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 March 31, 1998

[ ]      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)


                   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
                                  -----



<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 May 12, 1998:

Common Stock, par value $.001 - 2,375,797

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
                                                                                  ----

Part I.                Financial Information*
------                 ---------------------
<S>                    <C>                                                        <C>                                    
    Item 1.            Financial Statements (Unaudited)

                       Balance Sheets - September 30, 1997,                          4
                       and March 31, 1998 (Unaudited)

                       Statements of Operations - for the six                        5
                       months ended March 31, 1998 and 1997
                       (Unaudited)

                       Statement of Stockholders' Equity -                           6
                       for the period from September 30, 1997
                       through March 31, 1998 (Unaudited)

                       Statements of Cash Flows - for the six                        7
                       months ended March 31, 1998 and 1997
                       (Unaudited)

                       Notes to Condensed Financial Statements                       8
                       (Unaudited)

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

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

    Item 1.            Legal Proceedings                                            12
    Item 2.            Changes in Securities                                        12
    Item 3.            Defaults Upon Senior Securities                              12
    Item 4.            Submission of Matters to a Vote                              12
                       of Security Holders
    Item 5.            Other Information                                            12
    Item 6.            Exhibits and Reports on Form 8-K                             13

</TABLE>

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

                                        3


<PAGE>
                         FOUNTAIN PHARMACEUTICALS, INC.
                                 BALANCE SHEETS

                          ASSETS                                                

                                             March 31,                          
                                               1998              September 30,  
                                           (Unaudited)                1997 
                                           ----------            ------------   

Current assets:                                                                 
    Cash and cash equivalents               $ 1,639,581           $ 2,371,071   
    Accounts receivable                         164,424               109,808   
    Inventories                                 135,241                95,678   
    Prepaid expenses                             29,466                31,360   
                                            -----------           -----------

    Total current assets                      1,968,712             2,607,917   
                                                                                

Furniture and equipment, less                                                   
                                                                                
    accumulated depreciation
    ($259,627, March 31, 1998;
    $254,699, September 30, 1997)                40,027                 9,360   
                                                                                
Patent costs, less accumulated                                                  
    amortization ($21,083, March 31,                                            
    1998; $17,753, September 30, 1997)          136,115               138,036   
                                                                                
                                                                                
Other assets                                      6,595                 6,595   
                                            -----------           -----------


Total assets                                $ 2,151,449           $ 2,761,908   
                                            ===========           ===========   


<TABLE>
<CAPTION>

               LIABILITIES AND STOCKHOLDERS' EQUITY                                               
                                                                                                  
                                                       March 31,                                   
                                                         1998             September 30,           
                                                      (Unaudited)              1997
                                                      ----------          ------------               
                                                                                                  
<S>                                                 <C>                   <C>   
Current liabilities:                                                                              
    Notes payable, bank                              $                      $                     
    Notes payable, officer                                                      40,000            
    Current portion of liabilities                                                                
     not subject to compromise                            17,667                29,469            
    Current portion of liabilities                                                                
     subject to compromise                                47,288                92,298            
    Accounts payable and accrued expenses                232,697               123,402            
                                                      ----------           -----------            
                                                                                                  
    Total current liabilities                            297,652               285,169            
                                                      ----------            ----------            
                                                                                                  
Liabilities not subject to compromise, non-current                               2,584            
                                                                            ----------            
                                                                                                  
                                                                                                  
Stockholders' equity:                                                                             
    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; 2,375,802, March 31,                                                    
       1998; 47,516,049, September 30, 1997, issued                                               
       and outstanding (1 vote per share)                  2,376                47,516            
    Class B common stock; par value $.001,                                                        
       5,000,000 shares authorized; 4,505, March                                                  
       31, 1998; 90,100, September 30, 1997, shares                                               
       issued and outstanding (5 votes per share)              5                    90            
    Additional paid-in capital                        17,056,449            17,011,224            
    Accumulated deficit                              (15,207,009)          (14,586,675)           
                                                      ----------            ----------            
     Subtotal stockholders' equity                     1,853,821             2,474,155            
    Less:  Treasury Stock                          (          24)                                 
                                                    ------------           -----------                            
     Total stockholders' equity                        1,853,797             2,474,155            
                                                      ----------           -----------             
                                                                                                  
Total liabilities and stockholders' equity           $ 2,151,449           $ 2,761,908                                              
                                                     ===========           ===========  
</TABLE>

                       See notes to financial statements.
                                                                                
                                        4
                                                                                
                                                                                
<PAGE>
<TABLE>
<CAPTION>

                         FOUNTAIN PHARMACEUTICALS, INC.
                            STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

                                                     Three Months Ended                 Six Months Ended
                                                          March 31,                         March 31,
                                                 --------------------------        ----------------------------
                                                     1998             1997             1998             1997
                                                 ------------     ---------        ------------     -----------
<S>                                              <C>              <C>              <C>              <C>        
Revenue                                          $   290,671      $   212,438      $   328,533      $   322,358

Cost of sales                                        155,662          110,596          169,559          149,682
                                                 -----------      -----------      -----------      -----------

Gross profit                                         135,009          101,842          158,974          172,676
                                                 -----------      -----------      -----------      -----------

Operating expenses:
    Research and development                          83,209           50,633          161,863          112,036
    General and administrative                       123,986           86,317          252,498          174,258
    Selling                                          288,221           70,857          404,025          129,440
    Depreciation and amortization                      4,991            8,053            9,795           16,473
                                                 -----------      -----------      -----------      -----------

Total operating expenses                             500,407          215,860          828,181          432,207
                                                 -----------      -----------      -----------      -----------

Loss from operations                             (   365,398)     (   114,018)     (   669,207)     (   259,531)

Other income (expenses):
    Interest income                                   24,997                            56,426
    Interest expense                             (     2,399)      (    6,393)     (     6,405)     (    12,099)
    Other income (expense)                       (     1,152)      (      808)     (     1,148)     (     3,854)
                                                  ----------        ---------       ----------       ----------

Total other income (expenses)                         21,446       (    7,201)          48,873      (    15,953)
                                                  ----------        ---------       ----------       ----------

Net loss                                         ($  343,952)     ($  121,219)     ($  620,334)     ($  275,484)
                                                  ==========       ==========       ==========       ==========



Earnings per share:

    Net loss per share                                ($ .14)          ($ .05)          ($ .26)          ($ .12)
                                                       =====            =====            =====            =====

    Weighted average number of shares
      outstanding:                                 2,380,307        2,380,307        2,380,307        2,380,307
                                                  ==========       ==========       ==========       ==========
</TABLE>

                                        See notes to financial statements.

                                                         5


<PAGE>
                         FOUNTAIN PHARMACEUTICALS, INC.
                       STATEMENTS OF STOCKHOLDERS' EQUITY
          FOR THE PERIOD FROM SEPTEMBER 30, 1997 THROUGH MARCH 31, 1998
                                   (UNAUDITED)
<TABLE>
<CAPTION>


                                                                 Class B
                                    Common Stock             Common Stock              Preferred Stock          Additional      
                                Shares       Amount      Shares        Amount      Shares       Amount       Paid-in Capital    
                                ------       ------      ------        ------      ------       ------       ---------------    

<S>                            <C>             <C>           <C>       <C>        <C>            <C>          <C>               
Balances
    October 1, 1997           47,516,049      $47,516     90,100         $90       2,000,000      $2,000         $17,011,224    

Reverse Stock Split          (45,140,247)    ( 45,140)   (85,595)       ( 85)                                         45,225

Repurchase of
    Factional Shares                                                                                                            

Net Loss for the Period                                                                                                         
                           -------------    ---------   --------       -----    ------------    --------      --------------    

Balances,
    March 31, 1998             2,375,802      $ 2,376      4,505         $ 5       2,000,000      $2,000         $17,056,449    
                           =============    =========   ========       =====    ============    ========      ==============    


</TABLE>
[RESTUBBED TABLE]

                                 Accumulated           Treasury                
                                   Deficit               Stock         Total   
                                 --------------        ---------       -----   
                                                                               
                                  
Balances                       
    October 1, 1997              ($14,586,675)                      $2,474,155  
                                                                                
Reverse Stock Split                                                             
                                                                                
Repurchase of                                                                   
    Factional Shares                                    ( 24)      (        24) 
                                                                                
Net Loss for the Period          (    620,334)                     (   620,334) 
                                 ------------          -----        ----------  
                                                                                
Balances,                                                                       
    March 31, 1998               ($15,207,009)          ($24)       $1,853,797  
                                 ============          =====        ==========  

                       See notes to financial statements.

                                        6


<PAGE>
                         FOUNTAIN PHARMACEUTICALS, INC.
                            STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                    Six Months Ended March 31
                                                                           ---------------------------------------
                                                                               1998                          1997
                                                                           ---------                     ---------

<S>                                                                      <C>                           <C>   
Cash flows from operating activities:
    Net loss                                                               ($620,334)                     ($275,484)
    Adjustments to reconcile net loss
    to net cash used in operating activities:
        Depreciation                                                           6,466                        14,795
        Amortization                                                           3,330                         1,678
        Increase (decrease) in cash due to changes in:
           Accounts receivable                                             (  54,616)                       79,797
           Inventories                                                     (  39,563)                        1,098
           Prepaid expenses and other assets                                   1,894                        14,688
           Accounts payable and accrued expenses                             109,295                        49,345
                                                                            --------                      --------

Net cash used in operating activities                                      ( 593,528)                    ( 114,083)
                                                                            --------                      --------

Cash flows from investing activities:
    Deferred patent costs incurred                                         (   1,408)
    Acquisition of furniture and equipment                                 (  37,134)
                                                                            --------                      --------

Net cash used in investing activities                                      (  38,542)
                                                                            --------                      --------

Cash flows from financing activities:
    Proceeds from line of credit                                                                           157,000
    Repayment of line of credit                                                                          (  73,000)
    Officer loans and advances                                                                              20,000
    Repayment of liabilities under Reorganization Plan                     (  59,396)                    (  55,230)
    Repayment of officer loan                                              (  40,000)
    Repurchase of factional shares                                         (      24)
                                                                           ---------                      --------

Net cash used in financing activities                                      (  99,420)                       48,770
                                                                            --------                      --------

Decrease in cash and cash equivalents                                      ( 731,490)                    (  65,313)

Cash and cash equivalents at beginning of period                           2,371,071                        66,647
                                                                           ---------                      --------

Cash and cash equivalents at end of period                                $1,639,581                      $  1,334
                                                                          ==========                      ========
</TABLE>

                 Supplemental Schedule of Cash Flow Information

Interest paid was $6,405 and $12,099 for the six months ended March 31, 1998 and
1997, respectively.


                       See notes to financial statements.

                                        7


<PAGE>
                         FOUNTAIN PHARMACEUTICALS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                FOR THE SIX MONTHS ENDED MARCH 31, 1998 AND 1997
                                   (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, 1997.

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 six months ended March 31, 1998 and 1997
         are not necessarily indicative of the results for a full year.

3.       The Company completed a one for twenty reverse stock split on December
         11, 1997. At March 31, 1998, the Company had repurchased fractional
         shares associated with this reverse stock split. All weighted average
         shares and per share amounts have been calculated by giving retroactive
         effect of the reverse stock split to the earliest period presented.







                                       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.

         While in bankruptcy, the Company was able to successfully reorganize
its operations and finances. It achieved significant reductions in overhead and
other costs of operations, while recognizing an increase in revenues and a
redirection of its marketing efforts to focus upon its licensing arrangements.

         The Company's Plan of Reorganization, which was approved and became
effective on December 20, 1995 (the "Plan"), resulted in, among other things, a
substantial reduction in the Company's outstanding liabilities, an 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. On July 25, 1996, the U.S. Bankruptcy Court issued a
final decree stating the Court no longer has jurisdiction over matters in
connection with the bankruptcy.

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

         In order to facilitate the conversion of the Company's Preferred Stock
and to enhance the market price and liquidity of the Company's Common Stock, the
Company completed a one for twenty reverse stock split, specifically, a
conversion of every twenty issued and outstanding shares into one share of the
same class of Common Stock (the "Reverse Stock Split"), which became effective
on December 11, 1997.

         Results of Operations

         During the quarter ended March 31, 1998, the Company realized a net
loss of $343,952 on revenues of $290,671, compared to net loss of $121,219 on
revenues of $212,438 for the quarter ended March 31, 1997. The increase in
losses from the prior year's quarter ended March 31, 1997, is attributable
primarily to expenses relating to increased sales and marketing efforts. Due to
the increased sales and marketing efforts, revenues for the quarter ended March
31, 1998, increased by 36.8% from the quarter ended March 31, 1997.

         During the quarter, the Company incurred operating expenses of
$500,407, a 131.8% increase over operating expenses of $215,860 in the quarter
ended March 31, 1997. This increase

                                        9

<PAGE>

in expenses was primarily due to increased sales and marketing efforts relating
to existing and new markets, research and development relating to new projects
and formulations, and additional personnel.

         During the six months ended March 31, 1998, the Company incurred a net
loss of $620,334 on revenues of $328,533, compared to a net loss of $275,484 on
revenues of $322,358 for the comparable period ended March 31, 1997. Sales in
the first six months ended March 31, 1998, were negatively affected by delays in
purchases from European affiliates. Such delays are expected to be offset by
sales in the third and fourth quarters of fiscal 1998. Delayed European
purchases and substantial investment in marketing expenses in support of new
business launches which commenced in April 1998, in addition to increased
research and development expenses, largely on in vitro and in vivo testing of
compounds employing the Company's encapsulation system, resulted in an increase
in losses in comparison to the six months ended March 31, 1997.

         For the near term, the Company will continue to focus upon increasing
sales through new business launches, and expects to increase research and
development expenditures for the balance of Fiscal 1998.

         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.

         During the period from the quarter ended June 30, 1994 throughout the
bankruptcy proceedings, and to the current date, the Company's operations were
funded primarily through sales of products, royalties and proceeds of $2.5
million generated from a private placement offering.

         As of March 31, 1998, the Company had working capital of $1,671,060, a
decrease of $651,688 from the level of working capital of $2,322,748 as of
September 30, 1997, and a $1,750,169 increase from the Company's working capital
deficit of $79,109 as of March 31, 1997. The increase in working capital from
March 31, 1997, is primarily attributable to the sale of $2.5 million of
Preferred Stock in July 1997. The decrease in working capital from September 30,
1997, reflects increased sales and marketing efforts relating to existing and
new markets, research and development relating to new projects and formulations,
and additional personnel. During the six months ended March 31, 1998, the
Company's other principal sources of working capital were derived from revenues
and a $100,000 line of credit with First Union National Bank of Florida. As of
March 31, 1998, the Company had no outstanding balance under its line of credit.

         During July 1997, the Company completed a private placement of
2,000,000 shares of Series A Convertible Preferred Stock to Fountain Holdings,
LLC. As a result of such private placement, the Company obtained additional
working capital of $2.5 million, which management believes has enhanced the
expansion of the Company's sales and marketing program, as well as

                                       10

<PAGE>

further the Company's research and development efforts. The Preferred Stock is
convertible at the election of the holder, into shares of the Company's Common
Stock, which currently represents approximately one-third of the Company's
outstanding stock on a post-conversion basis. Prior to conversion, the holders
of the Preferred Stock have the right to elect a majority of the Company's Board
of Directors and to vote as a class on all matters that require a vote of
stockholders.

         In order to facilitate the conversion of the Company's Preferred Stock
and to enhance the market price and liquidity of the Company's Common Stock, the
Company completed the reverse stock split, which became effective on December
11, 1997. The Company has 2,380,302 shares of Common Stock (including Class B)
outstanding as of May 12, 1998.

         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.

                                       11

<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

         a. General
            -------

         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 as a result of various factors. 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; and (iii) 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 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.


                                       12

<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

                  None.

                                       13

<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:  March 15, 1998                      /s/John C. Walsh
                                            ----------------
                                            JOHN C. WALSH,
                                            Chief Executive Officer