safety profile compared to currently available
ophthalmic steroids. The Company has completed the submission of its New Drug
Application ("NDA") for LotemaxTM to the U.S. Food and Drug Administration
("FDA").

The Company's principal executive offices are located at 2 Innovation
Drive, Alachua, Florida 32615, telephone (904) 462-1210.

RISK FACTORS
The Common Stock being offered hereby involves a high degree of risk.
Prospective investors should carefully consider the following risk factors in
addition to other information contained in this Prospectus, in evaluating an
investment in the shares of Common Stock offered hereby.

Early Stage of Development; Technological Uncertainty

Pharmos is at an early stage of development. Apart from LotemaxTM, most of
the Company's other potential products are early in the research and development
phase, and product revenues may not be realized from the sale of any such
products for at least the next several years, if at all. Many of the Company's
proposed products will require significant additional research and development
efforts prior to any commercial use, including extensive preclinical and
clinical testing as well as lengthy regulatory approval. There can be no
assurance that the Company's research and development efforts will be
successful, that the Company's potential products will prove to be safe and
effective in clinical trials or that any commercially successful products will
ultimately be developed by the Company.

History of Operating Losses; Accumulated Deficit

The Company has experienced significant operating losses since its
inception. As of September 30, 1995, the Company had an accumulated deficit of
approximately $53 million. The Company expects to incur operating losses over
at least the next several years as the Company's research and development
efforts and preclinical and clinical testing activities continue. The Company's
ability to achieve profitability depends in part upon its ability, alone or with
others, to successfully commercialize and receive approval on its first proposed
product, to complete development of its other proposed products, to obtain
required regulatory approvals and to manufacture and market such products.

<PAGE>

Future Capital Needs; Uncertainty of Additional Financing

The Company's operations to date have consumed substantial amounts of cash.
The development of the Company's technology and potential products will require
a commitment of substantial funds to conduct the costly and time-consuming
research necessary to develop and optimize such technology, and ultimately, to
establish manufacturing and marketing capabilities. The Company's future
capital requirements will depend on many factors, including continued scientific
progress in the research and development of the Company's technology and drug
programs, the ability of the Company to establish and maintain collaborative
arrangements with others for drug development, progress with preclinical and
clinical trials, the time and costs involved in obtaining regulatory approvals,
the costs involved in preparing, filing, prosecuting, maintaining and enforcing
patent claims, competing technological and market developments, changes in its
existing research relationships and effective product commercialization
activities and arrangements.

The Company believes that its current cash resources and interest income
thereon, including approximately $8.1 million in net cash and cash equivalents
received by the Company from the Private Placement Transaction and contractual
amounts due from Bausch & Lomb Pharmaceuticals, Inc. ("Bausch & Lomb") under the
Company's marketing and manufacturing agreement with Bausch & Lomb (See "Recent
Developments"), should be sufficient to fund its operating expenses and capital
requirements as currently planned through March 1997. The Company will seek
additional funding through collaborative arrangements or through future public
or private equity or debt financing. There can be no assurance that additional
financing will be available on acceptable terms, or at all. If additional funds
are raised by issuing equity securities, further dilution to stockholders may
result. If adequate funds are not available, the Company may be required to
delay, reduce the scope of or eliminate one or more of its research or
development programs or to obtain funds through arrangements with collaborative
partners or others that may require the Company to relinquish rights to certain
of its technologies, product candidates or products that the Company would
otherwise seek to develop or commercialize itself.

Dependence on Potential Collaborative Partners

The Company's strategy for the development, clinical testing,
manufacturing, marketing and commercialization of certain of its products
includes entering into various collaborations with corporate partners,
licensors, licensees and others. To date, the Company has entered into an
agreement with Bausch & Lomb to manufacture and market its lead product,
LotemaxTM, in the United States. The agreement also covers the co-development
of LotemaxTM line extension products currently being developed by the Company
(See "Recent Developments"). There can be no assurance that the Company will be
able to negotiate any future collaborative agreement with companies on
acceptable terms, or that any present or future collaborative agreements will be
successful. To the extent that the Company chooses not to or is not able to
establish such arrangements, the Company would experience increased capital
requirements to undertake such activities at its own expense. In addition, the
Company may encounter significant delays in

2
<PAGE>

introducing its proposed products currently under development into certain
markets or find that the development, manufacture, or sale of its proposed
products in such markets is adversely affected by the absence of such
collaborative agreements.

Technological Change and Competition

The pharmaceutical industry is subject to rapid, unpredictable and
significant technological change. Competition from universities, research
institutions and other pharmaceutical, chemical and biotechnology companies is
intense. Many competitors or potential competitors have greater financial
resources, research and development capabilities, and manufacturing and
marketing experience than the Company. To this end, the Company has entered
into an agreement with Bausch & Lomb for the manufacture and marketing of
LotemaxTM (See "Recent Developments"). There can be no assurance that
developments by the Company's competitors or potential competitors will not
render the Company's technology or proposed applications of its technology
obsolete.

Technologies Subject to Licenses

As a licensee of certain research technologies, the Company has various
license agreements with certain U.S. federal agencies and the State of Israel,
certain universities and Dr. Nicholas Bodor, a former director of the Company
(who previously was also a vice president of the Company), wherein the Company
has acquired exclusive and coexclusive rights to develop and commercialize
certain research technologies. The agreements generally require the Company to
pay royalties on sale of products developed from the licensed technologies and
fees on revenues from sublicensees, where applicable, and the Company is
responsible for the costs of filing and prosecuting patent applications. In
addition, some of the Company's license agreements require that the Company
commit certain sums annually for research and development of the licensed
products. The Company's license agreements with the University of Florida and
with Dr. Bodor require the Company to pay annual license maintenance fees as
well as make payments upon completion of certain milestones occurring in the
clinical trials of certain licensed products. The Company is currently
negotiating the modification of its agreement with the University of Florida and
is involved in litigation with Dr. Bodor relating to its agreement with him (see
"Legal Proceedings and Disputes").

The exclusivity of license agreements generally expires fifteen years after
the later of commercialization or the effectiveness of the patents. Each
agreement is terminable by either party, upon notice, if the other party
defaults in its obligations.

Uncertainty of Protection of Patents and Proprietary Rights

The Company's success will depend in large part on its ability to obtain
patents, maintain trade secrets and operate without infringing on the
proprietary rights of others, both in the U.S. and in other countries. The
patent positions of pharmaceutical companies can be highly uncertain and involve
complex legal and factual questions, and therefore the breadth and

3
<PAGE>

enforceability of claims allowed in pharmaceutical patents cannot be predicted.
There can be no assurance that any issued or pending patents will not be
challenged, invalidated or circumvented, or that the rights granted thereunder
will provide proprietary protection or competitive advantages to the Company.

The commercial success of the Company also will depend, in part, on Pharmos
not infringing patents issued to others and not breaching the technology
licenses upon which any Company products are based. It is uncertain whether any
third-party patents will require the Company to alter its products or processes,
obtain licenses or cease certain activities. In addition, if patents are issued
to others which contain competitive or conflicting claims, and such claims are
ultimately determined to be valid, the Company may be required to obtain
licenses to these patents or to develop or obtain alternative technology. If
any licenses are required, there can be no assurance that the Company will be
able to obtain any such licenses on commercially favorable terms, if at all.
The Company's breach of an existing license or failure to obtain a license to
any technology that it may require to commercialize its products may have a
material adverse impact on the Company. Litigation, which could result in
substantial costs to the Company, may also be necessary to enforce any patents
licensed or issued to the Company or to determine the scope and validity of
third-party proprietary rights. If competitors of the Company prepare and file
patent applications in the U.S. that claim technology also claimed by the
Company, the Company may have to participate in interference proceedings
declared by the U.S. Patent and Trademark Office to determine priority of
invention, which could result in substantial costs to the Company, even if the
eventual outcome is favorable to the Company. An adverse outcome could subject
the Company to significant liabilities to third parties, require disputed rights
to be licensed from third parties or require the Company to cease using such
technology.

The Company also relies on secrecy to protect its technology, especially
where patent protection is not believed to be appropriate or obtainable. Thus,
Pharmos protects its proprietary technology and processes, in part, by
confidentiality agreements with its employees, consultants and certain
contractors. There can be no assurance that these agreements will not be
breached, that the Company would have adequate remedies for any breach, or that
the Company's trade secrets will not otherwise become known or be independently
discovered by competitors.

Legal Proceedings and Disputes

The Company recently commenced an action against Dr. Nicholas Bodor, a
former director of the Company, seeking to enjoin Dr. Bodor from taking any
steps to terminate or interfere with the Company's rights under its License
Agreement with Dr. Bodor relating to LotemaxTM. Dr. Bodor claims that the
advances against future revenues of LotemaxTM recently received by the Company
under its Marketing Agreement with Bausch & Lomb Pharmaceuticals, Inc. are an up
front licensing fee of which Dr. Bodor is entitled to receive a portion and that
the failure to pay would constitute grounds for his terminating the License
Agreement. Dr. Bodor also claims that the Marketing Agreement is actually a
sublicense entitling Dr. Bodor to additional royalties under his License
Agreement. The Company strongly disagrees with Dr.

4
<PAGE>

Bodor's characterization of the Bausch & Lomb Marketing Agreement and believes
his interpretation is incorrect and has no merit. To prevent Dr. Bodor from
wrongfully terminating the License Agreement, the Company commenced the action
to protect its rights under both the License Agreement and the Marketing
Agreement (See "Recent Developments").

The Company is also involved in separate disputes with two of its licensors
regarding the applicability of the Company's license to a new technology being
developed by the licensor and the priority of a licensed patent. While the
Company believes that its position is correct in both of these disputes and that
it will prevail, an adverse determination or resolution of both or either of
them could have a material adverse effect on the Company and its operations.

The Company has been named as an additional co-defendant in an amended
complaint filed in a pending purported class action suit against David Blech, D.
Blech & Co. and a number of other defendants, including eleven publicly traded
biotechnology companies. The complaint seeks damages for alleged unlawful
manipulation of the stock market prices of the named biotechnology companies.
The Company believes that the claims against it have no factual or legal basis
and are without merit and has filed a motion to dismiss the claims asserted
against it (See "Recent Developments").

Extensive Government Regulation

The Company's products require the approval of the FDA before they can be
marketed in the U.S. In addition, approvals are also required from health
authorities in most foreign countries before the Company's products can be
marketed in such countries. Before an NDA, a type of submission used to obtain
FDA approval to market a new drug, can be filed with the FDA, a product must
undergo, among other things, extensive animal testing and human clinical trials,
which can take up to seven years to complete. Except for LotemaxTM, the Company
has not yet filed NDAs on its products. The time required for regulatory
approval of the Company's products after acceptance for filing an NDA can vary
and is usually one to three years or more, and the FDA may require additional
animal studies and/or clinical trials before granting approval. There can be no
assurance that the FDA and foreign regulatory agencies will be satisfied with
the information, including that emanating from clinical trials, submitted to
them in applications (like NDAs) seeking approval and will approve the marketing
of any of the Company's potential products, or that problems will not arise that
could delay or prevent the commercialization of the Company's future products.

There can be no assurance that any potential products developed by the
Company alone or in conjunction with others will be proven to be safe and
effective in clinical trials and will meet all of the applicable regulatory
requirements needed to receive marketing approval. Data obtained from
preclinical testing and clinical trials can be susceptible to varying
interpretations which could delay, limit or prevent regulatory approvals. In
addition, delays or disapprovals may be encountered based upon additional
government regulation resulting from future legislation or administrative action
or changes in FDA policy made during the period of product development and FDA
regulatory review. Similar delays may also be encountered in foreign

<PAGE>

countries. There can be no assurance that even after such time and
expenditures, regulatory approval will be obtained for any potential products
developed by the Company. If regulatory approval of a product is granted, such
approval will be limited to those therapeutic uses for which the product has
been demonstrated through clinical studies and other means to be safe and
effective. Furthermore, approval may entail ongoing requirements for post-
marketing studies. Even if regulatory approval is obtained, a marketed product,
its manufacturer and its manufacturing facilities are subject to continual
review and periodic inspections. The regulatory standards for manufacturing are
currently being applied stringently by the FDA. Discovery of previously unknown
problems with a product, manufacturer or facility may result in FDA restrictions
being placed on such product or manufacturer or facility, including an order to
withdraw a specific product from the market, and may also result in court
enforced sanctions against the product, manufacturer or facility.

The Company may establish collaborative relationships to conduct clinical
testing and seek regulatory approvals to market its products in major markets
outside the U.S. There can be no assurance that the Company will be successful
in establishing such relationships or that such approvals will be received in a
timely manner, if at all. To market its products abroad, the Company is also
subject to numerous and varying foreign regulatory requirements, implemented by
foreign health authorities, governing the design and conduct of human clinical
trials, pricing and marketing. The approval procedure varies among countries
and can involve additional testing, and the time required to obtain approval may
differ from that required to obtain FDA approval. At present, foreign marketing
authorizations are applied for at a national level, although within the European
Union ("EU") certain registration procedures are available to companies wishing
to market a product in more than one EU member country. If a regulatory
authority is satisfied that adequate evidence of safety, quality and efficacy
has been presented, marketing authorization is almost always granted. The
foreign regulatory approval process includes all of the risks associated with
obtaining FDA approval set forth above. Approval by the FDA does not ensure
approval by other countries.

Lack of Sales and Marketing Capability

The Company has no experience in sales, marketing or distribution. To
market any of its products directly, the Company must develop a marketing force
and sales force with technical expertise and with supporting distribution
capability. Alternatively, the Company may obtain the assistance of a
pharmaceutical company with an established distribution system and sales force.
The Company recently announced that it has entered into an agreement with Bausch
& Lomb to market LotemaxTM (See "Recent Developments"). There can be no
assurance, however, that the Company will be able to establish sales and
distribution capabilities or be successful in gaining market acceptance for its
products.

Lack of Manufacturing Capability

The Company currently has limited manufacturing capacity to produce its
products for clinical trials. The Company's recent agreement with Bausch & Lomb
addresses the

6
<PAGE>

manufacturing of LotemaxTM (See "Recent Developments"). The proposed products
under development by the Company have never been manufactured on a commercial
scale and there can be no assurances that such products can be manufactured at a
cost or in quantities necessary to make them commercially viable. Any delay in
availability of products may result in delay in the submission of products for
regulatory approval or the market introduction and subsequent sales of such
products, which would have a material adverse effect on the Company.

Need to Attract and Retain Key Employees and Consultants

The Company is highly dependent on the principal members of its scientific
and management staff. In addition, the Company relies on consultants and
advisors to assist the Company in formulating its research and development
strategy. Retaining and attracting qualified personnel, consultants and
advisors will be critical to the Company's success. In order to pursue its
product development and marketing plans, the Company will be required to hire
additional qualified scientific personnel to perform research and development,
as well as personnel with expertise in clinical testing, government regulation,
manufacturing and marketing. The Company faces competition for qualified
individuals from numerous pharmaceutical and biotechnology companies,
universities and other research institutions. There can be no assurance that
the Company will be able to attract and retain such individuals on acceptable
terms or at all.

The Company's clinical development is conducted under agreements with
universities and medical institutions. The Company depends on the availability
of a principal investigator for each such program, and the Company cannot assure
that these individuals or their research staffs will be available to conduct
clinical development. The Company's academic collaborators are not employees of
the Company. As a result, the Company has limited control over their activities
and can expect that only limited amounts of their time will be dedicated to
Company activities. The Company's academic collaborators may have relationships
with other commercial entities, some of which compete with the Company.

Uncertainty of Health Care Reform Measures and Third-Party Reimbursement

The levels of revenues and profitability of biotechnology and
pharmaceutical companies may be affected by the continuing efforts of
governmental and third-party payors to contain or reduce the costs of health
care through various means. For example, in certain foreign markets, pricing or
profitability of prescription pharmaceuticals is subject to government control.
In the U.S., there have been, and the Company expects that there will continue
to be, a number of federal and state proposals to control health care costs.
While the Company cannot predict whether any such legislative or regulatory
proposals will be adopted or the effect such proposals may have on its business,
the uncertainty surrounding such proposals could have a material adverse effect
on the Company. Furthermore, the Company's ability to commercialize its
potential product portfolio may be adversely affected to the extent that such
proposals have a material adverse effect on the business, financial condition
and profitability of other companies that are prospective collaborators for
certain of the Company's proposed products.

<PAGE>

Dependence on Reimbursement

Pharmos' ability to commercialize its products successfully may depend in
part on the extent to which reimbursement for the cost of such products and
related treatments will be available from government health administration
authorities, private health insurers and other organizations. Third-party
payors are increasingly challenging the price of medical products and services.
Significant uncertainty exists as to the reimbursement status of newly approved
health care products, and there can be no assurance that adequate third-party
coverage will be available to enable Pharmos to maintain price levels sufficient
to realize an appropriate return on its investment in product development.

Risk of Product Liability; Availability of Insurance

The design, development and manufacture of the Company's products involve
an inherent risk of product liability claims and associated adverse publicity.
Although the Company currently maintains general liability insurance, there can
be no assurance that the coverage limits of the Company's insurance policies
will be adequate. Similarly, the Company currently maintains clinical trial
liability insurance, but there can be no assurance that the coverage limit of
the Company's insurance policies will be adequate. The Company currently has no
product liability insurance, and there can be no assurance that the Company will
be able to obtain or maintain product liability insurance on acceptable terms or
with adequate coverage against potential liabilities. Such insurance is
expensive, difficult to obtain and may not be available in the future on
acceptable terms or at all. A successful claim brought against the Company in
excess of the Company's insurance coverage could have a material adverse effect
upon the Company and its financial condition.

Use of Hazardous Materials; Potential Liability to Comply with Environmental
Problems

The Company's research and development involves the controlled use of
hazardous materials. Although the Company believes that its safety procedures
for handling and disposing of such materials comply in all material respects
with the standard prescribed by state and federal regulations, the risk of
accidental contamination or injury from these materials cannot be completely
eliminated. In the event of such an accident, the Company could be held liable
for any damages that result, and any such liability could exceed the resources
of the Company. The Company may incur substantial costs to comply with
environmental regulations if the Company develops manufacturing capacity.

Market for the Company's Securities; Shares Eligible for Future Sale; Possible
Volatility of Share Prices

The market price of the Company's Common Stock, like that of other emerging
pharmaceutical companies, has fluctuated significantly in recent years and is
likely to fluctuate in the future. Announcements by the Company or others
regarding scientific discoveries, technological innovations, litigation,
products, patents or proprietary rights, the progress of

<PAGE>

clinical trials, government regulation, public concern as to the safety of drugs
and the reliability of the Company's testing processes and general market
conditions may have a significant impact on the market price of the Common
Stock. The addition of the shares being offered hereby and the shares issuable
upon exercise of the Company's currently outstanding warrants and options to the
number of publicly-traded shares of the Company's Common Stock may affect the
volatility of share prices of the Company's Common Stock.

Outstanding Stock Options and Warrants

The Company may issue additional capital stock, warrants and/or options to
raise capital in the future. The Company regularly examines opportunities to
expand its technology base and product line through means such as licenses,
joint ventures and acquisition of assets or ongoing businesses and may issue
securities in connection with such transactions. However, no commitments to
enter into or pursue any such transaction have been made and there can be no
assurance that any such discussions will result in any such transaction being
concluded. In order to attract and retain key personnel, the Company may also
issue additional securities, including stock options, in connection with its
employee benefit plans. During the terms of such options and warrants, the
holders thereof are given the opportunity to profit from a rise in the market
price of the Company's Common Stock. The exercise of such options and warrants
may have an adverse effect on the market value of the Company's Common Stock.
Also, the existence of such options and warrants may adversely affect the terms
on which the Company can obtain additional equity financing.

Anti-Takeover Provisions

The Company is subject to Sections 78.411-.444 of the Nevada General
Corporation Law ("Nevada Law"), an anti-takeover law, which may discourage
certain types of transactions involving an actual or potential change in control
of the Company, including transactions in which the stockholders might otherwise
receive a premium for their shares over the current prices, and may limit the
ability of the stockholders to approve a transaction that they may deem to be in
their best interests. In addition, the Board of Directors has the authority
without action by the stockholders to fix the rights and preferences of and
issue shares of Preferred Stock, which may have the effect of delaying or
preventing a change in control of the Company.

9
<PAGE>

Potential Future Acquisitions

Due to the current uncertainties of the capital markets for emerging
pharmaceutical companies, the Company has had preliminary discussions with
several emerging pharmaceutical and biotechnology companies about potential
business and/or product consolidations, joint ventures, acquisitions, mergers or
other business combinations (collectively "acquisitions"). In the event the
Company undertakes any such acquisitions it may use some of its cash, including
part of the cash received in connection with the Private Placement Transaction,
or may issue its stock in connection therewith. Although management would
attempt to structure such acquisitions in a manner that will minimize dilution
of the equity owned by current stockholders, no assurance can be given that
acquisitions will not result in such dilution or that control of the Company
will not be changed as a result of such acquisitions. Such acquisitions may be
negotiated or may be sought on an unsolicited basis and may involve speculative
and risky undertakings by the Company with increased risks to its stockholders.
Under Nevada law, acquisitions do not require shareholders' approval except when
accomplished by merger or consolidation. The Company does not, in general,
intend to submit acquisitions to shareholder vote except where required by
Nevada law. The Company has not entered into any preliminary undertaking with
any third parties involving any acquisitions or other business combination
transactions.

Special Considerations of Doing Business in Israel

A significant part of the operations of the Company is conducted in Israel
through its wholly-owned subsidiary, Pharmos Limited ("Pharmos Ltd."), and is
directly affected by economic, political and military conditions there. In
addition, Pharmos Ltd. has received certain funding from the Office of the Chief
Scientist of the Israel Ministry of Industry and Trade (the "Chief Scientist")
relating to its proprietary SubMicron Emulsion Technology and expects to file an
application to receive funding with respect to Dexanabinol, a new chemical
entity. Such funding prohibits the transfer or license of know-how and the
manufacture of resulting products outside of Israel without the permission of
the Chief Scientist. Although it is the Company's belief that the Chief
Scientist does not unreasonably withhold this permission if the request is based
upon commercially justified circumstances and any royalty obligations to the
Chief Scientist are sufficiently assured, there can be no assurance that such
consent, if requested, would be granted upon terms satisfactory to the Company
or granted at all.

Absence of Dividends

No dividends have been paid on the Common Stock to date, and the Company
does not expect to pay cash dividends in the foreseeable future.

10
<PAGE>
DILUTION

As of September 30, 1995, the net tangible book value of the Company was
$6,887,165 or $0.24 per share. Net tangible book value per share is determined
by dividing the net tangible book value (tangible assets less liabilities) of
the Company by the number of shares of Common Stock outstanding at that date.

If all 900,000 of the Warrants exercisable at an exercise price of $1.80
per share are exercised (each of the Warrants purchasing one share of Common
Stock), there would be 30,030,679 shares of Common Stock outstanding with a net
tangible book value of $0.28 and the purchasers of shares through the exercise
of such Warrants at a price of $1.80 per share would suffer immediate dilution
of $1.52 per share.

If all 10,000 of the Warrants exercisable at an exercise price of $0.78 per
share are exercised (each of the Warrants purchasing one share of Common Stock),
there would be 29,140,679 shares of Common Stock outstanding with a net tangible
book value of $0.24 and the purchasers of shares through the exercise of such
Warrants at a price of $0.78 per share would suffer immediate dilution of $0.54
per share.

If all 50,000 of the Warrants exercisable at an exercise price of $0.75 per
share are exercised (each of the Warrants purchasing one share of Common Stock),
there would be 29,180,679 shares of Common Stock outstanding with a net tangible
book value of $0.24 and the purchasers of shares through the exercise of such
Warrants at a price of $0.75 per share would suffer immediate dilution of $0.51
per share.

If all 50,000 of the Warrants exercisable at an exercise price of $1.00 per
share are exercised (each of the Warrants purchasing one share of Common Stock),
there would be 29,180,679 shares of Common Stock outstanding with a net tangible
book value of $0.24 and the purchasers of shares through the exercise of such
Warrants at a price of $1.00 per share would suffer immediate dilution of $0.76
per share.

If all 50,000 of the Warrants exercisable at an exercise price of $1.50 per
share are exercised (each of the Warrants purchasing one share of Common Stock),
there would be 29,180,679 shares of Common Stock outstanding with a net tangible
book value of $0.24 and the purchasers of shares through the exercise of such
Warrants at a price of $1.50 per share would suffer immediate dilution of $1.26
per share.

If all 10,000 of the Warrants exercisable at an exercise price of $1.88 per
share are exercised (each of the Warrants purchasing one share of Common Stock),
there would be 29,140,679 shares of Common Stock outstanding with a net tangible
book value of $0.24 and the purchasers of shares through the exercise of such
Warrants at a price of $1.88 per share would suffer immediate dilution of $1.64
per share.

11
<PAGE>

If all of the Warrants are exercised (each of the Warrants purchasing one
share of Common Stock), there would be 30,200,679 shares of Common Stock
outstanding with a net tangible book value of $0.29. The purchasers of shares
through the exercise of such Warrants at a price of $1.80 per share would suffer
immediate dilution of $1.51 per share; the purchasers of shares through the
exercise of such Warrants at a price of $0.78 per share would suffer immediate
dilution of $0.49 per share; the purchasers of shares through the exercise of
such Warrants at a price of $0.75 per share would suffer immediate dilution of
$0.46 per share; the purchasers of shares through the exercise of such Warrants
at a price of $1.00 per share would suffer immediate dilution of $0.71 per
share; the purchasers of shares through the exercise of such Warrants at a price
of $1.50 per share would suffer immediate dilution of $1.21 per share; and the
purchasers of shares through the exercise of such Warrants at a price of $1.88
per share would suffer immediate dilution of $1.59 per share.

USE OF PROCEEDS
The Company will receive no proceeds from the 6,000,000 shares of Common
Stock to be offered and resold by the Selling Stockholders.

Assuming that all of the 1,070,000 Warrants whose underlying Common Stock
is being offered hereby are exercised, the gross proceeds to be received by the
Company will be $1,809,100. Such proceeds will be added to working capital and
used for general corporate purposes. The amount of proceeds to be received by
the Company, however, depends on the number of Warrants exercised.

The Company believes that its current cash resources and interest income
thereon, including the funds obtained from the Private Placement Transaction,
combined with the proceeds from the exercise of the Warrants, assuming all of
the 1,070,000 Warrants are exercised (as to which there can be no assurances),
should be sufficient to fund its operating expenses and capital requirements as
currently planned through May 1997. The amounts and timing of expenditures for
each purpose will depend on the progress of the Company's research and
development programs, technological advances, determinations as to commercial
potential, the terms of any collaborative arrangements entered into by the
Company for development and licensing, regulatory approvals, and other factors,
many of which are beyond the Company's control.

Pending such uses, the cash received in connection with the Private
Placement Transaction and the net proceeds from the exercise of the Warrants (if
exercised) will be invested in short-term, interest-bearing investment grade
securities. Due to the current uncertainties of the capital markets for
emerging pharmaceutical companies the Company has had preliminary discussions
with several emerging pharmaceutical and biotechnology companies about potential
acquisitions. Any such transaction might involve the use of the Company's cash
resources as consideration, including part of the proceeds of this Offering.
The Company has not entered into any preliminary understanding with any third
parties involving any acquisitions and is not currently in any negotiations.
See "Risk Factors -- Potential Acquisitions."

12
<PAGE>

DESCRIPTION OF SECURITIES

Common Stock

The Common Stock being offered hereby (i) by the Selling Stockholders, (ii)
by the Company upon the exercise of the Warrants, and (iii) by any "affiliate"
of the Company upon the resale of such Common Stock obtained from exercising the
Warrants is fully described in the Company's Registration Statement on Form 8-A
dated January 30, 1984, filed pursuant to Section 12 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). See "Incorporation of Certain
Documents by Reference".

The Company's Restated Articles of Incorporation currently authorize the
issuance of up to 50,000,000 shares of Common Stock. There are currently
29,130,679 shares outstanding, or 33,132,722 shares taking into account exercise
of all outstanding stock options (and stock options which the Company is
contractually obligated to issue) and warrants (including the Warrants).
Warrants

The 900,000 Warrants exercisable at an exercise price of $1.80 are
exercisable commencing September 14, 1996, and expire on September 14, 2000.
The 10,000 Warrants exercisable at an exercise price of $0.78 are exercisable
from April 30, 1996 until April 30, 2005. The 150,000 Warrants, 50,000 of which
are exercisable at an exercise price of $0.75, 50,000 of which are exercisable
at an exercise price of $1.00, and 50,000 of which are exercisable at an
exercise price of $1.50, are exercisable from May 1, 1996 until April 30, 2000.
The 10,000 Warrants exercisable at an exercise price of $1.88 are exercisable
from October 31, 1996 until October 31, 2001. All of the Warrants contain anti-
dilution provisions providing for an adjustment to their respective exercise
prices in the event that the Company effects a stock split or stock dividend.
In addition, the number and kind of shares of Common Stock underlying the
Warrants are subject to adjustments in the event of any capital reorganization,
or reclassification of the capital stock of the Company, or consolidation or
merger of the Company with another corporation or entity (other than a
subsidiary of the Company in which the Company is the surviving or continuing
corporation and no change occurs in the Company's Common Stock).

Other Securities--Preferred Stock

The Company's Restated Articles of Incorporation currently authorize the
issuance of up to 1,250,000 shares of Preferred Stock, none of which is
currently issued and outstanding, and empower the Board of Directors, without
the necessity of further action or authorization by the stockholders, to
authorize the issuance of Preferred Stock from time to time in one or more
series and to fix the relative rights, preferences and limitations of each such
series. The issuance of Preferred Stock could adversely affect the voting power
of holders of Common Stock and the likelihood that such holders will receive
dividend payments and payments upon liquidation and could have the effect of
delaying, deferring or preventing a change in control of the Company. The
Company has no present plan to issue any shares of Preferred Stock.

<PAGE>

Other Securities--Options and Class A and Class B Warrants

As of September 30, 1995, the Company had outstanding incentive stock
options to purchase an aggregate of 252,187 shares of Common Stock at an average
exercise price of $6.66 per share and non-qualified stock options to purchase an
aggregate of 372,182 at an average exercise price of $6.63 per share issued to
employees, directors and consultants pursuant to stock option plans and
individual agreements with management and directors of the Company and warrants
(excluding the 10,000 Warrants exercisable at an exercise price of $1.88) to
purchase 3,367,674 shares of the Company's Common Stock at an average price of
$2.31 per share, consisting of: 396,243 warrants which can be exercised until
November 1998 each to purchase a single share of Common Stock for $3.06; 223,342
warrants which can be exercised until November 1996 to each purchase a single
share of Common Stock for $5.23; 36,393 Class A warrants which can be exercised
until March 1998 to purchase 36,393 shares of Common Stock for $2.29 per share
and 41,083 Class B warrants, which Class B warrants expire in March 1999 and
allow the holder to purchase one share of Common Stock for $2.84; unit purchase
options expiring in March 1998 which allow the holder to purchase 331,328 shares
of Common Stock for $1.66 per share and 200,146 Class A Warrants which can be
exercised to purchase 200,146 shares of Common Stock for $3.61 per share and
225,940 Class B Warrants, which warrants can be exercised to purchase one share
of Common Stock per warrant for $2.84 per share; 63,913 warrants which can be
exercised until September 1999 each to purchase a single share of Common Stock
for $2.30; 214,286 warrants which can be exercised until October 1999 each to
purchase a single share of Common Stock for $0.84; 75,000 warrants which can be
exercised until February 2000 each to purchase a single share of Common Stock
for $0.52; 500,000 warrants which can be exercised from April 1996 until April
2005 to purchase one share of Common Stock per warrant for $2.75 per share;
10,000 Warrants which can be exercised from April 1996 until April 2005 to
purchase one share of Common Stock per warrant for $0.78 per share; 50,000
Warrants which can be exercised from May 1996 until April 2000 to purchase one
share of Common Stock per warrant for $.75 per share; 50,000 Warrants which can
be exercised from May 1996 until April 2000 to purchase one share of Common
Stock per warrant for $1.00 per share; 50,000 Warrants which can be exercised
from May 1996 until April 2000 to purchase one share of Common Stock per warrant
for $1.50 per share; and 900,000 Warrants which can be exercised from September
14, 1996 until September 14, 2000 to purchase one share of Common Stock per
warrant for $1.80 per share.

Nevada Anti-Takeover Laws

The Company is subject to the provisions of Sections 78.411 through 78.444
of the Nevada Law, an anti-takeover statute (the "Business Combination
Statute"). In general, the Business Combination Statute prohibits a publicly-
held Nevada corporation from engaging in a "combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless such combination is
approved in a prescribed manner and continuing thereafter unless such
combination is approved in a prescribed manner or satisfies certain fair value
requirements. For the purposes of the Business Combination Statute,
"combination" includes a merger, an asset sale, the issuance or transfer by the
corporation of its shares in one transaction or a series of transactions, having
an aggregate fair market value equal to five percent or more of the aggregate
market value of the corporation's outstanding shares, to the interested
stockholder or to an associate of the interested

<PAGE>

stockholder, and certain other types of transactions resulting in a financial
benefit the interested stockholder. An "interested stockholder" is a person who
is the beneficial owner, directly or indirectly, of ten percent or more of the
corporation's voting stock or an affiliate or associate of the corporation that
at any time within the three years immediately preceding the date in question
was the beneficial owner, directly or indirectly, of ten percent or more of the
corporation's voting stock.

By an amendment to its By-laws, the Company has exempted itself from the
provisions of Sections 78.378 through 78.3793 of the Nevada Law, a "control
share" statute which otherwise prohibits an acquiring person, under certain
circumstances, from voting certain shares of a target corporation's stock after
such acquiring person's percentage of ownership of such corporation's stock
crosses certain thresholds, unless the target corporation's disinterested
stockholders approve the granting of voting rights to such shares.

Transfer Agent and Registrar

The transfer agent and registrar for the Company's Common Stock is American
Stock Transfer and Trust Company, New York, New York.

PLAN OF DISTRIBUTION

The Shares offered hereby by the Selling Stockholders are 6,000,000 shares
of Common Stock purchased by the Selling Shareholders from the Company in the
Private Placement Transaction. This prospectus also covers the issuance by the
Company of up to 1,070,000 shares of Common Stock upon the exercise of the
Warrants, 900,000 of which were issued in connection with the Private Placement
Transaction, 10,000 of which were issued to a financial advisor to the Company,
150,000 of which were issued to the Company's investment banker\financial
consultant, and 10,000 of which were issued to the Company's Acting Chief
Financial Officer in recognition for his efforts in connection with the Private
Placement Transaction.

The sale of all or a portion of the Shares and Warrant Shares offered
hereby by the Selling Stockholders may be effected from time to time on the
over-the-counter market at prevailing prices at the time of such sales, at
prices related to such prevailing prices or at negotiated prices. The Selling
Stockholders may effect such transactions by selling to or though one or more
broker-dealers, and such broker-dealers may receive compensation in the form of
underwriting discounts, concessions or commissions from the Selling
Stockholders. The Selling Stockholders and any broker-dealers that participate
in the distribution may under certain circumstances be deemed to be
"underwriters" within the meaning of the Securities Act, and any commissions
received by such broker-dealers and any profits realized on the resale of shares
by them may be deemed to be underwriting discounts and commissions under the
Securities Act. The Company and the Selling Stockholders may agree to indemnify
such broker-dealers against certain liabilities, including, without limitation,
certain liabilities under the Securities Act, or, if such indemnity is
unavailable, to contribute toward amounts required to be paid in respect of such
liabilities.

To the extent required under the Securities Act, a supplemental prospectus
will be filed, disclosing (a) the name of any such broker-dealers, (b) the
number of shares involved, (c) the

<PAGE>

price at which such shares are to be sold, (d) the commissions paid or discounts
or concessions allowed to such broker-dealers, where applicable, (e) that such
broker-dealers did not conduct any investigation to verify the information set
out or incorporated by reference in this prospectus, as supplemented, and (f)
other facts material to the transaction.

There is no assurance that any of the Selling Stockholders will sell any or
all of the shares of Common Stock hereby.
The Company has agreed to pay certain costs and expenses incurred in
connection with the registration of the shares of Common Stock offered hereby,
except that the Selling Stockholders shall be responsible for all selling
commissions, transfer taxes and related charges in connection with the offer and
sale of such shares.

The Company has agreed to keep the Registration Statement of which this
Prospectus forms a part continuously effective until the earlier of the date
that all of such Shares have been sold or three years from the date of this
Prospectus.

SELLING SECURITY HOLDERS
The table below sets forth the name of each Selling Stockholder; the total
amount of (i) shares of Common Stock and (ii) shares of Warrant Shares issuable
upon the exercise of the Warrants beneficially owned by such security holder;
the aggregate amount of Common Stock and/or Warrant Shares which may be offered
for sale for the account of such security holder, in his/her discretion from
time to time pursuant to this Prospectus; and the amount of Common Stock which
would be beneficially owned by such security holder after sale of all securities
offered by the Selling Stockholder pursuant to this Prospectus, if they are
offered and sold, and assuming that any other shares held by such security
holders are not sold. None of the Selling Stockholders referred to herein has
held any position or office, or had any material relationship, with the Company
or any of its predecessors or affiliates within the last three years, except as
noted below, and none of the Selling Stockholders will own 1% or more of the
outstanding stock of the Company after completion of the offering, except as
noted below.

Because the initial issuance by the Company of the Warrant Shares to non-
affiliated holders is covered by the Registration Statement of which this
Prospectus forms a part and the resale thereof by such non-affiliated holders
need not be registered under the Securities Act, the table below does not
include the non-affiliated holders of the Warrants, except for the Company's
investment banker/financial consultant, Janssen-Meyers Associates, L.P., who is
an investor in the Private Placement Transaction, as well as a holder of
Warrants.

<PAGE>

<TABLE><CAPTION>
Amount of Shares of
Warrant Shares Common Stock
Shares of Issuable upon and/or Warrant
Common Stock Exercise of Shares Shares Owned
Names Held(1) Warrants Held Offered(2) After Sale

<S> <C> <C> <C> <C>
Richard Stone 231,371 7,500 100,000 131,371

Michael G. Jesselson 4/8/71 Trust 120,833 9,063 120,833 0
Jesselson 12/18/80 Trust FBO 120,833 9,062 120,833 0
Grandchildren

Esther Blech 83,333 31,250 83,333 0

Edward Blech Family Trust 333,334 0 333,334 0

The Blech Family Trust 250,000 18,750 250,000 0

Stanley Shapiro 68,610 5,000 66,667 1,943
The Richard H. Davimos Trust 140,000 7,500 100,000 40,000
UAD 5/12/92 FBO Richard Davimos

David Russell 1,000,000 75,000 1,000,000 0

Robert E. Hernreich 50,000 3,750 50,000 0

Steven Oliveira 25,000 1,875 25,000 0
Janssen-Meyers Associates, L.P. 175,000 403,125 175,000 0

J. M. Hull Associates, L.P. 250,000 18,750 250,000 0

Argonaut Partnership, L.P. 175,000 13,125 175,000 0

Argonaut Investment Fund Ltd. 325,000 24,375 325,000 0

Stephen J. Buell 25,000 1,875 25,000 0
Apollo Capital Management Group, 100,000 7,500 100,000 0
L.P.

Fred Applegate 100,000 7,500 100,000 0

Bulldog Capital Partners, L.P. 178,000 11,250 150,000 28,000

Contrarian Opportunities Fund, 25,000 1,875 25,000 0
L.P.

Everglades Partners, L.P. 75,000 5,625 75,000 0

The Fairmont Fund 250,000 18,750 250,000 0

Richard A. Gibbs, II 185,000 9,375 125,000 60,000

Richard A. Hansen 100,000 7,500 100,000 0
Philip J. Hempleman 80,000 6,000 80,000 0

Infinity Fund, L.P. 165,400 7,500 100,000 65,400

17
<PAGE>

Amount of Shares of
Warrant Shares Common Stock
Shares of Issuable upon and/or Warrant
Common Stock Exercise of Shares Shares Owned
Names Held(1) Warrants Held Offered(2) After Sale

Little Wing, L.P. 100,000 7,500 100,000 0

Pamela L. Miles Trust DTD 4/26/91 100,000 7,500 100,000 0

Harry Mittelman 130,000 7,500 100,000 30,000
Peqout Scout Fund, L.P. 350,000 26,250 350,000 0

Porter Partners, L.P. 400,000 30,000 400,000 0

Sanford Prater 20,000 1,500 20,000 0

Peter Rawlings 70,000 5,250 70,000 0

Morton H. Sachs, IRA 50,000 3,750 50,000 0
The Sachs Company 100,000 7,500 100,000 0

Seedling Fund, L.P. 25,000 1,875 25,000 0

Steven Silver 100,000 7,500 100,000 0

Sonz Partners, L.P. 100,000 7,500 100,000 0

John P. Weeks 130,000 9,750 130,000 0
Dr. Lance W. Willsey 50,000 3,750 50,000 0

S. Colin Neill 5,000 10,000 10,000(3) 5,000
____________________
</TABLE>

(1) Does not include Common Stock issuable upon exercise of
Warrants held by Selling Stockholders.

(2) Does not include the Warrant Shares because the initial
issuance by the Company of the Warrant Shares to non-affiliated holders is
covered by the Registration Statement of which this Prospectus forms a part
and the resale thereof by such non-affiliated holders need not be
registered under the Securities Act.

(3) Includes Mr. Neill's Warrant Shares since Mr. Neill is
currently an affiliate of the Company, and, therefore, the Registration of
which this Prospectus forms a part covers the issuance of his Warrant Shares by
the Company upon the exercise of his Warrants and his resale of his
Warrant Shares.

<PAGE>

RECENT DEVELOPMENTS

LotemaxTM NDA Status Update

On December 19, 1995, the Company announced that the Company and Bausch &
Lomb had recently met with the FDA to discuss the status of the clinical
segments of the NDA filed for LotemaxTM. Discussions included the clinical
importance of uveitis, a severe form of eye inflammation, to fully support the
broad class labeling claims sought in the NDA. As a result of the discussions,
Pharmos and Bausch & Lomb have opted to accelerate a previously planned Phase IV
uveitis clinical trial to provide the FDA with additional data. The study will
begin early in 1996 and is planned to be completed by the middle of 1996. This
will result in a product launch delay until late 1996.

The Company also announced the commencement of two clinical trials on
LotemaxTM line extension to treat eye allergies. These studies use a different
dosage and a different formulation from the 0.5% Loteprednol etabonate used in
LotemaxTM, and will be designed to treat mild allergies of the eye, an important
segment of the opthalmic market. The studies are scheduled to be completed in
the middle of 1996 and the Company is planning to submit an NDA by late 1996.

Bodor Dispute

On October 27, 1995, the Company commenced an action in Supreme Court, New
York County (the "State Court"), against Dr. Nicholas Bodor, a former director
of the Company, seeking to enjoin Dr. Bodor from taking any steps to terminate
or interfere with the Company's rights under its License Agreement with Dr.
Bodor relating to LotemaxTM. Dr. Bodor claims that the advances against future
revenues of LotemaxTM recently received by the Company under its Marketing
Agreement with Bausch & Lomb are an up front licensing fee of which Dr. Bodor is
entitled to receive a portion and that the failure to pay would constitute
grounds for his terminating the License Agreement. Dr. Bodor also claims that
the Marketing Agreement is actually a sublicense entitling Dr. Bodor to
additional royalties under his License Agreement and in response has commenced a
separate action seeking judicial clarification of these issues. In such event,
Dr. Bodor would be entitled to receive a portion of the Company's advances from
Bausch & Lomb as well as a higher royalty percentage from the Company on future
sales of LotemaxTM.

The Company strongly disagrees with Dr. Bodor's characterization of the
Bausch & Lomb Marketing Agreement and believes his interpretation is incorrect
and has no merit. To prevent Dr. Bodor from wrongfully terminating the License
Agreement, the Company commenced the action to protect its rights under both the
License Agreement and the Marketing Agreement.

<PAGE>

Amended Complaint in Blech Class Action

In September 1994, a class action was commenced in the United States
District Court for the Southern District of New York against David Blech
("Blech"), D. Blech & Co. ("Blech & Co."), Bear Stearns & Co., Inc. and certain
other Defendants alleging that Defendants conspired to manipulate and inflate
the prices of the securities of a number of publicly traded biotechnology
companies in which Blech and Blech & Co. allegedly had a controlling interest
for an alleged class period from July 1, 1991 through September 21, 1994.

On March 28, 1995, an Amended Consolidated Class Action Complaint, entitled
In re Blech Securities Litigation, 94 Civ. 7696 (RWS) (S.D.N.Y.) ("Amended
- -----------------------------------
Complaint") was filed, in which action the Company was named as an additional
co-Defendant. The Amended Complaint names as Defendants Blech, Blech & Co.,
Bear Stearns & Co., Inc. and numerous other Defendants, including eleven
publicly traded biotechnology companies, one of which is the Company. The
Amended Complaint asserts the same basic claims as the original complaint. The
Amended Complaint seeks certification as a class action and requests unspecified
damages against Defendants in connection with the alleged unlawful manipulation
of the stock market prices of twenty-four different biotechnology companies.

The Company believes that the claims against it have no factual or legal
basis, and filed in June 1995 a motion to dismiss the claims asserted against
it. In the Company's motion to dismiss, the Company maintained, inter alia,
----- ----
that the Amended Complaint did not contain any specific or legally cognizable
allegations of fraudulent conduct on the part of the Company, and that the named
Plaintiffs (none of whom are alleged to have purchased or sold common stock of
the Company) lacked standing to assert any claims against the Company.

The Company's motion to dismiss (along with motions to dismiss by numerous
other Defendants) was argued and submitted before United States District Court
Judge Robert W. Sweet, the Federal Judge assigned the case on November 9, 1995.
The Federal Judge took the motions under submission at the conclusion of oral
argument on November 9, 1995, and a decision has not yet been rendered by the
Court.

Marketing Agreement with Bausch & Lomb

On July 5, 1995, the Company announced that it has signed a definitive
agreement with Bausch & Lomb to manufacture and market LotemaxTM in the United
States. Also covered by the agreement with Bausch & Lomb are LotemaxTM line
extension products currently being developed by the Company. Under the
agreement, Bausch & Lomb will purchase the active drug substance from the
Company for a cost of 29.4% of the drug selling price. The agreement provides
for cash advances relating to future sales by the Company aggregating up to $4
million. The Company received an initial $1 million upon signing and will
receive another $3 million by March 1996. An additional $2 million is subject
to reaching certain development milestones in the LotemaxTM line extension
products. Bausch & Lomb will also collaborate in the development of such
additional products by making available amounts up to $3 million to fund 50% of
their Phase III clinical trial costs. The Company will retain certain
conditional co-marketing rights to all of the products covered by the marketing
agreement.

<PAGE>

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents filed by the Company with the Commission are
incorporated herein by reference:

(a) The Company's Annual Report on Form 10-K, for the fiscal year ended
December 31, 1994, filed pursuant to Section 13 of the Exchange Act. The
consolidated financial statements included in the Company's Annual Report on
Form 10-K should be read in conjunction with the disclosures in Forms 8-K and a
related amendment filed subsequent to December 31, 1994.

(b) The Company's Quarterly Reports on Form 10-Q, for the quarters ending
March 31, June 30 (as amended) and September 30, 1995, filed pursuant to Section
13 of the Exchange Act.

(c) The Company's Current Report on Form 8-K, dated October 27, 1995,
filed pursuant to Section 13 of the Exchange Act. As described on page 17 of
this Prospectus under the caption "Bodor Dispute," such Form 8-K reported that
the Company has commenced an action against Dr. Nicholas Bodor, a former
director of the Company, seeking to enjoin Dr. Bodor from taking any steps to
terminate or interfere with the Company's rights under its License Agreement
with Dr. Bodor relating to LotemaxTM.

(d) The Company's Current Report on Form 8-K, dated September 14, 1995,
filed pursuant to Section 13 of the Exchange Act, describing the Private
Placement Transaction.

(e) The Company's Current Report on Form 8-K, dated July 5, 1995, filed
pursuant to Section 13 of the Exchange Act, describing the Bausch & Lomb
Marketing and Manufacturing Agreement.

(f) The Company's Current Report on Form 8-K, dated April 26, 1995, as
amended, filed pursuant to Section 13 of the Exchange Act, describing the
Company's acquisition of Oculon Corporation.

(g) The Company's Current Report on Form 8-K, dated April 10, 1995, filed
pursuant to Section 13 of the Exchange Act. As described on page 17 of this
Prospectus under the caption "Amended Complaint in Blech Class Action," such
Form 8-K reported that the Company has been named as an additional co-defendant
in an amended complaint filed in a pending class action suit against David
Blech, D. Blech & Co. and a number of other defendants, including eleven
publicly traded biotechnology companies.

(h) The description of the Common Stock contained in the Company's
Registration Statement on Form 8-A dated January 30, 1984, filed pursuant to
Section 12 of the Exchange Act.

In addition, all reports and other documents to be filed by the Company
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to
the filing of a post-effective amendment which indicates that all securities
offered hereby have been sold or which deregisters all securities offered hereby
then remaining unsold, as well as all such reports filed after the date

<PAGE>

hereof and prior to the termination of this offering, shall be deemed to be
incorporated by reference herein and shall be deemed to be a part hereof from
the date of the filing of each such report or document.

COMMISSION'S POLICY ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES

Article 12 of the Company's Restated Articles of Incorporation directs the
Company to provide in its bylaws for provisions relating to the indemnification
of directors and officers to the full extent permitted by law, including the
federal securities law. Section 78.751 of the Nevada Revised Statutes, as
amended, authorizes the Company to indemnify any director or officer under
certain prescribed circumstances and subject to certain limitations against
certain costs and expenses, including attorneys' fees actually and reasonably
incurred in connection with any action, suit or proceeding, whether civil,
criminal, administrative or investigative, to which such person is a party by
reason of being a director or officer of the Company if it is determined that
such person acted in accordance with the applicable standard of conduct set
forth in such statutory provisions. The Company may also purchase and maintain
insurance for the benefit of any director or officer which may cover claims for
which the Company could not indemnify such person.

Insofar as indemnification for liabilities arising under the Act may
be permitted to directors, officers, and controlling persons of the Company, or
to underwriters (or controlling persons thereof) of which an officer, partner,
or controlling person thereof is one of the foregoing pursuant to the foregoing
provisions or otherwise, the Company has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Company of expenses incurred or paid by any such persons, in the successful
defense of any action, suit or proceeding) is asserted by any such persons in
connection with the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.

LEGAL OPINIONS
Legal matters in connection with the securities being offered hereby will
be passed upon for the Company by Fitzpatrick Eilenberg & Zivian, 666 Third
Avenue, New York, New York 10017.

EXPERTS

The financial statements incorporated in this Prospectus by reference to
the Annual Report on Form 10-K for the year ended December 31, 1994, have been
so incorporated in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.

<PAGE>

PHARMOS CORPORATION
-------------------

__________, 1995

INDEX
-----

Page No.

THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

DILUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

DESCRIPTION OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . 13

PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

SELLING SECURITY HOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . 16

RECENT DEVELOPMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE . . . . . . . . . . . . . . 21

COMMISSION'S POLICY ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES . . . . . . . . . . . . . . . . . . . . . . 22

LEGAL OPINIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 14. Other Expenses of Issuance and Distribution
-------------------------------------------
The following statement sets forth the estimated expenses(1) in connection
with the offering described in the Registration Statement, assuming all of the
Warrants are exercised at their respective exercise price (all of which will be
borne by the Registrant).

Securities and Exchange Commission Fee . . $3,807
Printing and Engraving Expenses . . . . . . . . 100
Accountants' Fees and Expenses . . . . . . . 1,000
Legal Fees and Expenses . . . . . . . . . . 15,000
Blue Sky Filing Fees . . . . . . . . . . . 10,000
Miscellaneous . . . . . . . . . . . . . . . . . 193

TOTAL $30,100

Item 15. Indemnification of Directors and Officers.
------------------------------------------

Article 12 of the Registrant's Certificate of Incorporation directs the
Registrant to provide in its bylaws for provisions relating to the
indemnification of directors and officers to the full extent permitted by law.
Section 78.751 of the Nevada Revised Statutes, as amended, authorizes the
Registrant to indemnify any director or officer under certain prescribed
circumstances and subject to certain limitations against certain costs and
expenses, including attorneys' fees actually and reasonably incurred in
connection with any action, suit or proceeding, whether civil, criminal, admini-
strative or investigative, to which such person is a party by reason of being a
director or officer of the Registrant if it is determined that such person acted
in accordance with the applicable standard of conduct set forth in such
statutory provisions.

The Registrant may also purchase and maintain insurance for the benefit of
any director or officer which may cover claims for which the Registrant could
not indemnify such person.

Item 16. Exhibits
---------
4(a) Specimen of Common Stock Certificate (incorporated by
reference to Form S-3 Registration Statement of the Company
dated November 25, 1994 [No. 33-86720])

4(b) Restated Articles of Incorporation (incorporated by
reference to Appendix E to the Joint Proxy Statement/
Prospectus included in the Form S-4 Registration Statement
of the Registrant dated September 28, 1992 [No. 33-52398])

II-1
<PAGE>

4(c) Certificate of Amendment of Restated Articles of
Incorporation (incorporated by reference to the Company's
Annual Report on Form 10-K for the year ended December 31,
1994 [No. 0-11550])

4(d) Amended and Restated By-Laws (incorporated by reference to
Form S-1 Registration Statement of the Company dated June
30, 1994 [No. 33-80916])

4(e) Form of Unit Purchase Agreement dated as of September 14,
1995 between the Company and the Investors (incorporated by
reference to the Company's Current Report on Form 8-K dated
September 14, 1995 [No. 0-11550])

4(f) Form of Warrant Agreement dated as of September 14, 1995
between the Company and the Investors (incorporated by
reference to the Company's Current Report on Form 8-K dated
September 14, 1995 [No. 0-11550])

*4(g) Form of Warrant Agreement dated as of April 30, 1995
between the Company and Charles Stolper

*4(h) Form of Warrant Agreement dated as of April 30, 1995
between the Company and Janssen/Meyers Associates, L.P.

*4(i) Form of Warrant Agreement dated as of October 31, 1995
between the Company and S. Colin Neill

*5 Opinion re: legality

23(a) Consent of Fitzpatrick Eilenberg & Zivian (included in
the Opinion filed as Exhibit 5)

**23(b) Consent of Price Waterhouse LLP

_______________

* Filed with original S-3 Registration Statement filed on November 14, 1995.

** Filed herewith.

Item 17. Undertakings.
------------
The undersigned Registrant hereby undertakes;

(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:

II-2
<PAGE>

(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the registration statement;

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.

Provided, however, that Paragraphs (i) and (ii) above do not apply if the
-------- -------
Registration Statement is on Form S-3 and the information required to be
included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to Section 13 or Section 15(d)
of the Securities Exchange Act of 1934 that are incorporated by reference in the
Registration Statement.

(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.

(4) That, for the purpose of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer, or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

II-3
<PAGE>

SIGNATURES
----------

Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Alachua and State of Florida on the 29th day of
December, 1995.

PHARMOS CORPORATION

By:/s/ HAIM AVIV
----------------------------------
Dr. Haim Aviv, Chairman, Chief
Scientist, Chief Executive Officer
and Director (Principal Executive
Officer)

Pursuant to the requirements of the Securities Act of 1933, this registration
statement or amendment has been signed below by the following persons in the
capacities and on the dates indicated:

Signature Title Date
- --------- --------- ----

/s/ S. COLIN NEILL Acting Chief December 29, 1995
- ------------------
S. Colin Neill Financial Officer
(Principal Financial and
Accounting Officer)

/s/ MARVIN P. LOEB Director December 29, 1995
- ----------------------
Marvin P. Loeb

/s/ E. ANDREWS GRINSTEAD III Director December 29, 1995
- ----------------------------
E. Andrews Grinstead III

/s/ STEPHEN C. KNIGHT Director December 29, 1995
- ---------------------
Stephen C. Knight

/s/ DAVID SCHLACHET Director December 29, 1995
- --------------------
David Schlachet

/s/ WILLIAM C. HULLEY Director December 29, 1995
- ---------------------
William C. Hulley

EXHIBIT 23(b)

CONSENT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and
Shareholders of Pharmos Corporation

We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report dated
March 17, 1995 appearing in Pharmos Corporation's Annual Report on Form 10-K for
the year ended December 31, 1994. We also consent to the reference to us under
the heading "Experts" in such Prospectus.

/s/ PRICE WATERHOUSE LLP
- ------------------------

PRICE WATERHOUSE LLP
New York, New York
December 29, 1995