UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March~~June 3130, 2012

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 0-11550

Pharmos Corporation

(Exact name of registrant as specified in its charter)

	Nevada		36-3207413
	(State or other jurisdiction of incorporation or organization)		(IRS Employer Id. No.)

99 Wood Avenue South, Suite 302

Iselin, NJ 08830

(Address of principal executive offices)

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company as defined in Rule 12b-2 of the Exchange Act.

Large accelerated filer o

Non-accelerated filer o

Accelerated filer o

Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x .

As of ~~April~~July 1630, 2012, the Registrant had outstanding 60,~~023~~170,~~612~~671 shares of its $.03 par value Common Stock.

PART I FINANCIAL INFORMATION		Page
Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets as of March 31, 2012 and December 31, 2011		1
	Condensed Consolidated Balance Sheets as of June 30, 2012 and December 31, 2011		1
	Condensed Consolidated Statements of Operations for the three months ended March 31, 2012 and 2011		2
	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2012 and 2011		2
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2012 and 2011		3
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2012 and 2011		3
	Notes to Condensed Consolidated Financial Statements		4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		9
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		1413
Item 4	Controls and Procedures		1413
PART II OTHER INFORMATION
Item 1.	Legal Proceedings		1514
Item 1A.	Risk Factors		1514
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		1514
Item 3.	Defaults Upon Senior Securities		1514
Item 4.	Mine Safety Disclosures		1514
Item 5.	Other Information		1514
Item 6.	Exhibits		1615
SIGNATURES			1716

Part I.

Financial Information

Item 1

Financial Statements

PHARMOS CORPORATION
Condensed Consolidated Balance Sheets (Unaudited)
	March 31, 2012			December 31, 2011
	June 30, 2012			December 31, 2011
Assets
Cash and cash equivalents	$	1517,~~016,483~~344		$	1,535,137
Prepaid expenses and other current assets		~~132~~113,~~402~~689			122,417
Total current assets		1631,~~148,885~~033			1,657,554
Fixed assets, net		3,~~877~~262			4,493
Total assets	$	1634,~~152,762~~295		$	1,662,047
Liabilities and Shareholders’ Equity
Accounts payable	$	~~286~~64,~~456~~633		$	262,067
Accrued interest and expenses		55109,~~105~~355			98,833
Convertible debenture		1,000,000			1,000,000
Total current liabilities		1,~~341~~173,~~561~~988			1,360,900
Total liabilities		1,~~341~~173,~~561~~988			1,360,900
Shareholders’ Equity (Deficit)
Preferred stock, $.03 par value, 1,250,000 shares authorized, none issued and outstanding		-			-
Common stock, $.03 par value; 120,000,000 shares
authorized, 60,026,450 and 59,879,391 issued as of
March 31, 2012 and December 31, 2011, respectively		1,800,794			1,796,382
June 30, 2012 and December 31, 2011, respectively		1,800,794			1,796,382
Paid-in capital in excess of par		211,~~919,~~951,935			211,838,004
Accumulated deficit		(~~213~~214,~~909~~291,~~118~~996	)		(213,332,813	)
Treasury stock, at cost, 2,838 shares		(426	)		(426	)
Total shareholders' equity (Deficit)		(~~188~~539,~~799~~693	)		301,147
Total liabilities and shareholders' equity (Deficit)	$	1634,~~152,762~~295		$	1,662,047

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

PHARMOS CORPORATION

Condensed Consolidated Statements of Operations

(Unaudited)

	Three months ended March 31,
	Three months ended June 30,						Six months ended June 30,
	2012			2011			2012			2011
Expenses
Research and development	$	~~290~~114,~~663~~857		$	~~281~~214,~~783~~470		$	405,521		$	496,254
General and administrative		~~260~~237,~~057~~751			~~294~~259,~~345~~415			497,808			553,760
Depreciation and amortization		~~616~~615			~~626~~671			1,231			1,297
Total operating expenses		~~551~~353,~~336~~223			~~576~~474,~~754~~556			904,560			1,051,311
Loss from operations		(~~551~~353,~~336~~223	)		(~~576~~474,~~754~~556	)		(904,560	)		(1,051,311	)
Other (expense) income
Interest income		3120			9660			52			156
Interest expense		(25,000	)		(26,469	)
Other expense		(4,675	)		-			(4,675	)		-
Other expense		(24,969	)		(26,373	)
Interest expense		(25,000	)		(25,937	)		(50,000	)		(52,406	)
Net loss	$	(576,305	)	$	(603,127	)
Other expense		(29,655	)		(25,877	)		(54,623	)		(52,250	)
Net loss per share
Net loss	$	(382,878	)	$	(500,433	)	$	(959,183	)	$	(1,103,561	)
- basic and diluted	$	(0.01	)	$	(0.01	)
Net loss per share
Weighted average shares outstanding
- basic and diluted	$	(0.01	)	$	(0.01	)	$	(0.02	)	$	(0.02	)
- basic and diluted		59,589,756			58,994,984
Weighted average shares outstanding
- basic and diluted		59,689,821			59,095,703			59,639,788			59,045,622

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

Pharmos Corporation

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Three months ended March 31,
	Six months ended June 30,
	2012			2011
Cash flows from operating activities
Net loss	$	(~~576~~959,~~305~~183	)	$	(~~603~~1,~~127~~103,561	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		~~616~~1,231			~~626~~1,297
Amortization of deferred financing fees		-			12,~~469~~406
Stock based compensation		3668,~~360~~343			3978,~~813~~167
Interest expense to be paid in common stock		25,000			25,000
Interest paid in common stock		50,000			50,000
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		(98,~~986~~728	)		(4923,~~643~~786	)
Accounts payable		24(197,~~389~~434	)		~~236~~(12,~~102~~661	)
Accrued expenses		~~(18~~10,~~728~~522	)		(1214,~~067~~260	)
Net cash used in operating activities		(~~518~~1,~~654~~017,793	)		(~~361~~1,~~827~~022,398	)
Net decrease in cash and cash equivalents		(518,654	)		(361,827	)
Cash flows from investing activities
Purchases of fixed assets		-			(1,600	)
Net cash used in investing activities		-			(1,600	)
Net decrease in cash and cash equivalents		(1,017,793	)		(1,023,998	)
Cash and cash equivalents at beginning of year		1,535,137			3,139,347
Cash and cash equivalents at end of period	$	1517,~~016,483~~344		$	2,~~777~~115,~~520~~349
Supplemental disclosure of non-cash investing and financing activities:
Common shares issued for debenture interest	$	50,000		$	50,000
Common shares issued for accrued interest	$	50,000		$	50,000

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

Notes to Condensed Consolidated Financial Statements (unaudited)

1. Basis of Presentation

The accompanying unaudited interim condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information pursuant to the ~~instructions~~rules toand ~~Form~~regulations ~~10-Q~~of ~~and~~the ~~Article~~Securities 10and ofExchange ~~Regulation~~Commission ~~S-X~~(SEC). Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments, ~~consisting~~which ofinclude only normal recurring ~~accrual~~ adjustments, considered necessary for a fair ~~statement~~presentation of the results for the interim periods presented have been included. Operating results and cash flows for the ~~three~~six month period ended ~~March~~June 3130, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012. The December 31, 2011 condensed consolidated balance sheet was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America and included in the Form 10-K filing.

~~2. Liquidity~~The December 31, ~~Business~~2011 ~~Risks~~condensed consolidated balance sheet was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America and ~~Going~~included ~~Concern~~in the Form 10-K filing. These financial statements should read in conjunction with the Company’s audited financial statements and notes thereto for the year ended December 31, 2011.

~~The Company’s condensed consolidated financial statements have been prepared assuming it will continue as a going concern~~2. ~~At March 31~~ Liquidity, ~~2012,~~Business ~~the~~Risks ~~Company had approximately $1.0 million in cash~~ and ~~cash~~Ability ~~equivalents. Management believes that the current cash and cash equivalents will be sufficient~~ to ~~support~~Continue ~~their currently planned continuing operations through at least July of 2012. However, the Company’s ability to continue~~ as a ~~going~~Going concern is largely dependent upon achieving a collaboration with a pharmaceutical partner or raising additional capital to advance its lead compounds, Levotofisopam, for the treatment of Gout, and Dextofisopam, for the treatment of IBS in 2012. The Company has in the past pursued various funding and financing options; however management believes that future funding or financing options will continue to be challenging because of the current environment.Concern

The Company’s ~~does~~condensed ~~not~~consolidated ~~currently~~financial statements have ~~the~~been ~~finances~~prepared ~~and~~assuming ~~resources~~it towill ~~conduct~~continue ~~large~~as ~~clinical~~a ~~trials~~going ~~for~~concern. ~~its~~At ~~most~~June ~~advanced~~30, ~~compound~~2012, ~~Dextofisopam~~the ~~and~~Company ~~continues~~had toapproximately ~~seek~~$0.5 amillion ~~partner.~~in ~~Meanwhile,~~cash ~~the~~and ~~Company~~cash isequivalents. ~~pursuing~~Management believes that the ~~development~~current ofcash ~~Levotofisopam~~and ~~for~~cash ~~the~~equivalents ~~treatment~~will ofbe ~~Gout~~sufficient ~~and~~to issupport their currently ~~incurring~~planned ~~clinical~~continuing ~~trial~~operations ~~costs.~~through ~~The~~October ~~Company~~2012. ~~expects~~Currently tothe ~~have~~Company ~~sufficient~~spends ~~cash~~approximately to$100,000 ~~fund~~a ~~the~~month ~~development~~on ofcontinuing ~~Levotofisopam~~operating ~~through~~expenses. ~~completion~~The ofCompany ~~the~~has ~~current~~a ~~proof-~~debenture of~~-concept~~ ~~Gout~~$1 ~~trial~~million ~~(the~~due ~~Gout~~to ~~trial)~~be ~~based~~repaid on ~~current~~November ~~estimates.~~1, ~~During~~2012 which the ~~first~~Company ~~half~~will ofbe ~~2012,~~unable ~~the~~to ~~Company~~satisfy ~~expects~~without toraising ~~have~~additional ~~more~~capital ~~information~~or onachieving ~~the~~a ~~probability~~collaboration ofwith ~~success~~a ofpharmaceutical ~~the~~partner ~~Gout~~for ~~trial.~~one ~~The~~or ~~Company~~both ~~intends~~of toits ~~partner~~lead compounds, Levotofisopam ~~upon~~for ~~successful~~the ~~completion~~treatment of ~~this~~Gout ~~trial~~or Dextofisopam for the treatment of IBS. ~~Should~~The ~~this~~Company ~~not~~has ~~occur,~~in the ~~Company~~past ~~will~~pursued bevarious ~~unable~~funding toand ~~continue~~financing ~~operations,~~options; ~~including~~however ~~repayment~~management ofbelieves ~~the~~that ~~outstanding~~future ~~convertible~~funding ~~debenture,~~or ~~unless~~financing ~~additional~~options ~~capital~~will ~~can~~continue to be ~~obtained~~challenging because of the current environment.

The Company does not currently have the finances and resources to conduct any further clinical trials. The Company completed a proof-of-concept Gout trial (the Gout trial) for Levotofisopam in April 2012 and in May 2012, announced the successful completion of this proof-of-concept trial in which rapid and significant reduction in uric acid was observed in all patients. The Company has been intensely attempting to partner Levotofisopam. Through the date of this filing, a partnership or other form of collaboration has not been achieved and should a collaboration or other form of financing not be achieved by November 1, 2012, the Company will be unable to continue operations past quarter three or quarter four of 2012, including repayment of the outstanding convertible debenture in quarter four.

Further, if the Company is unable to raise sufficient funds imminently, it will not be able to retain personnel or repay its outstanding convertible debenture on its due date. This would cause the Company to suspend its operations indefinitely and most likely, permanently.

As such, these factors raise substantial doubt as to the Company’s ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The Company has initiated a proof-of-concept clinical trial in the US in Gout patients using Levotofisopam at the Duke Clinical Research Unit of Duke University. The costs remaining are $172,159 which are of a short term nature and would not be payable should the Company stop the clinical trial.4

3. The Company

Pharmos Corporation (the Company or Pharmos) is a biopharmaceutical company that discovers and develops novel therapeutics to treat a range of metabolic and nervous system disorders, including gout, disorders of the brain-gut axis (e.g., Irritable Bowel Syndrome), pain/inflammation, and autoimmune disorders.

4Pharmos owns the rights to both R- and S-Tofisopam through two US issued composition of matter patents. These are the two enantiomers of racemic tofisopam, a well-tolerated, effective, non-sedating agent used outside the United States for over 30 years for the treatment of a variety of disorders associated with stress or autonomic instability. Dextofisopam, the R-enantiomer, is being developed for the treatment of irritable bowel syndrome (IBS) and has completed clinical testing through Phase 2b. IBS is a large unmet medical need but Pharmos does not have the financial resources to fund the next trial and therefore seeks a pharmaceutical company as a partner.

~~Pharmos~~Levotofisopam ~~owns~~is the ~~rights~~S-enantiomer toof ~~both~~racemic Rtofisopam. ~~and~~In ~~S Tofisopam through~~ two USearlier ~~issued~~Phase ~~composition~~1 ofstudies ~~matter~~using ~~patents.~~Levotofisopam, significant ~~These~~and ~~are~~rapid ~~the~~lowering ~~two enantiomers~~ of ~~racemic~~uric ~~tofisopam~~acid ~~that~~was ~~has~~noted. ~~been~~The ~~used~~Company ~~safely~~recently ~~outside~~conducted ~~the~~an ~~United~~open-label, ~~States~~Phase ~~for~~2 ~~over~~proof-of-concept 30trial ~~years.~~at ~~Dextofisopam~~the isDuke ~~the~~Clinical RResearch ~~enantiomer~~Unit ~~and~~of isDuke ~~being~~University. ~~developed~~In ~~for~~May 2012 the ~~treatment~~Company ofreported ~~irritable~~positive ~~bowel~~top ~~syndrome~~line ~~(IBS)~~results ~~and~~from asthis ~~described~~trial. ~~below~~Uric ~~has~~acid ~~completed~~was ~~clinical~~reduced ~~testing~~in ~~through~~all ~~Phase~~13 2btreated patients. ~~IBS~~Mean isreduction ain ~~large~~uric ~~unmet~~acid ~~medical~~was ~~need~~over ~~but~~45%. ~~Pharmos~~Additionally, ~~does~~fractional ~~not~~excretion ~~have~~of ~~the~~uric ~~financial~~acid ~~resources~~increased, toconfirming ~~fund~~Levotofisopam’s ~~the~~mechanism ~~next~~of ~~trial~~action ~~and~~as ~~therefore~~enhancing ~~seeks~~excretion aand ~~pharmaceutical~~not ~~company~~ as a ~~partner~~xanthine oxidase inhibitor.

~~Levotofisopam~~The Company is ~~the~~actively ~~S-enantiomer~~attempting ofto ~~the~~secure ~~racemic mixture RS-tofisopam,~~ a ~~well-tolerated,~~partner ~~effective,~~to ~~non-sedating~~fund ~~agent used outside~~ the ~~United~~further ~~States~~development ~~for the treatment~~ of aLevotofisopam ~~variety of disorders associated with stress~~ or ~~autonomic~~alternatively ~~instability.~~raise Inadditional ~~two earlier Phase 1 studies using S-Tofisopam a significant and rapid lowering of uric acid was noted~~capital. ~~The~~If ~~Company initiated a proof of concept Phase 2a trial at~~ the ~~Duke Clinical Research Unit of Duke University and on January 10, 2012 the~~ Company ~~announced~~is ~~that~~unable ~~the first patients in this clinical trial had been dosed. The trial expects~~ to ~~enroll~~raise 20sufficient ~~patients~~funds ~~in an open label study. As of March 31~~imminently, ~~2012,~~it 11will ~~patients~~not ~~have~~be ~~completed~~able ~~treatment~~to ~~and~~retain ~~all~~personnel ~~patients~~or ~~showed~~repay aits ~~reduction~~outstanding inconvertible ~~uric~~debenture ~~acid.~~on ~~The~~its ~~mean~~due ~~reduction was over 45% with reductions seen in all patients~~ date. This ~~Additionally,~~would ~~there~~cause ~~was an increase in~~ the ~~fractional~~Company ~~excretion~~to ofsuspend ~~urate~~its ~~confirming~~operations ~~the~~indefinitely ~~compound’s mechanism of action as enhancing excretion~~ and ~~not~~most aslikely, apermanently ~~xanthine~~(see ~~oxidase~~Note ~~inhibitor~~2).

The Phase 2a trial is expected to be completed in May 2012 and the Company’s strategy is to seek a partner for the further development of Levotofisopam.

While the Company has limited cash resources and is unable to fund the next development trial for Dextofisopam, it does have sufficient cash to complete the ongoing US based clinical proof-of-concept trial using Levotofisopam in Gout patients. Currently this is a small trial that the Company expects to be able to fund with its current cash resources. The Company’s strategic plan is to partner with a pharmaceutical company upon successful completion of the proof-of-concept clinical trial.

Pharmos’ most advanced compound is Dextofisopam, which has completed a Phase 2a double-blind, placebo-controlled trial with patients having diarrhea-predominant or alternating IBS with positive effect on primary efficacy endpoint (n=141, p=0.033). In this study, Dextofisopam was well-tolerated and demonstrated significant improvement over placebo, suggesting that Dextofisopam has the potential to become a novel first line treatment for IBS. Pharmos initiated a Phase 2b trial in February 2007. Dextofisopam is the R-enantiomer of racemic tofisopam, a molecule marketed and used safely outside the United States for over three decades for multiple indications including IBS. Unlike the two 5-HT3 or 5-HT4 IBS therapies recently introduced into the market, and subsequently withdrawn because of safety concerns, Dextofisopam’s novel non-serotonergic activity offers a unique and innovative approach to IBS treatment.

The results of a Phase 2b study were announced in September 2009. The primary endpoint of overall adequate relief was not met due to a high placebo response, but drug activity was observed in all drug cohorts, especially the 200 mg dose. The Company is now seeking a pharmaceutical partner with clinical, scientific and financial capabilities to further develop Dextofisopam.

In research efforts over the past decade, the Company has developed a significant expertise in cannabinoid biology and chemistry, and has generated significant know-how and an intellectual property estate pertaining to multiple areas of cannabinoid biology. The Company closed its operations in Israel effective October 31, 2008. No further development work has been performed on the cannabinoid assets and the focus is to partner or sell these assets. The Company continues to seek, to sell or license other CB2 assets, including Cannabinor which was the only CB2 asset to enter human clinical trials.

The Company has explored the concept of a merger or reverse merger with another life science company in order to build greater pipeline critical mass. Several possible candidates were recently examined but were not pursued after preliminary scientific diligence. Suitable opportunities continue to be evaluated.

The Company has executive offices in Iselin, New Jersey.

4. Significant Accounting Policies

Basis of consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries: Pharmos Ltd. and Vela Pharmaceuticals. All significant intercompany balances and transactions are eliminated in consolidation. Vela Acquisition Corp. is dormant and was used as the vehicle to acquire Vela Pharmaceuticals Inc. in October 2006. The Israel operations (Pharmos Ltd.), including research and development activities, ceased effective October 31, 2008 and the Company completed its voluntary liquidation in May 2010. Vela Pharmaceuticals Inc. was dissolved in August of 2011.

Cash and Cash Equivalents

Cash and Cash Equivalents as of ~~March~~June 3130, 2012 consist primarily of a money market fund invested in short term government obligations.

Concentration of Credit Risk

Financial instruments that subject the Company to credit risk primarily consist of cash and cash equivalents. The Company maintains its cash and cash equivalent balances with a high quality financial institution who invests the Company’s funds in Government short-term instruments. Consequently the Company believes that such funds are subject to minimal credit risk.

Grants

The costs and expenses of research and development activities are partially funded by grants the Company received. The grants are deducted from research and development expenses at the time such grants are received. There were no grants received in the three or six month periods ended ~~March~~June 3130, 2012 and 2011, respectively.

Income Taxes

The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities, if any, are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled and any change in tax rates is recognized in the results of operations in the period that includes the enactment date. A tax benefit has not been recognized due to the uncertainties previously disclosed and a full valuation allowance is maintained.

The Company follows the guidance for Accounting for Uncertainty in Income Taxes which prescribes a recognition threshold of more-likely-than-not to be sustained upon examination. Measurement of the tax uncertainty occurs if the recognition threshold has been met. Pharmos conducts business in the US and as a result, files US and New Jersey income tax returns. In the normal course of business, the Company is subject to examination by taxing authorities. At present, there are no ongoing audits or unresolved disputes with the ~~various~~ tax authorities that the Company files with and there are no tax uncertainties as of ~~March~~June 3130, 2012 and December 31, 2011.

Fair value of financial instruments

The carrying amounts of the Company’s financial instruments, including cash and cash equivalents, other assets, accounts payable and accrued liabilities approximate fair value due to their short term maturities.

6The Company has estimated the fair value of the $1,000,000 outstanding convertible debenture due November 1, 2012 to be approximately $898,000 at June 30, 2012. As described in Note 2 the Company’s future financial viability is dependent upon achieving a partnership or raising additional capital. Therefore there is a large amount of subjectivity in determining the fair value of the outstanding debenture. In determining the fair value the Company used level 3 inputs (unobservable) and a discount rate of 33%. Management used a discount rate they believe was most relevant given the business risks and because they have been unable to raise third party financing during the past several years. However, the Company’s ability to repay the debenture on its due date is dependent upon achieving a successful partnership for Levotofisopam and or Dextofisopam or in raising additional capital.

The Company has estimated the fair value of the $1,000,000 outstanding convertible debenture due November 1, 2012 to be approximately $829,000 at March 31, 2012. In determining the fair value the Company used level 3 inputs (unobservable) and a discount rate of 33%. Management used a discount rate they believe was most relevant given the business risks and because they have been unable to raise third party financing during the past several years. The Company’s ability to repay the debenture on its due date is dependent upon achieving a successful partnership for Levotofisopam and or Dextofisopam or in raising additional capital.

Equity based compensation

During the ~~three~~six months ended ~~March~~June 3130, 2012 and 2011, the Company recognized equity based compensation expense of $3668,~~360~~343 and $3978,~~813~~167, respectively, for restricted stock and stock options. As of ~~March~~June 3130, 2012, the total compensation costs related to non-vested stock options not yet recognized is $9882,~~471~~989 which will be recognized over the next ~~four~~three and one half years. Also, the compensation expense related to the Executive Chairman of the Board non-vested restricted stock not yet recognized is $7155,~~500~~000 which will be recognized over the next one ~~and one half years~~year.

~~During the three months ended March 31, 2012 and 2011, executive and outside directors of the Company were granted stock options under the 2009 Stock Option Plan per the table below:~~6

Period Ended	Grants Issued		Weighted Average Exercise Price		Weighted Average Fair Value
March 31, 2012		70,000	$	0.06	$	0.05
March 31, 2011		1,120,000	$	0.09	$	0.07

During the six months ended June 30, 2012 and 2011, executive and outside directors of the Company were granted stock options under the 2009 Stock Option Plan per the table below:

Period Ended	Grants Issued		Weighted Average Exercise Price		Weighted Average Fair Value

June 30, 2012		70,000	$	0.06	$	0.05
June 30, 2011		1,120,000	$	0.09	$	0.07

Recent Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2011-04, Fair Value Measurement (Topic 820). This ASU is intended to create consistency between U.S. GAAP and International Financial Reporting Standards on the definition of fair value and on the guidance on how to measure fair value and on what to disclose about fair value measurements. This ASU will be effective for financial statements issued for fiscal periods beginning after December 15, 2011, with early adoption prohibited for public entities. This update did not have any material effect on our financial statements.

InSubsequent June 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income ("ASU 2011-05"). This update amends Accounting Standards Codification ("ASC") Topic 220, Comprehensive Income, to provide that total comprehensive income will be reported in one continuous statement or two separate but consecutive statements of financial performance. Presentation of total comprehensive income in the statement of stockholders' equity or the footnotes will no longer be allowed. The calculation of net income and basic and diluted net income per share will not be affected. ASU 2011-005 is effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2011, and is currently effective for our Company. This update did not have any material effect on our financial statements.Events

In the third quarter of 2012, the Company elected to pay the interest on its 10% Convertible Debentures due November 2012 incurred through the ninth interest payment date, July 15, 2012, in common stock to the remaining debenture holder. The dollar amount of interest incurred from January 15, 2012 to July 15, 2012 to be paid in stock amounted to $50,000 which, converted at $0.34 per share, resulted in an aggregate of 147,059 shares issued to the debenture holder.

5. Convertible Debentures

The Company has a $1,000,000 convertible debenture that is due November 1, 2012. In the first quarter of 2012, the Company elected to pay the interest on its 10% Convertible Debentures incurred through the eighth interest payment date, January 15, 2012, in common stock to the remaining debenture holder. The dollar amount of interest incurred from July 15, 2011 to January 15, 2012 to be paid in stock amounted to $50,000 which, converted at $0.34 per share, resulted in an aggregate of 147,059 shares issued to the debenture holder.A post-effective amendment to the registration statement covering the resale of the shares underlying the debenture held by Lloyd I. Miller, III, was declared effective in February 2012.

7The Company’s ability to repay the debenture on its due date is dependent upon achieving a successful partnership for Levotofisopam and or Dextofisopam or in raising additional capital (see Note 2).

The Company’s ability to repay the debenture on its due date is dependent upon achieving a successful partnership for Levotofisopam and or Dextofisopam or in raising additional capital.

6. Net Loss Per Common Share

Basic and diluted net loss per common share was computed by dividing the net loss for the period by the weighted average number of shares of common stock issued and outstanding. For the periods ending ~~March~~June 3130, 2012 and 2011, other potential common stock has been excluded from the calculation of diluted net loss per common share, as their inclusion would be anti-dilutive.

~~The following table sets forth the number of potential shares of common stock that have been excluded from diluted loss per share since inclusion would have been anti-dilutive.~~7

	March 31,
	2012		2011
Stock options		4,478,812		4,577,812
Convertible debenture		1,428,571		1,428,571
Restricted stock		375,000		675,000
Warrants		18,000,000		18,000,000
Total potential dilutive securities not included in loss per share		24,282,383		24,681,383

The following table sets forth the number of potential shares of common stock that have been excluded from diluted loss per share since inclusion would have been anti-dilutive

	June 30,
	2012		2011

Stock options		4,478,812		4,289,312
Convertible debenture		1,428,571		1,428,571
Restricted stock		300,000		600,000
Warrants		18,000,000		18,000,000

Total potential dilutive securities not included in loss per share		24,207,383		24,317,883

7. Common Stock Transactions

On May 11, 2009, Robert Johnston, the Executive Chairman, was awarded 1,200,000 shares of restricted stock. 300,000 of such shares became vested and free from a risk of forfeiture on the first anniversary of the date hereof, and the remaining 900,000 shares become vested and free from a risk of forfeiture in quarterly increments over a three-year period commencing on the first anniversary of the grant date. Over the four year period, a total of $264,000 will be recorded as compensation expense. In the first ~~three~~six months of 2012, the Company expensed $1633,~~500~~000 for Mr. Johnston’s restricted stock.

In the first quarter of 2012, the Company elected to pay the interest on its 10% Convertible Debentures due November 2012 incurred through the eighth interest payment date, January 15, 2012, in common stock to the remaining debenture holder. The dollar amount of interest incurred from July 15, 2011 to January 15, 2012 to be paid in stock amounted to $50,000 which, converted at $0.34 per share, resulted in an aggregate of 147,059 shares issued to the debenture holder.

As of ~~March~~June 3130, 2012, the Company had reserved 4,478,812 common stock shares for outstanding stock options. The Company has outstanding warrants exercisable for 18,000,000 shares of common stock. The exercise price of the warrants, which have a five-year term and expire on April 21, 2014, is $0.12 per share.

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

This report on Form 10-Q contains information that may constitute "forward-looking statements." The use of words such as "believe," "expect," "intend," "estimate," "anticipate," "project," "will" and similar expressions identify forward-looking statements, which generally are not historical in nature. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future are forward-looking statements. As and when made, we believe that these forward-looking statements are reasonable. However, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date when made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our company's historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to, those described in Part I, "Item 1A. Risk Factors" of our Form 10-K for the year ended December 31, 2011 and elsewhere in this report and those described from time to time in our future reports filed with the Securities and Exchange Commission.

We do not undertake to discuss matters relating to our ongoing clinical trials or our regulatory strategies beyond those which have already been made public or discussed herein.

Executive Summary of 2012 Strategy and Operating Plan

The Company owns the rights to both R- and S -Tofisopam. Levotofisopam is the S-enantiomer of the racemic mixture RS-tofisopam. Dextofisopam is the R -enantiomer of racemic tofisopam and is being developed for IBS.

~~Pharmos’~~Levotofisopam is ~~developing Levotofisopam for~~ the ~~treatment~~S-enantiomer of ~~Gout~~racemic tofisopam. In two earlier Phase 1 studies using ~~S-Tofisopam~~Levotofisopam, a significant and rapid lowering of uric acid was noted. The Company ~~initiated~~recently aconducted ~~proof~~an ofopen-label, ~~concept~~ Phase 2a2 proof-of-concept trial at the Duke Clinical Research Unit of Duke University. ~~and~~In onMay ~~January 10,~~ 2012 the Company ~~announced~~reported ~~that~~positive ~~the~~top ~~first~~line ~~patients~~results infrom this ~~clinical~~ trial ~~had been dosed~~. ~~The~~Uric ~~trial~~acid ~~expects~~was toreduced ~~enroll 20 patients~~ in anall ~~open~~13 ~~label~~treated ~~study~~patients. AsMean ~~of March 31, 2012, 11 patients have completed treatment and all patients showed a~~ reduction in uric acid. ~~The mean reduction~~ was over 45% ~~with reductions seen in all patients~~. Additionally, ~~there was an increase in the~~ fractional excretion of ~~urate~~uric ~~confirming~~acid ~~the~~increased, ~~compound~~confirming Levotofisopam’s mechanism of action as enhancing excretion and not as a xanthine oxidase inhibitor.

The ~~Phase~~Company 2ais ~~trial~~actively isseeking ~~expected~~to secure a partner for the further development of Levotofisopam or alternatively raise additional capital. If we are unable to raise sufficient funds imminently, we will not be ~~completed~~able into ~~May~~retain ~~2012~~personnel ~~and~~or ~~the~~repay our ~~Company’s~~outstanding ~~strategy~~convertible isdebenture on its due date. This would cause us to ~~seek~~suspend aour ~~partner~~operations ~~for~~indefinitely ~~the~~and ~~further~~most ~~development~~likely, ofpermanently ~~Levotofisopam~~(see Note 2).

~~Pharmos’~~The ~~most~~results ~~advanced~~for ~~compound~~the isthree ~~Dextofisopam,~~and ~~which has~~six ~~completed~~months aended ~~double-blind~~June 30, ~~placebo-controlled~~2012 ~~diarrhea-predominant~~and or2011 ~~alternating~~were ~~IBS~~a ~~Phase~~net 2aloss ~~study~~of ~~with~~$0.4 ~~positive~~million ~~effect~~and ~~on primary efficacy endpoint (n=141, p=~~$0.~~033).~~5 Inmillion ~~this~~and ~~study,~~a ~~Dextofisopam~~net ~~was~~loss ~~well-tolerated~~of ~~and~~$1.0 ~~demonstrated~~million ~~significant~~and ~~improvement~~$1.1 ~~over placebo~~million, ~~suggesting~~respectively. ~~that~~On ~~Dextofisopam~~a ~~has~~loss ~~the~~per ~~potential~~share tobasis, ~~become~~this aequates ~~novel~~to ~~first~~$(0.01) ~~line~~and ~~treatment~~$(0.01) for ~~IBS. Dextofisopam is~~ the ~~R-enantiomer~~quarters ofended ~~racemic~~June ~~tofisopam~~30, a2012 ~~molecule~~and ~~marketed~~2011 and ~~used~~$(0.02) and ~~safely~~$(0.02) ~~outside the United States~~ for ~~over three decades for multiple indications including IBS. Unlike~~ the ~~two~~first ~~5-HT3 or 5-HT4 IBS therapies recently introduced into the market~~half, ~~and subsequently withdrawn because of safety concerns, Dextofisopam’s novel non-serotonergic activity offers a unique and innovative approach to IBS treatment~~respectively.

Except for 2001, the Company has experienced operating losses every year since inception in funding the research, development and clinical testing of our drug candidates. The ~~results~~Company had an accumulated deficit of a$214.3 ~~Phase~~million as 2bof ~~study~~June ~~were~~30, ~~announced~~2012 and expects to continue to incur losses going forward. Such losses have resulted principally from costs incurred in ~~September~~research ~~2009~~and development and from general and administrative expenses. Previously the Company had financed its operations with public and private offerings of securities, advances and other funding pursuant to an earlier marketing agreement with Bausch & Lomb, grants from the Office of the Chief Scientist of Israel, research contracts, the sale of a portion of its New Jersey net operating loss carryforwards (NOL’s), and interest income. The ~~primary~~Company ~~endpoint~~had approximately $0.5 million of ~~overall~~cash ~~adequate~~and ~~relief~~cash ~~was~~equivalents ~~not~~at ~~met~~June ~~due~~30, 2012. However, the Company’s ability to continue as a ~~high~~going ~~placebo~~concern ~~response,~~is ~~but~~largely ~~drug~~dependent ~~activity~~upon ~~was~~achieving ~~observed~~a incollaboration ~~all~~with ~~drug~~a ~~cohorts~~pharmaceutical partner or raising additional capital to advance its lead compounds, ~~especially~~Levotofisopam, for the ~~200~~treatment mgof ~~dose~~Gout, and Dextofisopam, for the treatment of IBS.

The Company now is seeking a pharmaceutical partner with clinical, scientific and financial capabilities to further develop Dextofisopam. The Company has not to date been successful in attracting a partner or securing additional funding for the further development of Dextofisopam.

InThe ~~research~~Company ~~efforts~~does ~~over~~not currently have the ~~past~~finances ~~decade,~~and ~~the~~resources ~~Company~~to ~~has~~conduct ~~developed~~any further clinical trials. The Company completed a ~~significant~~proof-of-concept ~~expertise~~Gout trial (the Gout trial) for Levotofisopam in ~~cannabinoid~~April ~~biology~~2012 and ~~chemistry~~in May 2012, ~~and~~announced ~~has~~the ~~generated~~successful ~~significant~~completion ~~know~~of this proof-~~how~~of-concept trial in which rapid and ansignificant ~~intellectual~~reduction ~~property~~in ~~estate~~uric ~~pertaining~~acid towas ~~multiple~~observed ~~areas~~in ofall ~~cannabinoid~~patients. ~~biology~~The Company has been intensely attempting to partner Levotofisopam. ~~With~~ Through the ~~decision~~date toof ~~focus~~this ~~resources~~filing, ona ~~Dextofisopam~~partner or other form of collaboration has not been achieved and ~~with~~should ~~the~~a ~~closure~~collaboration or other form of financing not be achieved by November 1, 2012, the Company’s ~~operations~~will inbe ~~Israel~~unable ~~effective~~to ~~October~~continue ~~31,~~operations ~~2008,~~past noquarter ~~further~~three ~~development~~or ~~work~~quarter isfour ~~being~~of ~~performed~~2012, onincluding repayment of the ~~cannabinoid~~outstanding ~~assets~~convertible ~~and~~debenture in quarter four. Currently the ~~focus~~Company isspends toapproximately ~~partner~~$100,000 ora ~~sell~~month ~~these~~on ~~assets~~continuing operating expenses.

The Company continues to seek, to sell or license other CB2 assets, including Cannabinor which was the only CB2 asset to enter human clinical trials.

The results for the three months ended March 31, 2012 and 2011 were a net loss of $0.6 million and $0.6 million, respectively. On a loss per share basis, this equates to $(0.01) and $(0.01) for the quarters ended March 31, 2012 and 2011, respectively.

Except for 2001, the Company has experienced operating losses every year since inception in funding the research, development and clinical testing of our drug candidates. The Company had an accumulated deficit of $213.9 million as of March 31, 2012 and expects to continue to incur losses going forward. Such losses have resulted principally from costs incurred in research and development and from general and administrative expenses. Previously the Company had financed its operations with public and private offerings of securities, advances and other funding pursuant to an earlier marketing agreement with Bausch & Lomb, grants from the Office of the Chief Scientist of Israel, research contracts, the sale of a portion of its New Jersey net operating loss carryforwards (NOL’s), and interest income. During 2010 the Company was awarded a cash grant of $244,000 under the Federal Qualifying Therapeutic Discovery Project for the further development of Dextofisopam. The Company had approximately $1.0 million of cash and cash equivalents at March 31, 2012. However, the Company’s ability to continue as a going concern is largely dependent upon achieving a collaboration with a pharmaceutical partner or raising additional capital to advance its lead compounds, Levotofisopam, for the treatment of Gout, and Dextofisopam, for the treatment of IBS.

The Company does not currently have the finances and resources to conduct large clinical trials for its most advanced compound, Dextofisopam and continues to seek a partner. Meanwhile, the Company is pursuing the development of Levotofisopam for the treatment of Gout and is currently incurring clinical trial costs. The Company expects to have sufficient cash to fund the development of Levotofisopam through completion of a proof-of-concept Gout trial (the Gout trial) based on current estimates. During the first half of 2012, the Company expects to have more information on the probability of success of the Gout trial. The Company intends to partner Levotofisopam upon successful completion of this trial. Should this not occur, the Company will be unable to continue operations, including repayment of the outstanding convertible debenture, unless additional capital can be obtained.

Results of Operations

Three Months ended ~~March~~June 3130, 2012 and 2011

Total operating expenses for the ~~first~~second quarter of 2012 decreased by $25121,~~418~~333 or 426%, from $~~576~~474,~~754~~556 in 2011 to $~~551~~353,~~336~~223 in 2012.

Research & development expenses for the ~~first~~second quarter ~~increased~~decreased by $899,~~880~~613, or 346%, from $~~281~~214,~~783~~470 in 2011 to $~~290~~114,~~663~~857 in 2012. The primary areas include a $~~149~~34,000 ~~increase~~reduction in clinical study fees ~~which~~and ~~were offset by~~ a $~~138~~66,000 reduction in consultant and professional fees ~~and a $2,000 reduction in various other areas~~. Clinical study fees ~~increased~~decreased as the Gout trial ~~commenced~~concluded in ~~January~~April 2012 and fees were incurred on 13 completed patients. In 2011 clinical study fees were higher due to costs related to conducting a non-human primate toxicology study. Consulting and professional fees have decreased as the Company filed the IND for the Gout trial in 2011 while in 2012 there were normal expenses in this area.

10General and administrative expenses for the second quarter of 2012 decreased by $21,664, or 8%, from $259,415 in 2011 to $237,751 in 2012. The primary reductions were a $7,000 reduction in salaries and benefits and a $15,000 reduction in various other areas. The decrease in payroll costs in 2012 reflects lower stock compensation. There was also a reduction of various facility related expenses as the Company continued to reduce and manage overhead.

General and administrative expenses for the first quarter of 2012 decreased by $34,288, or 12%, from $294,345 in 2011 to $260,057 in 2012. The primary reductions were a $15,000 reduction in consultant and professional fees, a $6,000 reduction in salaries and benefits and a $13,000 reduction in various other areas. Professional fees have decreased as there were reduced legal fees incurred. The decrease in payroll costs in 2012 reflects lower stock compensation. There was also a reduction of various facility related expenses as the Company continued to reduce and manage overhead.

No tax provision is required at this time since the Company expects to be in a tax loss position at year-end December 31, 2012 and has net operating losses from previous years. The Company has established a 100% valuation allowance against the deferred tax assets generated primarily from these losses.

Results of Operations

Six Months ended June 30, 2012 and 2011

Total operating expenses for the first half of 2012 decreased by $146,751 or 14%, from $1,051,311 in 2011 to $904,560 in 2012.

Research & development expenses for the first half of 2012 decreased by $90,733, or 18%, from $496,254 in 2011 to $405,521 in 2012. The primary areas include an $115,000 increase in clinical study fees which were offset by a $204,000 reduction in consultant and professional fees and a $2,000 reduction in various other areas. Clinical study fees increased as the Gout trial commenced in January 2012 and fees were incurred on 13 completed patients. Consulting and professional fees have decreased as the Company filed the IND for the Gout trial in 2011 while in 2012 there were normal expenses in this area.

General and administrative expenses for the first half of 2012 decreased by $55,952, or 10%, from $553,760 in 2011 to $497,808 in 2012. The primary reductions were a $15,000 reduction in consultant and professional fees, a $13,000 reduction in salaries and benefits and a $28,000 reduction in various other areas. Professional fees have decreased as there were reduced legal fees incurred. The decrease in payroll costs in 2012 reflects lower stock compensation. There was also a reduction of various facility related expenses as the Company continued to reduce and manage overhead.

Liquidity and Capital Resources

The following table describes the Company's working capital, cash and cash equivalents and convertible debentures on ~~March~~June 3130, 2012, and on December 31, 2011:

	March 31, 2012			December 31, 2011
	June 30, 2012			December 31, 2011
Working capital	$	(~~192~~542,~~676~~955	)	$	296,654
Cash and cash equivalents	$	1517,~~016,483~~344		$	1,535,137
Convertible debenture, due 2012	$	1,000,000		$	1,000,000

Current working capital position

As of ~~March~~June 3130, 2012, the Company had working capital of $(0.26) million consisting of current assets of $10.16 million and current liabilities of $1.32 million. This represents a decrease of $0.58 million from its working capital of $0.3 million on current assets of $1.7 million and current liabilities of $1.4 million as of December 31, 2011. This decrease in working capital of $0.58 million was principally associated with the funding of general and administrative activities and research and development expenses related to the ~~start~~completion of a proof-of-concept clinical trial in Gout patients using S-Tofisopam.

Current and future liquidity position

As discussed in Notes 2 and 3 to the ~~executive~~condensed ~~summary~~consolidated financial statements, the Company does not currently have the finances and resources to conduct ~~large~~any further clinical trials. ~~for~~The ~~its~~Company ~~most~~completed ~~advanced~~a ~~compound,~~proof-of-concept ~~Dextofisopam~~Gout ~~and~~trial ~~continues~~(the toGout ~~seek~~trial) afor ~~partner.~~Levotofisopam ~~Meanwhile,~~in ~~the~~April ~~Company~~2012 isand ~~pursuing~~in May 2012, announced the ~~development~~successful completion of ~~Levotofisopam~~this ~~for~~proof-of-concept ~~the~~trial ~~treatment~~in ofwhich ~~Gout~~rapid and issignificant ~~currently~~reduction ~~incurring~~in ~~clinical~~uric ~~trial~~acid ~~costs~~was observed in all patients. The Company ~~expects~~has tobeen beintensely ~~able~~attempting to ~~fund~~partner ~~the~~Levotofisopam. ~~proof-of-concept~~Through ~~clinical~~the ~~trial~~date ~~with~~of ~~its~~this ~~current~~filing, ~~cash~~a ~~resources~~partner ~~which~~or ~~are~~other ~~sufficient~~form toof ~~support~~collaboration ~~operations~~has ~~through~~not ~~July~~been ~~2012.~~achieved ~~The~~and ~~Company~~should ~~intends~~a tocollaboration ~~partner~~or ~~Levotofisopam~~other ~~upon~~form ~~successful completion~~ of afinancing ~~proof-of-concept~~not ~~clinical~~be ~~trial.~~achieved ~~Should~~by ~~this~~November ~~not~~1, ~~occur~~2012, the Company ~~may~~will be unable to continue operations past quarter three or quarter four of 2012, including repayment of the outstanding convertible debenture in quarter four. Currently the Company spends approximately $100,000 ~~unless~~a ~~additional~~month ~~capital~~on ~~can~~continuing beoperating ~~obtained~~expenses.

As such these factors raise substantial doubt as to the Company’s ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments that might result from this uncertainty.

Operating activities

Net cash used in operating activities for the first ~~three~~six months of 2012 was $01.50 million compared to net cash used of $01.40 million for the first ~~three~~six months of 2011. Overall on a year to year comparison the net cash used was similar. The Company continues to fund research & development activities and general and administrative costs.

~~Commitments~~The table below sets out our current contractual obligations as of June 30, 2012.

The table below sets out our current contractual obligations as of March 31, 2012. However, the nature of these contracts with various clinical research organizations is such that if work is stopped with very short notice, we will then only be obligated to pay costs incurred to date.

	Payments Due by Period
	Total		Less than 1 Year		1 – 3 Years		3 – 5 Years		More Than 5 Years		Undetermined
Operating Leases	$	13,215	$	13,215	$	-	$	-	$	-	$	-
Convertible Debenture Interest		33,333		33,333		-		-
Convertible Debenture		1,000,000		1,000,000		-		-		-		-
Total	$	1,046,548	$	1,046,548	$	-	$	-	$	-	$	-

	Payments Due by Period
	Total		Less than 1 Year		1 – 3 Years		3 – 5 Years		More Than 5 Years		Undetermined
Operating Leases	$	19,823	$	19,823	$	-	$	-	$	-	$	-
Convertible Debenture Interest		58,333		58,333		-		-		-		-
Duke University		172,159		172,159		-		-		-		-
Convertible Debenture		1,000,000		1,000,000		-		-		-		-
Total	$	1,250,315	$	1,250,315	$	-	$	-	$	-	$	-

In connection with the acquisition of Vela Pharmaceuticals which closed on October 25, 2006 the Company is obligated to pay certain performance based milestones connected to the development of Dextofisopam.

The remaining milestones are as follows:

· $1 million cash: Final patient enrolled in Phase 2b trial (1)

· $2 million + 2 million shares: NDA submission

· $2 million cash +2.25 million shares: FDA approval

· 1 million shares: Approval to market in Europe or Japan

· 4 million shares: $100 million sales of Dextofisopam, when and if approved, in any 12-month period

(1) The milestone was reached when the final patient was enrolled in the Dextofisopam Phase 2b trial and was recognized in the first quarter of 2009 as all probability criteria were met. The milestone had two components, a cash portion of $1,000,000 and a share portion of 2,000,000 shares valued at $180,000. The total charge in the first quarter 2009 was $1,180,000. The shares were issued in November 2009 under the terms of the Amendment #3 to the agreement and plan of merger. Under that amendment the payment of the cash portion was deferred until such time as 1) the Company successfully entered into a strategic collaboration or licensing agreement with a third party for the development of Dextofisopam resulting in an upfront cash fee of at least $10 million, and 2) payment of the cash milestone would still leave the Company with one year’s operating cash.

The Company recorded the milestone in the first quarter of 2009 as it met the accounting requirements of under ACS 450. The results of the Phase 2b trial were announced in September 2009 and reported that while there was clearly drug activity, the trial did not achieve its primary endpoint. Under the terms of the Vela acquisition agreement as amended, the 2 million shares were issued on November 2, 2009. The cash portion that was expensed in Q1 2009 was reversed in Q4 2009 since it is not deemed probable that the amended terms would be achieved. Since the trial results were not successful, no other milestones have been achieved.

New accounting pronouncements

In June 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income ("ASU 2011-05"). This update amends Accounting Standards Codification ("ASC") Topic 220, Comprehensive Income, to provide that total comprehensive income will be reported in one continuous statement or two separate but consecutive statements of financial performance. Presentation of total comprehensive income in the statement of stockholders' equity or the footnotes will no longer be allowed. The calculation of net income and basic and diluted net income per share will not be affected. ASU 2011-005 is effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2011, and is currently effective for our Company. This update did not have any material effect on our financial statements.12

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We assessed our vulnerability to certain market risks, including interest rate risk associated with financial instruments included in cash and cash equivalents. Due to the relatively short-term nature of these investments the Company has determined that the risks associated with interest rate fluctuations related to these financial instruments do not pose a material risk to us.

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures: An evaluation of Pharmos' disclosure controls and procedures (as defined in Section13a-15(e) of the Securities Exchange Act of 1934 (the “Act”)) was carried out under the supervision and with the participation of Pharmos' principal executive officer and principal financial officer at ~~March~~June 3130, 2012. Based on this evaluation, Pharmos' principal executive officer and principal financial officer concluded that as of ~~March~~June 3130, 2012, Pharmos' disclosure controls and procedures were effective, at a reasonable level of assurance, in ensuring that the information required to be disclosed by Pharmos in the reports it files or submits under the Act is (i) accumulated and communicated to Pharmos' management (including the principal executive officer and principal financial officer) in a timely manner, and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms.

(b) Changes in Internal Control over Financial Reporting: There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended) during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

1413

Part II Other Information

Item 1	Legal Proceedings	NONE

Item 1A	Risk Factors

Need For Additional Capital

Our ability to operate as a going concern is dependent upon raising adequate financing. Management believes that the current cash and cash equivalents, totaling $1.0.5 million as of ~~March~~June 3130, 2012, will be sufficient to support our currently planned continuing operations through at least ~~July~~October of 2012. However, the Company’s ~~ability~~does tonot ~~continue~~currently ashave athe ~~going~~finances ~~concern~~and isresources ~~largely~~to ~~dependent~~conduct ~~upon~~any ~~achieving~~further aclinical ~~collaboration~~trials. ~~with~~The aCompany ~~pharmaceutical~~completed ~~partner~~a ~~or raising~~proof-of-concept ~~additional~~Gout ~~capital~~trial to(the ~~advance~~Gout ~~its~~trial) ~~lead compounds, Dextofisopam,~~ for ~~the~~Levotofisopam ~~treatment~~in ofApril ~~IBS,~~2012 and ~~Levotofisopam~~in May 2012, ~~for~~announced the ~~treatment~~successful completion of ~~gout. The~~this ~~Company~~proof-of-concept ~~does~~trial ~~not~~in ~~currently~~which ~~have~~rapid ~~the~~and ~~finances~~significant ~~and~~reduction ~~resources~~in touric ~~conduct~~acid ~~large~~was ~~clinical~~observed ~~trials~~in ~~for~~all ~~its~~patients. ~~most~~The ~~advanced~~Company ~~compound,~~has ~~Dextofisopam~~been ~~and~~intensely ~~continues~~attempting to ~~seek a~~ partner Levotofisopam. ~~Meanwhile,~~Through the ~~Company~~date isof ~~pursuing~~this ~~the~~filing, ~~development~~a ofpartner ~~Levotofisopam~~or ~~for~~other ~~the~~form ~~treatment~~ of ~~Gout~~collaboration ~~and~~has isnot ~~currently~~been ~~incurring~~achieved ~~clinical~~and ~~trial~~should ~~costs.~~a ~~The~~collaboration ~~Company~~or ~~intends~~other toform ~~partner Levotofisopam upon successful completion~~ of afinancing ~~proof-of-concept~~not ~~clinical~~be ~~trial.~~achieved ~~Should~~by ~~this~~November ~~not~~1, ~~occur~~2012, the Company ~~may~~will be unable to continue operations past quarter three or quarter four of 2012, including repayment of the outstanding convertible debenture, ~~unless~~in ~~additional~~quarter ~~capital can be obtained~~four.

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	NONE

Item 3	Defaults upon Senior Securities	NONE

Item 4	Mine Safety Disclosures	N/A

Item 5	Other Information	NONE

1514

Item 6

Exhibits

Number		Exhibit
3.1		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 Company dated September 28, 1992 (No. 33-52398)
3.2		Certificate of Amendment of Restated Articles of Incorporation dated January 30, 1995 (Incorporated by reference to Annual Report on Form 10-K for the year ended December 31, 1994).
3.3		Certificate of Amendment of Restated Articles of Incorporation dated January 16, 1998 (Incorporated by reference to the Company’s Current Report on Form 8-K, dated February 6, 1998).
3.4		Certificate of Amendment of Restated Articles of Incorporation dated October 21, 1999 (Incorporated by reference to exhibit 4(e) to the Form S-3 Registration Statement of the Company filed September 28, 2000 (No. 333-46818)).
3.5		Certificate of Amendment of Restated Articles of Incorporation dated July 19, 2002 (Incorporated by reference to Exhibit 3 to the Company’s Report on Form 10-Q for the quarter ended June 30, 2002).
3.6		Certificate of Amendment of Restated Articles of Incorporation dated July 7, 2004 (Incorporated by reference to Exhibit 3.1 to the Company’s Report on Form 10-Q for the quarter ended June 30, 2004).
3.7		Certificate of Amendment to Articles of Incorporation dated September 23, 2005 (Incorporated by reference to exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005).
3.8		Certificate of Amendment to Articles of Incorporation dated August 5, 2009 (Incorporated by reference to exhibit 3.8 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2009).
3.9		Amended and Restated By-Laws (Incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007).
31.1		Certification of Principal Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15(d)-14(a), adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15(d)-14(a), adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.1		The following financial information from Pharmos Corporation's Quarterly Report on Form 10-Q for the quarter ended ~~March~~June 3130, 2012, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of ~~March~~June 3130, 2012, and December 31, 2011, (ii) Condensed Consolidated Statements of Operations for the three and six months ended ~~March~~June 3130, 2012, and ~~March~~June 3130, 2011, (iii) Condensed Consolidated Statements of Cash Flows for the ~~three~~six months ended ~~March~~June 3130, 2012, and ~~March~~June 3130, 2011 and (iv) Notes to Condensed Consolidated Financial Statements.

1615

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	PHARMOS CORPORATION
Date: April 16, 2012
Date: July 30, 2012
	by:	/s/ S. Colin Neill
	S. Colin Neill
	President, Chief Financial Officer, Secretary & Treasurer
	(Principal Accounting and Financial Officer)

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