SECURITIES AND EXCHANGE COMMISSION

                              Washington, DC 20549

                                  FORM 10-KSB
                 Annual Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934
                  For the Fiscal year ended December 31, 1997

                          Commission File No. 01-21617
                          ----------------------------

                            THE QUIGLEY CORPORATION
                            -----------------------
             (Exact name of registrant as specified in its charter)


          Nevada                                   23-2577138
          ------                                   ----------
 (State or other jurisdiction of                  (IRS Employer
  incorporation or organization)               Identification Number)

             (MAILING ADDRESS: PO Box 1349, Doylestown, PA 18901.)

        Landmark Building, 10 South Clinton Street, Doylestown, PA 18901
        ----------------------------------------------------------------

               (Address of principle executive offices)         Zip Code

                                 (215) 345-0919
                                 --------------
              (Registrant's telephone number, including area code)

      Securities registered under Section 12(b) of the Exchange Act: None

 Securities registered under Section 12(g) of the Exchange Act:
                        COMMON STOCK ($.0005 Par Value)

Indicate  by check  mark  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. [XX] Yes [ ] No

Indicate by the check mark if there is no disclosure  of  delinquent  filers in
response  to  Item  405 of  Regulation  S-B  contained  in  this  form,  and no
disclosure  will be  contained,  to the  best  of  registrant's  knowledge,  in
definitive  proxy or information  statements  incorporated by reference in Part
III of this Form 10-KSB or any amendments to this Form 10-KSB. [ ]

The Registrant's revenues for its most recent year (1997) were $70,172,563.

As of March 16, 1998,  the  aggregate  market value of the voting stock (all of
one  class  $.0005  par  value  Common  Stock)  held by  non-affiliates  of the
Registrant was $144,350,957 based upon the closing price of the Common Stock on
that date as reported on the NASDAQ SmallCap Issues Market.

                    APPLICABLE ONLY TO CORPORATE REGISTRANTS

Number of shares of each of the Registrant's  classes of securities (all of one
class of  $.0005  par  value  Common  Stock)  outstanding  on March  16,  1998:
13,427,996.

                      DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the following  documents are incorporated by reference in this
Report on Form 10-KSB:

     1.  Information  set forth in Part III of this report is  incorporated  by
     reference to the Registrant's 1997 Proxy Statement.

                  THE EXHIBIT INDEX IS LOCATED ON PAGES 14-15.


                                  Page 1 of 30

<PAGE>






                               TABLE OF CONTENTS


Part I                                                           Page

Item 1.   Business                                                3 - 6

     2.   Properties                                                  6

     3.   Legal Proceedings                                           6

     4.   Submission of Matters to a Vote by Security Holders         6


Part II

     5.   Market for the Registrant's Common Equity and
          Related  Stockholders Matters                           7 - 8

     6.   Management's  Discussion  and Analysis of Results of
          Operations and Financial Condition                      8 - 11

     7.   Financial Statements                                        12

     8.   Change in and Disagreements with Accountants on
          Accounting and Financial Disclosure                         13


Part III

     9.   Directors and Executive Officers of the Registrant          13

     10.  Executive Compensation                                      13

     11.  Security Ownership of Certain Beneficial Owners
          and Management                                              13

     12.  Certain Relationships and Related Transactions              13


Part IV

     13.  Exhibits, Finanical Statement Schedules and Reports
          on Form 8-K                                            14 - 30












                                      -2-
<PAGE>



Forward-Looking Statements

     In  addition  to  historical  information,  this  Annual  Report  contains
forward-looking  statements.  These  forward-looking  statements are subject to
certain  risks and  uncertainties  that could  cause  actual  results to differ
materially from those reflected in these  forward-looking  statements.  Factors
that might cause such a difference  include,  but are not limited to management
of growth,  competition,  pricing pressures on the Company's product,  industry
growth and general  economic  conditions.  Readers are  cautioned  not to place
undue reliance on these forward-looking statements,  which reflect management's
opinions  only as of the date hereof.  The Company  undertakes no obligation to
revise or publicly release the results of any revision to these forward-looking
statements. Readers should carefully review the risk factors described in other
documents the Company files from time to time with the  Securities and Exchange
Commission  including Quarterly Reports on Form 10-Q to be filed by the Company
in fiscal year 1998.


                                     PART 1

ITEM 1. DESCRIPTION OF BUSINESS

Business Development

     The Quigley  Corporation  (hereinafter  referred to as the "Company") is a
Nevada  corporation  which was  organized  on  August  24,  1989 and  commenced
business operations in October, 1989.

     The Company's current business is the manufacture and distribution of the
Cold-Eeze(R) product.  Cold-Eeze(R) is zinc gluconate glycine lozenge proven in
a study conducted by the Cleveland Clinic Foundation to reduce the duration and
severity of the common cold  symptoms by nearly  half.  Cold-Eeze(C)  is now an
established product in the health care and cold remedy market.

Description of Business Operations

     Since its inception,  the Company has conducted  research and  development
into various types of  health-related  food  supplements and  homeopathic  cold
remedies.  Prior to the current year, the Company has had minimal revenues from
operations and as a result had suffered  continuing  losses due to research and
development and operations  expenses.  However,  the Company's product line has
been  developed,  and during the most recent year ended  December 31, 1997, the
Company has had increasing and significant revenues from its national marketing
program and increased public awareness of its Cold-Eeze(R) lozenge product.

     The Company's  initial  business was the marketing and  distribution  of a
line of nutritious health supplements (hereinafter "Nutri-Bars").  Beginning in
1995,  the Company  minimized its marketing of the  Nutri-Bars  and focused its
efforts on the development and marketing of the Company's patented Cold-Eeze(R)
zinc gluconate cold relief lozenge product.

     Since June 1996,  the Company has  concentrated  its  business  operations
exclusively on the manufacturing,  marketing and development of its proprietary
Cold-Eeze(R)   and  Cold-Eezer  Plus   cold-remedy   lozenge  products  and  on
development of various product  extensions.  The Company's lozenge products are
based upon a proprietary  zinc  gluconate  glycine  formula which in a clinical
study  conducted by The Cleveland  Clinic has been shown to reduce the severity
and  duration of the common cold  symptoms.  The Quigley  Corporation  acquired
world-wide  manufacturing  and distribution  rights to this formulation in 1992
and commenced national marketing in 1996.



                                      -3-

<PAGE>



Product

     In May 1992, the Company entered into an exclusive agreement for worldwide
representation,  manufacturing,  marketing  and  distribution  rights to a zinc
gluconate glycine lozenge  formulation which was patented in the United States,
United Kingdom,  Sweden, France, Italy, Canada,  Germany, and pending in Japan.
This  product is  presently  being  marketed by the  Company  and also  through
independent brokers and marketers under the trade-name Cold-Eeze(R).

     In  1996,  the  Company  also  acquired  an  exclusive  license  to a zinc
gluconate  use  patent,  thereby  assuring  the Company of  exclusivity  in the
manufacturing and marketing of zinc gluconate  glycine lozenge  formulated cold
relief products.

     Under a Food and Drug Administration ("FDA") approved  Investigational New
Drug  Application,  filed  by  Dartmouth  College,  a  randomized  double-blind
placebo-controlled  study  (randomized  study),  conducted at Dartmouth College
Health Science, Hanover, New Hampshire,  concluded that the lozenge formulation
treatment,   initiated  within  48  hours  of  symptom  onset,  resulted  in  a
significant reduction in the total duration of the common cold.

     On May 22, 1992,  ZINC AND THE COMMON COLD, A CONTROLLED  CLININAL  STUDY,
was published in England,  in the "Journal of International  Medical Research",
Volume  20,  Number  3,  Pages  234-246.  According  to this  publication,  (a)
flavorings used in other Zinc lozenge products  (citrate,  tartrate,  separate,
orotate,  picolinate,  mannitol  or  sorbitol)  render  the Zinc  inactive  and
unavailable  to the  patient's  nasal  passages,  mouth and throat,  where cold
symptoms  have to be treated,  (b) this patented  pleasant-tasting  formulation
delivers  approximately  93% of the active Zinc to the mucosal surfaces and (c)
the patient has the same  sequence of symptoms as in the absence of  treatment,
but goes through the phases at an  accelerated  rate and with  reduced  symptom
severity.

     On   July   15,   1996,   results   of  a  new   randomized   double-blind
placebo-controlled study on the common cold were published,  which commenced at
the Cleveland  Clinic  Foundation on October 3rd,  1994. The study called "Zinc
Gluconate Lozenges for Treating the Common Cold" was completed and published in
the  Annals of  Internal  Medicine  - Vol.  125 No. 2.  Using a 13.3mg  lozenge
(almost  half the  strength of the lozenge used in our  Dartmouth  Study),  the
result  still  showed  a 42%  reduction  in the  duration  of the  common  cold
symptoms.


Patents and Trademarks, Royalty and Employment Agreements

     The  Company  currently  owns no  patents.  However,  the Company has been
granted an exclusive  agreement for world-wide  representation,  manufacturing,
marketing  and  distribution   rights  to  a   zinc/gluconate/glycine   lozenge
formulation, which are patented as follows:

         United States:             No. 4 684 528 (August 4, 1987) AND
                                    No. 4 758 439 (July 19, 1988)
         Germany:                   No. 3,587,766 (March 2, 1994)
         France & Italy:            No. EP 0 183 840 B1 (March 2, 1994)
         Sweden:                    No. 0 183 840 (March 2, 1994)
         Canada:                    No. 1 243 952 (November 1, 1988)
         Great Britain:             No. 2 179 536 (December 21, 1988)
         Japan:                     Pending.

     In 1996, the Company also acquired  exclusive  license for a United States
zinc  gluconate  use patent number RI 33,465 from the patent  holder.  This use
patent  gives the  Company  exclusive  rights  to both the use and  formulation
patents on zinc  gluconate for reducing the duration and severity of the common
cold symptoms.

     The  Cold-Eeze(R)  product is  manufactured  for the Company by a contract
manufacturer  and  marketed  by the Company in  accordance  with the terms of a
licensing  agreement  (between the Company and the developer).  The contract is
assignable by the Company with the developer's consent. Throughout the duration
of the  agreement  the  developer is to receive a three percent (3%) royalty on
all gross sales  (subsequent to the Company  receiving  payment upon such gross
sales, less certain  deductions).  A separate consulting  agreement between the
parties referred to directly above was

                                      -4-
<PAGE>



similarly  entered into on May 4, 1992,  whereby the  developer is to receive a
consulting fee of two percent (2%) of gross sales of the lozenge by the Company
for consulting services to the Company with respect to such product.

     Pursuant to the License Agreement entered into between the Company and the
patent  holder,  the Company  pays a royalty fee to the patent  holder of three
percent (3%) on all gross sales  (subsequent to the Company  receiving  payment
upon such gross sales, less certain deductions).

     During 1997, the Company  instituted a trademark for the major  components
of its lozenge, ZIGG(TM) (denoting zinc gluconate glycine), to set Cold-Eeze(R)
apart from the imitations proliferating the marketplace.

     An employment  agreement  between the Company and the founders was entered
into on June 1, 1995. The founders,  in consideration of the acquisition of the
cold therapy  product,  are to receive a total  royalty of five percent (5%) of
gross sales of the lozenge,  less certain deductions,  by the Company until the
termination  of said  agreement on May 31, 2005.  These royalty  amounts are in
addition to the normal considerations of an Executive Employment Agreement.


Product Distribution and Customers

     The Company has several Broker, Distributor and Representative Agreements,
both  Nationally  and  Internationally   which  are  sales  performance  based.
Additionally, the Company has issued incentive common stock purchase options to
its Brokers, Distributors and Representatives.

     The  Cold-Eeze(R)   lozenge  products  are  distributed  through  numerous
independent  and chain drug and discount  stores  throughout the United States,
including the Walgreen Company,  BindleyWestern Drug Company,  Revco,  American
Drug Stores, CVS, RiteAid,  Eckerd Drug Company,  Phar-Mor Inc., Drug Emporium,
K-Mart Corporation, and wholesale distributors including McKesson Drug Company,
Bergen Brunswig Drug Company, US Health Distributors, AmeriSource.

     The Company is not dependent on any single  customer as the broad range of
customers includes many large wholesalers, mass merchandisers, and multi-outlet
pharmacy  chains,  five of which account for a significant  percentage of sales
volume.  These five  represent 68% of sales revenue for the year ended December
31, 1997,  76% for the three months  ended  December 31, 1996,  and 62% for the
year ended September 30, 1996. As the customer base broadens still further,  it
is expected that this percentage will begin to reduce.

Research and Development
     The Company's  research and development  costs for the year ended December
31, 1997,  three months ended December 31, 1996,  and year ended  September 30,
1996 were $79,784, $20,777 and $41,856,  respectively. The increase in research
and  development  costs is  attributable  to the  Company's  completion  of its
current  research and  development  projects  with respect to the  Cold-Eeze(R)
product. Future research and development  expenditures to develop extensions of
the lozenge product,  including  potential pediatric  Cold-Eeze(R),  along with
chewing gum and  mouthwash  formulations  of the  Cold-Eeze(R)  product will be
evaluated on an ongoing basis.

Regulatory Matters

     The  business  of the  Company is  subject  to federal  and state laws and
regulations  adopted  for the  health  and  safety  of users  of the  Company's
products.  The Company's  Cold-Eeze(R) product is a homeopathic remedy which is
subject to regulation by various federal,  state and local agencies,  including
the  FDA  and  the  Homeopathic  Pharmacopoeia  of  the  United  States.  These
regulatory  authorities  have  broad  powers,  and the  Company  is  subject to
regulatory  and  legislative  changes  that can  affect  the  economics  of the
industry by requiring  changes in operating  practices  or by  influencing  the
demand for, and the costs of providing its products.  Management  believes that
the Company is in  compliance  with all such laws,  regulations  and  standards
currently in effect  including the Food, Drug and Cosmetics Act of 1938 and the
Homeopathic Pharmacopoeia Regulatory Service.  Management further believes that
the cost of compliance  with such laws,  regulations and standards have not and
will not have a material  adverse effect on the Company's  financial  position,
operations or cash flows in future years.

                                      -5-
<PAGE>


Competition

     The Company competes with other suppliers of cold remedy  products.  These
suppliers  range  widely  in  size.  Some  of the  Company's  competitors  have
significantly  greater  financial,  technical or marketing  resources  than the
Company.  Many of the products  offered by the Company's  competitors  may only
temporarily  relieve  the  symptoms  of the common  cold  symptoms.  Management
believes  that its  product,  which has been  clinically  proven to reduce  the
severity  and  duration  of the  common  cold  symptoms,  offers a  significant
advantage  over many of its  competitors  in the  over-the-counter  cold remedy
market. The Company believes that its ability to compete depends on a number of
factors, including price, product quality, availability and reliability, credit
term, name recognition, delivery time and post-sale service and support.

Employees

     At December 31, 1997 the Company had 10 full-time  employees,  of whom all
were involved in an executive,  marketing or administrative  capacity.  None of
the Company's employees are covered by a collective  bargaining agreement or is
a member of a union.

Suppliers

     The Company currently uses a single supplier to provide its zinc gluconate
glycine  finished  product.  The  product  is  manufactured  by a  third  party
manufacturer,   that  produces   exclusively  for  the  Company.   Should  this
relationship   terminate  or  discontinue  for  any  reason,  the  Company  has
formulated a contingency plan necessary in order to prevent such discontinuance
from materially affecting the Company's  operations.  Any such termination may,
however,  result in a  temporary  delay in  production  until  the  replacement
facility is able to meet the Company's production requirements.

     Raw  material  used in the  production  of the product is  available  from
numerous sources. Currently, it is being procured from a single vendor in order
to secure  purchasing  economies.  In a situation  where this one vendor is not
able to supply the contract  manufacturer  with the ingredients,  other sources
have been identified.

ITEM 2. Description of Property

     (a)  The Company currently  maintains its executive offices in Doylestown,
          Pennsylvania,  where it occupies  approximately  2,500 square feet of
          office space pursuant to a 2-year lease agreement  expiring  December
          1998. The Company also occupies warehouse space, in Las Vegas, Nevada
          and in New  Britain,  Pennsylvania.  The Nevada  location has a three
          year lease,  occupying  approximately 5,400 square feet, with the New
          Britain  location  having  a  month  to  month  ongoing  arrangement,
          occupying  2,600 square feet.  The Company also stores its product in
          three  additional  warehouses in  Pennsylvania  with storage  charges
          based  upon the  quantities  of product  being  stored.  The  monthly
          aggregate  lease payments are $4,476.  The Company  believes that its
          existing warehousing facilities are adequate. The Company has reached
          an  agreement   in  principle  to  purchase  a  building,   including
          improvements,  approximating  14,000 square feet that will be used as
          corporate  offices  as  well  as  laboratory  facilities,  at a  cost
          approximating $1 million dollars.


ITEM 3. Legal Proceedings

     The Company is subject to legal  proceedings  and claims which have arisen
in the ordinary  course of its business.  Although there can be no assurance as
to  the  ultimate  disposition  of  these  matters,  it is the  opinion  of the
Company's  management  based upon the information  available at this time, that
the expected outcome of these matters,  individually or in the aggregate,  will
not have a  material  adverse  effect on the  financial  position,  results  of
operations or cash flows of the Company.


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

          None

                                      -6-

<PAGE>


                                    PART II

ITEM 5. Market for Company's Common Equity and Related Stockholder Matters

Market Information

     From July 1997 the Company's Common Stock, $.0005 par value, has traded on
the NASDAQ  SmallCap Market under the trading symbol "QGLY." Prior to this, the
stock was reported on the NASD Bulletin  Board.  The following table sets forth
the average  range of bid and ask  quotations  for each full  quarterly  period
presented.

By Quarter, Calendar 1996 & 1997
                                           Common Stock

                                 1997                           1996
                        -----------------------     --------------------------
 Quarter Ended               High        Low             High           Low

 December 31, 1995                                      $0.687        $0.437

 March 31                  $18.500      $8.375          $0.687        $0.437

 June 30                   $11.250      $7.687          $1.125        $0.312

 September 30              $20.125      $9.187          $5.250        $0.812

 December 31               $23.000     $14.000         $10.750        $4.187


     Prior to July 1997, trading  transactions in the Company's  securities had
been  limited  to the  over-the-counter  market.  The  over-the-counter  market
quotes,  dated before July 1997,  indicated above, reflect inter-dealer prices,
without retail mark-up or commissions, and may not necessarily represent actual
transactions.  Accordingly,  an  "established  public trading  market" for such
securities  existed for more than sixty  business  days  before July 1997.  All
prices indicated herein relating to periods before July 1997, had been reported
to the Registrant by  broker-dealer(s)  making a market in its securities.  Bid
and asked quotations at fixed prices had appeared  regularly in the established
quotation  systems on at least one-half of such business days. Since July 1997,
the  Company's  securities  have  traded  on the  NASDAQ  SmallCap  Market  and
consequently  stock  prices are  available  daily as  generated by the SmallCap
Market established quotation system.

     In January  1997,  there was a two for one share  split,  benefiting  each
stockholder on record as of January 15, 1997.

Holders

     As of December 31, 1997, there were approximately 411 holders of record of
the Company's Common Stock,  including brokerage firms, clearing houses, and/or
depository firms holding the Company's securities for their respective clients.
The exact number of beneficial owners of the Company's  securities is not known
but would necessarily exceed the number of record owners indicated above.

Dividends

     No cash dividends were paid during 1997 and 1996. The Company has not paid
or declared any  dividends  upon its Common Stock since its  inception.  Future
dividends are dependent upon cash needs for international expansion.




                                      -7-


<PAGE>


Warrants and Options

     In addition to the Company's  aforesaid  outstanding  Common Stock,  there
are, as of December  31, 1997,  issued and  outstanding  Common Stock  Purchase
Warrants and Options which are exercisable at the price-per-share indicated and
which expire on the date indicated, as follows:

Description        Number      Exercise Price              Expiration Date

 CLASS "D"        740,000             $0.50             December 14, 2000
 CLASS "E"      1,175,000             $1.75                  June 30,2001
 CLASS "F"        325,000             $2.50              November 4, 2001
 CLASS "G"        945,000            $10.00                   May 5, 2002
 Options        1,232,600       $0.50-$1.75    December 1, 2000 to April 2, 2002

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


Overview

     The trend  continued in 1997 that started  during the last three months of
1996 with the Company focusing  exclusively on the manufacture and marketing of
the  patented  Cold-Eeze(R)  cold relief  lozenge.  During  1997,  Cold-Eeze(R)
established  itself as the dominant remedy  available to counteract the effects
of the common cold  symptoms.  The  uniqueness  of the product was  established
following the publication of the Cleveland Clinical Study in July 1996, showing
that Cold-Eeze(R)  significantly  reduced both the duration and severity of the
common cold  symptoms.  Continued  advertising  and  promotional  activity  has
greatly  increased  the public  awareness  of the  product,  along with various
independent  television programs  highlighting the product's  desirability as a
common cold remedy. The culmination of these efforts can be seen when comparing
the twelve  months  sales  revenue  ending  December 31, 1997 and 1996 of $70.2
million and $5.0 million  respectively.  It is  anticipated  that this momentum
generated  over the past  fifteen  months will  continue in 1998.  This product
serves the cold remedy market. The demand for the product is seasonal, with the
first and fourth quarters representing the largest sales volume.

     The Company  continues to use the  resources of  independent  national and
international brokers to represent the Company's  Cold-Eeze(R) lozenge product,
thereby saving capital and other ongoing expenditures,  that would otherwise be
incurred.

     On the manufacturing side, 1997 saw the introduction of various efficiency
measures by the  manufacturing  company,  in terms of new  equipment,  improved
purchasing procedures and pricing, and improved production availability thereby
achieving  greater output in order to satisfy consumer demand.  In addition the
manufacturer  commenced  manufacturing  exclusively  for the  Company  in 1997,
thereby  boosting  their  output  further.  At the end of 1996,  as a result of
unexpected  demand  and  inadequate  manufacturing  availability,  there  was a
significant order backlog, in contrast at the end of 1997, when all orders were
being met despite heavy demand.

     One of the reasons for the delay in marketing the product  internationally
was this  manufacturing  output  constraint.  During 1997 the  domestic  market
continued to grow to establish the product. It is anticipated 1998 will be when
the Company  introduces the product to the  international  market.  In February
1998, the Company reached an agreement with Merck KGaA, Darmstadt,  Germany for
exclusive distribution of Cold-Eeze(R) in the Canadian market.  Ongoing, future
revenues,  costs,  margins and profits will  continue to be  influenced  by the
Company's ability to maintain and increase its manufacturing  capacity together
with its  marketing  and  distribution  capabilities  in order to  compete on a
national and international level.



                                      -8-
<PAGE>



Results of Operations

Twelve months ended December 1997 compared with same period 1996

     For 1997, the Company  reported  revenues of $70,172,563 and net income of
$20,966,862, as compared with revenues of $4,993,496 and net income of $986,392
for the comparable period ended December 31, 1996. This substantial increase in
revenue is primarily  attributable to the market acceptance of the Cold-Eeze(R)
lozenge product.  The year 1997 saw  Cold-Eeze(R)  become a formidable force in
the  marketplace  as a unique remedy to reduce the severity and duration of the
common  cold  symptoms.  This  resulted  from the release of the results of The
Cleveland  Clinic  Study  in July  1996,  a  national  marketing  program  that
commenced in the fourth quarter of 1996 together with national  exposure in the
media, such as the NBC's PrimeTime network national news program and "20/20" on
ABC in January 1997.  Sales in the  transition  quarter ended December 31, 1996
were $4,091,653,  thereby  commencing the current trend of Cold-Eeze(R) being a
major player in the cold remedy market.

     Cost of Goods Sold, as a percentage of net sales, decreased by 2.35%, down
to 30.5%  for 1997 from  32.85%  for 1996.  This  decrease  in cost of goods is
primarily  due  to  efficiencies  resulting  from  the  manufacturer  utilizing
improved equipment such as fully automated  production lines. In addition,  the
higher volume of production  brought  economies of scale resulting in the lower
purchase cost of raw materials and packaging, thereby, reducing the cost of the
finished product. During 1997, operating expenses increased to $13,506,252 from
$2,155,646  in the  comparable  period 1996.  This was as a result of increased
costs  associated with a national  marketing and advertising  program and other
variable costs associated with bringing the sales volume to the level achieved.

     During 1997, the Company's major operating expenses of delivery, salaries,
brokerage  commissions,  promotion,  advertising  and legal costs accounted for
approximately  $12,562,060  (93%)  of the  $13,506,252  total  operating  costs
incurred by the Company. Other operating costs for this period maintained their
fixed  attributes,  in that they did not follow sales  volume but  maintained a
relative  constant dollar value for 1997.  During 1996, these expenses amounted
to $1,826,651  (85%) of the total of $2,155,646.  For future periods,  a normal
profitable  relationship should develop for all costs and operating expenses as
they relate to sales.

     The  total  assets  of the  Company  at  December  31,  1997 and 1996 were
$49,847,090  and  $6,950,297   respectively.   Working  capital   increased  to
$41,140,547  from  $5,205,531 for the  respective  periods.  These  significant
increases  are primarily  due to increased  sales volume,  and funds or paid in
capital  generated  from the sale,  exercise  or exchange  for  services of the
Company's  Common  Stock,  options and  warrants.  Additionally,  inventory has
increased  from  $300,732 at December  31, 1996 to  $7,726,757  at December 31,
1997.

Three months ended December 1996 compared with same period 1995

     For the three  months  ended  December  31,  1996,  the  Company  reported
revenues of $4,091,653 and net income of $1,676,314,  as compared with revenues
of $147,718 and a net loss of ($4,347) for the comparable period ended December
31, 1995. This substantial increase in revenue and profits was primarily due to
the Company's  national  marketing  program  coupled with the  publication of a
clinical  trial  study  in  a  medical   journal   during  1996,   proving  the
effectiveness  of  Cold-Eeze(R)  as a remedy for the common cold.  Prior to the
release of this study, financial information reported was not comparable to the
financial  relationships  that were  present in the three  month  period  ended
December  31,  1996.  The  gross  profit  rate of 66.4% was  lower  because  of
manufacturing  inefficiencies  associated with the set up of larger  production
volume.

     Operating expenses,  such as delivery,  brokerage commissions,  promotion,
and advertising costs, increased significantly over the prior comparable period
due to the  national  marketing  efforts for the  Cold-Eeze(R)  product.  These
expenses  accounted for approximately  $585,202 of the total operating costs of
$802,823  for the three  months  ended  December  31, 1996 as compared to total
operating costs of $134,090 for the prior comparable period.

     Total  assets  of   $6,950,297,   working   capital  of   $5,205,531   and
shareholders'  equity of  $5,543,504  for the period  ended  December 31, 1996,
increased  dramatically from the period ended September 30, 1996. This occurred
primarily from significant sales increases,  which thereby  increased  accounts
receivable by $1,593,746 and inventories by $242,393.  Also, issuance of common
stock related transactions totaling $1,815,795 contributed to the balance sheet
increases.


                                      -9-

<PAGE>


Twelve months ended September 1996 compared with same period 1995

     For 1996,  the Company  reported  revenues of $1,049,561 and a net loss of
($694,269),  as compared with revenues of $501,903 and a net loss of ($152,556)
for the comparable  period ended September 30, 1995. This substantial  increase
in revenue was  primarily  attributable  to gradual  market  acceptance  of the
Cold-Eeze(R)   lozenge   products.   The  gradual  market   acceptance  of  the
Cold-Eeze(R)  product resulted from a national  marketing  program commenced in
1996 and the  release of the  results of The  Cleveland  Clinic  Study in July,
1996.  Sales in 1995  were  $501,903,  most of  which  resulted  following  the
Company's marketing shift from health food bars to cold-relief products.

     Cost of Goods Sold, as a percentage  of net sales,  increased to 27.1% for
1996 from  22.3% for 1995.  The slight  increase  was  similarly  caused by the
Company's  change in its  product  mix  toward  developing  and  marketing  the
Cold-Eeze(R)  products  instead of health  food bars.  During  1996,  operating
expenses  similarly  increased to $1,493,794  from  $552,696 in 1995.  This was
primarily a result of  increased  costs  associated  with a national  marketing
program and the increased  sales volume from the  Cold-Eeze(R)  product  during
1996.

     During 1996, the Company's major operating  expenses included $558,281 for
salaries  and  $570,752  for  advertising  which  collectively   accounted  for
$1,129,033 or approximately 75.6% of the Company's  operating  expenses.  Other
operating costs for this period maintained their fixed attributes, in that they
did not follow sales volume but maintained a relative constant dollar value for
1995.  During 1995, these expenses  included  $106,660 for salaries and $93,931
for  advertising.  If these two  categories  of  expenses  maintained  the same
relationship  to net sales  from  1995,  then the net loss for 1996  would have
changed to basically a break even.

     The total assets of the Company at September  30, 1996 and  September  30,
1995 were $1,368,301 and $437,076  respectively.  Working capital  increased to
$910,970 from $287,281 for the respective periods.  These significant increases
are due primarily to increased sales volume, the acquisition of the use patent,
and funds or paid in capital generated from the sale,  exercise or exchange for
services of the Company's Common Stock, options and warrants.

     At September 30, 1996, the Company's sales order backlog was approximately
$2 million  as  compared  to no backlog at  September  30,  1995.  The  backlog
increase was  attributable  to a growth in sales of the Company's  Cold-Eeze(R)
lozenge products and shortfalls in the manufacturing capabilities.


Material Commitments and Significant Agreements

     Since the Cold-Eeze(R)  lozenge product is manufactured for the Company by
an outside source,  capital  expenditures during 1998 are not anticipated to be
material.  The Company  has reached an  agreement  in  principle  to purchase a
building, including improvements, approximating 14,000 square feet that will be
used  as  corporate  offices  as  well  as  laboratory  facilities,  at a  cost
approximating $1 million dollars.

     There are  significant  royalty  agreements  between  the  Company and the
developer and patent holder of the Company's  cold-relief  product. The Company
has  entered  into  royalty  agreements  with the patent  holder  that  require
payments of 6% of gross sales and with the  founders  who share a royalty of 5%
of gross sales. Additionally,  the developer receives a consulting fee of 2% of
gross  sales.  All such  royalty  and  consulting  arrangements  are subject to
certain adjustments,  and payments are required of the Company only after funds
are remitted from such sales.

     The agreements with the patent holder and the developer expire on March 5,
2002 and May 4, 2007, respectively and with the founders on May 31, 2005.



                                      -10-
<PAGE>



Liquidity and Capital Resources

     The Company had working  capital of $41,140,547 and $5,205,531 at December
31, 1997 and 1996, respectively.  The increase in working capital is due to the
proceeds  received by the Company from the sale or exchange of common stock and
options for cash or services and  increased  sales of  $65,179,067.  Total Cash
balances at December 31, 1997 were  $25,498,359,  as compared to  $2,455,973 at
December 31, 1996.

     The Company  believes that its increased  marketing  efforts and increased
national  publicity  concerning  the  Cold-Eeze(R)  product,  together with the
Company's increased  manufacturing  availability,  will result in significantly
increased  revenues in 1998.  These revenues will provide an internal source of
capital to fund the Company's business  operations.  In addition to anticipated
earnings from operations, the Company may continue to raise capital through the
issuance of equity securities to finance anticipated growth.

     Management is not aware of any trends,  events or uncertainties  that have
or are reasonably  likely to have a material negative impact upon the Company's
(a) short term or long term liquidity, (b) net sales or revenues or income from
continuing operations.  Any challenge to the Company's patent rights could have
a material  adverse  effect on future  liquidity of the Company,  however,  the
Company is not aware of any condition that would make such an event probable.

     Management  believes  that its  present  cash  balances  and  future  cash
provided by operating  activities will be sufficient to support current working
capital  requirements and planned expansion through 1998.  However,  should the
Company's  business expand  significantly,  the Company obtained,  in September
1997,  a $5,000,000  revolving  line of credit  facility for general  corporate
purposes. This facility is collateralized by accounts receivable and inventory,
and renews in one year, with interest accruing at the Wall Street Journal prime
rate,  or 275 basis points above the  Euro-Dollar  Rate,  each to move with the
respective base rate.  There were no borrowings under this line during the year
ended December 31, 1997.

New Accounting Standards

     In June 1997, the Financial  Accounting  Standards  Board ("FASB")  issued
Statement  of  Financial  Accounting  Standard  ("SFAS")  No.  130,  "Reporting
Comprehensive  Income," requiring more detailed disclosure of specific areas of
income and expenses.  The Statement establishes standards for the reporting and
display of  comprehensive  income and its components in a full set of financial
statements.  The  impact of its  adoption  by the  Company  is  expected  to be
insignificant.  This new  standard is  effective  for periods  beginning  after
December 15, 1997.

     In June 1997, the FASB issued SFAS No. 131,  "Disclosure about Segments of
an Enterprise  and Related  Information,"  requiring  public  companies  report
certain information about operating segments within their financial statements.
Additionally,  it requires that such entities report certain  information about
their products and services,  the geographic  areas in which they operate,  and
their major customers.  These additional  disclosure  requirements are required
within financial statements for fiscal years beginning after December 15, 1997.
During 1998, the Company expects to commence international activities which may
require additional disclosures.

Impact of Inflation

     The Company is subject to normal  inflationary trends and anticipates that
any increased costs should be passed on to its customers.

Year 2000 Compliant

     Management  believes  no  material   commitments  or  contingencies  exist
relating to computer  operations as the computer system utilized by the company
in its operation has been deemed "Year 2000" compliant by the system vendor.




                                      -11-

<PAGE>


ITEM 7 FINANCIAL STATEMENTS


INDEX TO FINANCIAL STATEMENTS                                         Page
                                                                     ------

     Balance Sheets as of December 31, 1997 and 1996                   F-1

     Statements of Income for the year ended December 31,
     1997, three months ended December 31, 1996 and year
     ended September 30, 1996                                          F-2

     Statements of Stockholders' Equity for the year ended
     December 31, 1997, three months ended December 31, 1996
     and year ended September 30, 1996                                 F-3

     Statements of Cash Flows for for the year ended
     December 31, 1997, three months ended December 31, 1996
     and year ended September 30, 1996                            F-4  to F-5

     Notes to Financial Statements                                F-6 to F-14

     Responsibility for Financial Statements                          F-15

     Report of Independent Accountants                                F-16

     Report of Independent Certified Public Accountant                F-17























                                      -12-

<TABLE>
<CAPTION>


                            THE QUIGLEY CORPORATION
                                 BALANCE SHEETS


               ASSETS                             December 31,     December 31,
               ------                                   1997            1996
                                                        ----            ----
<S>                                               <C>             <C>

CURRENT ASSETS:
  Cash and cash equivalents ...................   $ 25,498,359    $  2,455,973
  Accounts receivable, net ....................     10,851,573       2,200,824
  Due from attorney's escrow account ..........           --           260,000
  Inventory ...................................      7,726,757         300,732
  Prepaid income taxes ........................      3,548,057         430,558
  Prepaid expenses and other current assets ...      1,023,628         544,609
  Deferred income taxes .......................        591,245         419,628
                                                  ------------    ------------
      TOTAL CURRENT ASSETS ....................     49,239,619       6,612,324
                                                  ------------    ------------

EQUIPMENT - Less accumulated depreciation .....        162,189          66,599
                                                  ------------    ------------

OTHER ASSETS:
  Patent rights - Less accumulated amortization        372,986         267,985
  Other assets .................................        72,296           3,389
                                                  ------------    ------------
      TOTAL OTHER ASSETS .......................       445,282         271,374
                                                  ------------    ------------

TOTAL ASSETS ...................................  $ 49,847,090    $  6,950,297
                                                  ============    ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable .............................  $  1,115,620    $    131,797
  Accrued royalties and sales commissions ......     4,730,856         630,645
  Accrued freight ..............................       468,577           4,470
  Other current liabilities ....................     1,784,019         639,881
                                                  ------------    ------------
      TOTAL CURRENT LIABILITIES ................     8,099,072       1,406,793
                                                  ------------    ------------

COMMITMENT AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
  Preferred stock, $.01 par value; authorized
     1,000,000; no shares issued                        --              --
  Common stock, $.0005 par value;
     authorized 50,000,000;
  Issued: 13,791,358 and 12,099,192 shares ......        6,896           6,049
  Additional paid-in capital ....................   23,046,551       7,010,244
  Retained earnings(Deficit) ....................   19,839,929      (1,126,933)
  Less: Treasury stock, 486,862 at cost .........   (1,145,358)         --
        Stock subscription receivable ...........         --          (345,856)

                                                  ------------    ------------
      TOTAL STOCKHOLDERS' EQUITY ................   41,748,018       5,543,504
                                                  ------------    ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ...... $ 49,847,090    $  6,950,297
                                                  ============    ============
</TABLE>


                 See accompanying notes to financial statements
                                      F-1


<PAGE>
<TABLE>
<CAPTION>


                            THE QUIGLEY CORPORATION
                              STATEMENTS OF INCOME

                                                        Three
                                       Year Ended   Months Ended     Year Ended
                                       December 31,  December 31,  September 30,
                                            1997         1996           1996
                                       ------------  ------------   ------------
<S>                                     <C>           <C>           <C>

NET SALES ...........................   $70,172,563   $ 4,091,653   $ 1,049,561
                                        -----------   -----------   -----------

COST OF SALES .......................    21,427,888     1,374,327       283,967
                                         -----------   -----------  -----------

GROSS PROFIT ........................    48,744,675     2,717,326       765,594
                                        -----------   -----------   -----------


OPERATING EXPENSES:
   Sales and marketing ..............     7,741,428       585,202       647,782
   Administration ...................     5,764,824       217,621       839,131
                                        -----------   -----------   -----------
TOTAL OPERATING EXPENSES ............    13,506,252       802,823     1,486,913
                                        -----------   -----------   -----------

INCOME BEFORE TAXES .................    35,238,423     1,914,503      (721,319)
                                        -----------   -----------   -----------

INCOME TAXES ........................    14,271,561       238,189       (27,050)
                                        -----------   -----------   -----------

NET INCOME ..........................   $20,966,862   $ 1,676,314   $  (694,269)
                                        ===========   ===========   ===========


Earnings  per common share:

   Basic ............................   $      1.72   $      0.15        ($0.08)
                                        ===========   ===========   ===========

   Diluted ..........................   $      1.43   $      0.12        ($0.08)
                                        ===========   ===========   ===========


Weighted average common shares outstanding:

   Basic ............................    12,181,020    11,087,279     8,131,178
                                        ===========   ===========   ===========

   Diluted ..........................    14,633,999    13,611,295     8,131,178
                                        ===========   ===========   ===========


</TABLE>










                 See accompanying notes to financial statements
                                      F-2

<PAGE>

<TABLE>
<CAPTION>


                                                THE QUIGLEY CORPORATION
                                          STATEMENTS OF STOCKHOLDERS' EQUITY

                                 Common                   Additional                   Retained   Stockholders
                                  Stock         Issued      Paid-in-     Treasury      Earnings  Subscription
                                 Shares         Amount       Capital        Stock      (Deficit)   Receivable        Total
                             ------------    ----------    ----------   ----------    ----------   ----------    ----------
<S>                            <C>           <C>           <C>         <C>          <C>           <C>           <C>

Balance October 1, 1995 ...     6,722,828    $    3,361    $2,466,632               ($2,108,978)  ($   61,875)  $   299,140

Conversion of options .....        84,000            42        44,058                                                44,100

Shares issued to officers .     1,060,000           530       313,220                                               313,750


Shares issued  for services       674,386           337       790,499                                               790,836


Proceeds from warrants
    exercised .............         4,140             2         2,068                                                 2,070

Partial receipt of ........                                                                             9,145         9,145
receivable

Proceeds from stock,
    options, warrants .....       994,174           497       512,779                                               513,276

Issue of notes ............                                                                           (35,000)      (35,000)

Net loss year ended
    September 30, 1996                                                                  (694,269)                  (694,269)
                              -----------  ------------  ------------  -----------  ------------  -----------  ------------
Balance September 30, 1996      9,539,528         4,769     4,129,256                 (2,803,247)     (87,730)    1,243,048
                              -----------  ------------  ------------  -----------  ------------  -----------  ------------

Shares issued  for services       140,000            70       217,745                                               217,815

Proceeds from common
    stock issued ..........        54,664            27        40,973                                                41,000

Shares issued
   for subscription
   receivable..............                                                                          (258,126)     (258,126)

Proceeds from options &
    warrants exercise .....     2,365,000         1,183     1,590,416                                             1,591,599

Tax benefits from options
warrants, & stock..........                                 1,031,854                                             1,031,854

Net income period ended
   December 31, 1996 ......                                                            1,676,314                  1,676,314
                              -----------  ------------  ------------  -----------  ------------  -----------  ------------
Balance December 31, 1996 .    12,099,192         6,049     7,010,244                 (1,126,933)    (345,856)    5,543,504
                              -----------  ------------  ------------  -----------  ------------  -----------  ------------
Shares issued for services         21,054            11       212,894                                               212,905

Subscription sales ........        17,884             8        75,998                                                76,006

Shares for subscription
    receivable ............                                                                           345,856       345,856

Warrants issued for .......
contract termination costs.                                   609,000                                               609,000

Treasury stock ............      (486,862)                  1,145,358 ($1,145,358)                                      -

Tax benefits from options,
    warrants & common stock                                11,148,083                                            11,148,083

Proceeds from options and
    warrants exercised ....     1,653,228           828     2,844,974                                             2,845,802

Net income year ended
    December 31, 1997 .....                                                           20,966,862                 20,966,862
                              ===========  ============  ============  ===========  ============  ===========  ============
Balance December 31, 1997 .    13,304,496  $      6,896  $ 23,046,551  ($1,145,358) $ 19,839,929       --      $ 41,748,018
                              ===========  ============  ============  ===========  ============  ===========  ============

</TABLE>


                 See accompanying notes to financial statements
                                      F-3


<PAGE>



<TABLE>
<CAPTION>


                            THE QUIGLEY CORPORATION
                            STATEMENTS OF CASH FLOWS

                                                                        Three Months
                                                          Year Ended        Ended         Year Ended
                                                         December 31,    December 31,   September 30,
                                                             1997             1996            1996
                                                         ------------   -------------   -------------
<S>                                                      <C>            <C>            <C>

OPERATING ACTIVITIES:
   Net income (loss) .................................   $20,966,862    $ 1,676,314    $   (694,269)
                                                         ------------    ------------   ------------
   Adjustments to reconcile net income (loss)
      to net cash provided by operations:
      Depreciation and amortization ..................       133,323         18,807          17,461
      Expenditures paid with common stock ............     1,131,025        142,814         894,586
      Deferred income taxes ..........................      (171,617)      (363,107)        (27,050)
      (Increase) decrease in assets:
         Accounts receivable .........................    (8,650,749)    (1,593,746)       (471,095)
         Inventory ...................................    (7,426,025)      (242,393)         24,098
         Prepaid expenses and current assets .........    (1,001,045)      (544,609)        (11,633)
         Prepaid income tax ..........................    (3,117,499)      (430,558)            --

      Increase in liabilities:
         Accounts payable ............................       983,823         68,658           8,576
         Accrued royalties and sales commissions .....     4,100,211        630,645             --
         Accrued freight .............................       464,107          4,470             --
         Other current liabilities ...................     1,582,639        618,767             --
                                                         ------------    ------------   ------------
            Total adjustments ........................   (11,971,807)    (1,690,252)        434,943
                                                         ------------    ------------   ------------

NET CASH PROVIDED BY OPERATING ACTIVITIES ............     8,995,055        (13,938)       (259,326)
                                                         ------------    ------------   ------------

CASH FLOWS USED IN INVESTING ACTIVITIES:
   Capital expenditures .............................       (121,008)        (6,212)        (42,757)
   Other assets .....................................        (68,907)           (11)            --
                                                         ------------    ------------   ------------
   NET CASH FLOWS USED IN INVESTING ACTIVITIES ......       (189,915)        (6,223)        (42,757)
                                                         ------------    ------------   ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Tax benefits from stock options, warrants
      and common stock                                    11,148,083      1,031,854             --
   Proceeds from exercises of options and warrants ..      2,407,300      1,591,600         515,346
   Proceeds from common stock issued ................         76,007         41,000             --
   Due from attorney's escrow account ...............        260,000       (260,000)          9,000
   Change in stock subscription receivable ..........        345,856       (298,467)         15,145
                                                         ------------    ------------   ------------
   NET CASH FLOWS FROM FINANCING ACTIVITIES .........     14,237,246      2,105,987         539,491
                                                         ------------    ------------   ------------

   NET INCREASE IN CASH .............................     23,042,386      2,085,826         237,408

CASH & CASH EQUIVALENTS, BEGINNING OF PERIOD ........      2,455,973        370,147         132,739
                                                         ------------    ------------   ------------

CASH & CASH EQUIVALENTS, END OF PERIOD ..............   $ 25,498,359    $ 2,455,973       $ 370,147
                                                         ============    ============   ============


</TABLE>

                 See accompanying notes to financial statements
                                      F-4

<PAGE>



                            THE QUIGLEY CORPORATION
                      STATEMENTS OF CASH FLOWS (continued)


Supplemental disclosure of cash flow information
------------------------------------------------

                                                       Three
                                     Year Ended     Months Ended    Year Ended
                                    December 31,    December 31,   September 30,
                                        1997           1996              1996
                                          $             $                 $
                                ------------------------------------------------

Income taxes paid                    6,650,000           -                  -
--------------------------------------------------------------------------------

Non cash investing
  and financing:
Conversion of put
  option into equity                       -             -              (44,100)
Capital expenditures                    (7,905)          -                  -
Patent rights                         (205,000)      (75,000)          (210,000)
Common stock issued for
  services performed                 1,358,263        75,000            254,100
Treasury stock cost                 (1,145,358)          -                  -































                 See accompanying notes to financial statements
                                      F-5

<PAGE>



                            THE QUIGLEY CORPORATION
                         NOTES TO FINANCIAL STATEMENTS


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


     The Quigley  Corporation  (the  "Company") was organized under the laws of
the State of Nevada on August 24, 1989. The Company started business October 1,
1989 and has been  engaged in the business of marketing  health  products.  The
products are fully developed and are being offered to the general  public.  For
the most recent fiscal periods, the Company has concentrated its efforts in the
promotion  of a product  known as  "Cold-Eeze(R)"  in the United  States.  This
product serves the cold remedy market.  The demand for the product is seasonal,
with the first and fourth quarters representing the largest sales volume.

Principles of Accounting

     The  preparation of the financial  statements in conformity with generally
accepted  accounting  principles  requires  management  to make  estimates  and
assumptions  that affect the  reported  amounts of assets and  liabilities  and
disclosure of contingent  liabilities at the dates of the financial  statements
and the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.

Fiscal Year

     On January  2, 1997,  the Board of  Directors  approved  the change of the
Company's  fiscal year from  September  30 to December 31 to reflect the fiscal
year  that has been  generally  adopted  by the  pharmaceutical  industry.  The
three-month  transition  period ended  December 31, 1996  represents the bridge
between  the  Company's  old and new fiscal  year-ends.  Certain  prior  period
amounts have been reclassified to conform with the 1997 presentation.

Cash Equivalents

     The  Company  considers  all  highly  liquid  investments  with an initial
maturity  of  three  months  or  less  at  the  time  of  purchase  to be  cash
equivalents.  Cash equivalents  include cash on hand,  monies invested in money
market funds and savings  accounts.  The carrying amount  approximates the fair
market value due to the short term maturity of these investments.

Inventories

     Inventories  are stated at the lower of cost or market.  The Company  uses
the  first-in,   first-out   ("FIFO")  method  of  determining   cost  for  all
inventories. Inventories are comprised of finished goods only.

Equipment

     Equipment  is  recorded  at  cost.  The  Company  uses  a  combination  of
straight-line and accelerated  methods in computing  depreciation for financial
reporting  purposes.  The annual  provision for  depreciation has been computed
principally in accordance  with the following  ranges of estimated asset lives:
furniture  - seven  years;  machinery  and  equipment  - five to  seven  years;
computer software - three years; and vehicles - five years.

Patent Rights

     Patent  rights are amortized on a  straight-line  basis over the period of
the related licensing  agreements,  approximating 67 months.  Amortization cost
incurred for the year ended December 31, 1997,  three months ended December 31,
1996 and year ended  September  30, 1996,  were  $100,000,  $13, 881 and $3,134
respectively.  Accumulated amortization at December 31, 1997, December 31, 1996
and September 30, 1996 is $117,015, $17,015 and $3,134 respectively.

                                      F-6

<PAGE>


Concentration of Risks

     Financial  instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash investments and trade
accounts receivable.

     The Company maintains cash and cash equivalents with three major financial
institutions.  Since the  Company  maintains  amounts  in excess of  guarantees
provided by the Federal Depository Insurance Corporation,  the Company performs
periodic  evaluations  of the  relative  credit  standing  of  these  financial
institutions and limits the amount of credit exposure with any one institution.

     Trade  accounts  receivable,  potentially  subjects  the Company to credit
risk. The Company  extends credit to its customers  based upon an evaluation of
the  customer's  financial  condition and credit history and generally does not
require  collateral.  The  Company has  historically  incurred  minimal  credit
losses. The Company's broad range of customers includes many large wholesalers,
mass merchandisers, and multi-outlet pharmacy chains, five of which account for
a significant  percentage of sales volume,  which  represents  68% for the year
ended  December 31, 1997, 76% for the three months ended December 31, 1996, and
62% for the year ended September 30, 1996.

     The Company currently uses a single supplier to provide its zinc gluconate
glycine  finished  product.  The  product  is  manufactured  by a  third  party
manufacturer,   that  produces   exclusively  for  the  Company.   Should  this
relationship   terminate  or  discontinue  for  any  reason,  the  Company  has
formulated a contingency plan necessary in order to prevent such discontinuance
from materially affecting the Company's  operations.  Any such termination may,
however,  result in a  temporary  delay in  production  until  the  replacement
facility is able to meet the Company's production requirements.

     Raw  material  used in the  production  of the product is  available  from
numerous sources. Currently, it is being procured from a single vendor in order
to secure  purchasing  economies.  In a situation  where this one vendor is not
able to supply the contract  manufacturer  with the ingredients,  other sources
have been identified.

Long-lived assets

     Effective  January 1, 1996,  the Company  adopted  Statement  of Financial
Accounting  Standards  ("SFAS")  No. 121,  "Accounting  for the  Impairment  of
Long-Lived  Assets and for Long Lived Assets to be Disposed of." The provisions
of SFAS No.  121  require  the  Company  to review  its  long-lived  assets for
impairment on an exception  basis whenever  events or changes in  circumstances
indicate that the carrying amount of the assets may not be recoverable  through
future cash flows.  If it is determined  that an  impairment  loss has occurred
based on the expected cash flows, a loss is recognized in the income statement.

Revenue Recognition

     Sales are recognized at the time a shipment is received by the customer.

Royalties

     The Company  recognizes  royalties  paid as  increases in cost of products
sold.

Advertising

     Advertising  costs are generally  expensed within the period to which they
relate.  Advertising  cost incurred for the year ended December 31, 1997, three
months  ended  December  31,  1996 and year  ended  September  30,  1996,  were
$3,050,210, $124,371, and $121,385, respectively.


Income Taxes

     The  Company  accounts  for income  taxes  under  Statement  of  Financial
Standards No. 109 "Accounting for Income Taxes." This statement is an asset and
liability  approach which  requires the  recognition of deferred tax assets and
liabilities for the future tax consequences of events that have been recognized
in the Company's financial statements or


                                      F-7

<PAGE>


tax  returns.  In  estimating  future  tax  consequences,  SFAS  109  generally
considers all expected  future  events other than  enactments of changes in the
tax law or rates.

Recently Issued Accounting Standards

     In June 1997, the Financial  Accounting  Standards  Board ("FASB")  issued
SFAS  No.  130,  "Reporting  Comprehensive  Income,"  requiring  more  detailed
disclosure  of  specific  areas of income and  expenses.  This new  standard is
effective  for periods  beginning  after  December 15, 1997.  The effect of its
adoption by the Company is expected to be insignificant.

     In June 1997, the "FASB" issued SFAS No. 131,  "Disclosure  about Segments
of an Enterprise and Related  Information,"  requiring  public companies report
certain information about operating segments within their financial statements.
Additionally,  it requires that such entities report certain  information about
their products and services,  the geographic  areas in which they operate,  and
their major customers.  These additional  disclosure  requirements are required
within financial statements for fiscal years beginning after December 15, 1997.
During 1998, the Company expects to commence international activities which may
require additional disclosures.

NOTE 2 - EQUIPMENT

Equipment consisted of the following as of December 31, 1997 and 1996:

                                     December 31, 1997       December 31, 1996

  Machinery & equipment                      $155,430                 $66,020
  Computer software                            36,264                    -
  Vehicles                                     22,089                  22,089
  Furniture & fixtures                         14,991                  11,752
                                     -----------------     -------------------
                                              228,774                  99,861
  Less: Accumulated  depreciation              66,585                  33,262
                                     -----------------     -------------------
  Equipment, net                             $162,189                 $66,599
                                     =================     ===================

     Depreciation  expense for the year ended  December 31, 1997,  three months
ended December 31, 1996 and year ended September 30, 1996, was $33,323,  $4,926
and $14,327 respectively.

NOTE 3 - PATENT RIGHTS AND RELATED ROYALTY COMMITMENTS

     During 1996, the Company entered into a licensing  agreement  resulting in
the utilization of the zinc gluconate  patent. In return for the acquisition of
this license,  the Company  issued a total of 240,000 shares of common stock to
the patent holder and attorneys  during 1996 and 1997.  The related  intangible
asset,  approximating  $490,000,  has been  valued  at the fair  value of these
shares at the date of the grant.  This asset value is being  amortized over the
remaining  life of the patent  which  expires  in March  2002.  The  Company is
required to pay a 3% royalty,  less certain  deductions,  to the patent  holder
based on gross receipts on the sale of the product, throughout the term of this
agreement, which also expires in 2002.

     The Company  also  maintains a separate  representation  and  distribution
agreement  relating to the  development of the zinc gluconate  glycine  product
formulation.  In return for exclusive distribution rights, the Company must pay
the developer a 3 % royalty and a 2% consulting  fee based on gross receipts on
the  sale  of the  product,  less  certain  deductions,  over  the  term of the
agreement,  expiring in 2007. Additionally, a founder's royalty totaling 5%, on
gross receipts on the sale of the product less certain  deductions,  is paid to
two of the officers whose agreements expire in 2005.

     All  of  the  aforementioned  individuals  receiving  royalties  are  also
stockholder's  of the Company.  The royalty expense for the respective  periods
relating to these  agreements  amounted to  $8,870,828,  $592,003  for the year
ended  December  31,  1997  and the  three  months  ended  December  31,  1996,
respectively,  and no amounts were paid for the year ended  September 30, 1996.
Amounts accrued for royalties at December 31, 1997 and 1996 were $3,388,920 and
$485,844 respectively.

                                      F-8
<PAGE>


NOTE 4 - SHORT TERM BORROWINGS

     In September  1997,  the Company  obtained a $5,000,000  revolving line of
credit facility for general corporate purposes. This facility is collateralized
by  accounts  receivable  and  inventory,  renews  in one year,  with  interest
accruing at the Wall Street  Journal  prime rate, or 275 basis points above the
Euro-Dollar  Rate,  each to move with the respective  base rate.  There were no
borrowings under this line during the year ended December 31, 1997.

NOTE 5 - INCOME TAXES

The provision (benefit) for income taxes, consists of the following:

                                   Year Ended   Three Months Ended   Year Ended
                                   December 31,     December 31,   September 30,
                                      1997              1996            1996
                                  ------------- ------------------ -------------

 Current:
      Federal                      $12,161,445        $454,580              -
      State                          2,281,733         146,716              -
                                  -------------     ------------   -------------
                                    14,443,178         601,296              -
                                  -------------     ------------   -------------
 Deferred:
      Federal                         (180,601)       (260,718)        ($27,050)
      State                              8,984        (102,389)             -
                                  -------------     ------------   -------------
                                      (171,617)       (363,107)         (27,050)
                                  =============     ============   =============
         Total                     $14,271,561        $238,189         ($27,050)
                                  =============    =============   =============

A reconciliation  of the statutory  federal income tax expense (benefit) to the
effective tax is as follows:

Statutory rate                     $12,333,448        $650,931        ($108,198)
State taxes net of federal benefit   1,937,029         125,094              -
Net operating loss carry-forward           -          (594,357)         (56,521)
Other                                    1,084             -             (1,339)
Valuation allowance                        -            56,521          168,479
Cumulative effect adjustment               -               -            (29,471)
                                  =============    ============    =============
         Total                     $14,271,561        $238,189         ($27,050)
                                  =============    ============    =============

The tax effects of the primary "temporary  differences" between values recorded
for assets and liabilities for financial reporting purposes and values utilized
for  measurement  in  accordance  with tax laws  giving  rise to the  Company's
deferred tax assets are as follows:

Net operating loss carry-forward           -          $419,628          $56,521
Contract termination costs            $234,000             -                -
Other                                  357,245             -                -
                                  ------------    ------------     ------------
         Total                        $591,245        $419,628          $56,521
                                  ============    ============     ============


Certain  exercises of options and  warrants,  and  restricted  stock issued for
services that became unrestricted during the period,  resulted in reductions to
taxes    currently     payable    and    a     corresponding     increase    to
additional-paid-in-capital totaling $11,148,083 for the year ended December 31,
1997 and  $1,031,854  for the three  months  ended  December  31,  1996.  These
reductions  are  "permanent  differences"  and do not affect the provisions for
deferred or current income tax expense.

NOTE 6 - EARNINGS PER SHARE

     Effective  December 31, 1997, the Company  adopted  Statement of Financial
Accounting  Standard No. 128,  "Earnings Per Share," which simplifies  earnings
per share  calculations  and  requires  presentation  of both basic and diluted
earnings per share on the face of the statement of income.  Per this statement,
basic  earnings per share "EPS"  excludes  dilution and is computed by dividing
income available to common stockholders by the weighted - average number of

                                      F-9

<PAGE>


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 resulted in the issuance
of common  stock that then shared in the  earnings  of the entity.  Diluted EPS
also utilizes the treasury stock method which prescribes a theoretical buy back
of shares from the theoretical proceeds of all options and warrants outstanding
during  the  period.  Since  there is a large  number of options  and  warrants
outstanding,  fluctuations  in the  actual  market  price can have a varying of
results for each period presented.

A  reconciliation  of the applicable  numerators and denominators of the income
statement periods presented is as follows (millions,  except earnings per share
amount):
<TABLE>
<CAPTION>
                          Year Ended                     Three Months Ended                   Year Ended
                       December 31, 1997                  December 31, 1996               September 30, 1996
                   Income     Shares      EPS       Income     Shares      EPS        Loss      Share       EPS
                   ----------------------------------------------------------------
<S>                <C>       <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>

Basic EPS          $21.0       12.2      $1.72       $1.7       11.1      $0.15      ($0.7)       8.1     ($0.08)

Dilutives:
Options/Warrants     --         2.4                   --         2.5                    --         --
                  -------    -------    -------    -------    -------    -------    -------    -------    -------

Diluted EPS        $21.0       14.6      $1.43       $1.7       13.6      $0.12      ($0.7)       8.1     ($0.08)
                  =======    =======    =======    =======    =======    =======    =======    =======    =======
</TABLE>

     The weighted  average  number of shares used in the  computations  for the
three months  ended  December  31, 1996 and the year ended  September  30, 1996
reflect  the  retroactive  effect  of the  two-for-one  stock  split  which was
effective  January 23, 1997.  The Diluted EPS  computations  for the year ended
September 30, 1996, exclude 4,355,000 shares relating to stock options as their
effect would have been anti-dilutive.

NOTE 7 - STOCK-BASED COMPENSATION

     Stock options for purchase of the company's common stock have been granted
to both  employees and  non-employees  since the date of the  Company's  public
inception.  Options are exercisable  during a period determined by the Company,
but in no event later than five years from the date granted.

     On December 2, 1997, the Company's Board of Directors approved a new Stock
Option Plan ("Plan")  which would provide for the granting of up to one million
five hundred  thousand  shares to employees.  Under this Plan,  the Company may
grant  options to  employees,  officers or directors of the Company at variable
percentages of the market value of stock at the date of grant.  No option shall
be exercisable  more than ten years after the date of grant or five years where
the individual owns more than ten percent of the total combined voting power of
all classes of stock of the  Company.  As  shareholder  approval of the Plan is
required,  no  options  were  granted  under  this Plan  during  the year ended
December 31, 1997.

     The Company applies  Accounting  Principles Board Opinion 25 ("APB 25") in
accounting for its grants of options to both employees and non-employees. Under
the  intrinsic  value  method  prescribed  by APB 25, no  compensation  expense
relating  to grants to  employees  has been  recorded by the Company in periods
reported.  Had  compensation  expense  for  awards  made  during the year ended
December  31,  1997,  three  months  ended  December  31,  1996 and year  ended
September 30, 1996 been determined under the fair value method of SFAS No. 123,
"Accounting  for  Stock-Based  Compensation,"  the  Company's  net  income  and
earnings per share would have been reduced to the pro forma  amounts  indicated
below:

                               Year Ended     Three Months Ended     Year Ended
                               December 31,      December 31,      September 30,
                                  1997              1996                 1996
                            ----------------------------------------------------

Pro forma net income           $20,194,062      $1,501,314          ($1,243,769)

Pro forma earnings per share:
      Basic                       $1.66             $0.14               ($0.15)
      Diluted                     $1.38             $0.11               ($0.15)

                                      F-10
<PAGE>


     Expense   relating   to  options   granted  to   non-employees   has  been
appropriately  recorded  in the periods  presented  based on either fair values
agreed upon with the grantees or fair values as determined by the Black-Scholes
pricing model dependent upon the circumstances relating to the specific grants.

     The Company used the  Black-Scholes  pricing  model to determine  the fair
value of stock options granted during the periods presented using the following
assumptions:  expected  life of the option of 5 years and  expected  forfeiture
rate of 0%; expected stock price volatility of 29%;  expected dividend yield of
2.5%;  and  risk-free  interest  rate of 6.56% for the year ended  December 31,
1997, a range of 6.03-6.39%  for the three months ended December 31, 1996 and a
range of 5.55-6.49% for the year ended September 30, 1996 based on the expected
life of the  option.  The  impact of  applying  SFAS No.  123 in this pro forma
disclosure is not indicative of the impact on future years' reported net income
as SFAS 123 does not apply to stock  options  granted prior to the beginning of
fiscal year 1996 and additional  stock options awards are anticipated in future
years. All options were immediately vested upon grant.

     A summary  of the  status of the  Company's  stock  options  and  warrants
granted to both employees and  non-employees as of December 31, 1997,  December
31, 1996 and  September  30, 1996 and changes  during the periods then ended is
presented below:

Year Ended December 31, 1997:


                                  Employees       Non-Employees       Total
                              ----------------   --------------    -------------

                                      Weighted          Weighted        Weighted
                                       Average           Average         Average
                               Shares Exercise  Shares  Exercise Shares Exercise
                               (,000)   Price   (,000)    Price  (,000)   Price
                               -------------------------------------------------
Options/warrants      `
   outstanding at beginning
   of period                   1,820    $1.39    3,240    $1.36    5,060   $1.37
Additions (deductions):
   Granted                       345    10.00      675     9.82    1,020   10.00
   Exercised                     135     1.33    1,527     1.55    1,662    1.53
   Expired
                               -------------------------------------------------
Options/warrants
   outstanding at
   end of period               2,030    $2.86    2,388    $3.61    4,418   $3.27
                               -------------------------------------------------
Options/warrants
exercisable
   at end of period            2,030             2,388             4,418
                               =================================================


Weighted average fair value
of grants                      $2.24             $2.24             $2.24
Price range of  options/
   warrants exercised       $.50 - $2.50      $.50-$10.00       $.50-$10.00
Price range of options/
   warrants outstanding     $.50-$10.00       $.50-$10.00       $.50-$10.00
Price range of options/
   warrants Exercisable     $.50-$10.00       $.50-$10.00       $.50-$10.00












                                      F-11

<PAGE>


Three months ended December 31, 1996:

                                  Employees       Non-Employees       Total
                              ----------------   --------------    -------------

                                      Weighted          Weighted        Weighted
                                       Average           Average         Average
                               Shares Exercise  Shares  Exercise Shares Exercise
                               (,000)   Price   (,000)    Price  (,000)   Price
      `                        -------------------------------------------------
Options/warrants
   outstanding at
   beginning of period         1,570    $1.22    4,355     $.76    5,925    $.88
Additions (deductions):
   Granted                       250     2.50    1,250     1.81    1,500    1.68
   Exercised                                     2,365      .50    2,365     .50
   Expired
                               -------------------------------------------------
 Options/warrants
   outstanding at
   end of period               1,820    $1.39    3,240    $1.36    5,060   $1.37
                               -------------------------------------------------
Options/warrants
   exercisable at
   end of period               1,820             3,240             5,060
                               =================================================

Weighted average fair
   value of  grants             $.70              $.52              $.56
Price range of options/
   warrants exercised                          $.50-$2.50       $.50-$2.50
Price range of options/
   warrants outstanding     $.50-$2.50         $.50-$2.50       $.50-$2.50
Price range of options/
warrants exercisable        $.50-$2.50         $.50-$2.50       $.50-$2.50
--------------------------------------------------------------------------------

Year ended September 30, 1996:

                                  Employees       Non-Employees       Total
                              ----------------   --------------    -------------

                                      Weighted          Weighted        Weighted
                                       Average           Average         Average
                               Shares Exercise  Shares  Exercise Shares Exercise
                               (,000)   Price   (,000)    Price  (,000)   Price
      `                        -------------------------------------------------
Options/warrants
   outstanding at
   beginning of period         1,570     $.08    6,525     $.08    8,095    $.08
Additions (deductions):
  Granted                      1,570     1.22    1,730     1.38    3,300    1.05
  Exercised                                        851      .47      851     .47
  Expired                      1,570      .08    3,049      .08    4,619     .08
                              --------------------------------------------------
Options/warrants
  outstanding  at
  end of period                1,570    $1.22    4,355     $.76    5,925    $.88
      `                        -------------------------------------------------
Option/warrants
  exercisable at
  end of period                1,570             4,355             5,925
                               =================================================

Weighted average fair
  value of grants               $.35              $.39              $.37
Price range of options/
  warrants exercised                          $.08 - $.50       $.08 - $.50
Price range of options/
  warrants outstanding       $.50-$1.75       $.50-$1.75        $.50-$1.75
Price range of options/
  warrants exercisable       $.50-$1.75       $.50-$1.75        $.50-$1.75



                                      F-12
<PAGE>



The following table summarizes  information about stock options outstanding and
stock options  exercisable  as granted to both employees and  non-employees  at
December 31, 1997, December 31, 1996 and September 30, 1996, respectively:


                                   December 31,    December 31,    September 30,
                                        1997           1996             1996
--------------------------------------------------------------------------------
Employees:

Range of exercise prices          $.50 - $10.00    $.50 - $2.50    $.50 - $1.75
Share (thousands)                    2,030            1,820           1,570
Weighted average remaining
   in Contractual life                3.5              4.3             4.5
Weighted average exercise price      $2.86            $1.39           $1.22

Non-Employees:

Range of exercise prices          $.50 - $10.00    $.50 - $2.50    $.50 - $1.75
Share (thousands)                    2,388            3,240           4,355
Weighted average remaining in
   in Contractual life                3.7              4.4             4.2
Weighted average exercise price      $3.61            $1.36            $.76

Totals:

Range of exercise prices          $.50 - $10.00    $.50 - $2.50    $.50 - $1.75
Share (thousands)                    4,418            5,060           5,925
Weighted average remaining in
   Contractual life                   3.6              4.4             4.3
Weighted average exercise price      $3.27            $1.37            $.88


Options  outstanding  as of December 31, 1997,  December 31, 1996 and September
30, 1996 expire from December 14, 2000 through May 5, 2002,  depending upon the
date of grant.

NOTE 8 - SERVICE CONTRACTS AND RELATED TERMINATION COSTS

     In October  1996,  the Company  entered into a three-year  agreement  with
Sands Brothers & Co., Ltd. for investment  banking services  including  private
placements.  Upon commencement of the contract, Sands received 800,000 warrants
with an  exercise  price of $1.75  per share  contingent  upon  services  to be
provided

     During the first  quarter of 1997,  the  Company  decided  not to pursue a
private placement offering. In order to terminate the agreement with Sands, the
Company issued to Sands 350,000  additional  warrants to purchase the Company's
stock at $10 per  share.  As a result,  the  Company  recorded  an  expense  of
approximately $700,000.

     Additionally,   during   September  1996,  the  Company   contracted  with
Diversified  Corporate  Consulting  Group,  L.L.C.  ("Diversified")  for public
relations  and  consulting  services  over a period  of one  year.  Diversified
received  350,000 stock  options with an exercise  price of $1.75 per share for
these  services.  During May 1997,  the Company  made the decision to terminate
this contract.  As a result,  the Company  recorded an expense of approximately
$91,000.





                                      F-13

<PAGE>


NOTE 9 - STATUS OF NUTRITIONAL FOODS CORPORATION LITIGATION

     During 1992, the Company authorized  litigation against  Nutritional Foods
Corporation  ("NFC")  in  which  the  Company  sought  to  cancel  the  729,928
restricted  shares issued to NFC for  international  marketing  services,  as a
result  of  certain  false  and  misleading  representations  made by it to the
Company  including,  but not limited to, NFC's  failure to act as the Company's
international sales agent under an Agreement between NFC and the Company.

     Pursuant to a final  decree  issued in the Court of Common  Pleas of Bucks
County,  Pennsylvania  dated January 23, 1997, the Company received an order to
return  to  treasury  these  outstanding  shares.  In  November  of  1997,  NFC
challenged the validity of the decree.  In March of 1998, a subsequent order of
the Court of Common  Pleas of Bucks  County  modified the decree of January 23,
1997 to provide for a return to treasury of 604,928  shares to the Company.  As
payment for legal services, 118,066 of these shares were reissued with a market
value of approximately  $1,145,358.  This value, the cost of reacquiring  these
shares,  then  became  the value of the net  treasury  stock  ($2.35 per share)
represented by 486,862 shares returned to treasury.

NOTE 10 - COMMITMENTS AND CONTINGENCIES

     Certain  operating leases for office and warehouse space maintained by the
Company  resulted in rent expense for the year ended  December 31, 1997,  three
months ended  December 31, 1996 and year ended  September  30, 1996 of $92,464,
$7,410, $28,265, respectively. The future minimum lease obligations under these
operating leases are $49,783 for 1998, $25,100 for 1999, and $14,903 for 2000.

     Management  believes  no  material   commitments  or  contingencies  exist
relating to computer  operations as the computer system utilized by the company
in its operation has been deemed "Year 2000" compliant by the system vendor.

     The Company has committed to advertising costs  approximating  $5,500,000.
Additional  advertising  costs are expected to be incurred for the remainder of
1998.

     The Company is subject to legal  proceedings  and claims which have arisen
in the ordinary  course of its business.  Although there can be no assurance as
to  the  ultimate  disposition  of  these  matters,  it is the  opinion  of the
Company's  management  based upon the information  available at this time, that
the expected outcome of these matters,  individually or in the aggregate,  will
not have a  material  adverse  effect on the  financial  position,  results  of
operations or cash flows of the Company.

NOTE 11 - SUBSEQUENT EVENTS

     On January 8, 1998, the Company's Board of Directors  authorized a plan to
reacquire up to 250,000 of the Company's  issued and  outstanding  common stock
shares  during the period ended  December 31, 1998.  The schedule and amount of
shares re-purchased will be based upon market conditions.  As of March 3, 1998,
115,000 shares have been repurchased.

     The Company has reached an  agreement in principle to purchase a building,
including  improvements,  approximating 14,000 square feet that will be used as
corporate offices as well as laboratory facilities,  at a cost approximating $1
million dollars.











                                      F-14

<PAGE>







                    RESPONSIBILITY FOR FINANCIAL STATEMENTS




     The  management  of  The  Quigley   Corporation  is  responsible  for  the
information and representations  contained in this report.  Management believes
that the financial  statements  have been prepared in conformity with generally
accepted  accounting  principles and that the other  information in this annual
report  is  consistent  with  those  statements.  In  preparing  the  financial
statements,  management  is required to include  amounts based on estimates and
judgements which it believes are reasonable under the circumstances.

     In fulfilling its responsibilities for the integrity of the data presented
and to safeguard the Company's assets,  management employs a system of internal
accounting  controls designed to provide reasonable  assurance,  at appropriate
cost,  that the  Company's  assets  are  protected  and that  transactions  are
appropriately  authorized,  recorded and summarized.  This system of control is
supported  by  the  selection  of  qualified   personnel,   by   organizational
assignments  that provide  appropriate  delegation of authority and division of
responsibilities, and by the dissemination of policies and procedures.

     Coopers & Lybrand L.L.P., the Company's independent accountants, performed
an audit for the year ended  December 31, 1997,  and Nachum  Blumenfrucht,  CPA
performed an audit of the three  months ended  December 31, 1996 and year ended
September 30, 1996, in accordance with generally  accepted auditing  standards.
The independent  accountants conducted a review of internal accounting controls
to the extent required by generally  accepted auditing  standards and performed
such tests and  procedures,  as they deem  necessary to arrive at an opinion on
the fairness of the financial statements presented herein.






/s/  Guy J. Quigley                                     March 30, 1998
-------------------                                     --------------
Guy J. Quigley,                                         Date
Chairman of the Board,
President, Chief Executive Officer





/s/ George J. Longo                                      March 30, 1998
-------------------                                      --------------
George J. Longo,                                         Date
Vice President, Chief Financial Officer
(Principal Financial and Accounting Officer)












                                      F-15

<PAGE>




                       REPORT OF INDEPENDENT ACCOUNTANTS



Stockholders of the The Quigley Corporation



     We have audited the accompanying  balance sheet of The Quigley Corporation
as of December  31, 1997 and the related  statements  of income,  stockholders'
equity, and cash flows for the year then ended. These financial  statements are
the  responsibility  of the  Company's  management.  Our  responsibility  is to
express an opinion on these financial statements based on our audit.

     We conducted  our audit in accordance  with  generally  accepted  auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable  assurance  about  whether  the  financial  statements  are  free of
material misstatement.  An audit includes examining,  on a test basis, evidence
supporting the amounts and  disclosures in the financial  statements.  An audit
also  includes  assessing  the  accounting   principles  used  and  significant
estimates  made by  management,  as well as  evaluating  the overall  financial
statement  presentation.  We believe that our audit provides a reasonable basis
for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects,  the financial position of The Quigley Corporation as
of December  31,  1997,  and the  results of its  operations,  cash flows,  and
stockholders'  equity  for the year then  ended in  conformity  with  generally
accepted accounting principles.




/s/ COOPERS & LYBRAND L.L.P.
----------------------------
    COOPERS & LYBRAND L.L.P.




2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 20, 1998











                                      F-16


<PAGE>




               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT





Stockholders of the The Quigley Corporation


     I have audited the accompanying  balance sheets of the Quigley Corporation
as of December 31, 1996 and  September  30, 1996 and the related  statements of
income,  stockholders'  equity,  and cash  flows  for the  three  months  ended
December  31,  1996 and the year ended  September  30,  1996.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   My
responsibility is to express an opinion on these financial  statements based on
my audit.

     I  conducted  an audit in  accordance  with  generally  accepted  auditing
standards.  Those standards require that I plan and perform the audit to obtain
reasonable  assurance  about  whether  the  financial  statements  are  free of
material misstatement.  An audit includes examining,  on a test basis, evidence
supporting the amounts and  disclosures in the financial  statements.  An audit
also  includes  assessing  the  accounting   principles  used  and  significant
estimates  made by  management,  as well as  evaluating  the overall  financial
statement  presentation.  I believe that my audit provides reasonable basis for
my opinion.

     In my opinion,  the financial statements referred to above present fairly,
in all material respects,  the financial position of The Quigley Corporation as
of December 31, 1996 and September 30, 1996 and the results of its  operations,
cash flows,  and  stockholders'  equity for the three months ended December 31,
1996 and the year ended  September  30,  1996,  in  conformity  with  generally
accepted accounting principles.



/s/ Nachum Blumenfrucht
-----------------------
    Nachum Blumenfrucht
    Certified Public Accountant




Brooklyn, New York
February 11, 1998






                                      F-17


<PAGE>






ITEM 8  Changes  in  and  Disagreements  With  Accountants  on  Accounting  and
     Financial Disclosure


     On January 29, 1997, the Company engaged the  independent  accounting firm
of Coopers & Lybrand L.L.P. to audit the Company's financial statements for the
calendar year 1997.  The  replacement  of the previous  certifying  accountant,
Nachum Blumenfrucht, CPA, was made by approval of the Board of Directors of the
Company and with the agreement of Mr. Blumenfrucht.  This change was due to the
dramatic expansion of business  operations  undertaken by the Company since the
close of the prior  fiscal  year.  There  have been no  disagreements  with the
former  accountant  on  any  matter  of  accounting  principles  or  practices,
financial  statement  disclosure,  or  auditing  scope  of  procedure,  nor any
reportable event required to be disclosed.


PART III

ITEM 9. Directors and Executive Officers of the Registrant


     The  information  required under this item is incorporated by reference to
the Company's 1997 Proxy Statement.

ITEM 10. Executive Compensation

     The  information  required under this item is incorporated by reference to
the Company's 1997 Proxy Statement.


ITEM 11. Security Ownership of Certain Beneficial Owners and Management

     The  information  required under this item is incorporated by reference to
the Company's 1997 Proxy Statement.



ITEM 12. Certain Relationships and Related Transactions


     The  information  required under this item is incorporated by reference to
the Company's 1997 Proxy Statement.

















                                      -13-
<PAGE>



                                    PART IV


ITEM 13 Exhibits, Financial Statements, Schedules and Reports on Form 8-K


     (a)  Exhibits:

     3.1 Articles of Incorporation  of the Company (as amended),  (incorporated
by reference to Exhibit 3.1 of Form 10-KSB/A dated April 4, 1997)

     3.2  Certificate  to  increase  the  number  of  authorized  shares of the
          Company  (incorporated  by reference to Exhibit 3.2 of Form  10-KSB/A
          dated April 4, 1997)

     3.3  Bylaws  of the  Company  as  currently  in  effect  (incorporated  by
          reference to Exhibit 3.2 of Form 10-KSB/A dated April 4, 1997)

     4.1  Specimen  Common  Stock  Certificate  (incorporated  by  reference to
Exhibit 4.1 of Form 10-KSB/A dated April 4, 1997)

     10.1  Stock  Option  Plan  for  Consultants,   Advisors  and  Non-Employee
Directors  (incorporated  by reference to Exhibit 10.1 of Form  10-KSB/A  dated
April 4, 1997)

     10.2 Exclusive Representation and Distribution Agreement dated May 4, 1992
between the Company and Godfrey Science and Design, Inc. et al (incorporated by
reference to Exhibit 10.2 of Form 10-KSB/A dated April 4, 1997)

     10.3  Employment  Agreement dated June 1, 1995 between the Company and Guy
J. Quigley  (incorporated  by reference to Exhibit 10.3 of Form 10-KSB/A  dated
April 4, 1997)

     10.4  Employment  Agreement  dated June 1, 1995  between  the  Company and
Charles A. Phillips (incorporated by reference to Exhibit 10.4 of Form 10-KSB/A
dated April 4, 1997)

     10.5  Exclusive  Master Broker  Wholesale  Distributor  and  Non-Exclusive
National  Chain  Broker  Agreement  dated July 22, 1994 between the Company and
Russell  Mitchell  (incorporated  by reference to Exhibit 10.7 of Form 10-KSB/A
dated April 4, 1997)

     10.6 Licensing Agreement dated August 24, 1996 between the Company, George
A. Eby III and George Eby Research  (incorporated  by reference to Exhibit 10.6
of From 10-KSB/A dated April 4, 1997)

     10.8  United  States  Exclusive  Supply  Agreement  dated  March 17,  1997
(Portions  of this  exhibit  are  omitted  and were filed  separately  with the
Securities Exchange Commission pursuant to the Company's application requesting
confidential  treatment  in  accordance  with  Rule  406  of  Regulation  C  as
promulgated under the Securities Act of 1933,  included by reference to Exhibit
10.5 of Form SB-2 dated September 29, 1997)

     10.9  Consulting  Agreement  dated May 4, 1992  between  the  Company  and
Godfrey Science and Design,  Inc. et al.  (incorporated by reference to Exhibit
10.5 of From 10-KSB/A dated April 4, 1997)

     10.10 Employment  Agreement dated November 5, 1996 between the Company and
George J. Longo (filed herewith)

     10.11  Employment  Agreement dated January 1, 1997 between the Company and
Eric H. Kaytes (filed herewith)

                                      -14-

<PAGE>



     23.1 Consent of Coopers & Lybrand L.L.P.,  Auditors,  dated March 30, 1998
(filed herewith)


     23.2  Consent of Nachum  Blumenfrucht,  CPA dated  March 30,  1998  (filed
herewith)


     25.0 Power of  Attorney,  (included  by  reference to Exhibit 25.0 of Form
SB-2 dated September 29, 1997)


     27.1 Financial Data Schedule.


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


     (a)  Reports on Form 8-K

     No reports were filed on Form 8-K in the quarter ended December 31, 1997.































                                      -15-

<PAGE>





Signatures


     Pursuant  to the  requirements  of Section  13 or 15(d) of the  Securities
Exchange  Act of 1934,  the company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.


THE QUIGLEY CORPORATION



/s/  Guy J. Quigley                                   March 30, 1998
-------------------                                   --------------
Guy J. Quigley, Chairman of the Board,                Date
President, Chief Executive Officer
and Director




     Pursuant to the requirements of the Securities  Exchange Act of 1934, this
report has been signed by the following persons on behalf of the company in the
capacities and on the dates indicated:


      Signature                  Title                        Date



/s/ Guy J. Quigley       Chairman of the Board,                  March 30, 1998
------------------       President, Chief Executive              --------------
Guy J. Quigley           Officer and Director


/s/ George J. Longo      Vice President, Chief Financial         March 30, 1998
-------------------      Officer and Director (Principal         --------------
George J. Longo          Financial and Accounting Officer)


/s/ Charles A. Phillips  Executive Vice President,               March 30, 1998
-----------------------  Chief Operating Officer                 --------------
Charles A. Phillips      and Director


/s/ Eric H. Kaytes       Vice President,                         March 30, 1998
------------------       Chief Information Officer,              --------------
Eric H. Kaytes           Secretary, Treasurer and
                         Director


/s/ Gurney P. Sloan      Director                                March 30, 1998
-------------------                                              --------------
Gurney P. Sloan


/s/ Jacqueline F. Lewis  Director                                March 30, 1998
-----------------------                                          --------------
Jacqueline F. Lewis





                                      -16-
<PAGE>


                                                                  EXHIBIT 10.10

                         EXECUTIVE EMPLOYMENT AGREEMENT

THIS  AGREEMENT,  made this 5th day of  November,  1996,  between  THE  QUIGLEY
CORPORATION, a Nevada Corporation (hereinafter "Company"), and GEORGE J. LONGO,
a resident of Pennsylvania (hereinafter "Employee")

                              W I T N E S S E T H:

WHEREAS,  the Company agrees to hire and employ Employee according to the terms
and  conditions  stated herein;  and,

WHEREAS,  the Employee agrees to render Company services according to the terms
and conditions stated herein;

NOW,  THEREFORE,  in  consideration of the mutual promises herein contained and
intending to be legally bound hereby, the parties hereto agree as follows:

1. Employee's  Duties and Title.  The Company hereby employs Employee to render
services  to the  Company  in the  capacity  of Chief  Financial  Officer  with
assigned  duties and tasks as specified by the  President  and Chief  Executive
Officer  of the  Company,  including,  by  way  of  example  only  and  without
limitation,  responsibility for the Company's  day-to-day  financial operations
and affairs.  Employee's  title and job description may be changed from time to
time at the absolute and exclusive  discretion  of the Company's  President and
Chief  Executive  Officer.  The Employee hereby accepts such employment for the
period  stated in Paragraph 2, and agrees to devote his full time and attention
and his best talents and expertise to the duties of employment  hereby accepted
by him.

2. Term of Employment.  The term of Employee's  employment under this Agreement
shall  commence as of November 5, 1996 with  Employee's  first pay period as of
January 6, 1997.  ("Commencement  Date") and continue  until December 31, 2001,
unless sooner terminated pursuant to paragraph 5 of this Agreement.

3. Compensation.  As compensation to the Employee pursuant to services rendered
under this  contract,  the Company  shall pay to Employee  and  Employee  shall
accept the following salary, other compensation, and benefits:

     (a) From the Commencement  Date through end of the 1997 calendar year, the
     Company  shall pay the Employee a base salary at an annual rate, of Eighty
     Thousand  Dollars  ($80,000.00)  per year,  or such greater  amount as the
     Board of Directors may from time to time determine.

     (b) The  Employee's  annual base salary  shall,  commencing  with the 1998
     calendar  year, and for each calendar year  thereafter  during the term of
     Employee's  employment under this agreement,  be increased by an amount as
     shall

                                      -17-
<PAGE>


     be  determined by the  Company's  Board of  directors;  provided that each
     annual  increase  shall  not be less  than  twenty  percent  (20%)  of the
     previous calendar year's initial base salary.

     (c) The  Employee  shall  receive  from the  Company,  a fully  vested and
     unrestricted  option/warrant  to purchase  25,000  shares of the Company's
     stock at the exercise price of Five dollars ($5.00) per share, exercisable
     for a period  of five (5)  years  from the  date  such  option/warrant  is
     granted to Employee.

     (d)  The  Employee  shall  be  entitled  to  such  bonuses  and  incentive
     compensation  as may  be  awarded  in  the  discretion  of  the  Board  of
     Directors.

     (e) The Employee shall receive, at the Company's expense,  family coverage
     under the  Company's  health  insurance  plan,  and shall be  entitled  to
     participate  in any and all of the  Company's  present or future  employee
     benefit plans, including,  without limitation,  pension and profit sharing
     plans, and savings plans, which are generally  applicable to the Company's
     Employees;  provided,  however,  that (1) the  Employee's  receipt of such
     benefits is pursuant to and  determined  by the  provisions of such plans,
     and (2) the Company  reserves the right to modify or eliminate  and or all
     such plans.

     (f) In the event of Employee's  disability (as defined below), the Company
     shall  continue to pay  Employee  his base salary in effect at the time of
     such disability during the period of such disability;  provided,  however,
     that in the event that  Employee is disabled  for a  continuous  period in
     excess of eighteen (18) calendar months, the Company may, at its election,
     terminate  this  agreement,  in which event  Employee shall be entitled to
     receive a lump-sum termination payment of $100,000.  The term "disability"
     shall mean the total and complete inability of the Employee to perform his
     duties  under this  agreement as  certified  by an  independent  physician
     selected with the approval of the Company and Employee.

     (g) The Employee shall be reimbursed for all reasonable  business expenses
     incurred  by  him  in  the  performance  of  his  duties,   including  CPE
     requirements of the AICPA and PICPA.

4.  Vacation  benefits.  The Employee  shall be entitled to four (4) weeks paid
vacation in each calendar year during the term of his employment hereunder.


5. Termination. Employee's employment under this Agreement shall terminate upon
occurrence of any of the events  described in the following  subparagraphs  (a)
through (e):

      (a) In the event of  Employee's  violation of any of the covenants of this
     Agreement,  his employment shall automatically and immediately  terminate.
     No further payments or benefits whatsoever shall be due to the Employee or
     any  beneficiary  under this  Agreement as of the date of said  violation.


                                      -18-
<PAGE>


     (b) The Company may terminate the  employment of the Employee for cause at
     any time,  in which event  neither the Employee nor his  beneficiaries  or
     estate shall be entitled to any further payments  hereunder.  For purposes
     of this Agreement, "cause" shall mean:

          (i) The misappropriation of funds or property of the Company;

          (ii) Any  attempt  to obtain  personal  profit  from the  Company  by
          actions that are adverse to the interests of the Company;

          (iii)  Unreasonable  neglect or refusal to perform duties assigned to
          him; or

          (iv) Conviction of a felony.

     (c) If the Company is sold, merged, or consolidated, Employee's employment
     shall terminate;  provided, however, that upon such termination,  Employee
     shall be entitled to forty-eight  (48) months'  severance pay,  payable by
     the  Company  in a  lump  sum  within  thirty  (30)  days  following  such
     termination  or  at  the  settlement   date  of  the  sale,   merger,   or
     consolidation,  whichever  occurs  first.  Said  severance  pay  shall  be
     calculated by  multiplying  Employee's  then-base  monthly salary times 48
     months.

     (d) If the  Employee  dies  during the term of his  employment  under this
     Agreement,  his employment shall automatically terminate, and Employee and
     his Estate and Beneficiaries  shall only be entitled to such benefits,  if
     any, as are provided under the Company's  benefit plans in the event of an
     employee's  death.

6. Covenant not to Compete. Except as provided in paragraph (B) below:

A. Employee agrees,  that during the term of his employment under Agreement and
for a period of two (2) years thereafter, that:

     (1) He shall not associate  with,  enter into the employ of, or render any
     services to any business  that  competes  with Company or a business  that
     conducts similar  business (as defined in subparagraph  (d), below) to the
     business  of  Company,  within  a  twenty-five  (25)  mile  radius  of the
     Company's   principal   place   of   business    (currently    Doylestown,
     Pennsylvania).

     (2) He shall not  solicit,  divert,  or induce  customers  or  clients  of
     Company to obtain similar products or services from others,  including any
     competitor of the Company.

     (3) He shall not  acquire,  any  financial  interest,  other than for full
     consideration,  in any competitor in a similar business to the business of
     Company  (including  any  interest  in any  publicly-traded  entity)  that
     competes with Company anywhere in the United States.


                                      -19-
<PAGE>


     (4)  "Similar  business"  as used  in the  foregoing  subparagraphs  shall
     include, but not be limited to, the business of manufacture,  distribution
     and sale of (a) cold-relief  products,  (b) allergy-relief  products,  (c)
     health and nutritional  supplements,  and (d) any other business conducted
     by the Company.

B. The  provisions  of  paragraphs  A (1) - (4) shall  not apply if  Employee's
employment  terminates  because  of a sale,  merger,  or  consolidation  of the
Company.

7. Confidentiality/Secrecy Covenants.

A. During the period of his employment hereunder,  and for a period of five (5)
years thereafter, Employee agrees that he shall not:

     (1) Use, divulge, or communicate to anyone,  either orally, in writing, or
     by electronic means, the names and/or addresses of Company's  customers or
     clients,  or the  details  of any  transactions  or  financial  matters of
     Company,  whether or not such information was available to Employee during
     his employment.


     (2) Use, divulge or communicate to anyone,  either orally, in writing,  or
     by  electronic  means,  any  company  trade  secrets,  patents,  formulas,
     processes,  manufacturing methods, or data supplied or available to him in
     connection with his employment.

B.  Employee  agrees  that all trade  secrets,  formulas,  patents,  processes,
manufacturing  methods,  data,  documents,  equipment,  property,  customer and
supplier  information,  financial  information,  sales and marketing  data, and
other information  provided to the Employee by the Company,  or obtained by the
Employee,  in the course of, or in connection  with,  his  employment,  are and
shall  remain the  property of the Company and shall be returned to the Company
by the Employee immediately upon termination of Employee's  employment,  and no
copies or reproductions thereof in any form shall be retained by Employee.

8.  Injunctive  Relief.  In the  event of a breach  by  Employee  of any of the
covenants  contained in paragraphs 6 and 7 of this  Agreement,  Employee agrees
that money damages shall not be an adequate remedy for such breach, and Company
shall,  in addition to all other  remedies  for such breach  provided for under
this  Agreement or  applicable  law,  have the right to request  immediate  and
permanent  injunctive  relief  to  enjoin  and  restrain  such  breach  and any
consequences thereof.

9.  Company's   Proprietary  Rights.   Employee  agrees  that  all  his  ideas,
improvements,  inventions  and products  developed,  made or  discovered by the
Employee during the term of his employment  under this Agreement shall be owned
by and be the exclusive property of the Company.

                                      -20-
<PAGE>


10. Miscellaneous.

     (a)  This   Agreement   supersedes   any  and  all  prior   Agreements  or
     understandings,  oral or written,  with respect to the  employment  of the
     Employee  with  said  Company.  This  Agreement  may  not  be  altered  or
     terminated  orally,  and shall be modified  only by a  subsequent  written
     Agreement executed by both the Employee and the Company.

     (b) This Agreement  shall be governed by and construed in accordance  with
     the laws of the Commonwealth of Pennsylvania.

     (c) This Agreement shall be binding upon and shall inure to the benefit of
     the  Company and its  successors  and  assigns.  This  Agreement  shall be
     binding  upon and shall inure to the benefit of the  Employee,  his heirs,
     executors and personal  representatives,  and shall not be assigned by the
     Employee  and any  attempted  assignment  shall  be in  violation  of this
     Agreement and shall be null and void.

     (d)  Whenever  possible,  each  provisions  of  this  Agreement  shall  be
     interpreted  in such a manner  as to make  all  provisions  effective  and
     valid;  but, if any  provision  in this  Agreement  is held to be invalid,
     illegal or  unenforceable,  such  provision  will be  ineffective  without
     invalidating the remainder of this Agreement.

     (e) All notices,  demands or other  communications,  shall be delivered to
     the Company or Employee at the  following  addresses  which may be changed
     from time to time by either party within thirty (30) days written  notice:

     To the Company:

           Guy J. Quigley,  President/CEO
           The Quigley Corporation
           10 South Clinton Street
           Doylestown, PA 18901

     To the Employee:

           George J. Longo

     (f) All rights and remedies granted to the Company  hereunder shall not be
     exclusive,  but shall be in addition to all rights and remedies  available
     to the Company at law or in equity.

     (g) Unless otherwise specifically defined within this Agreement, words and
     phrases shall be construed and interpreted according to their common usage
     and meaning.  Headings and titles are for reference  purposes only and are
     not to be construed as part of this Agreement.

                                      -21-
<PAGE>



     IN WITNESS WHEREOF,  the Company,  by its authorized  representative,  and
Employee, have caused this Agreement to be executed and made, all as of the day
and year first written above.


                                                   THE QUIGLEY CORPORATION

                                          By:      /S/ Guy J. Quigley
                                                   ------------------
                                                   Guy J. Quigley, President


                                                   /s/ George J. Longo
                                                   -------------------
                                                   George J. Longo ("Employee")






































                                      -22-

<PAGE>



                                                            EXHIBIT 10.11


                         EXECUTIVE EMPLOYMENT AGREEMENT

THIS  AGREEMENT,  made  this 1st day of  January,  1997,  between  THE  QUIGLEY
CORPORATION,  a Nevada Corporation (hereinafter "Company"), and ERIC H. KAYTES,
a resident of Pennsylvania (hereinafter "Employee")

                              W I T N E S S E T H:


WHEREAS,  the Company agrees to hire and employ Employee according to the terms
and  conditions  stated herein;  and,

WHEREAS,  the Employee agrees to render Company services according to the terms
and conditions stated herein; NOW,

THEREFORE,  in  consideration  of the  mutual  promises  herein  contained  and
intending to be legally bound hereby,  the parties hereto agree as follows:

     1.  Employee's  Duties and Title.  The Company hereby employs  Employee to
render  services to the Company in the  capacity of Chief  Information  Officer
with  assigned  duties  and  tasks as  specified  by the  President  and  Chief
Executive Officer of the Company, including, by way of example only and without
limitation:  responsibility for the Company's day-to-day information operations
and affairs, responsibility for all management information systems for Company,
computer  programming,  and support for all computer  hardware and software for
all corporate  accounting.  Employee's title and job description may be changed
from time to time at the absolute and  exclusive  discretion  of the  Company's
President  and Chief  Executive  Officer.  The  Employee  hereby  accepts  such
employment  for the period stated in Paragraph 2, and agrees to devote his full
time  and  attention  and his best  talents  and  expertise  to the  duties  of
employment hereby accepted by him.

2. Term of Employment.  The term of Employee's  employment under this Agreement
shall commence as of January 1, 1997  ("Commencement  Date") and continue until
December 31, 2001,  unless  sooner  terminated  pursuant to paragraph 5 of this
Agreement.

3. Compensation.  As compensation to the Employee pursuant to services rendered
under this  contract,  the Company  shall pay to Employee  and  Employee  shall
accept the following salary, other compensation, and benefits:


(a) From the  Commencement  Date through the end of the 1997 calendar year, the
Company  shall pay the  Employee  a base  salary at an annual  rate,  of Eighty
Thousand Dollars  ($80,000.00) per year, or such greater amount as the Board of
Directors may from time to time determine.

                                      -23-
<PAGE>


     (b) The  Employee's  annual base salary  shall,  commencing  with the 1998
     calendar  year, and for each calendar year  thereafter  during the term of
     Employee's  employment under this agreement,  be increased by an amount as
     shall be  determined by the  Company's  Board of directors;  provided that
     each annual  increase  shall not be less than twenty  percent (20%) of the
     previous calendar year's initial base salary.

     (c)  The  Employee  shall  be  entitled  to  such  bonuses  and  incentive
     compensation  as may  be  awarded  in  the  discretion  of  the  Board  of
     Directors.

     (d) The Employee shall receive, at the Company's expense,  family coverage
     under the  Company's  health  insurance  plan,  and shall be  entitled  to
     participate  in any and all of the  Company's  present or future  employee
     benefit plans, including,  without limitation,  pension and profit sharing
     plans, and savings plans, which are generally  applicable to the Company's
     Employees;  provided,  however,  that (1) the  Employee's  receipt of such
     benefits is pursuant to and  determined  by the  provisions of such plans,
     and (2) the Company  reserves the right to modify or eliminate  and or all
     such plans.

     (e) In the event of Employee's  disability (as defined below), the Company
     shall  continue to pay  Employee  his base salary in effect at the time of
     such disability during the period of such disability;  provided,  however,
     that in the event that  Employee is disabled  for a  continuous  period in
     excess of eighteen (18) calendar months, the Company may, at its election,
     terminate  this  agreement,  in which event  Employee shall be entitled to
     receive a lump-sum termination payment of $100,000.  The term "disability"
     shall mean the total and complete inability of the Employee to perform his
     duties  under this  agreement as  certified  by an  independent  physician
     selected with the approval of the Company and Employee.

4.  Vacation  benefits.  The Employee  shall be entitled to four (4) weeks paid
vacation in each calendar year during the term of his employment hereunder.

5. Termination. Employee's employment under this Agreement shall terminate upon
occurrence of any of the events  described in the following  subparagraphs  (a)
through (e):

     (a) In the event of  Employee's  violation of any of the covenants of this
     Agreement,  his employment shall automatically and immediately  terminate.
     No further payments or benefits whatsoever shall be due to the Employee or
     any beneficiary under this Agreement as of the date of said violation.

     (b) The Company may terminate the  employment of the Employee for cause at
     any time,  in which event  neither the Employee nor his  beneficiaries  or
     estate shall be entitled to any further payments  hereunder.  For purposes
     of this Agreement, "cause" shall mean:

                                      -24-
<PAGE>


          (i) The misappropriation of funds or property of the Company;

          (ii) Any  attempt  to obtain  personal  profit  from the  Company  by
          actions that are adverse to the interests of the Company;

          (iii)  Unreasonable  neglect or refusal to perform duties assigned to
          him; or

          (iv) Conviction of a felony.

     (c) If the Company is sold, merged, or consolidated, Employee's employment
     shall terminate;  provided, however, that upon such termination,  Employee
     shall be entitled to twelve (12)  months'  severance  pay,  payable by the
     Company in a lump sum within thirty (30) days following  such  termination
     or at the settlement date of the sale, merger, or consolidation, whichever
     occurs  first.  Said  severance  pay shall be  calculated  by  multiplying
     Employee's then-base monthly salary times 12 months.

     (d) If the  Employee  dies  during the term of his  employment  under this
     Agreement,  his employment shall automatically terminate, and Employee and
     his Estate and Beneficiaries  shall only be entitled to such benefits,  if
     any, as are provided under the Company's  benefit plans in the event of an
     employee's death.

6. Covenant not to Compete. Except as provided in paragraph (B) below:

A. Employee agrees, that during the term of his employment under this Agreement
and for a period of two (2) years thereafter, that:

     (1) He shall not associate  with,  enter into the employ of, or render any
     services to any business  that  competes  with Company or a business  that
     conducts similar  business (as defined in subparagraph  (d), below) to the
     business  of  Company,  within  a  twenty-five  (25)  mile  radius  of the
     Company's   principal   place   of   business    (currently    Doylestown,
     Pennsylvania).

     (2) He shall not  solicit,  divert,  or induce  customers  or  clients  of
     Company to obtain similar products or services from others,  including any
     competitor of the Company.

     (3) He shall not  acquire,  any  financial  interest,  other than for full
     consideration,  in any competitor in a similar business to the business of
     Company  (including  any  interest  in any  publicly-traded  entity)  that
     competes with Company anywhere in the United States.

     (4)  "Similar  business"  as used  in the  foregoing  subparagraphs  shall
     include, but not be limited to, the business of manufacture,  distribution
     and sale of (a) cold-relief  products,  (b) allergy-relief  products,  (c)
     health and nutritional  supplements,  and (d) any other business conducted
     by the Company.

                                      -25-
<PAGE>


B. The  provisions  of  paragraphs  A (1) - (4) shall  not apply if  Employee's
employment  terminates  because  of a sale,  merger,  or  consolidation  of the
Company.

7. Confidentiality/Secrecy Covenants.

A. During the period of his employment hereunder,  and for a period of five (5)
years thereafter, Employee agrees that he shall not:

     (1) Use, divulge, or communicate to anyone,  either orally, in writing, or
     by electronic means, the names and/or addresses of Company's  customers or
     clients,  or the  details  of any  transactions  or  financial  matters of
     Company,  whether or not such information was available to Employee during
     his employment.

     (2) Use, divulge or communicate to anyone,  either orally, in writing,  or
     by  electronic  means,  any  company  trade  secrets,  patents,  formulas,
     processes,  manufacturing methods, or data supplied or available to him in
     connection with his employment.

B.  Employee  agrees  that all trade  secrets,  formulas,  patents,  processes,
manufacturing  methods,  data,  documents,  equipment,  property,  customer and
supplier  information,  financial  information,  sales and marketing  data, and
other information  provided to the Employee by the Company,  or obtained by the
Employee,  in the course of, or in connection  with,  his  employment,  are and
shall  remain the  property of the Company and shall be returned to the Company
by the Employee immediately upon termination of Employee's  employment,  and no
copies or reproductions thereof in any form shall be retained by Employee.

8.  Injunctive  Relief.  In the  event of a breach  by  Employee  of any of the
covenants  contained in paragraphs 6 and 7 of this  Agreement,  Employee agrees
that money damages shall not be an adequate remedy for such breach, and Company
shall,  in addition to all other  remedies  for such breach  provided for under
this  Agreement or  applicable  law,  have the right to request  immediate  and
permanent  injunctive  relief  to  enjoin  and  restrain  such  breach  and any
consequences thereof.

9.  Company's  Proprietary  Rights.  Employee  agrees that all  inventions  and
products developed by the Employee during the term of his employment under this
Agreement  shall be  owned by and be the  exclusive  property  of the  Company;
excluding,  however,  any computer  software  written or developed prior to the
date of this Agreement.

10. Miscellaneous.

     (a)  This   Agreement   supersedes   any  and  all  prior   Agreements  or
     understandings,  oral or written,  with respect to the  employment  of the
     Employee  with  said  Company.  This  Agreement  may  not  be  altered  or
     terminated orally, and shall be

                                      -26-
<PAGE>


     (b) modified only by a subsequent  written Agreement  executed by both the
     Employee  and  the  Company.  This  Agreement  shall  be  governed  by and
     construed in accordance with the laws of the Commonwealth of Pennsylvania.

     (c) This Agreement shall be binding upon and shall inure to the benefit of
     the  Company and its  successors  and  assigns.  This  Agreement  shall be
     binding  upon and shall inure to the benefit of the  Employee,  his heirs,
     executors and personal  representatives,  and shall not be assigned by the
     Employee  and any  attempted  assignment  shall  be in  violation  of this
     Agreement and shall be null and void.

     (d)  Whenever  possible,  each  provisions  of  this  Agreement  shall  be
     interpreted  in such a manner  as to make  all  provisions  effective  and
     valid;  but, if any  provision  in this  Agreement  is held to be invalid,
     illegal or  unenforceable,  such  provision  will be  ineffective  without
     invalidating the remainder of this Agreement.

     (e) All notices,  demands or other  communications,  shall be delivered to
     the Company or Employee at the  following  addresses  which may be changed
     from time to time by either party within thirty (30) days written notice:

     To the Company:

           Guy J. Quigley, President/CEO
           The Quigley Corporation
           10 South Clinton Street
           Doylestown, PA  18901

     To the Employee:

     Eric H. Kaytes

     (f) All rights and remedies granted to the Company  hereunder shall not be
     exclusive,  but shall be in addition to all rights and remedies  available
     to the Company at law or in equity.

     (g) Unless otherwise specifically defined within this Agreement, words and
     phrases shall be construed and interpreted according to their common usage
     and meaning.  Headings and titles are for reference  purposes only and are
     not to be construed as part of this Agreement.

IN  WITNESS  WHEREOF,  the  Company,  by  its  authorized  representative,  and
Employee, have caused this Agreement to be executed and made, all as of the day
and year first written above.

                                                  THE QUIGLEY CORPORATION

                                              By: /S/ Guy J. Quigley
                                                  ------------------
                                                  Guy J. Quigley, President


                                                 /s/  Eric H. Kaytes
                                                 -------------------
                                                 Eric H. Kaytes ("Employee")

                                      -27-
<PAGE>




                                                             EXHIBIT 23.1





                       CONSENT OF INDEPENDENT ACCOUNTANTS



We consent to the  incorporation by reference in the Registration  Statement of
The  Quigley  Corporation  on Form S-8  (File  Nos.  333-10059,  333-14687  and
333-26589) of our report dated February 20, 1998, on our audit of the financial
statements of The Quigley Corporation as of December 31, 1997, and for the year
then ended, which report is included in this Annual Report on Form 10-KSB.





/s/ Coopers & Lybrand L.L.P.
----------------------------
    Coopers & Lybrand L.L.P.


    Coopers & Lybrand L.L.P.
    Philadelphia, Pennsylvania
    March 30, 1998




















                                      -28-

<PAGE>







                                                             EXHIBIT 23.2





               CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT



 The Board of Directors
 The Quigley Corporation


As independent public  accountant,  I hereby consent to the incorporation of my
report dated  February 11, 1998 included in this Form 10-KSB into the Company's
previously filed  Registration  Statements on Form S-8, File Numbers 333-10059,
333-14687.


                                                /s/ Nachum Blumenfrucht
                                                -----------------------
                                                    Nachum Blumenfrucht
                                                    Certified Public Accountant



Brooklyn, New York
March 30, 1998

















                                      -29-