SECURITIES AND EXCHANGE COMMISSION
                       ----------------------------------
                             Washington, D.C. 20549
                             ----------------------

                                   FORM 10-QSB
                                   -----------
(Mark One)
[X]   QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT
---   --------------------------------------------------------------------------
      OF 1934
      -------
                For the quarterly period ended December 31, 1996
                ------------------------------------------------

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

                       Commission File Number:  0-18399
                       -----------------------  -------

                         FOUNTAIN PHARMACEUTICALS, INC.
             (Exact name of registrant as specified in its charter)

                 Delaware                                   62-1386759
       ------------------------------                    -----------------  
      (State or other jurisdiction of                   (I.R.S. Employer
       incorporation or organization)                   Identification No.)
 
                   7279 Bryan Dairy Road, Largo, Florida 33777
                   -------------------------------------------
                    (Address of principal executive offices)

                                 (813) 548-0900
                                 --------------
              (Registrant's telephone number, including area code)

      Check whether the Registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the  Securities  Exchange  Act of 1934 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.
                        (1)   Yes   X           No
                                  -----            -----

                        (2)   Yes   X           No
                                  -----            -----

         APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
                       DURING THE PRECEDING FIVE YEARS:

      Check whether the Registrant  filed all documents and reports  required to
be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 after
the distribution of securities under a plan confirmed by court.

                              Yes   X           No
                                  -----            -----


<PAGE>



                     APPLICABLE ONLY TO CORPORATE ISSUERS:

      State the number of shares outstanding of each of the Registrant's classes
of Common Stock, as of February 10, 1997:

Common Stock, par value $.001 - 47,516,049

Class B Common Stock, par value $.001 - 90,100

Transitional Small Business Disclosure Format:

                              Yes               No   X
                                  -----            ----- 
                                







































                                       2

<PAGE>



                        FOUNTAIN PHARMACEUTICALS, INC.

                                     INDEX


                                                                        Page
                                                                        ----

Part I.         Financial Information*
-------         ----------------------

   Item 1.      Financial Statements
                (Unaudited)

                Balance Sheets - September 30, 1996,
                and December 31, 1996
                (Unaudited)                                                4

                Statements of Operations - for the three
                months ended December 31, 1996 and 1995
                (Unaudited)                                                5

                Statement of Stockholders' Equity -
                for the period from September 30, 1996
                through December 31, 1996 (Unaudited)                      6

                Statements of Cash Flows - for the three
                months ended December 31, 1996 and 1995
                (Unaudited)                                                7

                Notes to Condensed Financial Statements
                (Unaudited)                                                8

   Item 2.      Management's Discussion and
                Analysis or Plan of Operation                              9

Part II.        Other Information
--------        -----------------

                Item 1.    Legal Proceedings                              13
                Item 2.    Changes in Securities                          13
                Item 3.    Defaults Upon Senior Securities                13
                Item 4.    Submission of Matters to a Vote
                           of Security Holders                            13
                Item 5.    Other Information                              13
                Item 6.    Exhibits and Reports on Form 8-K               14


*  The  accompanying  financial  information  is not  covered by an  Independent
   Certified Public Accountant's Report.



                                        3

<PAGE>
                                FOUNTAIN PHARMACEUTICALS, INC.
                                        BALANCE SHEETS
<TABLE>
<CAPTION>

                  ASSETS                                                 LIABILITIES AND STOCKHOLDERS' EQUITY

                             December 31,                                                       December 31,
                                 1996       September 30,                                          1996         September 30,
                             (Unaudited)        1996                                            (Unaudited)         1996
                             -----------    -------------                                       -----------     --------
<S>                           <C>             <C>                                                 <C>            <C>  
Current assets:                                                Current liabilities:
   Cash and cash equivalents  $     2,893     $    66,647        Current portion of
   Accounts receivable             93,111         236,032         liabilities not subject
   Inventories                    106,490         104,866         to compromise                   $   27,450     $   26,808
   Prepaid expenses                50,579          46,574        Current portion of
                              -----------     -----------         liabilities subject to
                                                                  compromise                          85,708         84,983
                                                                 Accounts payable and
                                                                  accrued expenses                    66,962        108,091
                                                                                                  ----------     ----------

    Total current assets          253,073         454,119         Total current liabilities          180,120        219,882
                                                                                                  ----------     ----------

                                                               Liabilities not subject to
                                                                 compromise, non-current              24,945         32,053
                                                                                                  ----------     ----------
Furniture and equipment, less                                  Liabilities subject to
   accumulated depreciation                                      compromise, non-current              70,071         92,298
                                                                                                  ----------     ----------
   ($239,716, December 31, 1996;
   $232,136, September 30, 1996)   24,344          31,924
                                                               Stockholders' equity:
Patent costs, less accumulated                                   Preferred stock, par value $.001,
   amortization ($22,905, December                                2,000,000 shares authorized
   31, 1996; $22,065 September                                   Common stock, par value
   30, 1996)                      123,839         138,575         $.001, 50,000,000 shares
                                                                  authorized; 47,516,049 issued
Other assets                        6,250           6,250         and outstanding (one vote per
                              -----------     -----------         share                               47,516         47,516
                                                                 Class B common stock; par value
                                                                  $.001, 5,000,000 shares
                                                                  authorized; 90,100 shares
                                                                  issued and outstanding (five
                                                                  votes per share)                        90             90
                                                                 Additional paid-in capital       14,529,102     14,529,102
                                                                 Accumulated deficit             (14,444,338)   (14,290,073)
                                                                                                  ----------     ----------
                                                                  Total stockholders'
                                                                  equity                             132,370        286,635
                                                                                                  ----------     ----------


                                                                 Total liabilities and
Total assets                  $   407,506     $   630,868         stockholders' equity           $   407,506    $   630,868
                              ===========     ===========                                        ===========    ===========





























                                             See notes to financial statements.

                                                             4
</TABLE>


<PAGE>
                        FOUNTAIN PHARMACEUTICALS, INC.
                           STATEMENTS OF OPERATIONS
                                  (UNAUDITED)

                                                Three Months Ended December 31
                                                ------------------------------
                                                   1996                 1995
                                                   ----                 ----

Revenue                                          $109,920            $ 43,433

Cost of sales                                      39,086               8,455
                                                 --------            --------

Gross profit                                       70,834              34,978
                                                 --------            --------

Operating expenses:
   Research and development                        61,403                 494
   General and administrative                      87,941              89,430
   Selling                                         58,583              60,081
   Depreciation and amortization                    8,420              11,855
                                                 --------            --------

Total operating expenses                          216,347             161,860
                                                 --------            --------

Loss from operations                            ( 145,513)          ( 126,882)
                                                 --------            --------

Other income (expenses):
   Interest expense                             (   5,706)               -
   Other income (expense)                       (   3,046)               -
   Reorganization expenses                           -              (  18,382)
                                                 --------            --------

Total other income (expenses)                   (   8,752)          (  18,382)
                                                 --------            --------

Loss before extraordinary item                  ( 154,265)          ( 145,264)

Extraordinary gain, net of $0 income taxes           -                322,368
                                                 --------            --------

Net income (loss)                               ($154,265)           $177,104
                                                 ========            ========


Earnings per share:

      Loss before extraordinary item             ($ .0032)           ($ .0046)

      Extraordinary gain                              -                 .0102
                                                  -------             -------

      Net income (loss)                          ($ .0032)            $ .0056
                                                  =======             =======

Weighted average number of shares
   outstanding:                                47,606,149          31,477,117
                                               ==========          ==========




                       See notes to financial statements.


                                        5



<PAGE>



                        FOUNTAIN PHARMACEUTICALS, INC.
                 STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
       FOR THE PERIOD FROM SEPTEMBER 30, 1996 THROUGH DECEMBER 31, 1996
                                  (UNAUDITED)
<TABLE>
<CAPTION>
                                                     Class B      
                                Common Stock       Common Stock      Additional
                            --------------------  ----------------    Paid-In       Accumulated
                              Shares     Amount   Shares    Amount    Capital         Deficit       Total
                            ----------   -------  -------   ------  -----------     -------------  ---------
<S>                         <C>          <C>      <C>       <C>     <C>             <C>            <C> 
Balances
  October 1, 1996           47,516,049   $47,516  90,100    $   90  $14,529,102     ($14,290,073)  $286,635


Net loss for the period                                                             (    154,265)  (154,265)
                            ----------   -------  -------   ------  -----------     -------------  ---------

Balances
  December 31, 1996         47,516,049   $47,516  90,100    $   90  $14,529,102     ($14,444,338)  $132,370
                            ==========   =======  ======    ======  ===========     =============  ========

</TABLE>



































                            See notes to financial statements.

                                                     6



<PAGE>
                        FOUNTAIN PHARMACEUTICALS, INC.
                           STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)

                                                Three Months Ended December 31
                                                ------------------------------
                                                   1996                 1995
                                                 --------             -------
Cash flows from operating activities:
   Net income (loss)                            ($154,265)           $177,104
   Adjustments to reconcile net income
   (loss) to net cash used in operating
   activities:
     Extraordinary gain                              -              ( 322,368)
     Depreciation and amortization                  8,420              11,855
     Increase (decrease) in cash due to
        changes in assets and liabilities:
          Accounts receivable, trade              142,921               6,205
          Inventories                           (   1,624)             10,888
          Prepaid expenses and
            other assets                           16,898               2,763
          Accounts payable and
            accrued expenses                    (  41,129)             25,671
                                                 --------             -------
Net cash used in
   operating activities                         (  28,779)          (  87,882)
                                                 --------            --------
Cash flows from investing activities:
   Deferred patent costs incurred               (   7,007)          (  13,395)
   Acquisition of furniture and
     equipment                                       -              (     718)
                                                 --------            --------
Net cash used in
   investing activities                         (   7,007)          (  14,113)
                                                 --------            --------
Cash flows from financing activities:
   Proceeds from line of credit                    10,000
   Repayment of line of credit                  (  10,000)
   Proceeds from stock offering, net                 -                250,000
   Repayment of liabilities under
     Reorganization Plan                        (  27,968)          (   3,141)
                                                 --------            --------
Net cash provided by (used in)
   financing activities                         (  27,968)            246,859
                                                 --------            --------

Increase (decrease) in cash                     (  63,754)            144,864

Cash at beginning of period                        66,647              82,245
                                                 --------            --------

Cash at end of period                            $  2,893            $227,109
                                                 ========            ========

                       See notes to financial statements.

                                        7



<PAGE>



                         FOUNTAIN PHARMACEUTICALS, INC.
                          NOTES TO FINANCIAL STATEMENTS
              FOR THE THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995
                                   (UNAUDITED)


1.   The financial  statements  and notes thereto  should be read in conjunction
     with the financial  statements  and notes for the year ended  September 30,
     1996.

2.   In the opinion of management,  all adjustments  (consisting  only of normal
     recurring  accruals)  necessary for a fair  presentation  of the results of
     operations for the periods  presented  have been  included.  The results of
     operations  for the three months  ended  December 31, 1996 and 1995 are not
     necessarily indicative of the results for a full year.






































                                        8


<PAGE>



Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

      Background

      During the quarter  ended  December  31,  1995,  the Company  emerged from
bankruptcy  proceedings  which commenced in November 1994. During and subsequent
to the bankruptcy  proceedings,  the principal source of the Company's  revenues
has  been  from  sales  of  its  sunscreen  products  to  licensees  who  act as
distributors and from royalties which are earned as the result of the subsequent
sale of these products by such distributors.

      During the fiscal year ended  September 30, 1995 ("Fiscal 1995") while the
Company was in bankruptcy  proceedings,  management restructured the Company and
significantly reduced its overall cost structure such that revenues derived from
sales and  royalties  were  sufficient to cover the  Company's  costs.  As such,
management no longer considers itself to be in the development stage.

      The Company's Plan of Reorganization (the "Plan"),  which became effective
on December 20, 1995,  resulted in, among other things, a substantial  reduction
in the Company's outstanding  liabilities,  infusion of capital by the Company's
Chief  Executive  Officer  through the  purchase of newly  issued  shares of the
Company's  Common  Stock  and  the  Company's   emergence  from  the  bankruptcy
proceedings.  The U.S.  Bankruptcy  Court  entered its final  decree on July 25,
1996,  and as such,  the  Court no  longer  has  jurisdiction  over  matters  in
connection with the bankruptcy.

      Results of Operations

      During the quarter  ended  December 31, 1996,  the Company  realized a net
loss of $154,265 on revenues of  $109,920,  compared to a net income of $177,104
on revenues of $43,433 for the quarter ended December 31, 1995. Such decrease in
income was primarily  attributable to an extraordinary gain of $322,368 recorded
in December 31, 1995, as a result of debt reduction pursuant to the Plan.

      Revenues  for the three  months  ended  December  31,  1996,  of  $109,920
represented an increase of $66,487 or 153.1% from revenues of $43,433 during the
same period  ended  December  31,  1995.  The increase in revenues was a result,
primarily,  of  advance  orders  from a European  licensee  in  anticipation  of
sunscreen product promotion for the upcoming summer season.  Management believes
that this  particular  quarter  is the low point of its  fiscal  year due to the
seasonal  nature  of  its  principal  product,  a  sunscreen.   Management  also
anticipates  that as its  product  line  and  geographic  markets  expand,  this
seasonality will be tempered, however, there can be assurances to that effect.

      During the quarter, the Company incurred operating expenses of $216,347, a
33.7% increase over  operating  expenses of $161,860 for the prior year quarter.
This  increase  in  expenses  was  primarily  due  to  increased   research  and





                                        9


<PAGE>


development activities from the previous year's quarter. Management expects that
operating  expenses are likely to increase  modestly during the remainder of the
year  ending  September  30,  1997  ("Fiscal  1997")  to  reflect  the  costs of
additional  personnel,  as well as increased  research and development  expenses
relating to new  projects.  Management  believes  that the Company  will realize
revenues  during Fiscal 1997  sufficient  to satisfy  these  expenses as well as
other  anticipated  obligations.  However,  there can be no  assurances  to that
effect.

      For the near term,  the Company's  operations  will continue to focus upon
increasing sales through its existing and new license arrangements and expanding
upon these  associations.  In January 1996, the Company entered into a long term
license and supply  agreement  with the Dermik  Laboratories  subsidiary  of the
Rhone-  Poulenc  Rorer  Corporation.  In October  1996,  Dermik  terminated  the
agreement  based  on  their  interpretation  of a  technical  provision  of  the
agreement.  The Company is not in agreement with Dermik's interpretation and has
engaged  counsel to determine the Company's  legal remedies in this regard.  The
Company  is  actively  pursuing  similar   marketing   arrangements  with  other
licensees,  including  several  who had  previously  expressed  interest  in the
Company's  products.  In May 1996, the Company entered into a seven year license
and supply  agreement with a pharmaceutical  company in Colombia.  Revenues from
this  agreement  are expected to be  recognized  in the third  quarter of Fiscal
1997. However, there can be no assurances to that effect.

      Liquidity and Capital Resources

      From  inception  through the quarter  ended June 30, 1994,  the  Company's
principal  sources  of working  capital  were  derived  from a series of private
financing  transactions  and an initial public  offering in 1990. As a result of
the  Company's  declining  equity and  assets,  the  Company's  securities  were
delisted from The NASDAQ SmallCap  Market(sm) during May 1994 and the securities
have since  traded on the less liquid  market of the OTC Bulletin  Board,  which
would limit the Company's efforts to obtain  additional  working capital through
the sale of its securities.

      During the period from the  quarter  ended June 30,  1994  throughout  the
bankruptcy  proceedings,  the Company's operations were funded primarily through
sales  of  products  and from  royalties.  Under  the  terms  of the  Plan,  the
liabilities  of the Company  were reduced by  approximately  55% and the Company
obtained  working  capital  of  $250,000  as the result of the  purchase  by the
Company's Chief Executive  Officer of 25,000,000  shares of the Company's Common
Stock at a purchase price of $.01 per share.

      As of December 31,  1996,  the Company had working  capital of $72,953,  a
decrease  of  $161,284  from the level of  working  capital  of  $234,237  as of
September  30,  1996,  and a decrease of  $138,380  from the  Company's  working
capital of $211,333 as of December 31, 1995. Such decrease in working capital is


                                       10


<PAGE>


primarily  attributable  to  expenses  incurred  in  connection  with  increased
marketing activity,  research and development efforts,  European patent fees and
debt obligation under the Plan.

      Under the Plan,  the Company  was  subject to $319,278 of pre-  bankruptcy
liabilities  to be paid  under the Plan over a maximum  of  thirty-three  months
which commenced February 1996. Presently,  pre- bankruptcy liabilities amount to
$208,174.  Payments  pursuant to the Plan were  current as of December 31, 1996,
and management expects all such required payments to be made on a timely basis.

      As of October 17, 1996,  the Company was granted a $100,000 line of credit
at an interest rate of prime plus .5% from First Union National Bank of Florida.
This  line of  credit  is  secured  by the  Company's  accounts  receivable  and
inventory.  The  Company  utilizes  this line of credit to  purchase  additional
inventory  and/or  fund the  Company's  research  and  development  efforts,  as
necessary.

      Providing  that  operations  reflect  continued  growth,  the  Company may
attempt to obtain  financing  through the sale of  additional  securities.  This
would require a restructuring of the Company's capital structure which currently
has  insufficient  authorized  capital stock  available to  facilitate  any such
financing  transaction.  Additional  capital may be  utilized  to  increase  the
Company's   research  and   development   efforts  and  to  seek   collaborative
associations with pharmaceutical  companies.  Increases in equity and assets may
also enable the Company to relist its  securities  on NASDAQ and thereby  regain
access to a more liquid trading market. However, there can be no assurances that
the Company's business strategy can be realized.

      Historically,  the  Company's  unexercised  warrants  had been a potential
source of capital financing for the Company.  However,  all previously  existing
Class A, B, C and D Warrants have expired.  The 1,583,334  common stock warrants
presently  vested and  outstanding  bear  exercise  prices  ranging from $.04 to
$1.12. Given the market price of the Company's Common Stock, it is feasible that
some of these  Warrants can be exercised,  but there can be no assurance in this
matter.

      In addition to the Warrants  identified  above,  the Company has 2,033,333
additional  Warrants  outstanding,  which are held by its existing directors and
certain employees which vest over a two year period commencing in July 1997.

      Based upon the Company's current capital structure,  an exercise of all of
the issued and  outstanding  Warrants  would not be possible since the number of
Warrants  (assuming  full  vesting)  exceeds  the number of shares  that  remain
authorized  and available  for  issuance.  An inability to issue shares upon the
exercise of the Warrants could  conceivably  delay any funding which the Company
could  otherwise  receive from the exercise of such  Warrants  pending  adequate
capitalization.  Management  does not believe  this is likely to occur given the







                                       11


<PAGE>


vesting  provisions of certain of the outstanding  Warrants,  the present market
price of the Company's  Common Stock and since a restructuring  of the Company's
capital structure would likely occur prior to any exercise of such Warrants.

      Effects of Inflation

      The Company does not expect inflation to materially  affect its results of
operations,  however,  it does expect that its  operating  costs and the cost of
capital  equipment  to be  acquired  in the  future  may be  subject  to general
economic and inflationary pressures.






































                                       12


<PAGE>



Part II.    Other Information
            
Item 1.     Legal Proceedings
            -----------------

      None.

Item 2.     Changes in Securities
            ---------------------
 
      None.

Item 3.     Defaults upon Senior Securities
            -------------------------------

      None.

Item 4.     Submission of Matters to a Vote of Security Holders
            ---------------------------------------------------

      None.

Item 5.     Other Information
            -----------------
    
                      CAUTIONARY STATEMENT FOR PURPOSES OF
                       THE "SAFE HARBOR" PROVISIONS OF THE
                PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

      When used in this  Quarterly  Report on Form  10-QSB  and in other  public
statements  by the  Company  and  Company  officers,  the words  "may",  "will",
"expect", "anticipate", "continue", "estimate", "project", "intend", and similar
expressions are intended to identify forward-looking statements regarding events
and financial trends which may affect the Company's future operating results and
financial position.  Such statements are subject to risks and uncertainties that
could  cause the  Company's  actual  results  and  financial  position to differ
materially.  Such factors include,  among others:  (i) the Company's  ability to
retain  existing or obtain  additional  licensees who act as distributors of its
products;  (ii) the Company's ability to obtain additional patent protection for
its  encapsulation  technology;  (iii) the potential  difficulty the Company may
have in  obtaining  financing  through the  placement  of  securities  until the
Company's  Common  Stock is  relisted  on the  NASDAQ  system;  and  (iv)  other
economic,   competitive  and  governmental   factors   affecting  the  Company's
operations,  market, products and services.  Additional factors are described in
the Company's other public reports and  registration  statements  filed with the
Securities  and Exchange  Commission.  Readers are  cautioned not to place undue
reliance on  forward-looking  statements  when made,  which speak only as of the
date made. The Company  undertakes no obligation to publicly release the results
of any  revision  of these  forward-looking  statements  to  reflect  events  or
circumstances  after  the date they are made or to  reflect  the  occurrence  of
unanticipated events.


                                      13


<PAGE>



Item 6.     Exhibits and Reports on Form 8-K

      (a)   Exhibits:

            Exhibit 27 - Financial Data Schedule (Electronic filing
            only).

      (b)   Reports on Form 8-K:  The Company filed a current report
            on Form 8-K on October 24, 1996, for the purpose of
            reporting that the United States Bankruptcy Court, Middle
            District of Florida, Tampa Division, issued a final
            decree on July 25, 1996, relating to the Company's
            Chapter 11 Reorganization proceedings, and as such, the
            Court no longer has jurisdiction over matters in
            connection with the bankruptcy.





































                                       14


<PAGE>


                        FOUNTAIN PHARMACEUTICALS, INC.

                                  SIGNATURES


      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.


                                          FOUNTAIN PHARMACEUTICALS, INC.



Dated:  February 14, 1997                 /s/John C. Walsh
                                          ----------------
                                          JOHN C. WALSH,
                                          Chief Executive Officer