<PAGE>
 
                    U.S. SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549

                                 FORM 10-KSB/A
 
[X]   Annual Report Under Section 13 or 15(d) of the Securities Exchange Act of
      1934 for the fiscal year ended August 31, 1996
     
[ ]   Transition Report Under Section 13 or 15(d) of the Securities Exchange Act
      of 1934 for the transition period from ____ to ____
      
COMMISSION FILE NUMBER                  0-9147
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                           FOUNTAIN OIL INCORPORATED
--------------------------------------------------------------------------------
                (Name of small business issuer in its charter)

           Delaware                                     91-0881481
-------------------------------              -----------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)
 
1400 Broadfield Blvd., Suite 200, Houston, Texas               77084-5163
--------------------------------------------------           --------------- 
  (Address of Principal Executive Offices)                      (Zip Code)
 
Issuer's Telephone Number:                (281) 492-6992
                          ------------------------------------------------------

Securities Registered Under Section 12(b) of the Act:

 Title of Each Class                     Name of  Exchange on Which Registered
       None                                              None
----------------------                   ---------------------------------------

Securities Registered Under Section 12(g) of the Act:

                    Common Stock, par value $0.10 per share
--------------------------------------------------------------------------------
                               (Title of Class)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 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 [ ]

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated herein by reference in Part III of this Form 10-KSB or
any amendment to this Form 10-KSB.    [X]

Issuer's revenues for its most recent fiscal year ended August 31, 1996 were
$35,177.

The aggregate market value of the voting stock held by non-affiliates of the
registrant, as of October 31, 1996, was $108,381,104.

The number of shares outstanding of registrant's Common Stock on October 31,
1996 was 18,751,821.

DOCUMENTS INCORPORATED BY REFERENCE.  None

        TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT  Yes [ ]  No [X]
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ITEM 10.  EXECUTIVE COMPENSATION

          COMPENSATION OF CERTAIN EXECUTIVE OFFICERS
          ------------------------------------------

          The following table shows all compensation (stated in U.S. dollars)
paid or accrued by the Company and its subsidiaries during the years ended
August 31, 1994, August 31, 1995 and August 31, 1996 to certain executive
officers of the Company (the "Named Officers").

                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
 
                               Annual Compensation                    Long-Term Compensation
                    --------------------------------------         --------------------------
                                                                          Securities
                                                Other Annual              Underlying                All Other
Name and                                        Compensation               Options/                 Compensation
Principal Position        Year     Salary ($)       ($)                    SARs (#)                    ($)
------------------------------------------------------------------------------------------------------------------------------------

<S>                       <C>      <C>             <C>                     <C>                        <C>
 
Oistein Nyberg            1996     154,104        83,151  (1)                 ---                      21,965   (7)
(1)                       1995     113,246        24,199  (1)                 ---                       6,125   (7)
                          1994         ---           ---                   44,000  (6)                    ---
Nils N. Trulsvik          1996     161,241         9,029                      ---                       8,635   (7)
(2)                       1995     147,754   (2)     ---                      ---                       6,344   (7)
                          1994         ---           ---                   60,000  (6)                    ---
Arnfin Haavik             1996     154,560        34,560  (3)                 ---                      21,259   (7)
(3)                       1995      92,685        24,234  (3)                 ---                       6,279   (7)
                          1994         ---           ---                   36,000  (6)                    ---
Gary J. Plisga            1996     150,300           ---                      ---                      15,613   (7)
(4)                       1995     104,777   (4)     ---                      ---                       6,556   (7)
                          1994         ---           ---                                                  ---
Arild Boe                 1996      149,380          ---                      ---                       8,780   (7)
(5)                       1995       22,125          ---                      ---                         ---
                          1994          ---          ---                   28,000  (6)                    ---
</TABLE>
___________________
(1)   Mr. Nyberg was elected President/CEO on March 9, 1995. Other annual
      compensation paid in fiscal 1995 includes $11,899 as a housing allowance
      and $7,738 in childrens' school fees. Other annual compensation paid in
      fiscal 1996 includes $54,441 as a housing allowance and $20,457 in
      childrens' school fees.

(2)   Mr. Trulsvik served as Executive Vice President from September 8, 1994 to
      November 21, 1994; as President/CEO from November 21, 1994 to March 9,
      1995 and as Executive Vice President since March 9, 1995. Mr. Trulsvik's
      salary in fiscal 1995 includes $33,722 as the value of 10,900 shares
      received in lieu of cash compensation.

(3)   Mr. Haavik was elected Executive Vice President/Chief Financial Officer on
      February 1, 1995. Other annual compensation paid in fiscal years 1995 and
      1996 includes $20,505 and $31,038, respectively, as a housing allowance.

(4)   Mr. Plisga was elected Executive Vice President, Americas on January 16,
      1995. Mr. Plisga's salary in fiscal 1995 includes $25,610 paid for
      consulting services provided by him in fiscal 1995 before his employment
      by the Company.

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<PAGE>
 
(5)   Mr. Boe served as Senior Vice President from August 1, 1995 to November
      14, 1995. He currently serves as Executive Vice President Asset Management
      Oil and Gas.
      
(6)   Options were granted in August 1994. The options expire August 16, 1999
      and are exercisable only while the holder renders services to the Company
      as an officer, director, employee, consultant or advisor or within six
      months after the holder ceases to render such services.

(7)   Represents the Company's contributions or accruals to individual
      retirement/pension plans.

                         FISCAL YEAR END OPTION VALUES

      Shown below is information regarding the value of unexercised stock
purchase warrants and options (referred to as "options" in the following table)
held by the Named Officers as of August 31, 1996.  No options were granted to,
or exercised by, the Named Officers in fiscal year 1996.
 
                          Number of Shares        Value of Unexercised In-the-
                       Underlying Unexercised       Money Options at Fiscal
Name                          Options                     Year End (1)
                      Held at Fiscal Year End
------------------------------------------------------------------------------
 
                    Exercisable   Unexercisable   Exercisable   Unexercisable
                    ------------  --------------  ------------  --------------
 
Oistein Nyberg            44,000               0      $220,000              $0
Nils N. Trulsvik          60,000               0       300,000               0
Arnfin Haavik             36,000               0       180,000               0
Gary J. Plisga                 0               0             0               0
Arild Boe                 28,000               0       140,000               0

_________________
(1)   Represents the difference between the market value on August 31, 1996 and
      the exercise price.

      COMPENSATION OF DIRECTORS
      -------------------------

      Robert A. Halpin is compensated for his services as Chairman of the Board
and member of Board committees pursuant to an agreement which provides for an
annual fee of $37,500 plus $1,000 per day for each day of service in excess of
55 days per year.  The Company provides Mr. Halpin with an office at the
Company's offices located in Calgary, Alberta, Canada, and reimburses Mr. Halpin
his out-of-pocket expenses in connection with services on behalf of the Company,
including travel and related expenses for his wife if Mr. Halpin is required to
be outside of Calgary for more than two weeks.  The Company also from time to
time uses the consulting services of Halpin Energy Resources, Ltd., which is
controlled by Mr. Halpin, in the area of petroleum projects, for which such
company is compensated at its customary rates.

      The Company pays non-employee Directors other than the Chairman of the
Board fees at the rate of $14,000 per year and $3,000 per year for service on
committees of the Board of Directors.  The Company also pays a fee of $1,000 per
day, other than a day on which the Board meets, for each day spent by a non-
employee Director on the business of Board committees which exceeds one day per
year with respect to the Compensation Committee and three days per year with
respect to the Audit Committee and the Petroleum Committee. The Company also
pays ordinary out-of pocket expenses for attending Board and Committee meetings.

      The Company provides for automatic grants of non-qualified options to 
non-employee Directors pursuant to the 1995 Long Term Incentive Plan.  Pursuant 
to the Plan, a non-qualified option to purchase 7,500 shares of Common Stock is 
granted automatically to each non-employee Director on each of (i) the date of 
each Meeting of Stockholders at which a non-employee is elected or re-elected as
a Director and (ii) the date a non-employee is first elected as a Director, if 
not at a Meeting of Stockholders.  In addition, a non-employee Director

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will automatically be granted a non-qualified Option to purchase 7,500 shares of
Common Stock on each date on which such non-employee Director is elected or re-
elected by the Board of Directors as Chairman of the Board of Directors.  The
exercise price of each option is equal to 100% of the fair market value of the
Common Stock on the date the option is granted.  Each option is 100% vested six
months after the date of the grant.  Options expire on the first to occur of
three years from the date of grant or the first anniversary of the date the
Director ceases to be a Director for any reason.

      Since January 1, 1996, Eugene Meyers, a non-employee Director, has
provided financial relations consulting services to the Company at the rate of
$15,000 per year for 22 days of service, and thereafter at the rate of $100 per
hour ($1,000 maximum per day).  He is also reimbursed his out-of-pocket expenses
for such services.

      The following table shows payments made to non-employee Directors, or
their affiliates, for the year ended August 31, 1996:
 
                                 Directors  Consulting  Options
               Name                Fees      Payments   Granted
               ------------------------------------------------
  
               Robert Halpin      $22,027     $11,000   15,000
               Stanley Heckman     13,381         ---    7,500
               Eugene Meyers        9,333      10,000    7,500

The options were granted on February 12, 1996 at an exercise price of $3.84375
expiring on February 11, 1999 and were 100% vested at August 12, 1996.

      EMPLOYMENT CONTRACTS
      --------------------

      The Company has entered into Employment Contracts with each of its
executive officers.  The Employment Contracts with Oistein Nyberg, Nils
Trulsvik, Arnfin Haavik, Gary Plisga and Arild Boe may be terminated by either
party on six months written notice.  The contracts provide for an annual salary
of approximately $150,000 US (denominated in local currency in the country in
which the officer is headquartered) which is subject to renegotiations at the
end of each fiscal year.  In addition, beginning April 1, 1995, each person
receives an allowance equal to 12.5% of his base salary which is used to provide
minimum life and disability insurance coverage for each such person.  The
remainder of such allowance may be used by each person for additional life,
medical or accident insurance and to fund individual pension/retirement plans.
The  Company reserves the right to review the 12.5% allowance every three years.
Each person is also entitled to receive up to a full year's salary in the event
he is unable to provide services due to sickness or injury.  The Employment
Contracts for Messrs. Nyberg and Haavik also provide for, among other things,
housing allowances and, in the case of Mr. Nyberg, payment of childrens' school
fees.

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                                  SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

FOUNTAIN OIL INCORPORATED
     (Registrant)

By: /s/ Susan E. Palmer                              Date:  April 23, 1997
    ------------------------------------
    Susan E. Palmer, Corporate Secretary


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