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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                           ---------------------------

                                    FORM 10-Q

                   QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                         For Quarter Ended June 30, 1997
                         Commission File Number 1-12584

                          ----------------------------


                         SHEFFIELD PHARMACEUTICALS, INC.
                    (EXACT NAME OF REGISTRANT IN ITS CHARTER)


        Delaware                                      13-3808303
(State of Incorporation)                   (IRS Employer Identification No.)


30 Rockefeller Plaza, Suite 4515
New York, New York                                            10112
(Address of Principal Executive Offices)                    (Zip Code)


       Registrant's telephone number, including area code: (212) 957-6600





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

                                 Yes X       No _____

            The number of shares  outstanding  of the  issuer's  Common Stock is
11,988,274 shares of Common Stock as of June 30, 1997.


--------------------------------------------------------------------------------
<PAGE>
                SHEFFIELD PHARMACEUTICALS, INC. AND SUBSIDIARIES
                        (a Development stage enterprise)

                                    INDEX

                                                                           Page
PART I.                 Financial Information

             ITEM 1.    Financial Statements.

                        Consolidated  Balance  Sheets -                       1
                        June 30, 1997 and  December 31,
                        1996.

                        Consolidated    Statements   of                        2
                        Operations  for the  three  and
                        six months  ended June 30, 1997
                        and  1996  and for  the  period
                        from     October    17,    1986
                        (inception) to June 30, 1997.

                        Consolidated Statements of Cash                        3
                        Flows  for  the  three  and six
                        months  ended June 30, 1997 and
                        1996  and for the  period  from
                        October 17, 1986 (inception) to
                        June 30, 1997.

                        Notes to Consolidated Financial                        4
                        Statements.

             ITEM 2.    Management's   Discussion   and                        6
                        Analysis of Financial Condition
                        and Results of Operations.

PART II.                Other Information.

             ITEM 2.    Changes in Securities.                                10

             ITEM 4.    Submission of Matters to a Vote                       11
                        of Security-Holders.

             ITEM 6.    Exhibits and Reports on Form 8-K                      12

SIGNATURES                                                                    13
<PAGE>
                SHEFFIELD PHARMACEUTICALS, INC. AND SUBSIDIARIES
                        (a development stage enterprise)
                           Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                                                    June 30,            December 31,
                                                                                                     1997                  1996
                                                                                                   ------------        -------------
                                                                                                    (Unaudited)

                                  ASSETS
<S>                                                                                                <C>                 <C>         
Current assets:
          Cash and cash equivalents                                                                $    539,287        $  1,979,871
          Marketable securities                                                                         174,407             460,768
          Prepaid expenses and other current assets                                                     104,420              43,975
                                                                                                   ------------        ------------
               Total current assets                                                                     818,114           2,484,614
                                                                                                   ------------        ------------

Property and equipment:
          Laboratory equipment                                                                          185,852             185,852
          Office equipment                                                                               82,243              89,019
          Leasehold improvements                                                                         61,390              61,390
                                                                                                   ------------        ------------
                                                                                                        329,485             336,261
          Less accumulated depreciation and amortization                                                189,162             162,007
                                                                                                   ------------        ------------
               Net property and equipment                                                               140,323             174,254
                                                                                                   ------------        ------------

Segregated cash                                                                                          75,000              75,000
Other assets                                                                                             39,416              40,016
                                                                                                   ------------        ------------
               Total assets                                                                        $  1,072,853        $  2,773,884
                                                                                                   ============        ============

      LIABILITIES AND STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)


Current liabilities:
          Accounts payable and accrued liabilities                                                 $    504,870        $    446,965
          Sponsored research payable                                                                    331,634             580,157
          Stock dividends payable                                                                        83,301                --
          Capital lease obligation-current portion                                                       25,694              23,719
                                                                                                   ------------        ------------
               Total current liabilities                                                                945,499           1,050,841

Capital lease obligation - non-current portion                                                           11,790              27,206

Cumulative convertible redeemable preferred stock, $.01 par value.  Authorized,
          3,000,000 shares; issued and outstanding, 35,700 and 0 shares, at
          June 30, 1997 and December 31, 1996, respectively                                                 357                --
Additional paid-in capital associated with cumulative convertible
          redeemable preferred stock                                                                  3,211,779                --

Stockholders' equity (net capital deficiency):
          Common  stock, $.01 par value.  Authorized,  50,000,000 and 30,000,000
                  shares at June 30, 1997 and December  31, 1996,  respectively;
                  issued and outstanding, 11,988,274 and 11,388,274
                  shares at June 30, 1997 and December 31, 1996, respectively                           119,883             113,883
          Notes receivable in connection with sale of stock                                            (110,000)           (110,000)
          Additional paid-in capital                                                                 29,955,576          28,319,838
          Unrealized loss on marketable securities                                                     (300,593)            (39,232)
          Deficit accumulated during development stage                                              (32,761,438)        (26,588,652)
                                                                                                   ------------        ------------
                                                                                                     (3,096,572)          1,695,837
                                                                                                   ------------        ------------
               Total liabilities and stockholders' equity (net capital deficiency)                 $  1,072,853        $  2,773,884
                                                                                                   ============        ============
</TABLE>
                                        1
<PAGE>
                SHEFFIELD PHARMACEUTICALS, INC. AND SUBSIDIARIES
                        (a development stage enterprise)
                           CONSOLIDATED STATEMENTS OF
               OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE
                      30, 1997 AND 1996 AND FOR THE PERIOD
               FROM OCTOBER 17, 1986 (INCEPTION) TO JUNE 30, 1997
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                                                 October 17, 1986
                                                      Three months ended                Six months ended           (inception) to
                                                           June 30,                         June 30,                 June 30,
                                                  ---------------------------     ----------------------------    -------------
                                                      1997            1996            1997            1996            1997
                                                  ------------    ------------    ------------    ------------    ------------

<S>                                               <C>             <C>             <C>             <C>             <C>         
Revenues:
     Sub-license revenue                          $       --      $       --      $       --      $       --      $    510,000
     Interest income                                    21,747          52,724          39,972          69,239         436,885
                                                  ------------    ------------    ------------    ------------    ------------
     Total revenue
                                                        21,747          52,724          39,972          69,239         946,885
Expenses:
     Acquisition of R & D in-process
          technology                                 1,650,000            --         1,650,000            --         1,650,000
     Research and development                          786,165         924,439       2,724,202       2,164,230      18,247,399
     General and administrative                      1,004,892         783,675       1,750,489       1,214,223      13,645,181
     Interest                                            2,089           2,567           4,768           4,396         125,231
                                                  ------------    ------------    ------------    ------------    ------------

     Total expenses                                  3,443,147       1,710,681       6,129,459       3,382,849      33,667,811 
                                                  ------------    ------------    ------------    ------------    ------------
                                                                                                                               
Loss before extraordinary item                      (3,421,400)     (1,657,957)     (6,089,487)     (3,313,610)    (32,720,926)
Extraordinary item                                        --              --              --              --            42,787 
                                                                                                                               
                                                  ------------    ------------    ------------    ------------    ------------
Net loss                                          $ (3,421,400)   $ (1,657,957)   $ (6,089,487)   $ (3,313,610)   $(32,678,139)
                                                  ============    ============    ============    ============    ============ 

Loss per share of common stock:
Loss before extraordinary item                    $      (0.29)   $      (0.15)   $      (0.52)   $      (0.32)   $      (7.12)
Extraordinary item                                        --              --              --              --              0.01
                                                  ------------    ------------    ------------    ------------    ------------
Net loss                                          $      (0.29)   $      (0.15)   $      (0.52)   $      (0.32)   $      (7.11)
                                                  ============    ============    ============    ============    ============

Weighted average common shares outstanding          11,823,439      10,873,102      11,607,059      10,264,818       4,598,365
                                                  ============    ============    ============    ============    ============

                                       2
</TABLE>

     See accompanying notes to unaudited consolidated financial statements
<PAGE>
                SHEFFIELD PHARMACEUTICALS, INC. AND SUBSIDIARIES
                        (a development stage enterprise)
                      Consolidated Statements of Cash Flows
  For the three and six months ended June 30, 1997 and 1996 and for the period
               from October 17, 1986 (inception) to June 30, 1997
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                                   October 17, 1986
                                                                Three months ended         Six months ended           (inception) to
                                                                     June 30,                   June 30,                  June 30,
                                                           --------------------------    --------------------------    ------------ 
                                                               1997          1996           1997           1996           1997
                                                           -----------    -----------    -----------    -----------    ------------ 

<S>                                                        <C>            <C>            <C>            <C>            <C>          
Cash outflows from development stage activities and
    extraordinary gain:
         Loss before extraordinary item                    $(3,421,399)   $(1,657,957)   $(6,089,487)   $(3,313,610)   $(32,720,926)
        Extraordinary gain on extinguishment of debt              --             --             --             --            42,787
                                                           -----------    -----------    -----------    -----------    ------------ 
           Net loss                                         (3,421,399)    (1,657,957)    (6,089,487)    (3,313,610)    (32,678,139)
Adjustments to reconcile net loss to net cash used by
    development stage activities:
        Issuance of common stock, stock
           options/warrants for services                          --             --             --             --         1,541,003
        Non-cash interest expense                                 --             --             --             --            50,000
        Issuance of common stock for license                      --             --             --             --             5,216
        Non-cash acquisition of R & D in process
           technology                                        1,650,000           --        1,650,000           --         1,650,000
        Transfer of securities for services                     25,000           --           25,000           --            25,000
        Securities acquired under sub-license agreement           --             --             --             --          (500,000)
        Issuance of common stock for intellectual
           property rights                                        --             --             --             --           866,250
        Amortization of organizational and debt
           issuance costs                                         --             --             --             --            77,834
        Depreciation                                            13,126         17,835         25,785         36,372         167,329
        Amortization                                             5,116           --           10,232           --            30,695
        Increase in debt issuance and organizational
           costs                                                  --             --             --             --           (77,834)
        Decrease (increase) in prepaid expenses and
           other current assets                                (75,451)       (22,266)       (60,445)        69,418        (163,461)
        Decrease (increase) in other assets                       --          (33,696)           600       (150,416)         19,625
        Increase (decrease) in accounts payable,
           accrued liabilities                                 172,305         72,960         57,905         46,384         (72,200)
        Increase (decrease) in sponsored
           research payable                                   (840,676)       170,061       (248,523)       187,598         908,704
        Increase in deferred license fee                          --          100,000           --          100,000            --   
                                                           -----------    -----------    -----------    -----------    ------------ 
           Net cash used by development stage
              activities                                    (2,471,979)    (1,353,063)    (4,628,933)    (3,024,254)    (28,149,978)
                                                           -----------    -----------    -----------    -----------    ------------ 
Cash flows from investing activities:
    Acquisition of laboratory and office equipment              (2,087)        (3,502)        (2,087)       (47,816)       (265,896)
    Increase in segregated cash                                   --             --             --             --           (75,000)
    Increase in notes receivable in connection with
       sale of stock                                              --             --             --             --          (240,000)
    Payments of notes receivable                                  --             --             --             --           130,000
    Acquisition of Camelot Pharmacal, L.L.C. (net)              (8,259)          --           (8,259)          --            (8,259)
                                                           -----------    -----------    -----------    -----------    ------------ 
           Net cash used by investing activities               (10,346)        (3,502)       (10,346)       (47,816)       (459,155)
                                                           -----------    -----------    -----------    -----------    ------------ 
Cash flows from financing activities:
    Principal payments under capital lease                      (5,891)        (7,549)       (13,441)       (13,040)        (34,969)
    Conversion of convertible, subordinated notes                 --             --             --             --           749,976
    Proceeds from issuance of debt                                --             --             --             --           550,000
    Proceeds from issuance of common stock                        --             --             --             --        13,268,035
    Proceeds from issuance of  cumulative
       convertible redeemable preferred stock                     --             --        3,212,136           --         3,212,136
    Proceeds from exercise of stock options                       --             --             --          137,175       1,337,677
    Proceeds from exercise of warrants                            --        4,480,106           --        6,246,109      10,064,481
                                                           -----------    -----------    -----------    -----------    ------------ 
           Net cash and cash equivalents provided by
              financing activities                              (5,891)     4,472,557      3,198,695      6,370,244      29,147,336
                                                           -----------    -----------    -----------    -----------    ------------ 
           Net increase in cash and cash equivalents        (2,488,216)     3,115,992     (1,440,584)     3,298,174         538,203
 Cash and cash equivalents at beginning of period            3,027,503      2,042,759      1,979,871      1,860,577           1,084
                                                           -----------    -----------    -----------    -----------    ------------ 
 Cash and cash equivalents at end of period                $   539,287    $ 5,158,751    $   539,287    $ 5,158,751    $    539,287
                                                           ===========    ===========    ===========    ===========    ============

Noncash investing and financing activities:
    Common stock, stock options and warrants
       issued for services                                 $      --      $      --      $      --      $      --      $  1,541,003
    Common stock issued for license                               --             --             --             --             5,216
    Common stock issued for intellectual
       property rights                                            --             --             --             --           866,250
    Common stock issued to retire debt                            --             --             --             --           600,000
    Securities acquired under sub-license agreement               --             --             --             --           500,000
    Transfer of securities for services                         25,000           --           25,000           --            25,000
    Acquisition of R & D in-process technology               1,650,000           --        1,650,000           --         1,650,000
    Unrealized depreciation of investments                      20,178           --          261,361           --           300,593
    Equipment acquired under capital lease                        --             --             --           72,453          72,453
    Notes payable converted to common stock                       --             --             --             --           749,976
                                                           ===========    ===========    ===========    ===========    ============

Supplemental disclosure of cash flow information:
    Interest paid                                          $     2,089    $     2,567    $     4,768    $     4,396    $    125,231
                                                           ===========    ===========    ===========    ===========    ============
</TABLE>

                                       3
<PAGE>
                SHEFFIELD PHARMACEUTICALS, INC. AND SUBSIDIARIES
                        (a development stage enterprise)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 1997
                                   (UNAUDITED)




1.   CONSOLIDATED FINANCIAL STATEMENTS

     The  accompanying  consolidated  balance  sheets  as of June  30,  1997 and
     December  31,  1996  and  the  accompanying   consolidated   statements  of
     operations  and cash flows for the three and six months ended June 30, 1997
     and 1996 and for the period from October 17, 1986  (inception)  to June 30,
     1997,   have  been  prepared  by  Sheffield   Pharmaceuticals,   Inc.  (the
     "Company"),  without audit.  In the opinion of management,  all adjustments
     (consisting only of normal recurring  accruals) necessary to present fairly
     the financial position,  results of operations,  and cash flows at June 30,
     1997 and for all periods presented have been made.

     Certain information and footnote disclosures normally included in financial
     statements  prepared  in  accordance  with  generally  accepted  accounting
     principles  have been  condensed  or omitted.  It is  suggested  that these
     consolidated financial statements be read in conjunction with the financial
     statements  and notes thereto  included in the  Company's  annual report on
     Form 10-KSB for the year ended December 31, 1996. The results of operations
     for the  three  and six  months  ended  June  30,  1997  and  1996  are not
     necessarily indicative of the operating results for the full years.

     The Company was incorporated on October 17, 1986, under the Canada Business
     Corporations  Act. The Company's  wholly-owned  subsidiary,  U-Tech Medical
     Corporation  ("U-Tech") was  incorporated  in the state of Texas on January
     13, 1992 and has been  substantially  inactive for two years as of June 30,
     1997.  On July 30, 1997 U-Tech was  dissolved.  On January  10,  1996,  Ion
     Pharmaceuticals,  Inc.,  a Delaware  corporation  ("Ion"),  was formed as a
     wholly-owned  subsidiary  of the  Company.  At that time,  Ion acquired the
     Company's  rights with  respect to its  anti-proliferative  technology.  On
     April 17, 1997, CP Pharmaceuticals,  Inc. ("CP") was formed for the purpose
     of acquiring Camelot Pharmacal,  L.L.C.,  which acquisition was consummated
     on April 25, 1997. Unless the context requires otherwise, Sheffield, U-Tech
     , Ion and CP are referred to as "the  Company".  The Company  commenced its
     biotechnology  operations  in the United  States in January  1992 under new
     management and Sheffield  became  domesticated as a Wyoming  corporation in
     May 1992.  At the Annual  Meeting of  shareholders  of the Company  held on
     January 26,  1995,  the  Company's  shareholders  approved  the proposal to
     reincorporate the Company in Delaware, which was effected on June 13, 1995.
     All significant intercompany  transactions are eliminated in consolidation.
     At the Annual Meeting of shareholders of the Company held on June 26, 1997,
     the Company's  shareholders approved the proposal to change the name of the
     Company  from   "Sheffield   Medical   Technologies   Inc."  to  "Sheffield
     Pharmaceuticals, Inc."

     The Company is in the  development  stage and as such has been  principally
     engaged in  licensing  and  research  efforts.  The Company  has  generated
     minimal  operating  revenue  and  requires  additional  capital,  which the
     Company  intends to obtain through equity and debt offerings to continue to
     operate its business. The Company's ability to meet its obligations as they
     become due and to continue as a going  concern must be  considered in light
     of the expenses, difficulties and delays frequently encountered in starting
     a new  business,  particularly  since the Company  will focus on  research,
     development and unproven  technology  which may require a lengthy period of
     time and substantial  expenditures to complete. Even if the Company is able
     to  successfully  develop  new  products or  technologies,  there can be no
     assurance  the Company will generate  sufficient  revenues from the sale or
     licensing of such products and  technologies  to be profitable.  Management
     believes that the Company's  ability to meet its obligations as they become
     due and to continue as a going concern through  December 1997 are dependent
     upon obtaining additional financing.

                                       4
<PAGE>
                SHEFFIELD PHARMACEUTICALS, INC. AND SUBSIDIARIES
                        (a development stage enterprise)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 1997
                                   (UNAUDITED)



2.   NET LOSS PER COMMON SHARE

     Net loss per  common  share  is based on net loss for the  relevant  period
     divided by the weighted  average  number of shares  issued and  outstanding
     during the period. Stock options,  common stock issuable upon conversion of
     warrants  and common  stock  issuable  upon the  conversion  of  cumulative
     convertible  redeemable  preferred  stock are not reflected as their effect
     would be antidilutive for both primary and fully diluted earnings per share
     computations.

     In February 1997, the Financial Accounting Standards Board issued Statement
     No. 128,  EARNINGS  PER SHARE,  which is required to be adopted on December
     31, 1997.  At that time,  the Company will be required to change the method
     currently  used to  compute  earnings  per share and to  restate  all prior
     periods.  The impact of  Statement  128 on the  calculation  of primary and
     fully diluted earnings per share is not expected to be material.



3.   SUPPLY AND LICENSE AGREEMENTS

     In March 1997, the Company  exercised its option and entered into exclusive
     supply and license  agreements for the world-wide  rights to the multi-dose
     inhaler technology (MSI) of Siemens A.G. The agreements call for Siemens to
     be the  exclusive  supplier  of  the  MSI  system,  a  hand-held,  portable
     pulmonary delivery system. The Company paid a licensing fee of $1.1 million
     in April 1997 to Siemens pursuant to its agreements and is required to make
     additional  payments  to Siemens  of DM 2.0  million on January 1, 1998 and
     1999.



4.   ACQUISITION

     On April 25, 1997, the Company acquired Camelot  Pharmacal,  L.L.C., of St.
     Louis,  Missouri,  a privately held emerging  pharmaceutical  company.  The
     members of Camelot's  management  team have been appointed  officers of the
     Company and Loren G. Peterson, a principal of Camelot, has been named Chief
     Executive  Officer of the  Company  and has joined the  Company's  Board of
     Directors. Consideration for this transaction was 600,000 shares of Company
     common stock. In addition,  the members of the Camelot management team have
     been granted  options to acquire 1.2 million  common shares  exercisable at
     market price as of the date of grant.


                                       5
<PAGE>
                SHEFFIELD PHARMACEUTICALS, INC. AND SUBSIDIARIES
                        (a development stage enterprise)
ITEM 2:

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



The Company,  being a development stage  enterprise,  has incurred a net loss in
each of the  fiscal  years  since its  inception  and has had to rely on outside
sources of funds to maintain its  liquidity.  Substantial  operating  losses are
expected to be incurred  for the next several  years as the Company  expends its
resources for product acquisition,  research and development and preclinical and
clinical testing.

As a development  stage company without  significant  revenues,  the Company has
financed its technology  development activities and operations primarily through
public  and  private  offerings  of  securities,  from  which it has  raised  an
aggregate of approximately  $28.4 million through June 30, 1997. On February 28,
1997, the Company completed a private offering of 35,000 shares of its 7% Series
A Cumulative  Convertible  Redeemable  Preferred Stock, which raised total gross
proceeds of $3.5  million.  The proceeds of this offering are to be used to fund
research and development, patent prosecution and for working capital and general
corporate purposes.  Such proceeds may also be used for the possible acquisition
of rights in new technologies in the Company's ordinary course of business.  The
Company's  operating results have fluctuated  significantly  during each quarter
since its inception, and the Company anticipates that such fluctuations, largely
attributable  to varying  sponsored  research and  development  commitments  and
expenditures, will continue into the foreseeable future.

The  Company  continues  to  conduct  scientific   research,   clinical  trials,
development, and intellectual property protection. During the three months ended
June 30, 1997, the Company funded  $786,165 for research and  development on its
projects.  During the succeeding 12-month period,  approximately $8.3 million in
additional  funding is  projected  to be  incurred on  clinical  and  laboratory
research  and   development.   Of  this  estimated   funding  of  $8.3  million,
approximately  $7,500,000 is expected to be applied to the MSI,  $675,000 to the
Ion Pharmaceuticals  Technologies,  $25,000 to the HIV/AIDS Vaccines, $40,000 to
the UGIF Technology-Prostate  Cancer, and $60,000 to the Membrane Attack Complex
(MAC)/Complement Technology.

In addition to clinical and laboratory research development, the Company expects
to incur ongoing costs in connection with its intellectual  property  protection
and patent  prosecution,  which costs are expected to approximate  $100,000 over
the next 12 months.


                                       6
<PAGE>
                SHEFFIELD PHARMACEUTICALS, INC. AND SUBSIDIARIES
                        (a development stage enterprise)


REVENUES AND EXPENSES

Revenues:

From  inception  through the period ended June 30, 1997,  the Company has earned
sub-license revenue of $510,000 primarily from the sub-license agreement for its
liposome-CD4 technology.

From  inception  through the period ended June 30, 1997,  the Company has earned
interest  income  of  $436,885  and an  extraordinary  item  from  gain on early
extinguishment  of debt of $42,787.  The Company's  ability to generate material
revenues is contingent on the successful  commercialization its technologies and
other  technologies which it may acquire,  followed by the successful  marketing
and  commercialization of such technologies through licenses,  joint ventures or
other arrangements.

Interest income for the three months ended June 30, 1997 was $21,747 compared to
$52,724 for the same period ended June 30, 1996. The decrease in interest earned
is attributable to a decrease of cash invested in short-term  investments Except
for the sub-license revenue mentioned above,  interest income represented all of
the Company's income in each of the prior periods.

Operating Expenses:

From  inception  through the period  ended June 30, 1997,  the Company  incurred
$33,667,811  of operating  expenses.  Of the total  operating  expenses for that
period,  $18,247,399  were costs of research and  development  for the Company's
technologies and $1,650,000 for the acquisition of R & D in-process  technology.
The  remainder  of expenses  for the same period were  incurred  principally  as
consulting  costs,  costs of management,  legal and other  professional fees and
expenses  relating to the  Company's  technologies,  and for its  completed  and
proposed financing plans.  Research and development costs are expected to remain
high as the Company implements later-stage research projects of its technologies
and such costs will continue to be expensed for financial reporting purposes.

Operating  expenses for the three months  ended June 30, 1997,  were  $3,443,146
compared to $1,710,681  for the same period ended June 30, 1996. The increase in
operating  expenses was  primarily  due to the  acquisition  of R & D in-process
technology,  in the  amount of  $1,650,000,  as a result of the  acquisition  of
Camelot   Pharmacal,   L.L.C.  in  April  1997.  The  increase  in  general  and
administrative  expenses  was  primarily  due to increased  salary  expense as a
result of the additions to the Company's management team and higher professional
fees.  The major items included in general and  administrative  expenses for the
three months ended June 30, 1997,  were (i) salaries of $320,174 which increased
by $111,669 as compared to 1996, primarily due to the increase in management and
staff,  (ii)  professional  fees of $262,005  or  $167,061  higher than the same
period in 1996,  primarily  due to increased  patent and  financing  activities,
(iii)  consulting  fees of $131,952  or $29,996  higher than 1996 and (iv) other
expenses of $290,761.

The table below  indicates (i) the  Company's  direct  research and  development
expenses  by  project  for the six  months  ended  June  30,  1997  and from the
Company's  inception to June 30, 1997,  (ii) the Company's  current  estimate by
project of committed and/or anticipated funding requirements after June 30, 1997
and (iii) revenues received to date by project.


                                       7

<PAGE>
                SHEFFIELD PHARMACEUTICALS, INC. AND SUBSIDIARIES
                        (a development stage enterprise)

                    Direct Research and Development Expenses
                                  (in dollars)

<TABLE>
<CAPTION>
                                                              Three months                           Committed and/or
                                                                ended            Inception to         anticipated R & D      Revenue
              R & D Projects                                   6/30/97             6/30/97         funding after 6/30/97    received
------------------------------------------------------------------------------------------------------------------------------------

<S>                                                            <C>                <C>                  <C>                   <C>
Multi-Dose Inhaler (MSI)                                       171,201            1,445,926            15,256,074                  0
Ion Pharmaceuticals, Inc.                                      267,016            4,599,183               671,690             10,000
     Technologies
RBC-CD4 Electroinsertion                                         6,736            6,254,185                     0                  0
     Technology
Lipsome-CD4 Technology                                               0            2,322,322                     0            500,000
HIV/AIDS Vaccine                                               100,000            1,199,118                25,000                  0
UGIF Technology                                                 60,018              163,419                40,000                  0
Membrane Attack Complex                                         60,936              304,682                80,000                  0
     (MAC)/Complement
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

On February 28, 1997, the Company  completed a private offering of 35,000 shares
of its 7% Series A Cumulative  Convertible  Redeemable  Preferred  Stock,  which
raised total gross  proceeds of $3.5 million.  The proceeds of this offering are
being used to fund research and development,  patent prosecution and for working
capital and general corporate  purposes.  Such proceeds may also be used for the
possible  acquisition of rights in new  technologies  in the Company's  ordinary
course of business.

In March 1997,  the Company  exercised  its option and  entered  into  exclusive
supply and license  agreements for the world-wide rights to Siemens'  multi-dose
inhaler (MSI).  The agreements call for Siemens to be the exclusive  supplier of
the MSI system,  a hand-held,  portable  pulmonary  drug  delivery  system.  The
Company paid Siemens a license fee of $1.1 million in April 1997 pursuant to the
agreements  and is  required  to make  additional  payments of DM 2.0 million on
January 1, 1998 and 1999.

The Company has  historically  financed its operations  through public offerings
and  private  placements  of  its  securities.  In  addition  to  the  potential
commercialization  of its  technologies,  the Company  plans to seek  additional
funds  through  bridge  loans,  security  financings,  joint  ventures  or other
commercial arrangements to obtain necessary working capital. It is not uncommon,
for  instance,  for a  third-party  commercial  partner  to enter into a license
agreement  with a technology  development  company,  on the merits of successful
research  relating to a given  technology,  which would yield  up-front  royalty
advances to such company before market-ready products are developed.  It is also
not uncommon  for a  third-party  commercial  partner to enter into an agreement
with a  development  company  whereby a third  party  will  contribute  funds in
support of the research and  operating  needs of such  development  companies in
consideration for rights related to the technologies.

The Company's ability to continue its operations as planned will be dependent on
the  Company's  ability to obtain  additional  funds,  particularly  through the
public  offering  and/or  private  placement of its  securities.  The Company is
currently  involved in negotiations  with  interested  parties over the terms of
proposed financings. However, there can be no assurance that any such financings
will  actually be  consummated.  In the event that proposed  financings  are not
completed,  there can be no assurance  that other  sources of capital may become
available in amounts and upon terms  acceptable  to the Company.  The failure by
the  Company to obtain  such funds will  require  the  Company to  significantly
reduce or delay its funding of current  technology  development  projects (which
may result in the  Company's  loss of rights in the  related  technologies)  and
delay the making of commitments for future projects.


                                       8
<PAGE>
                SHEFFIELD PHARMACEUTICALS, INC. AND SUBSIDIARIES
                        (a development stage enterprise)




THIS REPORT CONTAINS CERTAIN  FORWARD-LOOKING  STATEMENTS  WITHIN THE MEANING OF
SECTION 27A OF THE  SECURITIES  ACT OF 1933, AS AMENDED,  AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, WHICH ARE INTENDED TO BE COVERED BY
THE SAFE HARBORS CREATED HEREBY.  ALL  FORWARD-LOOKING  STATEMENTS INVOLVE RISKS
AND UNCERTAINTY,  INCLUDING WITHOUT LIMITATION,  THE SUCCESSFUL  DEVELOPMENT AND
LICENSING OF THE COMPANY'S TECHNOLOGIES AND THE SUCCESSFUL COMPLETION OF PLANNED
FINANCINGS.  ALTHOUGH THE COMPANY  BELIEVES THAT THE ASSUMPTIONS  UNDERLYING THE
FORWARD-LOOKING   STATEMENTS  CONTAINED  HEREIN  ARE  REASONABLE,   ANY  OF  THE
ASSUMPTIONS COULD BE INACCURATE,  AND THEREFORE,  THERE CAN BE NO ASSURANCE THAT
THE  FORWARD-LOOKING  STATEMENTS  INCLUDED  IN  THIS  REPORT  WILL  PROVE  TO BE
ACCURATE.   IN  LIGHT  OF  THE   SIGNIFICANT   UNCERTAINTIES   INHERENT  IN  THE
FORWARD-LOOKING  STATEMENTS  INCLUDED HEREIN,  THE INCLUSION OF SUCH INFORMATION
SHOULD NOT BE REGARDED AS A  REPRESENTATION  BY THE COMPANY OR ANY OTHER  PERSON
THAT THE OBJECTIVES AND PLANS OF THE COMPANY WILL BE ACHIEVED.



<PAGE>
                SHEFFIELD PHARMACEUTICALS, INC. AND SUBSIDIARIES
                        (a development stage enterprise)


PART II:    OTHER INFORMATION

Item 2.     CHANGES IN SECURITIES.

            The following unregistered securities were issued by the
            Company during the quarter ended June 30, 1997:
<TABLE>
<CAPTION>
                                                              Number of Shares
                                                                Sold/Issued
                                                                /Subject to
                                            Description          Options or  Offering/Exercise 
            Date of Sale/Issuance     of Securities Issued      Warrants        Price Per Share ($)     Purchaser or Class
            ---------------------     --------------------      --------        -------------------     ------------------

<S>         <C>                        <C>                     <C>                   <C>              <C>
            April - June 1997          Common Stock Options       220,000              2 11/16 - 3    Advisors

            April 25, 1997             Common Stock               600,000                 2 3/4       Officers of the
                                                                                                      Company

            April 25, 1997             Common Stock Options        50,000                 2 3/4       Issuance to Directors
                                                                                                      pursuant to 1996 Directors
                                                                                                      Stock Option Plan

            June 1997                  Common Stock Options       300,000             2 3/4 - 4 1/2   Issuance to employees
                                                                                                      pursuant to 1993 Stock Option
                                                                                                      Plan

            April 25, 1997             Common Stock Options      1,200,000                2 3/4       Issuance to employees
                                                                                                      pursuant to 1993 Stock Option
                                                                                                      Plan
</TABLE>


            The  issuance  of these  securities  is  claimed  to be exempt  from
            registration  pursuant  to  Section 4 (2) of the  Securities  Act of
            1933,  as  amended,  as  transactions  by an issuer not  involving a
            public offering. There were no underwriting discounts or commissions
            paid in connection with the issuance of any of these securities.






                                       10

<PAGE>
                SHEFFIELD PHARMACEUTICALS, INC. AND SUBSIDIARIES
                        (a development stage enterprise)

Item 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS

          An annual  Meeting  of  Stockholders  was held on June 26,  1997.  All
          management's  nominees for director,  as listed in the Proxy Statement
          for the Annual  Meeting,  were  elected.  Listed below are the matters
          voted on by  stockholders  and the  number of votes cast at the Annual
          Meeting:

(a)       ELECTION OF FIVE MEMBERS OF THE BOARD OF DIRECTORS.

                                        Voted      Votes     Broker Non-Votes
            Name            Voted for  Against   Withheld    and Abstentions

       Douglas R. Eger      9,164,375     0      1,237,364      0
      Loren G. Peterson    10,072,889     0        328,850      0
    Thomas M. Fitzgerald   10,072,890     0        328,849      0
       John M. Bailey      10,071,890     0        329,849      0
      Digby W. Barrios     10,070,990     0        330,749      0

(b)  APPROVAL OF THE AMENDMENT TO THE COMPANY'S  CERTIFICATE OF INCORPORATION TO
     INCREASE THE NUMBER AUTHORIZED SHARES OF THE COMPANY'S COMMON STOCK;

               Voted For:                                        10,021,014
             Voted Against:                                         333,666
            Voted Abstained:                                         47,059
            Broker Non-Votes                                              0

(c)  APPROVAL OF THE AMENDMENT TO THE COMPANY'S  CERTIFICATE OF INCORPORATION TO
     CHANGE THE NAME OF THE COMPANY FROM "SHEFFIELD  MEDICAL  TECHNOLOGIES INC."
     TO "SHEFFIELD PHARMACEUTICALS, INC."

               Voted For:                                        10,314,220
             Voted Against:                                          75,610
            Voted Abstained:                                         11,909
            Broker Non-Votes                                              0

(d)  APPROVAL OF CERTAIN AMENDMENTS TO THE COMPANY'S 1993 STOCK OPTION PLAN.


               Voted For:                                         3,284,922
             Voted Against:                                         867,539
            Voted Abstained:                                         49,659
            Broker Non-Votes                                      6,199,619

(e) RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS
OF THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 1997.

               Voted For:                                        10,317,481
             Voted Against:                                          43,849
            Voted Abstained:                                         40,409
            Broker Non-Votes                                              0



                                     11
<PAGE>
                SHEFFIELD PHARMACEUTICALS, INC. AND SUBSIDIARIES
                        (a development stage enterprise)

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

         EXHIBITS

         NO.    DESCRIPTION

         3.1    Certificate of Incorporation of the Company, as amended

         3.2    By-laws of the Company, as amended

         27     Financial Data Schedule


         No reports on Form 8-K were filed by the Company  during the quarter 
         ended June 30, 1997




                                       12
<PAGE>
                SHEFFIELD PHARMACEUTICALS, INC. AND SUBSIDIARIES
                        (a development stage enterprise)

In accordance with the  requirements of the Exchange Act, the registrant  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.


                                 SHEFFIELD PHARMACEUTICALS, INC.

Dated: August 14, 1997           /S/ LOREN G. PETERSON
                                 ----------------------
                                 Loren G. Peterson
                                 Chief Executive Officer


Dated: August 14, 1997           /S/ GEORGE LOMBARDI
                                 -------------------
                                 George Lombardi
                                 Vice President & Chief Financial Officer
                                 (Principal Financial and Accounting Officer)