UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  FORM 10-KSB/A

                  Annual Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934
                  For the fiscal year ended September 30, 1996

                          COMMISSION FILE NO. 01-21617
                          ----------------------------

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

              Nevada                                   23-2577138
--------------------------------------------------------------------------------
(State or other jurisdiction                 (IRS Employer Identification No.)
 of incorporation or organization) 


              LANDMARK BUILDING, PO BOX 1349, DOYLESTOWN, PA 18901
                 -------------------------------------------------
                    (Address of principal executive offices)

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

                 Securities registered pursuant to Section 12(b)
                                of the Act: NONE
                 Securities registered pursuant to Section 12(g)
                   of the Act: COMMON STOCK ($.001 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. Yes /X/  No/ /

As of December 31, 1996, the aggregate  market value of the voting stock (all of
one class $.001 par value Common Stock) held by non-affiliates of the Registrant
was  $74,674,850  based upon the average of the closing Bid and Asked  prices of
the Common Stock on that date as reported on the OTC Bulletin Board.

Number of shares of each of the  Registrant's  classes of securities (all of one
class of $.001 par  value  Common  Stock)  outstanding  on  December  31,  1996:
6,049,596.

<PAGE>

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

GENERAL DEVELOPMENT OF BUSINESS

The  Quigley  Corporation  (hereinafter  referred to as "the  Registrant")  is a
Nevada corporation which was organized on August 24, 1989 and commenced business
operations  in October,  1989.  Pursuant to a  Registration  Statement  filed in
accordance with the Securities Act of 1933, as amended,  and declared  effective
by the Securities and Exchange Commission on February 7, 1991, the Registrant in
August of 1991 sold 2,113,433 Units of its securities to the public.

The  Registrant's  offices  are  located  at  Landmark  Building,  PO Box  1349,
Doylestown,  PA 18901.  The telephone  number is (215) 345-0919.  The Registrant
maintains  a home page on the  Internet at  http://www.quigleyco.com  and can be
reached by e-mail at quigley@quigleyco.com.

FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

         SEE, Consolidated Financial Statements.

NARRATIVE DESCRIPTION OF BUSINESS OPERATIONS

Since its inception,  the Registrant has conducted research and development into
various types of health-related  food supplements and homeopathic cold remedies.
Prior to the current fiscal year,  the Registrant has had minimal  revenues from
operations  and as a result had suffered  continuing  losses due to research and
development and operations expenses.  However, the Registrant's product line has
been developed,  and during the most recent fiscal year ended September 30, 1996
("Fiscal 1996"), the Registrant has had increasing and significant revenues from
its  national   marketing   program  and  increasing  public  awareness  of  its
Cold-Eeze(TM) lozenge product.

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

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

PRODUCTS

THE COLD-EEZE(TM) COLD REMEDY LOZENGE

In May, 1992, the Registrant  entered into an exclusive  agreement for worldwide
representation,  manufacturing,  marketing  and  distribution  rights  to a zinc
gluconate/glycine  lozenge formulation developed by Dr. John C. Godfrey,  Ph.D.,
and  patented in the United  States,  United  Kingdom,  Sweden,  France,  Italy,
Canada,  Germany, and pending in Japan. This product is presently being marketed
by the Registrant under the tradename  Cold-Eeze(TM) by the Registrant  directly
and also through independent brokers and marketers, and is a featured product on
the QVC Cable TV shopping network.

                                       -2-

<PAGE>
In 1996, the Registrant  also acquired an exclusive  license to a zinc gluconate
use patent  which had been  patented  by George Eby III,  thereby  assuring  the
Registrant of exclusivity in the  manufacturing  and marketing of zinc gluconate
formulated cold relief products.

Under an 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  CLINICAL STUDY, by Dr.
Godfrey,  et al.,  was  published in England,  in the "Journal of  International
Medical Research",  Volume 20, Number 3, Pages 234-246. According to Dr. Godfrey
(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 new, 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, which commenced at the CLEVELAND CLINIC  FOUNDATION on
October 3rd, 1994 was published.  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  results  still  showed a 42%
reduction in the duration of the Common Cold.

ROYALTY AND EMPLOYMENT AGREEMENTS

The  Cold-Eeze(TM)  product is manufactured for the Registrant by an independent
manufacturer  and marketed by the Registrant in accordance with the terms of the
licensing  agreement (between the Registrant and Godfrey Science & Design,  Inc.
and  John  C.  Godfrey,  Ph.D;  hereinafter  "Dr.  Godfrey").  The  contract  is
assignable by the Registrant with Dr. Godfrey's consent. Throughout the duration
of the agreement  Dr.  Godfrey is to receive a three percent (3%) royalty on all
gross sales  (subsequent  to the  Registrant  receiving  payment upon such gross
sales).

A separate  consulting  agreement between the parties referred to directly above
was  similarly  entered  into on May 4, 1992 whereby Dr. John C. Godfrey and Dr.
Nancy J.  Godfrey are to receive a  consulting  fee of two percent (2%) of gross
sales of the  lozenge  by the  Registrant  for his  consulting  services  to the
Registrant with respect to such product.

Pursuant to the License Agreement entered into between the Registrant and George
Eby Research,  the Registrant pays a royalty fee. Throughout the duration of the
agreement  George Eby of George Eby Research is to receive a three  percent (3%)
royalty on all gross sales (subsequent to the Registrant  receiving payment upon
such gross sales).

An employment  agreement  between the  Registrant and Guy J. Quigley was entered
into  on  June  1,  1995,  whereby  Guy  J.  Quigley,   along  with  the  normal
considerations  of an Executive  Employment  Agreement,  in consideration of the
acquisition of the cold therapy product, is to receive a royalty of five percent
(5%) of gross sales of the Lozenge by the Registrant for the termination of said
agreement on May 31, 2005.

An  employment  agreement  between the  Registrant  and Charles A.  Phillips was
entered into on June 1, 1995, whereby Charles A. Phillips, along with the normal
considerations of an Executive Employment  Agreement,  shall receive 25% (twenty
five per cent) of the royalty  received by Guy J. Quigley,  either directly from
Guy J. Quigley or, if requested, directly from the Registrant. Should Charles A.
Phillips make such request upon Registrant,  the said 25% (twenty five per cent)
would be deducted from any royalties due to Guy J. Quigley.

                                       -3-

<PAGE>

BROKER, DISTRIBUTOR AND REPRESENTATIVE AGREEMENTS

The Registrant has several Broker,  Distributor and  Representative  Agreements,
both  Nationally and  Internationally.  These  agreements are sales  performance
based and in addition  the  Registrant  has also issued  incentive  common stock
purchase options to its Brokers, Distributors and Representatives.

PATENTS

The  Registrant  currently  owns no patents.  However,  the  Registrant has been
granted an exclusive  agreement  for  worldwide  representation,  manufacturing,
marketing  and   distribution   rights  to  a   zinc/gluconate/glycine   lozenge
formulation developed by Dr. John C. Godfrey, Ph.D., and 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 Registrant also acquired exclusive license for a United States ZINC
GLUCONATE  USE  PATENT  NUMBER RI 33,465  from the patent  holder  George Eby of
George Eby Research.  This use patent gives The Registrant  the only  world-wide
entity with rights to both USE and  FORMULATION  patents on zinc  gluconate  for
reducing the duration and severity of the common cold.

RESEARCH AND DEVELOPMENT

The Registrant's  research and development  costs for Fiscal 1996 and the fiscal
year  ending  September  30,  1995  ("Fiscal  1995") was  $41,856  and  $70,711,
respectively.  The decrease in research and development costs is attributable to
the  Registrant's  completion  of its research  and  development  projects  with
respect to the  Cold-Eeze(TM)  product.  The  clinical  study  conducted  by The
Cleveland  Clinic was done at no cost to the Registrant.  The Registrant will in
the fiscal year ending  September  30, 1997 ("Fiscal  1997") incur  research and
development expenditures to develop extensions of the lozenge product, including
potential pediatric Cold-Eeze, along with chewing gum and mouthwash formulations
of the Cold-Eeze(TM) product.

                   [BALANCE OF PAGE INTENTIONALLY LEFT BLANK]

                                       -4-

<PAGE>

REGULATORY MATTERS

The  business  of the  Registrant  is  subject  to  federal  and state  laws and
regulations  adopted  for the  health  and  safety of users of the  Registrant's
products.  The Registrant's  Cold-Eeze(TM) 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 Registrant 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  Registrant  is in
compliance  with all such laws,  regulations  and standards  currently in effect
including  the  Food,  Drug  and  Cosmetic  Act  of  1938  and  the  Homeopathic
Pharmacopoeia  Regulatory Service.  Management further believes that the cost of
compliance with such laws, regulations and standards has not and will not have a
material adverse effect on the Registrant.

COMPETITION

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

EMPLOYEES

At September 30, 1996 the Registrant had 4 full-time employees, of whom all were
involved in an  executive,  marketing or  administrative  capacity.  None of the
Registrant's  employees is covered by a collective  bargaining agreement or is a
member of a union. The Registrant  considers its relationship with its employees
to be good.

CUSTOMERS AND SUPPLIERS

The Cold-Eeze(TM)  lozenge products are distributed through numerous independent
and chain drug and  discount  stores  throughout  the United  States,  including
Walgreen's,  Revco,  Osco/Sav-On,  Thrift Drug, CVS, RiteAid,  Eckerd,  PharMor,
K-Mart,  and  wholesale  distribution  including,  McKesson,  Bergen  Brunswick,
Foxmeyer,  US Health  Distributors.  The  Cold-Eezer  Plus  product is  marketed
through an exclusive  sales agreement with the QVC cable shopping  network.  The
Registrant is not dependent on any single customer.

The Registrant  currently  uses a single  supplier to provide its zinc gluconate
products.  Should this relationship terminate,  the Registrant believes that the
contingency  plans which it has formulated  would prevent such  termination from
materially  affecting the  Registrant's  operations.  Any such  termination may,
however,  result in a temporary delay in production until a replacement facility
with available production time is located.

                                       -5-

<PAGE>

ITEM 2.  PROPERTIES

The  Registrant  currently  maintains  its  executive  offices  at the  Landmark
Building, 10 South Clinton Street,  Doylestown,  PA (and its alternative mailing
address is P.O. Box 1349, Doylestown,  PA 18901) where it occupies approximately
2,000 square feet of office space pursuant to a written  3-year lease  agreement
with an unaffiliated  landlord. The Registrant also occupies approximately 2,500
square  feet  of  warehouse  space  under a  one-year  lease  agreement  with an
unaffiliated landlord. The monthly aggregate lease payments for both premises is
$ 2,355. The Registrant  believes that its existing  facilities are adequate for
its  current  needs  and that  additional  facilities  in its  service  area are
available to meet future needs.


ITEM 3.  LEGAL PROCEEDINGS

The Registrant is not presently a party to any material  litigation  nor, to the
knowledge of management, is any material litigation threatened.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

On August 19, 1995, the Registrant  held its annual meeting of  stockholders  at
Doylestown,  PA, the number of shares  necessary  to  constitute  a quorum being
present either in person or by proxy. At this meeting, the stockholders ratified
all actions and  appointments of the Board of Directors taken and made since the
previous  Annual Meeting of Stockholders in June,  1993. The  stockholders  also
elected the slate of Directors  nominated by the  Registrant to hold such office
until  the  next  Annual  Meeting,   and  ratified  the  appointment  of  Nachum
Blumenfrucht, CPA, as independent auditor of the Registrant for Fiscal 1996.



                   [BALANCE OF PAGE INTENTIONALLY LEFT BLANK]

                                       -6-

<PAGE>

                                     PART II


ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

    (A)  MARKET INFORMATION

The   Registrant's   Common   Stock,   $.001  par   value,   is  traded  on  the
over-the-counter  market  (Bulletin  Board) under the trading  symbol QUIG.  The
following  table sets forth the average range of bid and ask  quotations for the
Registrant's  Common Stock as reported by the NASD Bulletin  Board for each full
quarterly period within the two most recent fiscal years (1).

Fiscal 1995 (2)


BY QUARTER                                            COMMON STOCK
----------                                            ------------

       QUARTER                 DATE                 HIGH              LOW
       -------                 ----                 ----              ---

         1st            December 31, 1994           $1.25            $1.00

         2nd            March 31, 1995              $1.25            $1.00

         3rd            June 30, 1995               $1.25            $1.00

         4th            September 30, 1995          $1.25            $1.00



Fiscal 1996 (2)


BY QUARTER                                              COMMON STOCK
----------                                              ------------

       QUARTER                   DATE                 HIGH            LOW
       -------                   ----                 ----            ---

         1st            December 31, 1995           $ 1.375          $0.875

         2nd            March 31, 1996              $ 1.375          $0.875

         3rd            June 30, 1996               $  2.25          $0.625

         4th            September 30, 1996           $10.50          $1.625



         (1)  Trading  transactions  in the  Registrant's  securities  has  been
         limited  to  the   over-the-counter   market   and,   accordingly,   an
         "established  public  trading  market"  for such  securities  currently
         exists and has existed for more than the past sixty  business days. Bid
         and asked  quotations  at fixed prices have  appeared  regularly in the
         established  quotation  systems on at least  one-half of such  business
         days. All prices  indicated herein are as reported to the Registrant by
         broker-dealer(s)  making  a market  in its  securities.  The  aforesaid
         securities are not traded or quoted on any automated  quotation system.
         The over-the-counter market quotes indicated above reflect inter-dealer
         prices,  without retail mark-up,  mark-down or commission,  and may not
         necessarily represent actual transactions.

         (2) Prices for Fiscal Years 1995 and 1996 have been adjusted to reflect
         the 10 for-One Reverse Split of Common Stock in December, 1995.

                                       -7-

<PAGE>

         (B) HOLDERS.  As of  September  30, 1996 there were  approximately  253
holders of record of  Registrant's  Common  Stock,  including  brokerage  firms,
clearing houses, and/or depository firms holding the Registrant's securities for
their  respective  clients.  The  exact  number  of  beneficial  owners  of  the
Registrant's  securities is not known but would necessarily exceed the number of
record owners indicated above.

         (C)  DIVIDENDS.  No cash  dividends  were paid  during  Fiscal 1996 and
Fiscal 1995.  The  Registrant  has not paid or declared any  dividends  upon its
Common Stock since its inception, and, by reason of its present financial status
and projected financial  requirements,  does not anticipate paying any dividends
upon its Common Stock in the foreseeable future.

         (D) WARRANTS.  In addition to the  Registrant's  aforesaid  outstanding
Common Stock,  there are as of December 26, 1996 issued and  outstanding  Common
Stock Purchase  Warrants which are exercisable at the price-per- share indicated
and which expire on the date indicated, as follows:

 WARRANT         NUMBER        EXERCISE PRICE     EXPIRATION DATE
 -------         ------        --------------     ---------------

CLASS "D"         800,000            $1.00         December 31, 2000
CLASS "E"       1,550,000            $3.50         June 30, 2001


ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS

THIS MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS   CONTAINS   FORWARD-LOOKING   STATEMENTS   THAT  INVOLVE  RISKS  AND
UNCERTAINTIES.  THE  REGISTRANT'S  ACTUAL RESULTS COULD DIFFER  MATERIALLY  FROM
THOSE ANTICIPATED IN THESE  FORWARD-LOOKING  STATEMENTS.  FACTORS THAT MAY CAUSE
SUCH DIFFERENCES  INCLUDE,  BUT ARE NOT LIMITED TO, THE  REGISTRANT'S  EXPANSION
INTO NEW  MARKETS,  COMPETITION,  TECHNOLOGICAL  ADVANCES  AND  AVAILABILITY  OF
MANAGERIAL PERSONNEL.

OVERVIEW

During Fiscal 1996,  management  of the  Registrant  made a strategic  marketing
decision to change the focus and business  operations  of the  Registrant to the
manufacture and marketing of the Registrant's patented Cold-Eeze(TM) cold relief
lozenge product and the  development  and marketing of brand extension  products
based upon the Registrant's proprietary zinc gluconate glycine formula.

By commencing  national  distribution of a cold-relief product clinically proven
to reduce the severity and duration of the common cold, the Registrant  believes
that it is offering a  significant  addition to the huge  over-the-counter  cold
remedy market.  Through greatly  increased sales and expansion of  manufacturing
capacity and by holding down operation,  marketing and  distribution  costs, the
Registrant  believes it will in Fiscal 1997 reverse the negative  cash flow from
operations associated with the product development.  The Registrant also intends
to continue to utilize the  financial  and  marketing  resources of  independent
national and  international  brokers and marketers to represent the Registrant's
Cold-Eeze(TM)  lozenge  product  and  product  extensions,  thereby  saving  the
Registrant  from the expenses and capital  outlays  which the  Registrant  would
otherwise be required to expend.

The  Registrant  had  not  generated  significant  revenues  from  its  business
operations  from its  inception  through the third  quarter of Fiscal 1996. As a
result of the release of the  clinical  study by The  Cleveland  Clinic in July,
1996 citing positive results of the efficacy of the  Registrant's  Cold-Eeze(TM)
formulation,  and the resultant  increased  national  publicity  concerning  the
Cold-Eeze(TM)  product,  revenue from product sales greatly increased during the
fourth quarter ending  September 30, 1996. For Fiscal 1996, the Registrant had a
net loss of  ($694,269)  on revenues of  $1,049,561.  The  dramatic  increase in
purchase orders for the Cold-Eeze(TM)  product resulted in a significant backlog
in purchase orders by the close of Fiscal 1996.

                                       -8-

<PAGE>

Based upon continuing strong consumer demand for the Cold-Eeze(TM)  product, the
Registrant  in  September,   1996  initiated  a  program  designed  to  increase
manufacturing  capacity in several stages throughout Fiscal 1997. As a result of
this program,  the Registrant  will have the ability to manufacture  and ship in
excess of $1.5  million of the Cold-  Eeze(TM)  product  by the end of  January,
1997, with additional manufacturing capacity coming on-line shortly thereafter.

As of  December  26,  1996,  the  Registrant  had a  purchase  order  backlog of
approximately $7.5 million of Cold-Eeze(TM)  product, and was, during the months
of November, 1996 and December,  1996, manufacturing and shipping Cold- Eeze(TM)
product at the rate of  approximately  $500,000 per week. These sales levels are
significantly  higher than any  previous  sales  results of the  Registrant  and
management  expects  that these sales  levels will  continue  for the  immediate
future and therefore will have a materially  positive effect on the Registrant's
results for Fiscal 1997.

Although the  Registrant  expects  that sales levels will be highest  during the
peak cold season from  September  through March,  near-term  sales levels should
continue  to  increase  as the  Registrant  ships  its  backlog  of  orders  and
distributors  and retailers  order  increasing  quantities of the  Cold-Eeze(TM)
product to fill their distribution  pipeline and meet increasing consumer demand
for the product. In addition,  the Registrant expects that it will during Fiscal
1997 utilize its  increased  manufacturing  capacity to  manufacture  sufficient
product  for  international   distribution  of  Cold-  Eeze(TM).   Although  the
Registrant  has begun to  establish  an  international  network  of  independent
distributors,   the  current   inability  to  meet   domestic   demand  for  the
Cold-Eeze(TM) product has delayed the introduction of the Cold- Eeze(TM) product
outside the United States.

The  Registrant  believes that it has developed an effective,  proprietary  cold
remedy product which is beginning to meet with widespread  consumer  acceptance.
Future results of the Registrant's operations, however, will be dependent upon a
number of factors, including competitive and financial pressures associated with
national  distribution  of an  over-the-counter  cold remedy.  Future  revenues,
costs,  margins and profits will continue to be  influenced by the  Registrant's
ability to increase its  manufacturing  capacity and marketing and  distribution
capabilities in order to compete on the national and international level.


The following  table sets forth selected  financial  information for the periods
indicated:
                                                For the Fiscal Year Ended
                                          1996                        1995
                                          ----                        ----
Statement of Operations Summary:
         Net Sales                     $1,049,561                   $501,903
         Net Loss                      ($694,269)                 ($152,556)
         Net Loss Per Share                ($.17)                     ($.05)

Balance Sheet Summary:
         Total Assets                 $1,368,301                   $437,076
         Total Liabilities              $125,253                   $137,936
         Stockholder's Equity         $1,243,048                   $299,140


                                       -9-

<PAGE>

RESULTS OF OPERATIONS

FISCAL 1996 COMPARED WITH FISCAL 1995

For Fiscal 1996, the Registrant  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 is primarily  attributable  to gradual market  acceptance of
the  Cold-Eeze(TM)  lozenge  products.  The  gradual  market  acceptance  of the
Cold-Eeze(TM)  product resulted from a national  marketing  program commenced in
the  fourth  quarter  of  Fiscal  1996 and the  release  of the  results  of The
Cleveland Clinic Study in July,  1996. Sales in Fiscal 1995 were $501,903,  most
of which resulted  following the  Registrant'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 Fiscal
1996 from 22.3% for Fiscal 1995. The slight increase was similarly caused by the
Registrant's  change in its  product mix toward  developing  and  marketing  the
Cold-Eeze(TM)  products  instead  of  health  food  bars.  During  Fiscal  1996,
operating  expenses  similarly  increased to $1,493,794  from $552,696 in Fiscal
1995. This was primarily a result of increased costs  associated with a national
marketing program and the increased sales volume from the Cold-Eeze(TM)  product
during Fiscal 1996.

During Fiscal 1996, the Registrant'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 Registrant'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
Fiscal 1995.  During Fiscal 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 Fiscal 1995,  then the net loss for Fiscal
1996 would have changed to basically a break even.

For future  periods,  a normal  profitable  relationship  should develop for all
costs and  operating  expenses as they relate to sales.  However,  this will not
occur  until  certain  break even sales  volume  levels are  achieved  to absorb
certain fixed costs of the Registrant. The pricing structure of the Registrant's
product is designed to render the  Registrant  profitable  after base line sales
volume levels are attained.

The total assets of the  Registrant 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 Registrant's Common Stock, options, and warrants.

At September 30, 1996, the Registrant's  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  Registrant's  Cold-Eeze(TM)  lozenge
products.

FISCAL 1995 COMPARED WITH FISCAL 1994

For Fiscal 1995, the Registrant  reported revenues of $501,903 and a net loss of
($152,556), as compared with revenues of $76,907 and a loss of ($73,784) for the
comparable period ended September 30, 1994 ("Fiscal 1994"). This dramatic change
in revenue is  primarily  attributable  to the  Registrant's  initial  marketing
efforts of its  cold-relief  products,  through  the "QVC"  television  shopping
network,  which represents  approximately  $261,000 or 52% of the total revenues
for Fiscal  1995,  and  growing  interest  of the  product by  consumers  in the
marketplace.

Cost of goods sold, as a percentage of net sales,  decreased to 22.3% for Fiscal
1995 from 34.8% for Fiscal 1994. The occurred because the Registrant's change in
its product mix toward  developing  and  marketing  the  Cold-Eeze(TM)  products
primarily  through QVC, which carried a lower cost of sales than health food and
other cold-relief products.

                                      -10-
<PAGE>

During Fiscal 1995, the health food bars accounted for approximately 1% of total
net sales as opposed to approximately 27% in Fiscal 1994.

During Fiscal 1995,  operating  expenses  increased to $552,696 from $180,015 in
Fiscal 1994. However, as a percentage of net sales, operating costs decreased to
110.1% in Fiscal 1995 from 234.1% in Fiscal 1994.  Even though  total  operating
costs were lower as a percentage  of net sales,  certain  expenses  increased in
Fiscal 1995 causing a greater loss from operations to be reported. During Fiscal
1995,  advertising and professional  expenses  increased to $93,931 and $69,325,
respectively, compared to $3,056 and ($8,081), respectively for Fiscal 1994.

The  Registrant  had  working  capital of  $287,281  for its  fiscal  year ended
September 30, 1995, as compared to a working capital deficiency of ($59,998) for
its fiscal year ended  September 30, 1994.  This  improvement in working capital
was due  primarily to a  significant  increase in revenues to $501,903 in Fiscal
1995 from $76,907 in Fiscal 1994,  combined with additional  capital obtained by
the Company through sale of Common Stock.

As of  September  30, 1995,  the  Registrant  did not have any current  material
commitments for capital expenditures.

FISCAL 1994 COMPARED WITH FISCAL 1993

The Registrant's  operations for Fiscal 1994 produced  revenues of $76,907 and a
net loss of  ($73,784)  as compared  with  revenues of $35,932 and a net loss of
($219,388) for the comparable  period ended September 30, 1993 ("Fiscal  1993").
This 114%  improvement in revenues was due to the Registrant  starting to sell a
new product for the cold remedy market which accounted for  approximately 73% of
net sales for Fiscal 1994.  Prior to Fiscal 1994, the primary source of revenues
were through the sales of a line of nutritious health food supplements.

Gross  profits  improved to $50,156,  or 65.2% of net sales,  for Fiscal 1994 as
compared to  $18,887,  or 61.9% of net sales,  for Fiscal  1993.  This  occurred
because of increased sales volume and a lower cost of production associated with
the cold remedy lozenge, as compared to the health food supplements products.

Operating  expenses  decreased to $180,015,  or 234.1% of net sales,  for Fiscal
1994 as compared to $238,275, or 663.1% of net sales, for Fiscal 1993. The major
cost associated with this reduction is that professional  expenses  decreased to
($8,081) during Fiscal 1994 as compared to $71,676 for Fiscal 1993. The negative
amount  occurred  because of a  settlement,  with a previous  attorney,  waiving
$17,500 of fees.

By adopting  FASB 109 during  Fiscal  1994,  an amount  totaling  ($21,564)  was
reflected as a cumulative tax credit for that period. Also, $32,500 was provided
for the sale of distribution  rights as compared to no provision,  respectively,
for Fiscal 1993.  The specific  preceding item changes are reflective in the net
loss of the Registrant which decreased to ($73,784) for Fiscal 1994, as compared
to ($219,388) for Fiscal 1993.

Deferred taxes increased to $23,526 during Fiscal 1994 with no provision  during
the prior fiscal year, thereby accounting for the primary change in total assets
to $57,635  for Fiscal 1994 as  compared  to $28,583  for Fiscal  1993.  Working
capital  deficits  for  Fiscal  1994  and  1993  were  ($59,998)  and  ($84,864)
respectively,  which remained  basically  unchanged as did all other significant
categories  with the exception of an advance  during Fiscal 1993 for $20,000 for
the sale of distribution rights to a Canadian corporation.

As of  September  30, 1994,  the  Registrant  did not have any current  material
commitments for capital expenditures.


MATERIAL COMMITMENTS AND SIGNIFICANT AGREEMENTS

Since the  Cold-Eeze(TM)  lozenge product is manufactured  for the Registrant by
outside sources,  capital expenditures for Fiscal 1997 are not anticipated to be
material.

                                      -11-

<PAGE>

There are significant  royalty  agreements between the Registrant and the patent
holders of the Registrant's cold-relief product. The Registrant has entered into
royalty  agreements with Godfrey Science & Design,  Inc. and George Eby Research
that  require  payments of 3% of gross sales and with Guy J. Quigley and Charles
A.  Phillips  who share a royalty of 5% of gross  sales (in a ratio of 3.75% and
1.25%, respectively). Additionally, Dr. John C. Godfrey and Dr. Nancy J. Godfrey
receive a consulting  fee of 2% of gross sales.  All such royalty and consulting
arrangements  are subject to certain  adjustments,  and payments are required by
the Registrant only after funds are remitted from such sales.  See,  Description
of Business- Royalty and Employment Agreements.

The agreements expire as follows: the agreement with George Eby Research expires
on March 5, 2002; the agreements with each of Godfrey Science & Design, Dr. John
C. Godfrey,  and Dr. Nancy J. Godfrey  expire on May 4, 2007; and the agreements
with Guy J. Quigley and Charles A.  Phillips  expire on May 31, 2005.  All costs
associated  with the cold-relief  product,  including the royalty and consulting
agreements,  have been built into the wholesale selling price of the product, in
order to render the operations  profitable after a certain base sales volume has
been achieved.

LIQUIDITY AND CAPITAL RESOURCES

The  Registrant  had working  capital of $910,970 and $287,281 at September  30,
1996 and 1995,  respectively.  The  increase  in  working  capital is due to the
proceeds  received by the  Registrant  from the sale or exchange of common stock
for cash or services and  increased  sales of $547,658.  Total cash  balances at
September 30, 1996 were $370,147, as compared to $132,739 at September 30, 1995.

The  Registrant  believes  that its  increased  marketing  efforts and increased
national  publicity  concerning  the Cold- Eeze(TM)  product,  together with the
Registrant's increased manufacturing availability,  will result in significantly
increased  revenues in Fiscal  1997.  These  revenues  will  provide an internal
source of capital to fund the Registrant's  business operations.  In addition to
anticipated  earnings  from  operations,  the  Registrant  may continue to raise
capital through the issuance of equity securities to finance anticipated growth.

On  October  1,  1996,  the  Registrant   entered  into  an  investment  banking
arrangement with Sands Brothers & Co. to raise  additional  capital to assist in
financing an expansion of the Registrant's business. Such financing arrangements
would primarily entail a private placement  offering of the Registrant's  equity
securities.

Management is not aware of any trends,  events or uncertainties that have or are
reasonably  likely or  expected  to have a  material  negative  impact  upon the
Registrant's (a) short term or long term liquidity, (b) net sales or revenues or
income from continuing  operations and (c) the Registrant's  business operations
may not be considered to be cyclical and/or seasonable in nature.  Any challenge
to the  Registrant's  rights under certain patents could have a material adverse
effect on future  liquidity of the  Registrant,  however,  the Registrant is not
aware of any condition which 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 Fiscal 1997.  However,  should the
Registrant's  business  expand  significantly,  additional  external  sources of
financing would be required.  While the Registrant  believes that such financing
would be available to it, there can be no assurance in this regard.

NEW ACCOUNTING STANDARDS

In March 1995,  the Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standards  No.  121  "Accounting  for the  Impairment  of
Long-Lived  Assets and for Long-Lived  Assets to Be Disposed Of," which requires
that certain  long-lived  assets be reviewed for impairment  whenever  events or
changes  in  circumstances   indicate  that  the  carrying  amount  may  not  be
recoverable.  Management  believes that the adoption of this  pronouncement will
not have a significant impact on the Registrant's financial statements.

                                      -12-

<PAGE>
In October 1995, the Financial  Accounting  Standards Board issued  Statement of
Financial   Accounting   Standards   No.   123   "Accounting   for   Stock-Based
Compensation,"  which requires  either a change in accounting or disclosures for
stock-based  compensation plans. The Registrant expects to select the disclosure
election of the standard.

Both standards will be effective for the Registrant  beginning the first quarter
of Fiscal 1997.

IMPACT OF INFLATION

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

ITEM 7.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by Item 7 is included immediately  following Item 13 of
this Report.  The Financial  Statements  contained  herein have been prepared in
accordance with the requirements of Regulation S-X and  supplementary  financial
information, if any, has been prepared in accordance with Item 302 of Regulation
S-K.

ITEM 8.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
         FINANCIAL DISCLOSURE

         None.

                   [BALANCE OF PAGE INTENTIONALLY LEFT BLANK]

                                      -13-

<PAGE>

                                    PART III


ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

DIRECTORS AND EXECUTIVE OFFICERS

Listed  below are the  names,  ages and  positions  with the  Registrant  of all
Directors and Executive Officers of the Registrant as of December 26, 1996. Each
director's   term  is  scheduled  to  expire  at  the  next  annual  meeting  of
shareholders and when his successor is duly elected:


            NAME             AGE          POSITION           YEAR FIRST ELECTED
            ----             ---          --------           ------------------

Guy J. Quigley               55      President, CEO and              1989
Landmark Building                    Director
10 South Clinton Street
Doylestown, PA 18901

Eric H. Kaytes               41      Vice President of               1989
Landmark Building                    Finance, CFO,
10 South Clinton Street              Secretary-Treas. and
Doylestown, PA 18901                 Director

Charles A. Phillips          49      Vice President, COO             1989
Landmark Building                    and Director
10 South Clinton Street
Doylestown, PA 18901

Robert L. Pollack, Ph.D.     72      Director of Research            1993
Landmark Building                    and Development,
10 South Clinton Street              and Director
Doylestown, PA 18901


GUY J. QUIGLEY has been Chairman of the Board,  President,  and Chief  Executive
Officer of the Registrant since September 1989. Prior to this date, Mr. Quigley,
an accomplished author,  established and operated various manufacturing,  sales,
marketing and real estate companies located in the United States, Europe and the
African Continent.

CHARLES A.  PHILLIPS has been Vice  President,  Chief  Operations  Officer and a
Director of the Registrant since September 1989.  Before his employment with the
Registrant,  Mr.  Phillips  founded and  operated  KEB  Enterprises,  a gold and
diamond  mining  operation  that was  based in Sierra  Leone,  West  Africa.  In
addition, Mr. Phillips, also served as a technical consultant for Re-Tech, Inc.,
Horsham,  Pennsylvania,   where  he  was  responsible  for  full  marketing  and
production of a prototype electrical device.

ERIC H. KAYTES  currently  serves as Vice  President of  Management  Information
Systems,  Secretary,  Treasurer and Director of the Registrant.  From 1989 until
January  1997,  Mr.  Kaytes  also served as the Chief  Financial  Officer of the
Registrant.  Prior to 1989 and  concurrent  with  his  responsibilities  for the
Registrant,  Mr.  Kaytes has been an  independent  programmer  and  designer  of
computer software.

                                      -14-

<PAGE>

ROBERT  L.  POLLACK,   B.S.,  M.S.,  Ph.D.,  Professor  Emeritus  Department  of
Biochemistry, Temple University School of Medicine. Dr. Pollack is a biochemist,
researcher,  nutritionist,  microbiologist,  editor and educator having lectured
(both  nationally and  internationally)  on  nutritional  matters to the general
public and  scientific  audiences.  In addition to publishing  several papers in
scientific  journals,  Dr.  Pollack has  authored  three books on the subject of
nutrition and currently  serves as Chairman of the Medical Advisory Board of the
Registrant.

TERM OF OFFICE

Directors are elected to serve until the next annual meeting of shareholders and
until their  successors  have been  elected  and have  qualified.  Officers  are
appointed  to serve until the meeting of the Board of  Directors  following  the
next  annual  meeting  of  shareholders  and until  their  successors  have been
appointed.



                   [BALANCE OF PAGE INTENTIONALLY LEFT BLANK]



                                      -15-

<PAGE>

ITEM 10.  EXECUTIVE COMPENSATION

     (a)  CASH COMPENSATION

The following table sets forth  information  concerning all remuneration paid or
accrued by the Registrant for services  rendered by the following persons in all
capacities during Fiscal 1996:

         (i) Each of the Registrant's five most compensated  executive  officers
whose cash compensation exceeded $100,000; and

         (ii) all executive officers of the Registrant as a group.

<TABLE>
<CAPTION>

      Name and Principal                                                  Salary                 Additional Compensation
           Position                         Year                          ($)(1)                          ($)(2)
---------------------------      -------------------------     --------------------------      --------------------------

<S>                                         <C>                           <C>                             <C>    
Guy J. Quigley                              1996                          125,000                         235,956
Chairman of the                             1995                           62,400
Board, President,                           1994                           25,000
Chief Executive Officer



Charles A. Phillips                         1996                           85,000                          81,547
                                            1995                           38,050
                                            1994                           25,000



All Executive Officers as                   1996                          221,300                         329,343
a group (3 Persons)                         1995                          103,850
                                            1994                           50,000
</TABLE>

-----------------------
(1)      Compensation paid pursuant to employee agreements.
(2)      Additional  payments,  including stock awards in lieu of cash, for past
         and current services.

                   [BALANCE OF PAGE INTENTIONALLY LEFT BLANK]

                                      -16-

<PAGE>

         (b) OUTSTANDING OPTIONS

As of September 30, 1996,  Officers and/or Directors of the Registrant have been
issued an aggregate of 585,000  options to purchase  shares of the  Registrant's
Common  Stock at  various  exercise  prices.  The  following  table  sets  forth
information  as to all options to purchase the  Registrant's  Common Stock which
were granted,  and held by each of the  individuals  listed on the  remuneration
table and all directors and officers as a group:
<TABLE>
<CAPTION>


                            Options To
                          Purchase # of                                                          Percent of
                              Shares             Exercise             Date                        Total
Name                        Indicated              Price             Granted      Expires        Options
----                        ---------              -----             -------      -------        ----------

<S>                         <C>                    <C>               <C>           <C>             <C>
Guy J. Quigley              100,000                $1.00             12/95         12/00           3.4
                            150,000                 3.50              7/96          6/01           5.1

Charles A. Phillips          75,000                $1.00             12/95         12/00           2.6
                            150,000                 3.50              7/96          6/01           5.1

Eric H. Kaytes               30,000                $1.00             12/95         12/00           2.6
                             25,000                 3.50              7/96          6/01           5.2

Robert L. Pollack            30,000                $1.00             12/95         12/00           1.0
                             25,000                 3.50              7/96          6/01            .8

</TABLE>



                   [BALANCE OF PAGE INTENTIONALLY LEFT BLANK]


                                      -17-

<PAGE>

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The  following  table  sets  forth  information   concerning  ownership  of  the
Registrant's  Common  Stock,  as of December 31, 1996, by (i) each person who is
known by the Company to be the beneficial owner of more than five percent of the
Common Stock outstanding on such date, (ii) each of the Company's directors, and
(iii) all current directors and executive officers of the Company as a group.

<TABLE>
<CAPTION>

                                                                                                         Outstanding
Name and Address                                 Common Stock(1)            Percent of Class             Warrants(8)
---------------------------------------      ----------------------     ---------------------      ----------------------

<S>                                                     <C>                          <C>                      <C>
GUY J. QUIGLEY(2)(3)                                    1,309,923(10)                21.7                     100,000(6)
Landmark Building                                                                                             150,000(7)
10 South Clinton Street
Doylestown, PA 18901

CHARLES A. PHILLIPS(2)(3)                                 436,496                     7.2                      75,000(6)
Landmark Building                                                                                             150,000(7)
10 South Clinton Street
Doylestown, PA 18901

ERIC H. KAYTES(2)(3)                                      134,496                     2.2                      30,000(6)
Landmark Building                                                                                              25,000(7)
10 South Clinton Street
Doylestown, PA 18901

ROBERT L. POLLACK, Ph.D.(2)(4)                             81,000                     1.3                      30,000(6)
Landmark Building                                                                                              25,000(7)
10 South Clinton Street
Doylestown, PA 18901

NUTRITIONAL FOODS, LTD(5)                                 324,694                     5.4
539 Park Terrace
Harrisburg, PA 17111

ALL DIRECTORS AND                                       1,961,915                    32.4                     235,000(6)
EXECUTIVE OFFICERS AS A                                                                                       350,000(7)
GROUP
(Four Persons)(9)
</TABLE>


-----------------
(1)      Does not include shares issued pursuant to a two-for-one stock split on
         January 15, 1997.
(2)      Director of the Registrant.
(3)      Officer of the Registrant.
(4)      Chairman of the Medical Advisory Board of the Registrant.
(5)      In  accordance  with a Resolution  adopted by the Board of Directors in
         May,  1992,  the  Registrant's  Transfer  Agent  was  directed  to stop
         transfer of the certificates  representing these shares. The Registrant
         takes the position that Nutritional Foods, Ltd. ("NFL") should not have
         received   these   shares   due  to   certain   false  and   misleading
         representations made by it to the Registrant, including but not limited
         to NFL's failure to act as the Registrant's  international sales agent.
         The Registrant has commenced litigation to cancel the shares of record.
(6)      Warrants are exercisable at $1.00 per share, granted December 1995, and
         expires December 2000.
(7)      Warrants are  exercisable  at $3.50 per share,  granted July 1996,  and
         expires June 2001.
(8)      There are 585,000  shares  of common stock underlying these unexercised
         warrants.

                                      -18-

<PAGE>

(9)      Does not include the Registrant's  Chief Financial  Officer,  George J.
         Longo,   whose  employment   agreement  provides  for  a  January  1997
         commencement date for this position.
(10)     Includes  an  aggregate  of  156,496  shares  held of record by certain
         members of Mr. Quigley's family.

CHANGE OF CONTROL

The Registrant  does not know of any  arrangement or pledge of its securities by
persons  now  considered  in control of the  Registrant  that might  result in a
change of such control.


ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         For Fiscal 1996, there have not been any material  transactions between
the  Registrant  and any Director,  Executive  Officer,  security  holder or any
member of the immediate family of any of the  aforementioned  which exceeded the
sum of $60,000.

                   [BALANCE OF PAGE INTENTIONALLY LEFT BLANK]


                                      -19-

<PAGE>

                                     PART IV

ITEM 13. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K

   (a)   Exhibits:

   *  3.1     --       Articles of Incorporation of the Registrant (as amended).

   *  3.2     --       Bylaws of the Registrant.

   *  4.1     --       Specimen Common Stock Certificate.

   * 10.1     --       Stock   Option   Plan  for   Consultants,  Advisors   and
                       Non-Employee Directors.

   **10.2     --       Exclusive Representation and Distribution Agreement dated
                       May 4, 1992 between the Registrant and Godfrey  Science &
                       Design, Inc. et al.

   * 10.3     --       Employment  Agreement  dated  June 1,  1995  between  the
                       Registrant and Guy J. Quigley.

   * 10.4     --       Employment  Agreement  dated  June 1,  1995  between  the
                       Registrant and Charles A. Phillips.

   **10.5     --       Consulting  Agreement  dated  May  4,  1992  between  the
                       Registrant and Godfrey Science & Design, Inc., et al.

   * 10.6     --       Licensing  Agreement  dated  August 24, 1996  between the
                       Registrant, George A. Eby III and George Eby Research.

   * 10.7     --       Exclusive   Master  Broker   Wholesale   Distributor  and
                       Non-Exclusive  National Chain Broker Agreement dated July
                       22, 1994 between the Registrant and Russell Mitchell.

   * 11.1     --       Statement of Computation of Per Share Earnings.

   * 23.1     --       Consent of Nachum Blumenfrucht, CPA dated April 4, 1997.

   * 27.1     --       Financial Data Schedule.

---------------------------
*        Filed herewith.
**       Incorporated by reference to the Registrant's Registration Statement on
         Form S-18,  filed with the Commission on September 21, 1990 (Commission
         File No. 33-36934), as amended.

         (b)      REPORTS ON FORM 8-K

         No reports were filed on Form 8-K in the quarter  ended  September  30,
1996.

                                      -20-

<PAGE>
                                 N. BLUMENFRUCHT
                           CERTIFIED PUBLIC ACCOUNTANT
                              1040 EAST 22ND STREET
                              BROOKLYN, N.Y. 11210
                                  ------------

                                 (718) 692-2743


                REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT


The Board of Directors
The Quigley Corporation
Doylestown, Pennsylvania



         I  have  audited  the  accompanying   balance  sheets  of  The  Quigley
Corporation  as of September  30, 1996 and 1995,  and the related  Statements of
Operations,  Cash Flows and Stockholders' Equity for the periods ended September
30, 1996, 1995 and 1994. 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 my 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 statements presentation.
I believe that my audit provides a 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 September 30, 1996 and 1995 and the results of its operations
and its Cash Flows and Stockholders'  Equity for the periods ended September 30,
1996,  1995  and  1994,  in  conformity  with  generally   accepted   accounting
principles.

         The accompanying  financial statements have been prepared assuming that
the Company will  continue as a going  concern.  However,  the Company  suffered
losses  since  inception,  which raises  substantial  doubt about its ability to
continue  as a going  concern.  Management's  plans in regard to this matter are
described in Note 2. The  financial  statements  do not include any  adjustments
that might result from the outcome of this uncertainty.

         As  discussed  in Note 1,  effective  October 1, 1993,  the Company has
changed its method of accounting  for income taxes in  accordance  with SFAS No.
109.


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


Brooklyn, New York
December 12, 1996

                                      -21-

<PAGE>

                             THE QUIGLEY CORPORATION
                                  Balance Sheet

                               As of September 30,

                                     ASSETS
                                     ------

<TABLE>
<CAPTION>
                                                                           1996           1995
                                                                           ----           ----
CURRENT ASSETS
<S>                                                                    <C>              <C>
   Cash                                                                $  370,147       $132,739
   Accounts receivable-Note 1                                             607,078        135,983
   Interest receivable-Stockholders-Note 6                                    659          2,784
   Inventory-Note 1                                                        58,339         82,437
   Due from attorney's escrow                                                   0          9,000
   Prepaid expenses-Note 5                                                      0          4,468
                                                                     ------------       --------
      TOTAL CURRENT ASSETS                                              1,036,223        367,411
                                                                     ------------       --------

FIXED AND OTHER ASSETS
   Fixed Assets (net of acc. depreciation of $28,337 and
      $14,010) - Note 1                                                    65,314         36,884
   Intangible Asset - Patent (net of acc. amortization of
      $3,134 in 1996)- Note 1                                             206,866              0
   Deposits- Note 1                                                         3,377          3,310
   Deferred taxes- Note 1                                                  56,521         29,471
                                                                      -----------       --------

TOTAL FIXED AND OTHER ASSETS                                              332,078         69,665
                                                                      -----------       --------

TOTAL ASSETS                                                           $1,368,301       $437,076
                                                                       ==========       ========

                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------

CURRENT LIABILITIES
   Accounts payable & accrued expenses-Note 7                           $  84,253       $ 75,677
   Prepaid stock subscription-Note 8                                       41,000              0
   Loans and note payable-Note 9                                                0          4,453
                                                                        ---------       --------

         TOTAL CURRENT LIABILITIES                                        125,253         80,130
                                                                        ---------       ---------

NON CURRENT LIABILITIES
   Auto loan payable-non current portion                                        0         13,706

   Restricted stock sold under put option 420,000 common                        0         44,100
   shares-Note 10                                                       ---------       ---------

TOTAL LIABILITIES                                                         125,253        137,936
                                                                        ---------       ---------

STOCKHOLDERS' EQUITY - Note 10
   Common Stock, $.001 par value; authorized 25,000,000                    4,769           3,361
      shares, issued and outstanding, 4,769,764 shares in
      1996 and 3,361,414 shares in 1995

Additional paid-in capital                                             4,129,256       2,466,632
Deficit                                                               (2,803,247)     (2,108,978)
Less:  Notes receivable stockholders - Note 6                            (87,730)        (61,875)
                                                                      ----------      -----------

TOTAL STOCKHOLDERS' EQUITY                                             1,243,048         299,140
                                                                      ----------      ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                            $1,368,301        $437,076
                                                                      ==========      ============
</TABLE>

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

                                      -22-

<PAGE>

                             THE QUIGLEY CORPORATION

                             Statement of Operations

<TABLE>
<CAPTION>
                                                                             YEARS ENDED SEPTEMBER 30,
                                                                             -------------------------
                                                                   1996                   1995                    1994
                                                                   ----                   ----                    ----
REVENUE
<S>                                                            <C>                     <C>                     <C>
Sales                                                          $1,049,561              $ 501,903               $ 76,907
   Cost of Goods Sold                                             283,967                111,834                 26,751
                                                               ----------              ---------               --------
Gross Profit                                                      765,594                390,069                 50,156

GENERAL AND ADMINISTRATIVE EXPENSES
   Officer salaries & payroll taxes                               558,281                106,660                 50,000
   Services rendered & R&D-Note 10                                 71,256                 80,411                  8,750
   Administrative expenses-Note 12                                 42,906                 39,305                 26,949
   Commissions, consulting & royalties                             77,030                 58,711                  6,100
   Travel, entertainment and shows                                  6,009                 13,758                 15,551
   Depreciation and amortization                                   17,461                  4,728                  2,773
   Utilities                                                       11,013                  9,498                  9,722
   Advertising and promotion                                      570,752                 93,931                  3,056
   Professional                                                    65,268                 69,325                (8,081)
   Rent                                                            28,265                 20,029                 32,893
   Interest                                                         4,523                  3,728                  3,676
   Insurance                                                       19,878                 25,697                  5,390
   Office and equipment rental                                      1,522                  1,290                 13,446
   Wages and outside labor                                         10,901                 18,156                      0
   Dues and subscriptions                                           1,777                  1,420                      0
   Stock transfer and maintenance fees                              4,462                  3,600                  5,700
   Miscellaneous                                                    2,490                  2,449                  4,090
                                                              -----------              ---------              ---------
Total General and administrative expenses                       1,493,794                552,696                180,015
                                                              -----------              ---------              ---------
Loss before other income provision for income tax and
cumulative effective adjustment                                  (728,200)              (162,627)              (129,859)
Interest Income                                                     6,881                  4,126                     49
Sale of distribution rights-Note 11                                     0                      0                 32,500
                                                            -------------              ---------              ---------
   Subtotal                                                     (721,319)              (158,501)               (97,310)
Less: Provision for Corporate Income Tax -(Credit)-
      Note I                                                     (27,050)                (5,945)                  1,962
                                                            -------------             ----------              ---------
   Loss before cumulative adjustment                            (694,269)              (152,556)               (95,348)

Less: Cumulative Effect Adjustment - (Credit)- Note 1                  --                     --                 21,564
                                                             ------------              ---------              ---------

Net Loss                                                    $   (694,269)             $(152,556)              $ (73,784)
                                                            =============             ==========              =========

Loss per share:
   Prior to cumulative effect adjust.                               (.17)                  (.05)                   (.04)
   Cumulative effect adjustment                                        --                    --                     .01
                                                             ------------              ---------              ---------

NET LOSS PER SHARE                                          $       (.17)             $    (.05)                  $(.03)
                                                            =============             ==========              ==========
</TABLE>


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

                                      -23-

<PAGE>

                             THE QUIGLEY CORPORATION

                             Statement of Cash Flows


<TABLE>
<CAPTION>
                                                                                     Year Ended
                                                                                   SEPTEMBER 30,
                                                                                   -------------
                                                                 1996                   1995                   1994
                                                                 ----                   ----                   ----
CASH FLOWS FROM OPERATING ACTIVITIES:

<S>                                                           <C>                     <C>                     <C>
Net loss                                                      $  (694,269)            $ (152,556)              $(73,784)
Adjustments to reconcile net loss to net cash used by
operating activities Non-cash items included in loss:
Amortization and depreciation                                      17,461                  4,728                  2,773
Expenses incurred without cost credited to additional
paid in capital                                                         0                      0                 40,000
Paid through the issuance of common stock                       1,104,586                110,214                 63,250
Allowance for deferred income taxes                               (27,050)                (5,945)               (23,526)

Change in assets and liabilities:
Accounts receivable                                              (471,095)              (135,983)                     0
Inventory                                                          24,098                (64,912)                (8,318)
Due from attorney's escrow account                                  9,000                 (9,000)                     0
Prepaid expenses                                                    4,468                 (4,468)                 8,474
Interest on notes receivable                                        2,125                 (2,784)                     0
Deposits                                                              (67)                 2,765                 (3,235)
Prepaid stock subscription                                         41,000                      0                      0
Accounts payable and accrued expenses                               8,576                  4,772                (24,242)
                                                               ----------            -----------               --------

   Cash provided by (used in) operations                           18,833               (253,169)               (18,608)
                                                               ----------            ------------               --------

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of fixed and other assets                               (42,757)               (35,725)                (1,000)
Acquisition of patent rights                                     (210,000)                     0                      0
                                                               -----------               -------                 ------
   Total cash provided by (used in)
   investing activities                                          (252,757)               (35,725)                (1,000)
                                                               -----------               --------                -------

CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of restricted common stock                                   515,346                433,925                 20,388
Less:  shares issued for notes                                    (25,855)               (61,875)                     0
Exercise and issuance of various options                                0                 38,042                      0
Loan payable by shareholder                                             0                      0                 (4,800)
Officers loan payable                                                (440)               (10,800)                 8,240
Automobile loan payable                                            17,719                 17,719                      0
                                                                ---------                -------                 ------
   Total cash provided by (used in)
   financing activities                                           471,332                417,011                 23,828
                                                                ---------                -------                 ------

NET INCREASE (DECREASE) IN CASH                                   237,408                128,117                  4,220
CASH AT BEGINNING OF PERIOD                                       132,739                  4,622                    402
                                                                ---------                -------                -------

CASH AT END OF PERIOD                                            $370,147               $132,739               $  4,622
                                                                =========               ========               ========
</TABLE>



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

                                      -24-

<PAGE>

                             THE QUIGLEY CORPORATION

                       Statement of Cash Flows (continued)

<TABLE>
<CAPTION>
                                                                                     Year Ended
                                                                                    SEPTEMBER 30,
                                                                                    -------------
                                                                  1996                  1995                   1994
                                                                  ----                  ----                   ----
<S>                                                             <C>                     <C>                  <C>
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION

Expenses paid by issuance of common stock and options           $1,104,586              $110,214             $63,250

Non cash investing & financing:
Conversion of put option into equity                                44,100

Acquisition of patent rights                                       210,000

</TABLE>


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

                                      -25-

<PAGE>

                             THE QUIGLEY CORPORATION

                   STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)

NOTE 10

<TABLE>
<CAPTION>

                                                                                                        Retained
                                  Common Stock             Issued              Additional               Earnings
                                     Shares                Amount            Paid-In Capital           (Deficit)          Total
                                     ------                ------            ---------------           ---------          -----

<S>                                <C>                    <C>                  <C>                  <C>                  <C>       
Balance at Sept. 30,
1993                               2,445,525              $2,445               $1,761,729           $(1,882,638)         $(118,464)

Sales of S registration
shares, net of
commission                            28,550                  29                   16,359                                   16,388

Exercise of options by
officers
August 1994                          300,000                 300                   20,700                                   21,000

Exercise of options-
August 1994                           50,000                  50                      (50)                                       0

Issuance of stock in
settlement of accounts
payable balance- August
1994                                  25,667                  26                    3,474                                    3,500

Issuance of stock in
exchange of loan and
notes payable- August
and September 1994                    60,000                  60                   29,940                                   30,000

Sale of shares- Sept.
1994                                   5,334                   5                    3,995                                    4,000

Issuance of stock for
services rendered -
September 1994                        10,000                  10                    8,740                                    8,750

Services contributed by
officers credited to paid
in capital-Note 12                                                                 40,000                                   40,000

Net Loss for Period
Ended September 30,
1994                                                                                                     (73,784)          (73,784)
                           ---------------------------------------------------------------------------------------------------------
Balance at Sept. 30,
1994                               2,925,076               2,925                1,884,887             (1,956,422)          (68,610)

Issuance of stock for
services rendered Oct. 1,
1994-Sept. 30, 1995                   88,171                  88                  110,126                                  110,214

Exercise of warrants Jan.
1995                                  21,134                  21                   38,021                                   38,042
                           ---------------------------------------------------------------------------------------------------------
SUBTOTAL                           3,034,381              $3,034               $2,033,034           $(1,956,422)           $79,646

</TABLE>


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

                                      -26-

<PAGE>

                             THE QUIGLEY CORPORATION

        STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) - NOTE 10 (Continued)

<TABLE>
<CAPTION>

                                                                         Additional      Retained       Notes
                                          Common          Issued         Paid-In         Earnings       Receivable-
                                       Stock Shares       Amount         Capital        (Deficit)       Stockholders        Total
                                       ------------       ------         -------        ---------       ------------        -----


<S>                                      <C>              <C>         <C>             <C>                  <C>           <C>
Balance                                  3,034,381        $3,034      $2,033,034      $(1,956,422)                       $  79,646

Sale of 504 Stock- December 1994
for cash & notes-Net of expenses           159,700           160         185,715                                           185,875

Less:  Shares issued for notes                                                                              (61,875)       (61,875)

Sale of Stock Oct. 1, 1994-Sept.
30, 1995 for cash                          167,333           167         247,883                                           248,050

Net Loss for period ended
September 30, 1995                                                                       (152,556)                        (152,556)
                                    ------------------------------------------------------------------------------------------------
Balance at Sept. 30, 1995                3,361,414         3,361       2,466,632       (2,108,978)          (61,875)       299,140

Conversion of put option to equity
January 1996                                42,000            42          44,058                                            44,100

Shares issued to officers net of
prior compensation recognized              530,000           530         313,220                                           313,750

Issuance of stock for services
rendered Oct. 1, 1995 -Sept. 30,
1996                                       269,320           269         580,567                                           580,836

Issuance of stock for Patent rights-
Note 1                                      60,000            60         209,940                                           210,000

Stock issued to underwriter-June
1996                                         7,873             8             (8)                                                 0

Exercise of warrants- Jan. 1996              2,070             2           2,068                                             2,070

Add:  partial receipt of notes
receivable on shares sold in prior
period                                                                                                         9,145         9,145

Sale of Stock, options & exercise
of options- Oct. 1, 1995- Sept. 30,
1996 for cash & notes                      497,087           497         512,779                                           513,276

Less:  Shares issued for notes                                                                              (35,000)       (35,000)

Net Loss for period ended
September 30, 1996                                                                       (694,269)                        (694,269)
                                    ------------------------------------------------------------------------------------------------

BALANCE AT SEPT 30, 1996                 4,769,764        $4,769      $4,129,256      $(2,803,247)          (87,730)    $1,243,048
                                         =========        ======      ==========      ============          ========    ==========


The accompanying notes are an integral part of these financial statements



</TABLE>


The accompanying notes are an integral part of these financial statements

                                      -27-

<PAGE>
                             THE QUIGLEY CORPORATION

                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1996

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

         (a)      ORGANIZATION AND OPERATIONS

                  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 fiscal year ended September 30, 1996 the Company had revenues of
approximately  $1,049,000 from the sale of these  products.  For the most recent
fiscal  periods the Company has  concentrated  its efforts in the promotion of a
product  known as  "Cold-Eeze(TM)".  Management  believes  that it can  generate
enough revenue in the next twelve months to sustain -the Company.  Management is
also pursuing additional capital through various methods.

         (b)      REVENUE

                  Revenue is  recognized  from product sales when the product is
shipped using the accrual basis of accounting.

         (c)      ACCOUNTS RECEIVABLE

                  The  direct  write off method of  accounting  for bad debts is
utilized and there is no allowance for doubtful accounts. For the current period
approximately $764 of bad debts was written off.

         (d)      INVENTORY

                  Inventory  is stated at the lower of cost or  market.  Cost is
determined by the first in, first out method.

         (e)      FIXED ASSETS

                  Fixed assets are reflected on the  accompanying  statements at
cost less  accumulated  depreciation.  A  combination  of the straight  line and
accelerated  methods of  depreciation is used utilizing a life of five years for
machinery and equipment and a life of seven years for furniture and fixtures.

         (f)      PATENT

                  During  the  current  fiscal  period  the  Company  reached an
agreement  with an individual who had patent rights on the use of zinc gluconate
which is used in the formulation of the Company's  products.  The Company issued
60,000 of its common  shares in return for the  exclusive and sole right to this
license / patent.  The stock  issued had a fair value of  $210,000  and is being
amortized  over the  remaining  patent  life  which  expires in March  2002.  In
addition to the payment of stock , the  Company has agreed to pay  royalties  to
the previous patentholder for the remaining term of the patent.

                  The Company is  obligated  under a licensing  agreement to pay
Drs. John and Nancy Godfrey a total of 5% of all sales of the Cold-Eeze product.
This is comprised of a royalty fee of 3% and a consulting fee of 2%.

                  The  Company  is also  obligated  under a  separate  licensing
agreement with George Eby to pay him a 3% royalty fee of all sales collected for
the remaining term of the patent. The patent expires in March 2002.

                  The Company is obligated  under an employment  contract to its
two  principal  officers,  Guy J. Quigley and Charles A.  Phillips,  whereby the
above-mentioned  officers are to receive a combined royalty of 5% of gross sales
from  the   Cold-Eeze   product.   Amounts  paid  to  the  officers   under  the
aforementioned  contract were included in officers compensation on the Statement
of Operations.

                                      -28-

<PAGE>

                             THE QUIGLEY CORPORATION

                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1996


NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)

         (g)      DEPOSITS

                  Deposits  are  comprised  of rent  security  and  the  related
accrued interest.

         (h)      INCOME TAXES

                  Effective  October 1, 1993 the  Company  changed its method of
accounting for income taxes to comply with SFAS No. 109,  "Accounting for Income
Taxes." The Company has suffered net losses since  inception and has a NOL carry
forward of approximately  $1,500,000.  Using an 15% income tax rate results in a
deferred tax asset of approximately  $225,000. A valuation allowance of $168,479
was  established  to  reduced  deferred  tax assets to  amounts  expected  to be
realized.  This resulted in a net deferred tax asset of $56,521. Of this $27,050
was  derived  from the current  year's NOL (after  provision  for the  valuation
allowance).  This amount was credited to provision for Corporate  Income Tax. Of
the total tax asset- $21,564  represented  prior years tax benefits,  before the
adoption by the Company of SFAS No.109. This credit was reported as a Cumulative
Effect  Adjustment on the Statement of Operations for the period ended September
30, 1994.

         (i)      FISCAL YEAR

                  The Company's fiscal year ends September 30th.

         (j)      SERVICES CONTRIBUTED BY OFFICERS

                  Prior to October 1, 1994, the officers received no significant
remuneration.  The Statement of Operations was charged an amount needed in order
to obtain an annual  officers  compensation  expense of $50,000.  For the fiscal
year ended Sept. 30, 1994 these charges totaled  $40,000 and additional  paid-in
capital was credited for such amounts.  For the fiscal years ended September 30,
1996 and 1995 the officers received  remuneration of approximately  $555,000 and
$106,000  respectively.  This includes common stock issued to the officers which
was shown at fair value at the time of issuance.

NOTE 2- MANAGEMENTS PLANS

                  It is  managements  contention  that  they  will  be  able  to
generate  sufficient cash from sales to support its operations for the following
twelve month period.  In addition the Company is  contemplating  various  equity
offerings in the next fiscal year.

                                      -29-

<PAGE>

                             THE QUIGLEY CORPORATION

                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1996

NOTE 3- LEASE COMMITMENTS

                  Operating  Leases- The Company  has a lease  agreement  on its
office space which expires in December 1998.  There is no lease agreement on its
warehouse space and the Company occupies the premises on a month to month basis.
The following table represents the future minimum rent payments  required on the
operating lease with terms in excess of one year as of September 30, 1996.

Fiscal Year Ended September 30,

1997               16,440
1998               18,213
1999                4,701
                  --------
                  $39,354

                  Capital Leases- in the most recent fiscal year the Company was
not obligated under any capital lease.


NOTE 4 - RELATED PARTY TRANSACTIONS

                  The  Company  had   various   transactions   with  the  Ruyala
Corporation  since  inception.  Ruyala is owned in its entirety by Wendy Quigley
(the wife of the  Company's  President,  Guy  Quigley).  For part of the current
fiscal year officer  compensation owing to Guy and Wendy Quigley was paid to the
Ruyala corporation and was charged to officers  compensation on the Statement of
Operations.


NOTE 5- PREPAID EXPENSES & BANK LOAN PAYABLE

                  Prepaid expenses  represents prepaid interest on an automobile
loan.  The  automobile  loan was satisfied in its entirety in the current fiscal
period.


NOTE 6- NOTES RECEIVABLE-SHAREHOLDERS

                  Notes  receivable  include  principal  and  interest  due from
shareholders.  The Company  sold shares  under a Section  504  registration  and
received a note in the amount of $61,875 in 1995.  The note was  originally  due
June 1, 1996 and bore interest at a rate of 6% per annum. The Board of Directors
authorized  an  extension  on the due date of the note until  July 1, 1997.  The
balance as of September 30, 1996 was $53,389.

                  Additionally,  certain  option and warrant  holders  exercised
their  options in September  1996.  The full  proceeds of the exercise  were not
received in the current  period.  As of September  30, 1996 the balance owing to
the Company was $35,000.

                  The  principal  amount  of  the  notes  has  been  shown  as a
reduction in  shareholders  equity  pending the  collection  of such notes.  The
interest receivable has been carried as a current asset on the balance sheet.


NOTE 7- ACCOUNTS PAYABLE AND ACCRUED EXPENSES

                  Accounts payable and accrued expenses  represent various short
term operating expenses of the Company including the purchase of merchandise.

                                      -30-

<PAGE>

                             THE QUIGLEY CORPORATION

                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1996

NOTE 8- PREPAID STOCK SUBSCRIPTION

                  As of September 30, 1996 an investor deposited $41,000 for the
purchase of common shares which were issued in October 1996.


NOTE 9- LOANS AND NOTES PAYABLE

         (a) As of September 30, 1995 loans payable represented an amount due to
officers of $440.  The loan was  satisfied  in full  during the  current  fiscal
period.

         (b) The  Company  purchased  an  automobile  and  financed  part of the
purchase  through a bank  loan.  The total  amount  financed  was  $15,324 at an
approximate  rate of 11% for a period of 60 months.  As of  September  30,  1995
approximately  $17,700 was owed.  The loan was  satisfied in full in the current
period.

NOTE 10-CAPITALIZATION

             In December  1995,  the Company  initiated a 1 for 10 reverse stock
split and  changed  the par value of its stock to $.001 per  common  share.  All
shares  referred  to in the  financial  statements  and  notes to the  financial
statements (unless specifically stated otherwise) refer to post split amounts.

         (a) In August of 1994 an option  holder  exercised  250,000  options in
lieu of the $2,500 owed to him by the Company for advertising services rendered.
The Statement of Operations reflects a charge to advertising in the period where
incurred.

         (b) In November 1992 , January and February 1993 the Company received a
total of $35,000 from an investor.  The agreement provided that the investor was
to receive 12,000  (pre-split)  restricted shares of the Company for each $1,000
invested up to an initial  maximum of 1,800,000  (pre-split)  restricted  common
shares for a maximum, investment of $150,000.

             The Company had granted the investor  certain  resale  rights where
the investor  could require the Company to  repurchase  the shares at increasing
prices ranging from $.0972 to $.105 per share.  This option  commenced 24 months
from January 1993 and expired 36 months from such date. As of September 30, 1995
the Company had issued 42,000 shares of stock to the investor.

             Due  to the  potential  exercise  of  the  put  option,  the  above
mentioned shares had been segregated from the stockholders' permanent equity and
had been included in the mezzanine section of the balance sheet in the amount of
$44,100 (the maximum  repurchase  price).  In the current- fiscal period the put
option expired and the shares were moved to the permanent equity section.

         (c) In June of 1994 the Company sold 28,550 shares in a Regulation  "S"
sale of common  shares of the Company.  The shares were offered  exclusively  to
non-US persons. The shares were sold at $.07 a share for total gross proceeds of
$19,985. Commissions totaling $3,597 were deducted from these proceeds resulting
in a net amount of $16,388 being forwarded to the Company.

         (d) In August 1994 various  officers and / or their  spouses  exercised
options  which were issued in 1992.  A total of 300,000  shares were issued upon
the exercise of these options.  The options exercised ranged in price from $.001
through $.10 per share. Total consideration was to have been $21,000. In lieu of
payment, the officers applied monies owed to them by the Company.

         (e) In August 1994 Gary Quigley (a relative of the Company's President)
exercised  500,000 options out of the 1,000,000  granted to him in 1992. in lieu
of paying the exercise  price Gary Quigley  relinquished  the remaining  500,000
options issued to him. The options were then cancelled by the Company.

                                      -31-

<PAGE>

                             THE QUIGLEY CORPORATION

                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1996

NOTE 10- CAPITALIZATION (CONTINUED)

         (f) In August 1994 the Company issued 36,000  restricted  shares to Dr.
Robert  Pollack in total  repayment of a debt of $18,000  ($.50 per share).  The
debt was incurred  over a period of fifteen  months and  included  $820 worth of
interest.

         (g) In September  1994 the Company issued 24,000  restricted  shares to
Dr.  and Mrs.  John  Godfrey  in full  repayment  of a loan owing to them in the
amount of $12,000 ($. 50 per share) .

         (h) In August 1994, 667  restricted  shares were issued to Robert Moore
in  payment  of a  debt  owed  to  him of  $1,000  ($1.50  per  share)  for  the
installation  of some fixed assets The balance sheet  account-  fixed assets was
charged for this item in a prior period in the amount of $1,000.

         (i) In September 1994 Mrs. Robert Pollack  purchased  5,334  restricted
shares of the Company at $.75 for a total cash consideration of $4,000.

         (j) In August  1994 the  Company  issued  10,000  restricted  shares of
common stock to Dr. John Godfrey for services  rendered.  A charge in the amount
of $8,750 was made to services  rendered on the Statement of Operations  for the
fair value of the stock.

         (k) During  the  period  October 1, 1994  through  September  30,  1995
various individuals purchased restricted stock from the Company.  167,333 shares
were sold for which the Company received consideration of $243,050 or an average
price of approximately $1.48 per share.

         (l) In  January  1995  warrants  which  were  originally  issued to the
underwriter were exercised by a third party who had the warrants  transferred to
him.  Total shares issued were 21,134 in  consideration  of an $38,042  exercise
price or a per share price of $1.80.

         (m) In December  1994 and January 1995 the Company sold 159,700  shares
of  stock  under  a  Registration  D  private   placement   offering  for  total
consideration  of  $199,625.  The Company  paid  commissions  on the sale in the
amount of  $13,750  which was  charged  against  paid in  capital.  The  Company
received an interest  bearing note receivable in the amount of $61,875 from some
investors. This note is due June 1, 1997.

         (n) During  the  period  October 1, 1994  through  September  30,  1995
various  individuals  were  issued  restricted  shares in  return  for goods and
services  rendered.  The total number of shares issued was 88,171. The statement
of  operations  was  charged  a total of  $110,214  or $1.25 per share for these
issuance. The various expenses categories charged were:

             Services rendered\ R&D                 $  70,711
             Advertising & Promotion                   19,813
             Legal                                      7,500
             Commissions                                6,875
             Purchases of goods                         2,815
             Office expense                             2,500
                                                     --------
             Total                                   $110,214
                                                     ========


The  valuation was based on the fair value of the stock which  approximated  the
value of goods and services rendered.

         (o) In  December  1995 the Company  initiated a 1 for 10 reverse  stock
split and  changed  the par value of the stock to $.001  per  common  share.  In
January 1996 all a, b, and c warrants  exercising prices were reduced from $.25,
$.50 and $.75 to $.10, $.15 and $.20 respectively. All warrants of these classes
expired as of January 31, 1996.

                                      -32-

<PAGE>

                             THE QUIGLEY CORPORATION

                          NOTES TO FINANCIAL STATEMENTS

                               SEPTEMBER 30, 1996

NOTE 10- CAPITALIZATION (CONTINUED)

         (p) During  the  period  October 1, 1995  through  September  30,  1996
various  individuals  were  issued  shares  in return  for  goods  and  services
rendered.  The total  number of shares  issued was  269,320.  The  statement  of
operations  was charged a total of $580,836 or an average of $2.16 per share for
these issuance. The various expenses categories charged were:

                  Services rendered\ R&D                      $ 41,836
                  Advertising & Promotion                      434,000
                  Legal                                        105,000
                                                              --------
                  Total                                       $580,836
                                                              ========

         (q) In addition,  an  underwriter  was issued 7,873 shares for services
rendered.  Additional  paid in capital  was charged  for this  transaction.  The
valuation was based on the fair value of the stock at the time of issuance.

         (r) For periods prior to October 1, 1994 officers compensation actually
received by officers was minimal.  For those periods the Statement of Operations
was charged an amount needed in order to obtain an annual officers  compensation
expense of $50,000.  Additional  paid in capital was credited for such  amounts.
During the period  October 1, 1995 through  September 30, 1996,  530,000  shares
were issued to various  officers  for past service  rendered.  The fair value of
these shares was $463,750.  This amount was reduced by $150,000 which represents
amounts charged in prior periods for compensation  which was never actually paid
to the officers.

         (s) In January and February 1996 20,700 of A warrants were exercised by
various  individuals  who  received  2,070 shares for a total  consideration  of
$2,070.

         (t) During  the  period  October 1, 1995  through  September  30,  1996
various  individuals  purchased shares,  options and or exercised options in the
Company.  The total shares issued was 497,087 and total  consideration  received
was $515,346.  By agreement with the  optionholders,  1,250,000 shares of common
stock  underlying the purchase  options were registered  pursuant to Form S-8 in
August and October 1996.

         (u) During the  current  period the  Company  entered  into a marketing
agreement with Pacific Rim  Pharmaceuticals for developing the Company's product
in the Far East.  Pacific Rim  Pharmaceutical  was issued  300,000  common stock
Class D warrants exercisable at $1 and expiring in December 2000.


NOTE 11- INCOME

         On June 21, 1993, the Company received a non refundable  deposit in the
amount of $20,000  from a Canadian  corporation  (Cold-Eeze  Canada  Inc.) These
monies were a deposit  toward a total of  $250,000  for an option to acquire the
distribution rights for one of the Company's product.

         In November 1993 Cold-Eeze Canada Inc.  transferred their  distribution
rights to Sunburst  Resources.  The Company and  Sunburst had  renegotiated  the
original  agreement  to allow for  distribution  in the  United  States on a non
exclusive  agreement.  Sunburst  agreed to pay $75,000 to the  Company  prior to
March 15, 1994. On January 15, 1994 the Company  received the first  installment
of $12,500.  In January 1994 the Company  terminated its agreement with Sunburst
as they had reneged on any  further  payments.  The receipt of these  monies was
shown as  income  from the  sale of  distribution  rights  on the  Statement  of
Operations in the period that negotiations ceased.

                                      -33-

<PAGE>

                             THE QUIGLEY CORPORATION

                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1996

NOTE 12- EXPENSES

         (a)  Services   contributed   by  officers  was  charged  to  officer's
compensation  even  though no monies were paid to those  officers.  Management's
estimate of the value of these costs are:



                   For year ended September 30,
                          1995 and 1996
                   ----------------------------          1994
                                                         ----

Officer's Salary             $0                        $40,000



The  corresponding  expense  was  charged on the  statement  of  operations  and
additional paid-in capital was credited for such amounts.

         (b)  Administrative  expenses are comprised  mainly of office  expense,
supplies and employee business expenses.

NOTE 13- COMMITMENTS AND CONTINGENCIES

         The  Company  is  obligated  on a lease  on its  office  which  expires
December 1998. The current monthly rent is $1,370.

         The Company is obligated  under a licensing  agreement to pay Drs. John
and Nancy Godfrey a total of 5% of all sales of the Cold-Eeze  product.  This is
comprised of a royalty fee of 3% and a consulting fee of 2%. These fees amounted
to $19,999 and $0 for Fiscal 1996 and Fiscal 1995.

         The Company is also obligated under a separate licensing agreement with
George Eby to pay him a 3% royalty fee of all sales  collected for the remaining
term of the patent.  The patent  expires in March 2002.  No royalties  were paid
under this agreement in Fiscal 1996 and Fiscal 1995.

         The  Company  is  obligated  under an  employment  contract  to its two
principal  officers,  Guy J.  Quigley  and  Charles  A.  Phillips,  whereby  the
above-mentioned  officers are to receive a combined royalty of 5% of gross sales
from the  Cold-Eeze  product.  No  royalties  were paid under this  agreement in
Fiscal 1996 and Fiscal 1995.

                                      -34-

<PAGE>

                             THE QUIGLEY CORPORATION

                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1996

NOTE 14- STOCK OPTIONS AND WARRANTS

The  following is a summary of stock  warrants and options  outstanding  for the
dates listed:

                             THE QUIGLEY CORPORATION
                  SCHEDULE OF OUTSTANDING WARRANTS AND OPTIONS


<TABLE>
<CAPTION>

                                                                                                             Sale
                         Warrants       Warrants        Warrants                                          Incentive
      Security            $1.00          $3.50        $.10,.15,.20       Options          Options          Options        Warrants
   Exercise Price        Class D        Class E       Class A,B,C        Various           $1.00         $1.25-$1.50    Underwriters
-----------------     -----------     ----------     ------------     ------------     ------------     ------------   -------------

<S>                   <C>           <C>            <C>              <C>              <C>                <C>               <C>
Balance
Oct. 1, 1994                0             0        634,030          1,710,000                0                0           84,536

Exercised
Oct. 1, 1994 -
Sept. 30, 1995              0             0              0                  0                0                0           21,134
                    ----------------------------------------------------------------------------------------------------------------
  Subtotal                  0             0        634,030          1,710,000                0                0           63,402

Add:
New items issued            0             0              0                  0        1,500,000          140,000           63,402
                    ----------------------------------------------------------------------------------------------------------------
Balance
Sept. 30, 1995              0             0        634,030          1,710,000        1,500,000          140,000           63,402

Exercised
Oct. 1, 95 -
Sept. 30, '96               0             0         20,700                  0          385,000                0           20,000

Expired
Oct. 1, 95 -
Sept. 30, '96               0             0        613,330          1,710,000                0                0                0
                    ----------------------------------------------------------------------------------------------------------------
  Subtotal                  0             0              0                  0        1,115,000          140,000           43,402

Add:
New items issued      800,000       850,000              0                  0                0                0                0
                    ----------------------------------------------------------------------------------------------------------------
Balance
Sept. 30, 1996        800,000       850,000              0                  0        1,115,000          140,000           43,402
                      =======       =======       ========         ==========        =========          =======           =======
</TABLE>

         During the current period the Company sold  incentive  stock options to
various  salesman.  The Company  received a total of $960 from the sale of these
options. 140,000 options were issued in total and the exercise price ranges from
$1.25 to $1.50.  The options  expire in 1998 and are  exercisable  upon reaching
certain sales goals.

NOTE 15- SUBSEQUENT EVENTS

         On October 1, 1996 the Company hired the investment banking firm, Sands
Brothers  & Co. to assist in raising  additional  capital  needed for  expansion
purposes.  The  company  is  considering  a private  placement  of common  stock
pursuant to  Regulation  D. It is  estimated  that total funds raised will be in
range of $6,000,000 - $8,000,000.

                                      -35-

<PAGE>
SIGNATURES

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


THE QUIGLEY CORPORATION


By:      /S/GUY J. QUIGLEY
         -----------------------------
         Guy J. Quigley, President and
         Chief Executive Officer

         Dated: April 4, 1997

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


               SIGNATURE                                 TITLE                              DATE
               ---------                                 -----                              ----


<S>                                      <C>                                            <C>
/S/ GUY J. QUIGLEY                       Chairman of the Board, President,              April 4, 1997
---------------------------------------  Chief Executive Officer and
Guy J. Quigley                           Director


/S/ GEORGE J. LONGO                      Vice President, Chief Financial                April 4, 1997
--------------------------------------   Officer and Director (Principal
George J. Longo                          Financial and Accounting Officer)


/S/ ERIC H. KAYTES                       Vice President, Secretary,                     April 4, 1997
-------------------------------------    Treasurer, and Director
Eric H. Kaytes


/S/ CHARLES A. PHILLIPS                  Vice President, Chief Operating                April 4, 1997
-------------------------------------    Officer and Director
Charles A. Phillips


-------------------------------------    Director                                       April 4, 1997
Dr. Robert L. Pollack
</TABLE>
                                      -36-