<PAGE>

                      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 June 30, 2001
                 --------------------------------------------

[_]  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 Identification No.)
incorporation or organization)


                    2040 Calumet St., Clearwater, FL 33765
                    --------------------------------------
               (Current Address of Principal Executive Offices)



                 7279 Bryan Dairy Road, Largo, Florida  33777
                 --------------------------------------------
                (Former Address of Principal Executive Offices)


                                (727) 446-6882
                                --------------
             (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 _____
                                   -----
<PAGE>

                      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 _____
                                 -----


                     APPLICABLE ONLY TO CORPORATE ISSUERS:

     State the number of shares outstanding of each of the Registrant's classes
of Common Stock, as of September 11, 2001:

Common Stock, par value           $.001 - 2,375,796

Class B Common Stock, par value   $.001 - 4,505


                Transitional Small Business Disclosure Format:

                              Yes _____    No   X
                                              -----

                                       2
<PAGE>

                        FOUNTAIN PHARMACEUTICALS, INC.

                                     INDEX

<TABLE>
<CAPTION>
                                                                       Page
                                                                       ----
<S>                                                                    <C>
Part I.      Financial Information*
-------      ---------------------

  Item 1.    Condensed Financial Statements (Unaudited)

             Balance Sheets - September 30, 2000
             and June 30, 2001 (Unaudited)                                4

             Statements of Operations - for the three and nine
             months ended June 30, 2001 and 2000
             (Unaudited)                                                  5

             Statements of Cash Flows - for the nine
             months ended June  30, 2001 and 2000
             (Unaudited)                                                  6

             Notes to Condensed Financial Statements
             (Unaudited)                                                  7

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

  Item 3.    Proforma Financial Information                              12

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

  Item 1.    Legal Proceedings                                           12
  Item 2.    Changes in Securities                                       12
  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
</TABLE>


* 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

                                                          June 30, 2001       September 30,
                                                           (Unaudited)             2000
                                                          -------------       -------------
<S>                                                       <C>                 <C>
Current assets:
  Cash and cash equivalents                               $     52,859        $     88,687
  Accounts receivable, net of allowance
   for uncollectible accounts
   ($1,700, June 30, 2001;
   $10,600, September 30, 2000)                                 88,815              50,409
  Inventories                                                  154,841             233,169
  Prepaid expenses                                               2,727               6,184
                                                          ------------        ------------

  Total current assets                                         299,242             378,449

Furniture and equipment, less
  accumulated depreciation
  ($267,161, June 30, 2001;
  $342,581, September 30, 2000)                                 66,271             101,819

Patent costs, less accumulated
  amortization ($209,347, June 30,
  2001; $45,408, September 30, 2000)                                 -             157,884

Other assets                                                     6,783              10,046
                                                          ------------        ------------

Total assets                                              $    372,296        $    648,198
                                                          ============        ============

        LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
  Accounts payable and accrued expenses                   $    189,605        $    219,114
  Accrued interest                                             535,713             303,887
  Current maturities of long-term debt                               -              17,810
  Notes Payable, related party                               2,716,500           2,476,000
                                                          ------------        ------------

       Total current liabilities                             3,441,818           3,016,811

Long-term debt, less current maturities                              -              13,799
                                                          ------------        ------------

       Total liabilities                                     3,441,818           3,030,610

Stockholders' deficit
  Preferred stock, par value $.001,
    2,000,000 shares authorized, issued
    and outstanding (1.2 votes per share)                        2,000               2,000
  Common stock, par value $.001,
    50,000,000 shares authorized;
    2,375,796 shares issued and
    outstanding (1 vote per share)                               2,376               2,376
  Class B common stock; par value
    $.001, 5,000,000 shares authorized;
    4,505 shares issued and outstanding
    (5 votes per share)                                              5                   5
  Additional paid-in capital                                17,094,106          17,086,682
  Accumulated deficit                                      (20,168,009)        (19,473,475)
                                                          ------------        ------------
       Total stockholders' deficit                          (3,069,522)         (2,382,412)
                                                          ------------        ------------
Total liabilities and stockholders' deficit               $    372,296        $    648,198
                                                          ============        ============
</TABLE>


                 See notes to condensed financial statements.

                                       4
<PAGE>

                        FOUNTAIN PHARMACEUTICALS, INC.
                           STATEMENTS OF OPERATIONS
                                  (UNAUDITED)
<TABLE>
<CAPTION>
                                               Three Months Ended        Nine Months Ended
                                                    June 30,                June 30,
                                               ------------------     ----------------------
                                                 2001      2000         2001          2000
                                               -------   --------     --------     ---------
<S>                                         <C>         <C>          <C>         <C>
Revenue                                     $  266,629  $  361,447   $  648,890  $   928,741

Cost of sales                                   67,621      45,346      119,176      128,100
                                            ----------  ----------   ----------  -----------

Gross profit                                   199,008     316,101      529,714      800,641
                                            ----------  ----------   ----------  -----------

Operating expenses:
 Research and development                       26,121      72,904      156,129      273,212
 General and administrative                     56,836     124,685      248,722      403,570
 Selling                                        97,062     244,029      396,419      946,780
 Depreciation and amortization                 170,147      13,898      198,949       41,645
                                            ----------  ----------   ----------  -----------

Total operating expenses                       350,166     455,516    1,000,219    1,665,207
                                            ----------  ----------   ----------  -----------

Loss from operations                        (  151,158) (  139,415)  (  470,505) (   864,566)

Other income (expenses):
 Interest income                                   134       1,409        6,899        2,840
 Interest expense                           (   72,809) (   69,314)  (  233,615) (   171,502)
 Loss on sale of furniture and equipment          (539)              (      289)
 Other income (expense)                     (      767) (    9,298)       2,976  (    13,635)
                                            ----------  ----------   ----------  -----------

Total other expenses                        (   73,981) (   77,203)  (  224,029) (   182,297)
                                            ----------  ----------   ----------  -----------

Net loss                                    ( $225,139) ( $216,618)  ( $694,534) ($1,046,863)
                                            ==========  ==========   ==========  ===========

Earnings per share data:

 Net loss per share                         ($     .09) ($     .09)  ($     .29)  ($     .44)
                                            ==========  ==========   ==========   ==========

 Weighted average number of shares
  outstanding:                               2,380,301   2,380,301    2,380,301    2,380,301
                                            ==========  ==========   ==========   ==========
</TABLE>

                 See notes to condensed financial statements.

                                       5
<PAGE>

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

<TABLE>
<CAPTION>
                                                                 Nine Months Ended June 30,
                                                               ------------------------------
                                                                  2001                2000
                                                               ---------          -----------
<S>                                                            <C>                <C>
Cash flows from operating activities:
  Net loss                                                     $(694,534)         $(1,046,863)
  Adjustments to reconcile net loss to net cash used in
    operating activities:
    Expenses funded by issuance of options and warrants            7,424                    -
    Loss on sale of furniture and equipment                          289                    -
    Depreciation                                                  35,009               34,584
    Amortization                                                 163,939                7,061
    Increase (decrease) in cash due to changes in:
      Accounts receivable                                        (38,406)              58,567
      Inventories                                                 78,328               52,841
      Prepaid expenses                                             3,457               56,653
      Other assets                                                 3,263                 (400)
      Accounts payable and accrued expenses                      202,317               97,303
                                                               ---------          -----------

Net cash used in operating activities                           (238,914)            (740,254)
                                                               ---------          -----------

Cash flows from investing activities:
  Deferred patent costs incurred                                  (6,055)              (4,245)
  Acquisition of furniture and equipment                               -              (22,058)
  Proceeds from sale of furniture and equipment                      250                    -
                                                               ---------          -----------

Net cash used in investing activities                             (5,805)             (26,303)
                                                               ---------          -----------

Cash flows from financing activities:
  Director and officer loans                                     240,500              831,000
  Payments on note payable, bank                                 (31,609)             (11,884)
  Repayment of director and officer loans                              -              (20,000)
                                                               ---------          -----------

Net cash provided by financing activities                        208,891              799,116
                                                               ---------          -----------

Increase (decrease) in cash and cash equivalents                 (35,828)              32,559

Cash and cash equivalents at beginning of period                  88,687              176,998
                                                               ---------          -----------

Cash and cash equivalents at end of period                     $  52,859          $   209,557
                                                               =========          ===========
</TABLE>

                Supplemental Schedule of Cash Flow Information
                ----------------------------------------------

Interest paid was $1,789 and $3,870 for the nine months ended June 30, 2001 and
2000, respectively.

                                       6
<PAGE>

                        FOUNTAIN PHARMACEUTICALS, INC.
                    NOTES TO CONDENSED FINANCIAL STATEMENTS
          FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2001 AND 2000
                                  (UNAUDITED)

1. The interim financial statements of Fountain Pharmaceuticals, Inc. (the
   "Company") which are included herein are unaudited and have been prepared in
   accordance with generally accepted accounting principles for interim
   financial information and with the instructions to Form 10-QSB. In the
   opinion of management, these interim financial statements include all the
   necessary adjustments to fairly present the results of the interim periods,
   and all such adjustments are of a normal recurring nature. The interim
   financial statements should be read in conjunction with the audited financial
   statements for the two years ended September 30, 2000 included in the
   Company's Annual Report on Form 10-KSB for the year then ended. The report of
   the Company's independent auditors for the year ended September 30, 2000
   contains an explanatory paragraph as to the substantial doubt of the
   Company's ability to continue as a going concern. No adjustments have been
   made to the accompanying financial statements to give effect to this
   uncertainty. Furthermore, subsequent to June 30, 2001 the Company commenced
   liquidation. (See Note 2). The assets at June 30 are carried at cost. Amounts
   anticipated to be realized from the liquidation of the Company's assets are
   expected to approximate their book value. The Company has not been able to
   definitively determine the amount expected to be realized from the sale of
   its public company shell. The interim results reflected in the accompanying
   financial statements are not indicative of the results of operations for a
   full fiscal year.

   The basic net loss per common share is computed by dividing the net loss by
   the weighted average number of common shares outstanding.

   Diluted net loss per common share is computed by dividing the net loss,
   adjusted on an as if converted basis, by the weighted average number of
   common shares outstanding plus potential dilutive securities (Common Stock
   options and Warrants). For the three and nine months ended June 30, 2001 and
   2000 potential dilutive securities had an anti-dilutive effect and were not
   included in the calculation of diluted net loss per common share.

2. Discontinuance of all operations:

       The Company has incurred recurring losses and has a $3,142,576 working
   capital deficit at June 30, 2001. During the past three years these losses
   have been principally funded through sales of preferred stock ($2,500,000) to
   an entity controlled by the Company's current Chairman of the Board (Mr.
   Joseph S. Schuchert, Jr.) and advances of $2,716,500 from Mr. Schuchert which
   included a secured line of credit of $1,500,000 ("Secured Credit Agreement").
   On June 21, 2001, Mr. Schuchert notified the Company that it was in default
   under the Secured Credit Agreement dated December 31, 1998. Mr. Schuchert
   requested immediate payment and in the event such payments were not
   forthcoming on or before July 2, 2001, notice was given that Mr. Schuchert
   would take action to take possession of the Company's assets and other
   collateral as defined in the Secured Credit Agreement.

                                       7
<PAGE>

     The Company's Board of Directors voted on June 28, 2001 to comply with the
agreement and transfer the assets of the Company at the close of business on
July 6, 2001 to Mr. Schuchert, since the Company was not in a financial position
to make the required payment. As of July 6, 2001, the Company had $1,870,997 of
principal and interest due under this facility. (See Pro-Forma Information
included elsewhere in Quarterly Report on Form 10QSB).

     Since the Company no longer has assets subsequent to June 30, 2001, except
the Company's public shell, it no longer has the ability to generate revenue to
offset the Company's unsecured liabilities; therefore, the Company is not in the
position to continue as a going concern. The Company's Board of Directors
accordingly suspended operations and is in liquidation. The Company's Board of
Director's retained only one employee, the Interim Chief Financial
Officer/Director of Finance and Administration, who will assist in the transfer
of assets to Mr. Schuchert and close down the operations of the Company. The
Company's Board of Directors is currently pursuing candidates with interests in
purchasing the Company's public shell, proceeds of which will be used to pay the
unsecured liabilities, to the extent possible, and other related Company
expenses. However, there can be no assurance that any such transactions will be
successfully completed by the Company.

                                       8
<PAGE>

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

     Background

     The Company was organized during 1989 to develop and commercialize certain
proprietary compound encapsulation technologies.  Following several years of
continued developmental efforts, the Company was able to secure patents on
several aspects of its technologies in the United States and Europe, introduce
branded products in certain markets and develop strategic associations with
pharmaceutical companies.

     From inception through 1994, the Company remained in the development stage
while experiencing substantial losses.  Its principal source of capital was
derived from a series of private financing transactions and an initial public
offering in 1990.  Sales revenues during this period were insufficient to offset
the Company's operating costs and liabilities.  Consequently, the Company filed
for protection under Chapter 11 of the United States Bankruptcy Code in the
United States Bankruptcy Court for the Middle District of Florida, Tampa
Division on November 30, 1994.  Upon successfully reorganizing its operations
and finances, the Company emerged from bankruptcy in July 1996.

     In July 1997, the Company completed a private placement of 2,000,000 newly-
designated and issued shares of Series A Convertible Preferred Stock (the
"Preferred Stock") to Fountain Holdings, LLC ("Holdings"), a Wyoming limited
liability company, controlled by Joseph S. Schuchert, Jr.  As a result of this
private placement (the "Private Placement"), the Company obtained additional
working capital of $2.5 million, which it utilized to enhance the expansion of
the Company's sales and marketing program, as well as to further the Company's
research and development efforts.

     As a result of significant increases in marketing costs associated with the
expansion of existing product lines and the introduction of new products during
fiscal year ended September 30, 1998, which were not offset by sales revenues
during the period, the Company substantially utilized its working capital
resources.  In order to provide working capital, the Company also entered into a
secured credit arrangement ("Secured Credit Agreement") with Mr. Schuchert as of
December 31, 1998.  The credit agreement provides for a two-year line of credit
of up to $1,500,000 subject to the Company satisfying certain agreed upon
quarterly operating budget guidelines.

     As a result of additional costs associated with the development and
marketing of two new product lines during fiscal year ended September 30, 1999,
the Company fully utilized the $1,500,000 line of credit.  During fiscal year
ended September 30, 2000 and subsequently, Mr. Schuchert made additional
unsecured advances to the Company, the terms of which have not been finalized.
As of July 6 the Company had $1,870,977 of principal and interest due under the
secured facility and as of August 27, 2001, the outstanding principal balance of
the unsecured loan was approximately $1,233,000.

     On June 21, 2001, Mr. Schuchert notified the Company that it was in default
of the funds advanced by him under the Secured Credit Agreement dated December
31, 1998. Mr. Schuchert requested immediate payment and in the event such
payments were not forthcoming on or before July 2, 2001, notice was given that
Mr. Schuchert would take action to take possession of the Company's assets and
other collateral as defined in the Secured Credit Agreement.

                                       9
<PAGE>

     The Company's Board of Directors voted on June 28, 2001 to comply with the
agreement and transfer the assets of the Company at the close of business on
July 6, 2001 to Mr. Schuchert, since the Company was not in a financial position
to make the required payment.  As a result, the secured debt was satisfied
through this transfer of assets, although the unsecured facility remains
outstanding.

     Since the Company no longer has assets subsequent to June 30, 2001, except
the Company's public shell, it no longer has the ability to generate revenue to
offset the Company's unsecured liabilities and is not in the position to
continue as a going concern.  The Company's Board of Directors accordingly
suspended operations and terminated the remaining employees including the
interim Chief Executive Officer/Vice President of Operations effective July 6,
2001. (See Part II, "Item 5, Other Information")  The Company's Board of
Director's retained only one employee, the Interim Chief Financial
Officer/Director of Finance and Administration, who will assist in the transfer
of assets to Mr. Schuchert and close down the operations of the Company.  The
Company's Board of Directors are currently pursuing candidates with interests in
purchasing the Company's public shell, proceeds of which will be used to pay the
unsecured liabilities, to the extent possible, and other related Company
expenses.  However, there can be no assurance that any such transactions will be
successfully completed by the Company. See "Liquidity and Capital Resources."

     Results of Operations

     During the quarter ended June 30, 2001, the Company realized a net loss of
$225,139 on revenues of $266,629 compared to net loss of $216,618 on revenues of
$361,447 for the quarter ended June 30, 2000.  The increase in loses from the
prior year's quarter ended June 30, 2000, is attributable primarily to the
additional reserve of obsolete inventory and the write-off of deferred patent
costs, which were considered to be impaired.  The decrease in revenues of 26.2%
from the prior year's quarter ended June 30, 2000 was a direct result of the
Company's European licensee in Switzerland transitioning its sunscreen
production to a non-Lyphazome technology process.  See "Liquidity and Capital
Resources."

     During the quarter ended June 30, 2001, the Company incurred operating
expenses of $350,166, a 23.1% decrease over operating expenses of $455,516 in
the quarter ended June 30, 2000.  This decrease in expenses was primarily due to
reduction in personnel, travel and entertainment expenses, sales and marketing
expenses relating to the Company's moisturizer and sunscreen brand, Lyphazome(R)
and the new skin care brand, Celazome(R).

     During the nine months ended June 30, 2001, the Company incurred a net loss
of $724,534 on revenues of $648,890, compared to a net loss of $1,046,863 on
revenues of $928,741 for the comparable period ended June 30, 2000.  This
decrease in net losses from the prior year's nine months ended June 30, 2000, is
attributable primarily to a 39.9% overall reduction in operating expenses.  The
decrease in revenues from the prior year's nine months ended June 30, 2000, was
a result, primarily, of the Company's European licensee in Switzerland
transitioning its sunscreen production to a non-Lyphazome technology process.

                                       10
<PAGE>

     During the quarter ended June 30, 2001, the Company incurred interest
expense of $72,809, a 5% increase over interest expense of $69,314 for the
quarter ended June 30, 2000.  Interest expense for the nine months ended June
30, 2001 was $233,615, representing a 36.2% increase over interest expense of
$171,502 for the nine months ended June 30, 2000.  This increase in interest
expense is associated with the secured line of credit arrangement and the
unsecured loan with Mr. Joseph S. Schuchert, Jr.  See "Liquidity and Capital
Resources."

     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 MarketSM during May 1994 and the securities
have since traded on the less liquid market of the OTC Bulletin Board.

     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, as well as the sale of 25,000,000 shares
(pre-split) of the Company's Common Stock to its then Chief Executive Officer at
a purchase price of $250,000 in December 1995.  Since emerging from bankruptcy,
the Company's primary sources of working capital have been sales revenues, short
term advances from the Company's then Chief Executive Officer and proceeds of
$2.5 million generated from a private placement offering in July 1997.

     The Company had substantially utilized its existing working capital
resources by December 1998. In order to provide working capital, the Company
entered into a secured credit arrangement with Mr. Schuchert as of December 31,
1998.  The Credit Agreement (the "Credit Agreement") provided for a secured line
of credit of up to $1,500,000, the principal and unpaid interest of which was
due on the earlier of December 31, 2000 or 180 days from written demand of Mr.
Schuchert as lender, or upon an event of default under the agreement. (See Part
II, "Item 3, Defaults upon Senior Securities.")  The line of credit bore
interest at an adjustable monthly rate equal to the greater of (i) the prime
rate quoted in the Wall Street Journal, plus 1 1/2% or (ii) 9%, which was
                   -------------------
payable monthly or may be accrued.  The facility was secured by all of the
assets of the Company (subject to any existing liens).  The facility was subject
to the Company satisfying certain agreed upon quarterly operating budget
guidelines for which the Company was in default.  The Company was not in a
financial position to make the payment of $1,782,184 in principal and interest
due on December 31, 2000.  Subsequent to December 31, 2000, the line of credit
continued to accrue interest, the Company remained in default under this
agreement; however, Mr. Schuchert did not exercise his option to call the loan
until June 21, 2001.  As of July 6, 2001, the Company had $1,500,000 outstanding
under this facility plus accrued interest of $370,997.

     Since October 1999, the Company has substantially relied upon advances by
Mr. Schuchert, a Director of the Company, to provide working capital to fund
operations.  Mr. Schuchert made the advances as an additional unsecured loan,
the terms of which were never finalized. As of August 27, 2001, the outstanding
principal balance of this unsecured loan was approximately $1,233,000 plus
estimated accrued interest of $178,306 as of July 31, 2001.  Subsequent to the
aforementioned transfer of assets in lieu of foreclosure, the Company's cash
position was zero and had no assets.  The Company has suspended operations and
terminated all, but one, of its employees.  The

                                       11
<PAGE>

Company is currently pursuing candidates with interests in purchasing the
Company's public shell, proceeds of which will be used to pay the unsecured
liabilities, to the extent possible, and other related Company expenses.
However, there can be no assurance that any such transactions will be
successfully completed by the Company. Mr. Schuchert has conditionally indicated
his intention to fund the Company's critical cash needs for the near term to
cover payroll, SEC filing fees and related expenses, legal and accounting fees,
federal, state and local tax agencies, but is under no obligation to do so.

     Effects of Inflation

     The Company does not expect inflation to materially effect its results of
operations.

Item 3.  PROFORMA FINANCIAL INFORMATION

     The July 2001 disposition of Fountain Pharmaceutical, Inc.'s sole business
segment resulted from the conveyance of substantially all of the Company's
assets, including its technology and patent rights, previously determined to be
impaired and written off, to a related party that had made loans to the Company,
which were in default. The loans were secured by all of the Company's assets and
the assets were conveyed to the lender in lieu of foreclosure. Subsequent to
this July 6, 2001 transaction, the Company had no assets, current liabilities of
approximately $1,570,000 and a stockholders' deficit of approximately
$1,570,000. All operations have been suspended and management estimates that the
cost to liquidate the remaining business of the Company will be $30,000.

Part II.  Other Information

Item 1.   Legal Proceedings
          -----------------

     On February 21, 2001, the Company was served a summons by the Plaintiff,
Chantal Hevia & Company, Inc., alleging non-payment for research and marketing
services rendered to the Company during the fiscal year ending September 30,
2000.  The Company is in agreement that payment is due, but is not in agreement
with the amount of $16,512.62 that is due with interest since April 1, 2000 as
stated in the summons by the Plaintiff, Chantal Hevia & Company, Inc.  A motion
to abate discovery or, alternatively, to extend time was filed by the Company's
attorneys, Whittemore, Ferguson P.A. on August 16, 2001.  A hearing for the
Company's motion to compel arbitration and motion to dismiss is scheduled for
September 25, 2001.

Item 2.   Changes in Securities
          ---------------------

     None

                                       12
<PAGE>

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

     As described under "Management's Discussion and Analysis of Financial
Condition and Results of Operations/Liquidity and Capital Resources" the
Company's line of credit with Mr. Schuchert matured on December 31, 2000. The
Company was not in a financial position to make the payment of $1,782,184 in
principal and interest due on that date. The line of credit is secured by a lien
on substantially all the assets of the Company. On July 6, 2001, Mr. Schuchert
took action to enforce his rights under the agreement which evidence the line of
credit.  Effective July 7, 2001, all assets of the Company were transferred to
Mr. Schuchert.

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

     None

Item 5.   Other Information
          -----------------

     (a)  Change in Officers

     Mr. Christopher J. Whitaker, Interim Chief Executive Officer/Vice President
of Operations was terminated on July 6, 2001 by the Company's Board of Directors
due to the Company suspending operations pursuant to the transfer of assets to
Mr. Joseph S. Schuchert, Jr. See "Management's Discussion And Analysis Or Plan
Of Operation."

     (b)  General

     PRIVATE SECURITIES LITIGATION REFORM ACT SAFE HARBOR STATEMENT
     --------------------------------------------------------------

     When used in this Quarterly Report on Form 10-QSB, the words "may", "will",
"expect", "anticipate", "continue", "estimate", "intend", and similar
expressions are intended to identify forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934 regarding events, conditions and financial
trends which may affect the Company's future plans of operations, business
strategy, operating results and financial position.  Such statements are not
guarantees of future performance and are subject to risks and uncertainties and
actual results may differ from those included within the forward-looking
statements (which differences may be material) as a result of various factors.
Such factors include, among others:  (i) the Company's ability to obtain
additional sources of capital to fund continuing operations in the immediate
term; (ii) the company's ability to secure a buyer for the public shell; and
(iii) the Company's ability to pay its' unsecured liabilities.  Additional
factors are described in the Company's other public reports and filings with the
Securities and Exchange Commission.  Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
made.  The Company undertakes no obligation to publicly release the result 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.

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<PAGE>

Item 6.   Exhibits and Reports on Form 8-K
          --------------------------------

     (a)  Exhibits:

          None

     (b)  Reports on Form 8-K:

          Current Report on Form 8-K dated of July 6, 2001 reporting the
transfer of assets to Mr. Joseph S. Schuchert, Jr. and suspending Company
operations.

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<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:  September 13, 2001              /s/ Francis J. Werner
                                        ---------------------
                                        FRANCIS J. WERNER
                                        Interim Chief Financial Officer and
                                        Director of Finance and Administration

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