================================================================================

                                 UNITED STATES
                       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 September 30, 1997

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

            For the transition period from __________ to __________
                         Commission File Number 0-27578

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

                              SUNPHARM CORPORATION
       (Exact name of small business issuer as specified in its charter)

          DELAWARE                                       F593097048
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)                         

                         4651 Salisbury Road, Suite 205
                          Jacksonville, Florida 32256
                    (Address of principal executive offices)

                   Issuer's telephone number: (904) 296-3320

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

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

                              Yes  [X]          No  [ ]

         Number  of  shares  of the  issuer's  Common  Stock  outstanding  as of
September 30, 1997: 5,732,471


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<PAGE>

                STATEMENT REGARDING FORWARD-LOOKING INFORMATION

         The Quarterly Report on Form 10-QSB contains 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.  Actual results could differ materially
from those projected in the  forward-looking  statements as a result of a number
of important  factors.  For a discussion of important  factors that could affect
the  Company's  results,  please  refer to the  discussions  herein and to those
contained  in the  Company's  Annual  Report on Form  10-KSB  for the year ended
December  31, 1996 under the  caption  "Item 1.  Description  of Business - Risk
Factors."

                         PART 1. FINANCIAL INFORMATION

Item 1.  Financial Statements

         The  following  unaudited  financial   statements  have  been  prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and notes disclosures, normally included in annual financial
statements prepared in accordance with generally accepted accounting principles,
have been omitted pursuant to these rules and regulations.  However, the Company
believes that the disclosures  made herein are adequate and,  accordingly,  that
the information  presented is not misleading.  These financial statements should
be read in  conjunction  with the  financial  statements  and notes for the year
ended  December 31, 1996,  which are included in the Company's  Annual Report on
Form  10-KSB  for the year  ended  December  31,  1996,  filed  pursuant  to the
Securities Exchange Act of 1934.



                                      -2-

<PAGE>

                              SUNPHARM CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)

                                 BALANCE SHEETS
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                      SEPTEMBER 30,      DECEMBER 31,
                                                                           1997               1996
                                                                      ------------       ------------
                 ASSETS
<S>                                                                   <C>                <C>         
Current Assets:
     Cash ......................................................      $    328,035       $    341,145
     Short-term investments ....................................         5,226,230          1,795,312
     Accounts receivable .......................................                --            500,000
     Other current assets ......................................           137,380            112,066
                                                                      ------------       ------------
          Total current assets .................................         5,691,645          2,748,523

Receivable from shareholder ....................................           103,162             10,000
Property and equipment, net ....................................            13,872              9,187
Other assets ...................................................             3,250              3,250
                                                                      ------------       ------------
                                                                      $  5,811,929       $  2,770,960
                                                                      ============       ============


LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
     Accounts payable ..........................................      $    279,708       $    323,451
     Accrued liabilities .......................................           430,431            869,245
     Notes payable .............................................                --            112,201
                                                                      ------------       ------------
          Total current liabilities ............................           710,139          1,304,897

Stockholders' Equity:
     Undesignated  preferred  stock, par value $.0001 per share;
          2,500,000 shares authorized; 0 shares issued and
          outstanding ..........................................                --                 --
     Common stock, par value $.0001 per share;
          25,000,000 shares authorized; 5,732,471
          and 3,708,879 shares issued and
          outstanding, respectively ............................               573                371
     Additional paid-in capital ................................        19,584,608         13,062,321
     Accumulated deficit during development stage ..............       (14,483,391)       (11,596,629)
                                                                      ------------       ------------
          Total stockholders' equity ...........................         5,101,790          1,466,063
                                                                      ------------       ------------
                                                                      $  5,811,929       $  2,770,960
                                                                      ============       ============

</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                       -3-

<PAGE>

                              SUNPHARM CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)

                            STATEMENTS OF OPERATIONS
                                   (Unaudited)


<TABLE>
<CAPTION>

                                                                     THREE MONTHS ENDED SEPTEMBER 30,
                                                                          1997             1996
                                                                      -----------       -----------
<S>                                                                   <C>               <C>        
Revenues:
     Interest income ...........................................      $    81,444       $    21,609
                                                                      -----------       -----------
          Total revenues .......................................           81,444            21,609

Expenses:
     Research and development ..................................          666,450           424,948
     General and administrative ................................          434,637           254,402
                                                                      -----------       -----------
          Total expenses .......................................        1,101,087           679,350
                                                                      -----------       -----------


Net loss .......................................................      $(1,019,643)      $  (657,741)
                                                                      ===========       ===========


Net loss per share .............................................      $     (0.18)      $     (0.20)
                                                                      ===========       ===========


Shares used in computing loss per share ........................        5,712,253         3,231,655
                                                                      ===========       ===========

</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                       -4-

<PAGE>

                              SUNPHARM CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)

                            STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>


                                                                                      FROM INCEPTION
                                                                                      (MAY 3, 1990)
                                                   NINE MONTHS ENDED SEPTEMBER 30,        THROUGH
                                                       1997              1996         SEPT. 30, 1997
                                                  ------------       ------------    ---------------
<S>                                               <C>                <C>                <C>         
Revenues:
     Sponsored research/sublicensing revenue      $         --       $    500,000       $  2,885,000
     Interest income .......................           200,949             47,385            436,211
                                                  ------------       ------------       ------------
          Total revenues ...................           200,949            547,385          3,321,211

Expenses:
     Research and development ..............         1,805,826          1,523,639          9,885,726
     General and administrative ............         1,281,885            862,698          7,428,876
     Royalty expense .......................                --                 --            490,000
                                                  ------------       ------------       ------------
          Total expenses ...................         3,087,711          2,386,337         17,804,602
                                                  ------------       ------------       ------------


Net loss ...................................      $ (2,886,762)      $ (1,838,952)      $(14,483,391)
                                                  ============       ============       ============


Net loss per share .........................      $      (0.57)      $      (0.61)                 
                                                  ============       ============


Shares used in computing loss per share ....         5,039,719          3,003,094                  
                                                  ============       ============

</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                      -5-

<PAGE>
                              SunPharm Corporation
                          (A DEVELOPMENT STAGE COMPANY)

                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (UNAUDITED)


<TABLE>
<CAPTION>

                                     Redeemable Convertible Preferred Stock:                            Additional    Accumulated
                                         Series A              Series B             Common Stock:          Paid-In    Deficit Since
                                  Shares      Amount      Shares      Amount     Shares       Amount       Capital      Inception
                                -------------------------------------------- -------------------------------------------------------

<S>                                 <C>         <C>         <C>         <C>    <C>             <C>      <C>           <C>           
Balance at December 31, 1996 ...     -           -           -           -     3,708,879       $ 371    $ 13,062,321  $ (11,596,629)

Issuance of Common Stock........     -           -           -           -     1,953,286         195       6,519,055     -

Exercise of Options.............     -           -           -           -        70,306           7           3,232     -

Net Loss........................     -           -           -           -          -             -              -       (2,886,762)
                                -------------------------------------------- -------------------------------------------------------

Balance at September 30, 1997        -           -           -           -     5,732,471       $ 573    $ 19,584,608  $ (14,483,391)
                                ============================================ =======================================================

</TABLE>

   The accompanying notes are an integral part of these financial statements.



                                      -6-
<PAGE>

                             SUNPHARM CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)

                            STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)
<TABLE>
<CAPTION>

                                                                                                                    FROM INCEPTION
                                                                                                                     (MAY 3, 1990)
                                                                             NINE MONTHS ENDED SEPTEMBER 30,            THROUGH
                                                                               1997                 1996            SEPT. 30, 1997
                                                                          -----------           -----------        ---------------
<S>                                                                       <C>                   <C>                   <C>          
CASH FLOWS FROM OPERATING ACTIVITIES
   Net loss ........................................................      $(2,886,762)          $(1,838,952)          $(14,483,391)
   Adjustments to reconcile net loss to net
      cash used in operating activities:
          Depreciation .............................................            2,800                 1,800                 74,506
          Expense related to issuance of
             stock for services ....................................               --                    --                 43,750
          Compensation expense related to
             operations, warrants and stock
             appreciation rights ...................................               --                    --                865,246
          Amortization of deferred offering costs
             incurred in connection with
             issuance of Bridge Notes ..............................               --                    --                775,000
          Write-off of patents .....................................               --                    --                 70,120
          (Increase) decrease in receivable
             from shareholder ......................................          (93,162)                1,271               (103,162)
          Decrease (increase) in accounts
             receivable and other current assets ...................          474,686               135,562               (139,021)
          Increase (decrease) in accounts payable ..................          (43,743)              161,849                279,708
          Increase (decrease) in accrued liabilities ...............         (438,814)              209,024                436,681
          Increase (decrease) in accrued legal fees ................               --              (270,000)               300,000
                                                                          -----------           -----------           ------------
             Total adjustments .....................................          (98,233)              239,506              2,602,828
                                                                          -----------           -----------           ------------
Net cash used in operating activities ..............................       (2,984,995)           (1,599,446)           (11,880,563)
                                                                          -----------           -----------           ------------

CASH FLOWS FROM INVESTING ACTIVITIES
   Purchases of short-term investments .............................       (6,198,946)                   --            (11,318,320)
   Sales and maturities of short-term investments ..................        2,768,028             1,290,464              6,092,090
   Capital expenditures ............................................           (7,485)                 (416)               (24,683)
   Payment of patent costs .........................................               --                    --                (67,424)
                                                                          -----------           -----------           ------------
Net cash (used in) provided by investing activities ................       (3,438,403)            1,290,048             (5,318,337)
                                                                          -----------           -----------           ------------

CASH FLOWS FROM FINANCING ACTIVITIES
   Repayments of notes payable .....................................         (112,201)              (77,807)              (100,000)
   Increase in deferred offering costs .............................               --                    --               (597,348)
   Issuance of Series A preferred stock ............................               --                    --                513,525
   Issuance of Series B preferred stock ............................               --                    --                450,000
   Net proceeds from issuance of common stock ......................        6,522,489             1,491,680             17,260,758
   Proceeds from payable to shareholders ...........................               --                    --                542,500
   Repayment of payable to shareholders ............................               --                    --               (542,500)
                                                                          -----------           -----------           ------------
Net cash provided by financing activities ..........................        6,410,288             1,413,873             17,526,935
                                                                          -----------           -----------           ------------

Net change in cash .................................................          (13,110)            1,104,475                328,035
Cash at beginning of period ........................................          341,145               331,069                     --
                                                                          -----------           -----------           ------------
Cash at end of period ..............................................      $   328,035           $ 1,435,544           $    328,035
                                                                          ===========           ===========           ============

Supplemental information:
   Cash paid for interest ..........................................      $     2,512           $     2,962           $    167,452
                                                                          ===========           ===========           ============

</TABLE>

    The accompanying notes are an integral part of these fnancial statements.


                                       -7-

<PAGE>


                              SUNPHARM CORPORATION
                         (A Development Stage Company)


                         NOTES TO FINANCIAL STATEMENTS
                               September 30, 1997
                                  (Unaudited)


1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         The balance  sheet at September  30, 1997,  the related  statements  of
operations for the nine- month periods ended September 30, 1997 and 1996 and the
period from inception (May 3, 1990) through September 30, 1997, the statement of
stockholders' equity at September 30, 1997, and the statements of cash flows for
the  nine-month  periods  ended  September 30, 1997 and 1996 and the period from
inception  through  September 30, 1997 are  unaudited.  These interim  financial
statements  should be read in  conjunction  with the December 31, 1996 financial
statements and related footnotes included in the Company's Annual Report on Form
10-KSB for the year ended  December 31, 1996.  The unaudited  interim  financial
statements  reflect all  adjustments  which are,  in the opinion of  management,
necessary for a fair statement of results for the interim periods presented, and
all such adjustments are of a normal recurring  nature.  Interim results are not
necessarily indicative of results for a full year.

NET LOSS PER SHARE

         Net loss per share is computed based on the weighted-average  number of
shares of common stock outstanding for the period.

PATENT COSTS

         The Company  reimburses the University of Florida Research  Foundation,
Inc. (UFRFI) for direct expenses relating to the Company's patents. Patent costs
consist of legal fees and other  direct  costs  incurred in  obtaining  patents.
These costs are charged to research and development expense when incurred.

RESEARCH AND DEVELOPMENT

         Sponsored  research  revenue is recognized as revenue when the payments
are  earned or  received  and the  research  has been  performed.  Research  and
development  expenses  are charged to  operations  when  incurred.  Research and
development  expenses include,  among other things,  consulting fees and cost of
reimbursements to UFRFI.

NEW ACCOUNTING STANDARD

         In February  1997,  the  Financial  Accounting  Standard  Board  issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS
128"). SFAS 128 simplifies the

                                      -8-

<PAGE>

                              SUNPHARM CORPORATION
                         (A Development Stage Company)

                         NOTES TO FINANCIAL STATEMENTS
                               September 30, 1997
                                  (Unaudited)


standards  for  computing  earnings  per share  previously  found in  Accounting
Principles Board Opinion No. l5, "Earnings Per Share" ("APB 15"), and makes them
comparable  to  international  earnings  per share  standards.  It replaces  the
presentation of primary  earnings per share ("EPS") with a presentation of basic
EPS. It also requires dual  presentation of basic diluted EPS on the face of the
income  statement for all entities with complex  capital  structures.  Basic EPS
excludes  dilution  and is  computed  by  dividing  income  available  to common
stockholders by the weighted-average number of common shares outstanding for the
period.  Diluted  EPS  reflects  the  potential  dilution  that  could  occur if
securities or other  contracts to issue common stock were exercised or converted
into common  stock or  otherwise  resulted in issuance of common stock that then
shared in earnings, similar to fully diluted EPS as computed by APB 15.

         The accounting and disclosure requirements of SFAS 128 are required for
the Company's year ending  December 31, 1997;  however,  its impact on operating
results when initially adopted is expected to immaterial.

RECLASSIFICATIONS

         Certain  reclassifications have been made in the September 30, 1996 and
the From Inception (May 3, 1990 Through September 30, 1997) financial statements
to  conform  to  classifications  used  in  the  September  30,  1997  financial
statements.

2.       SALE OF UNITS

         On March 28, 1997, the Company sold  1,828,286  units  ("Units"),  each
consisting of one share of the Company's common stock and one redeemable  Common
Stock Purchase Warrant ("Warrant") for $3.50 per Unit. Each Unit consists of one
share of the Company's  common stock and one  redeemable  Common Stock  Purchase
Warrant  ("Warrant").  The Warrants included in the Units expire five years from
the date of issuance.  In case of a "cashless  exercise,"  the Warrant  exercise
price is $4.00 per share  plus  forty  percent  of the  difference  between  the
current  trading  price of the  Company's  common stock and $4.00;  in all other
cases,  the Warrant exercise price is $4.00 per share plus thirty percent of the
difference  between the current trading price of the Company's  common stock and
$4.00.  The Warrants  are subject to  redemption  at the  exercise  price by the
Company,  provided  the  Company's  common  stock  closes at a price of  $16.00,
$20.00,  $24.00,  or $28.00 per share for  twenty  consecutive  days  during the
second, third, fourth or fifth years, respectively,  of the term of the Warrant.
Proceeds from the private placement were $6,116,500,  net of placement agent and
other offering  costs of $282,500.  During the three months ended June 30, 1997,
the Company issued 60,000  additional Units.  Through the issuance,  the Company
raised an additional $189,000, net of placement agents costs of $21,000.  During
the three months ended  September  30, 1997,  the Company  issued an  additional
60,000  Units and  raised an  additional  $189,000,  net of  placement  costs of
$21,000.

                                      -9-
<PAGE>


Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.

OVERVIEW

         Since its  inception  in May 1990,  SunPharm  Corporation  has  devoted
substantially  all of its efforts and  resources  to  research  and  development
conducted  on  its  own  behalf  and  through   collaborations   with   clinical
institutions. The Company's drug development strategy emphasizes conducting most
of  its  research  and  clinical   activities  at  the  University  of  Florida.
Consequently,   the  Company   believes   that  its  research  and   development
expenditures   have  been  lower  than  other   comparable   development   stage
pharmaceutical  companies.  The Company has  incurred  cumulative  net losses of
$14,483,000 from its inception  through  September 30, 1997. The Company expects
to incur  additional  significant  operating  losses  for at least  the next two
years,  principally  as a result  of its  continuing  anticipated  research  and
development and clinical trial expenditures.

RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996

         Interest  income  increased  to  $81,000  for the  three  months  ended
September  30, 1997 from $22,000 for the same period in 1996.  This  increase is
attributable to a greater cash balance available for investment as a result of a
private  placement  financing  (see  Note 2 to  Financial  Statements,  "Sale of
Units").

         The Company's  research and development  expenses  totaled $666,000 for
the three months ended  September  30, 1997,  as compared  with $425,000 for the
same  period in 1996.  This  increase  is  primarily  the  result  of  increased
sponsored  research  payments to the University of Florida,  increased  clinical
trial activity,  and establishment of a quality control laboratory.  The Company
expects its research and development expenses to continue to increase during the
remainder  of 1997 and into  1998,  reflecting  anticipated  increased  expenses
related to ongoing research, preclinical studies, and human clinical trials.

         General and administrative  expenses were $435,000 for the three months
ended  September  30, 1997 as compared to $254,000  for the same period in 1996.
The  increase  resulted  principally  from  the  addition  of  three  management
positions and associated recruiting and administrative costs.

         Net loss for the three months ended  September 30, 1997 was $1,020,000,
as compared to $658,000 for the same period in 1996. The greater loss was due to
increased  expenses  as  discussed  above,  slightly  offset by higher  interest
income.  Net loss per share for the three  months  ended  September  30, 1997 of
$0.18,  which compares to $0.20 for the same period in 1996, was impacted by the
greater  number  of  weighted-average  shares  outstanding,  due to the  private
placement financing discussed earlier (see Note 2 to Financial Statements, "Sale
of Units").


                                      -10-
<PAGE>

NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996

         The Company  recorded  licensing  revenues during the nine months ended
September 30, 1996 of $500,000, as a result of an agreement with Warner-Lambert.
No licensing revenues were earned during the same period in 1997.

         Interest  income  increased  to  $201,000  for the  nine  months  ended
September  30, 1997 from $47,000 for the same period in 1996.  This  increase is
attributable to a greater cash balance  available for  investment,  as discussed
above.

         The Company's research and development  expenses totaled $1,806,000 for
the nine months ended September 30, 1997, as compared to $1,524,000 for the same
period in 1996.  The higher  expenses  are  primarily  the  result of  increased
sponsored  research payments made to the University of Florida,  higher clinical
trial expenses,  and expenses associated with establishment of a quality control
laboratory.

         General and administrative expenses were $1,282,000 for the nine months
ended September 30, 1997,  nearly 50% higher than the $863,000  recorded for the
same period in 1996.  The increase is  principally  due to the addition of three
senior  management  positions,  associated  recruitment  costs,  and a generally
higher level of administrative activity in operating the Company.

         Net loss for the nine months ended  September 30, 1997 was  $2,887,000,
as compared to $1,839,000  for the same period in 1996. The greater loss was due
to the lower revenues and higher expenses as discussed above. Net loss per share
for the current period of $0.57,  which compares to $0.61 for the same period in
1996, was impacted by the greater number of weighted-average  shares outstanding
(see Note 2 to Financial Statements, "Sale of Units").

LIQUIDITY AND CAPITAL RESOURCES

         Since its inception,  the Company has financed its operations primarily
through  collaborative  research and  sublicense  agreements  with its strategic
alliance  partners  and the  issuance  of debt and  equity  securities.  Through
December 31, 1996, the Company had received  $2,885,000 of cumulative  sponsored
research and sublicensing revenues and approximately $11,266,000 in net proceeds
from equity offerings and exercise of stock warrants,  including net proceeds of
approximately  $7,200,000  related to the initial public  offering in January of
1995.

         On March 28, 1997, the Company sold  1,828,286  units  ("Units"),  each
consisting of one share of the Company's common stock and one redeemable  Common
Stock Purchase Warrant  ("Warrant") for $3.50 per Unit. The Warrants included in
the Units  expire five years from the date of  issuance.  In case of a "cashless
exercise,"  the Warrant  exercise price is $4.00 per share plus forty percent of
the difference  between the current trading price of the Company's  common stock
and $4.00;  in all other cases,  the Warrant  exercise  price is $4.00 per share
plus thirty percent of the difference  between the current  trading price of the
Company's  common stock and $4.00. The Warrants are subject to redemption at the
exercise price by the Company, provided the Company's common stock closes at

                                      -11-


<PAGE>


a price of $16.00,  $20.00,  $24.00 or $28.00  per share for twenty  consecutive
days during the second,  third, fourth or fifth years respectively,  of the term
of the Warrant.  Proceeds from the private  placement  were  $6,116,500,  net of
placement agent and other offering costs of $282,500.

         During the three months  ended June 30,  1997,  the Company sold 60,000
additional Units,  from which the Company received proceeds of $189,000,  net of
placement costs of $21,000. Additionally, options to purchase 70,306 shares were
exercised during this three-month period.

         During the three months ended  September 30, 1997,  the Company sold an
additional  60,000 Units,  from which the Company received proceeds of $189,000,
net of placement costs of $21,000.

         During the nine months ended  September 30, 1997,  the net cash used in
operating activities was $2,985,000, compared with $1,599,000 for the comparable
period in the  preceding  year.  This  increase  in cash used in  operations  is
attributable to increased  sponsored research payments made to the University of
Florida,  higher personnel and administrative  costs, and maintenance of a lower
accounts  payable  balance.  At  September  30,  1997,  the Company had cash and
investments totaling $5,554,000, compared with $1,435,000 at September 30, 1996.
The Company's working capital was $4,982,000 at September 30, 1997,  compared to
$511,000 at September 30, 1996. These increases are principally  attributable to
the equity  transactions  described  above.  At this time,  the Company  expects
currently  available  resources to be able to fund research and development,  as
well as operations, at least through the first half of 1998.

         The  Company  expects  to incur  substantial  additional  research  and
development  expenses,  including expenses associated with preclinical  studies,
clinical  trials and drug testing.  The Company  intends to use a portion of its
cash resources, together with funds from its existing collaborative arrangements
with  Warner-Lambert  and  Nippon  Kayaku,  for  these  purposes;  however,  the
Company's rights to receive payments from  Warner-Lambert  and Nippon Kayaku are
dependent  upon the  achievement  of certain  milestones by  Warner-Lambert  and
Nippon Kayaku,  respectively,  and are not within the control of the Company. No
assurance  can be made  that  such  milestones  will be  achieved  or that  such
payments  will be  received  by the  Company.  The  Company  intends  to  obtain
additional  funds  for  research  and  development   through  new  collaborative
arrangements  with  corporate  partners,  additional  financing,  and from other
sources;  however,  there can be no  assurance  that the Company will be able to
obtain necessary financing when required or what the terms of any financing,  if
obtained, might be. In addition, the Company's future success is affected by the
progress  of the  Company's  research  and  development  scope  and  results  of
preclinical  studies  and  clinical  trials,  the cost and timing of  regulatory
approvals, the Company's ability to obtain patent protection for its products on
a  cost-effective  and  timely  basis,  the  rate  of  technological   advances,
determinations  as to the commercial  potential of the Company's  products under
development,   the  status  of  competitive   products,   the  establishment  of
manufacturing capacity or third-party manufacturing  arrangements,  its reliance
on research institutions and corporate partners,  the uncertainty of health care
reform,  and the competitive  environment in which the Company operates.  At the
present time, the Company's existing capital resources will not be sufficient to
fund the Company's  operations to the point of  introduction  of a  commercially
successful  product,  if and when that time should  arrive.  No assurance can be
given that additional funds will be available on acceptable terms, if at all.


                                      -12-
<PAGE>

         The Company has incurred losses since inception and, therefore, has not
been subject to federal income taxes. As of December 31, 1996, the Company had a
net operating loss ("NOL") and tax credit carry forwards for income tax purposes
of  $9,553,000  and  $338,000,  respectively,  which may be  available to reduce
future taxable income and future tax liabilities.  These carry forwards begin to
expire in 2008. The Tax Reform Act of 1986 provides for an annual limitation the
use of NOL and credit carry forwards  (following certain ownership changes) that
could significantly limit the Company's ability to utilize these carry forwards.
The Company has made no determination  concerning  whether there has been such a
cumulative  change in ownership.  It is possible that such a change in ownership
occurred  following the completion of the Company's  initial public  offering in
1995 and private placements in 1996 and 1997. Accordingly, the Company's ability
to utilize the aforementioned carry forwards to reduce future taxable income and
tax  liabilities  may be limited.  Additionally,  because United States tax laws
limit the time during which these carry  forwards may be applied  against future
taxes,  the Company may not be able to take full  advantage of these  attributes
for federal income tax purposes.


                                      -13-
<PAGE>


PART II. OTHER INFORMATION


ITEM 2. CHANGES IN SECURITIES

During the three months ended  September 30, 1997, the Company sold 60,000 Units
to an  accredited  investor  pursuant to Rule 506 under and Section  4(2) of the
Securities Act of 1933, for $3.50 per Unit, representing the final sale of Units
in the 1997 private  placement  conducted by the Company.  The Company  received
$189,000 in  proceeds  from the sale of such Units,  net of  placement  costs of
$21,000.  The Company  issued  Warrants  exercisable  for 5,000  shares to Whale
Securities,  L.P. and certain of its  principals in  consideration  for services
related  to  the  private  placement  of the  60,000  Units.  See  "Management's
Discussion  and  Analysis of  Financial  Condition  and  Results of  Operations"
included  elsewhere in this Quarterly Report on Form 10-QSB for a description of
the Units and Warrants.


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K


         (a)      Exhibits

                  11.1*    Statement of computation of net loss per share

                  27.1*    Financial Data Schedule





------------
*Filed herewith.


                                      -14-

<PAGE>

                                   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.

                            SUNPHARM CORPORATION


Date: November 12, 1997     By: /s/ Stefan Borg
                               ---------------------------------
                                    President and Chief Executive Officer
                                    (Principal Executive Officer)


Date: November 12, 1997     By: /s/ Paul M. Herron
                               ---------------------------------
                                    Vice President and Chief Financial Officer
                                    (Principal Financial and Accounting Officer)



                                      -15-


<PAGE>

                                  EXHIBIT 11.1

                              SUNPHARM CORPORATION
               CALCULATION OF WEIGHTED AVERAGE SHARES OUTSTANDING

FOR NINE MONTHS ENDED SEPTEMBER 30, 1997:

                       TOTAL SHARES           DAYS OUTSTANDING
                       ------------           ----------------
                         3,708,879                     87            322,672,473
                         5,537,165                      5             27,685,825
                         5,608,101                     76            426,215,676
                         5,672,471                     44            249,588,724
                         5,732,471                     61            349,680,731
                                                      ---          -------------
                                                      273          1,375,843,429

         WEIGHTED AVERAGE SHARES              5,039,719
                                              =========

FOR NINE MONTHS ENDED SEPTEMBER 30, 1996:

                         TOTAL SHARES           DAYS OUTSTANDING
                         ------------           ----------------
                           2,884,535                   171           493,255,485
                           2,934,535                    30            88,036,050
                           3,270,619                    26            85,036,094
                           3,313,503                    17            56,329,551
                           3,339,683                    30           100,190,490
                                                       ---           -----------
                                                       274           822,847,670

         WEIGHTED AVERAGE SHARES              3,003,094
                                              =========

For Three Months Ended September 30, 1997:

                         TOTAL SHARES           DAYS OUTSTANDING
                         ------------           ----------------
                           5,672,471                    31           175,846,601
                           5,732,471                    61           349,680,731
                                                        --           -----------
                                                        92           525,527,332

         Weighted Average Shares              5,712,253
                                              =========

FOR THREE MONTHS ENDED SEPTEMBER 30, 1996:

                         TOTAL SHARES           DAYS OUTSTANDING
                         ------------           ----------------
                           2,934,535                    19            55,756,165
                           3,270,619                    26            85,036,094
                           3,313,503                    17            56,329,551
                           3,339,683                    30           100,190,490
                                                        --           -----------
                                                        92           297,312,300

         Weighted Average Shares              3,231,655
                                              =========


                                      -16-