<PAGE>
 
                    U.S. SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                   FORM 10-Q

(Mark One)
[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

For the quarterly period ended                 March 31, 1997
                              --------------------------------------------------
 
                                      OR

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

For the transition period from                          to
                               -----------------------     ---------------------

Commission File Number            1-6436
                      --------------------------------


                              FRAWLEY CORPORATION
--------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

              Delaware                                       95-2639686   
--------------------------------------------------------------------------------
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)
                 (I.R.S. EMP I.D. NO)

  28720 Roadside Dr., Suite 128, Agoura Hills, California       91301
--------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                     (ZIP CODE)

                                 (818)735-6622
--------------------------------------------------------------------------------
             (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

--------------------------------------------------------------------------------
     (FORMER NAME, ADDRESS AND FISCAL YEAR, IF CHANGED SINCE LAST REPORT)


Indicated 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  [_]

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the latest practicable date.

               Class                    Outstanding at March 31, 1997
--------------------------------------------------------------------------------
  Common stock, par value $1                       1,222,905

                                         Total Number of Pages 11
                                                              ----
<PAGE>
 
                     FRAWLEY CORPORATION AND SUBSIDIARIES



                                     INDEX

<TABLE> 
<CAPTION> 
                                                               PAGE NO.
<S>                                                            <C>
PART I:  FINANCIAL INFORMATION                             

     Item 1:  Financial Statements

     Consolidated Balance Sheets -
     March 31, 1997 and December 31, 1996............................3

     Consolidated Statements of Operations -
     Three Months Ended March 31, 1997 and 1996......................4

     Consolidated Statements of Cash Flows -
     Three Months Ended March 31, 1997 and 1996......................5

     Notes to Consolidated Financial Statements......................6

     Item 2:  Management's Discussion and Analysis
     of Financial Condition and Results of Operations ...............7-8


PART II:  OTHER INFORMATION

     Item 1:  Legal Proceedings .....................................9-10

     Item 5:  Other Information .....................................10

     Item 6:  Exhibits and Reports on Form 8-K.......................10


SIGNATURES ...........................................................11
</TABLE> 

                                       2
<PAGE>
 
                         ITEM I:  FINANCIAL STATEMENTS

                     FRAWLEY CORPORATION AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                     MARCH 31,     DECEMBER 31,
                ASSETS                                 1997            1996
-----------------------------------------          ------------    ------------
                                                           (Unaudited)
<S>                                                <C>             <C>
CURRENT ASSETS
  Cash                                             $    (65,000)   $    148,000
  Accounts receivable, net                              514,000         431,000
  Note receivable                                       547,000         547,000
  Prepaid expenses and other deposits                   147,000         169,000
                                                   ------------    ------------
                  TOTAL CURRENT ASSETS                1,143,000       1,295,000
                                                   
  Long-term accounts receivable, net                     91,000         223,000
  Long-term notes receivable                             84,000          93,000
  Real estate investments, net                        3,164,000       3,164,000
                                                   
  Property, plant and equipment, net                    464,000         467,000
                                                   ------------    ------------
                  TOTAL ASSETS                     $  4,946,000    $  5,242,000
                                                   ============    ============
 
  LIABILITIES AND STOCKHOLDERS' EQUITY
----------------------------------------

CURRENT LIABILITIES
  Notes payable to stockholders                    $  1,412,000    $  1,406,000
  Accounts payable and accrued expenses               1,182,000       1,266,000
  Environmental reserve                                 197,000         197,000    
  Unearned revenue                                      105,000         126,000
  Notes payable                                          16,000          16,000
                                                   ------------    ------------
                  TOTAL CURRENT LIABILITIES           2,912,000       3,011,000
 
LONG TERM LIABILITIES
Notes payable to Stockholders                           800,000         800,000        
  Notes payable                                          70,000          70,000
  Environmental reserve                               1,618,000       1,618,000
                                                   ------------    ------------
                  TOTAL LONG TERM LIABILITIES         2,488,000       2,488,000
 
STOCKHOLDERS' EQUITY:
  Preferred stock, par value $1 per share:
  Authorized, 1,000,000 shares; none issued
  Common stock, par value $1 per share;
  Authorized, 6,000,000 shares, issued
  1,414,217 shares                                    1,414,000       1,414,000
  Capital surplus                                    16,986,000      16,986,000
  Accumulated deficit                               (18,093,000)    (17,896,000)
                                                   ------------    ------------
                                                        307,000         504,000
  Less common stock in treasury,
  191,312 shares (at cost)                             (761,000)       (761,000)
                                                   ------------    ------------
                  TOTAL STOCKHOLDERS' EQUITY            454,000        (257,000)
                                                   ------------    ------------
TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY          $  4,946,000    $  5,242,000
                                                   ============    ============
</TABLE>

                 See notes to consolidated financial statements.

                                       3
<PAGE>
 
                     FRAWLEY CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (Unaudited)


<TABLE>
<CAPTION>
                                             Three Months Ended
                                                  March 31,
                                           -----------------------
                                              1997         1996
                                           ----------   ----------
<S>                                        <C>          <C>
REVENUES:
 
  Net revenues                             $  602,000     $  721,000
                                           ----------     ----------
 
COSTS AND EXPENSES:
  Cost of operations                          428,000        484,000
  Selling, general and administrative
   expenses                                   308,000        251,000
  Interest expense                             63,000         67,000
                                           ----------     ----------
 
          TOTAL COSTS AND EXPENSES            799,000        802,000
                                           ----------     ----------
 
NET LOSS                                   $ (197,000)    $  (81,000)
                                           ==========     ==========
 

NET LOSS PER SHARE:
 Continuing operations                     $     (.07)    $     (.07)
                                           ----------     ----------
                                                 (.07)          (.07)
                                           ==========     ==========
 

Weighted average number of
common shares outstanding                   1,222,905      1,222,905
                                           ==========     ==========
</TABLE> 
                See notes to consolidated financial statements

                                       4
<PAGE>
 
                     FRAWLEY CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (UNAUDITED)



<TABLE>
<CAPTION>
                                                      Three Months Ended
                                                           March 31,
                                                    -----------------------
                                                       1997         1996
                                                    ----------   ----------
<S>                                                 <C>          <C>
 
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss                                            $(197,000)   $ (81,000)
                                                    ---------    ---------
Adjustments to reconcile net loss to net
  cash used in operating activities:
 
    Depreciation                                      (31,000)      39,000
    Disposals of property, plant and equipment         36,000
Changes in operating assets and liabilities:
  Short- and long-term accounts
     receivable, net                                   58,000      (40,000)
  Prepaid expenses and deposits                        22,000       22,000
  Other assets                                                     150,000
  Accounts payable and accrued expenses               (84,000)    (364,000)
  Unearned revenue                                    (21,000)     (22,000)
                                                    ---------    ---------
 
             TOTAL ADJUSTMENTS                        (20,000)    (215,000)
                                                    ---------    ---------
             Net cash used in
             operating activities                    (217,000)    (296,000)
                                                    ---------    ---------
 
CASH FLOW FROM INVESTING ACTIVITIES:
  Equipment purchases                                  (2,000)      (4,000)
  Refunds received on real estate                                  154,000
                                                                 ---------
             Net cash provided by
             investing activities                      (2,000)     150,000
                                                    ---------    ---------
 
CASH FLOWS FROM FINANCING ACTIVITES:
  Short-term debt borrowings                            6,000
  Repayment of borrowings
                                                    ---------
             Net cash provided or used by
             financing activities                       6,000
                                                    ---------
 
 
NET DECREASE IN CASH AND CASH
  EQUIVALENTS                                        (213,000)    (146,000)
 
CASH, BEGINNING OF PERIOD                             148,000      470,000
                                                    ---------    ---------
 
CASH, END OF PERIOD                                 $ (65,000)   $ 324,000
                                                    =========    =========
</TABLE>

                See notes to consolidated financial statements

                                       5
<PAGE>
 
                     FRAWLEY CORPORATION AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1:   In the opinion of management, the accompanying unaudited consolidated
          financial statements contain all adjustments necessary to present
          fairly the financial position at March 31, 1997, the results of
          operations and changes in cash flow for the three months then ended.



NOTE 2:   Revenues from continued operations for the three months ended March
          31, 1997 totaled $602,000.



NOTE 3:   The results of operations for the three months ended March 31, 1997
          and 1996 are not necessarily indicative of results to be expected for
          the full year.

                                       6
<PAGE>
 
                     FRAWLEY CORPORATION AND SUBSIDIARIES

 

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
        CONDITION AND RESULTS OF OPERATIONS
 
Specialized Health Services
---------------------------
 

During the quarter ended March 31, 1997, operating revenues from Specialized
Health Services decreased by $137,000 when compared to the same period in 1996.
The Company continues to face serious difficulties in attracting patients. There
is a decreasing number of insurance carriers providing benefits for inpatient
treatment and in many HMO plans there is little coverage for chemical dependency
treatment. Emphasis by insurance carriers on less expensive outpatient treatment
programs makes the Company's inpatient treatment less accessible to many
potential patients. The Company continues to present a strong argument for the
success rate of the Schick program, compared to other programs, but a more
prevalent theme in health care today is the cost of a program not the efficacy
of the treatment. The Company will continue to explore more effective ways of
attracting patients to the inpatient program.

 

The Company plans to continue to improve operations through additional reduction
in overhead and increasing patients in both the inpatient and outpatient
treatment programs. Schick will continue to offer educational material regarding
the addiction cycle and chemical dependency and to popularize aversion treatment
methodology.

 
 
Real Estate
-----------
 

The real estate operating loss during the quarter ended March 31, 1997 was
$67,000 as compared to a loss of $27,000 for the same period in 1996. Real
estate losses continue as the company incurs carrying costs, improvements
required to sell the property and litigation cost with particular properties.

 

The undeveloped real estate market in Southern California is showing signs of
improvement. The Company is actively advertising the undeveloped real estate for
sale. Management is confident the real estate market will continue to improve
along with overall economic conditions in Southern California.

 

Liquidity and Capital Resources
-------------------------------
 

The Company's recurring losses from continuing operations and difficulties in
generating cash flow sufficient to meet its obligations raise substantial doubt
about its ability to continue as a going concern.

 

The Seattle Hospital and outpatient treatment program reported a $24,000 loss
for the three months ended March 31, 1997 compared to a $75,000 profit for the
three months ended March 31, 1996. Management believes the negative results will
continue as the Company goes though the transition from third party
reimbursement to direct payment from patients. Debt secured by the Seattle
Hospital in the amount of $800,000 is due September 1, 1999.

                                       7
<PAGE>
 
The Company continues to incur legal expenses and has an obligation in 1997 to
contribute $197,000 to the Chatham Brothers toxic waste cleanup lawsuit.

 

The Bankers Mortgage Note Receivable from the sale of the Schick Hospital in
Santa Barbara will be paid off in June 1997. Proceeds will be used to pay down
outstanding liabilities including reducing the amount owed to the Chatham Site
cleanup.

 

Servicing outstanding debt continues to be a significant burden on the
Company's operations.

 

The Company intends to raise capital for the health care business by seeking
partners in health care and selling real estate. The sale of real estate may
require further expenditures to prepare the land for sale which would be
financed through borrowings. The sale of the property is unpredictable and
highly uncertain and there is no assurance that the improvements will increase
the marketability of the property. The limited resources available to the
Company will be directed at revitalization of the health care business and the
continued elimination of non-producing assets and overhead.

                                       8
<PAGE>
 
               PART II - OTHER INFORMATION

 

ITEM 1: Legal Proceedings
        -----------------

 

        The Company is named as a defendant in the Chatham Brothers toxic waste
        cleanup lawsuit. In February 1991, the Company was identified as one of
        many "Potentially Responsible Parties" (PRPs) in the Chatham Brothers
        toxic waste cleanup site case, filed by the State of California -
        Environmental Protection Agency, Department of Toxic Substances Control
        (DTSC) and involved the Hartley Pen Company previously owned by the
        Company. On December 31, 1991, the Company and approximately 90 other
        companies were named in a formal complaint. The Company joined a group
        of defendants, each of whom was so notified and which are referred to as
        Potentially Responsible Parties (PRPs) for the purpose of negotiating
        with the DTSC and for undertaking remediation of the site. During 1995,
        the State of California adjusted the estimated cost of remediation. Soil
        remediation is estimated at $2,000,000 with the Company's participation
        at 3.8% or $76,000. Water clean up is estimated at $6,000,000 with the
        Company's share at 5.67% or $340,000. The Company has recorded a
        liability for its estimated share of the assessments, net of insurance
        recovery, in the accompanying financial statements. In 1996 the PRP
        Group revised the cleanup estimate cost of the site over a 30-year
        period and included a cost for overhead and State oversight costs for
        the same period of time. Also at the end of 1996 the PRP group announced
        that the allocation percentage would be changing. Although nothing has
        officially been released the Company has increased its reserve to
        reflect the higher cost estimate and the higher expected percentage
        based on discussion with PRP legal counsel and site management. The
        result was that the Company increased its 1995 reserve from $744,000 to
        $1,815,000 in 1996. Because of the long term nature of these expenses
        the Company has reclassified the liability into short term for $197,000,
        which the Company paid in May 1997, and long term for $1,618,000. The
        Company is also liable for its share of site study costs and in
        connection with such costs, the Company paid into the PRP group $38,000
        in 1993, $271,000 in 1994 and a cash call contribution of $197,000 in
        May of 1997.

 

          In June 1989, the Company filed a lawsuit in the Los Angeles County
        Superior Court, Frawley Corporation vs. Harold Spinner, etc. et al,
                        ----------------------------------------------------
        which involves the rights to the proceeds from the sale of certain
        property once allegedly owned by the Company and Mr. Spinner. In
        November 1989, Harold Spinner cross-complained against the Company and
        individuals, and in January 1990, Harold Spinner amended the cross-
        complaint. The Spinners seek approximately $4.4 million in damages and
        punitive damages based on fraud. On July 8, 1990, the Company amended
        its complaint against Mr. Spinner, seeking an accounting of the
        purchase price and carrying costs, as well as adding a claim of fraud.
        In 1993, the matter was set for trial on two occasions and was
        continued at each date.  On October 7, 1993, Harold Spinner filed
        personal bankruptcy and listed his claim against the Company at $1
        million. The filing of bankruptcy causes an automatic stay of the
        state court proceedings. Mr. Spinner has been discharged

                                       9
<PAGE>
 
        from bankruptcy. The Company filed a motion to have the case dismissed
        and a hearing was held August 23, 1995 whereby an order dismissing the
        complaint was signed by the court and entered on September 6, 1995. Mr.
        Spinner filed an appeal on October 29, 1995. On May 2, 1997, the Appeals
        Court rendered a decision in support of the lower Court. Mr. Spinner did
        not file an appeal to the State Supreme Court.



        In 1991, Sun Sail Development Company sold 23 acres to Shula Inc. for
        $1,000,000, $600,000 in cash and a $400,000 note secured by a second
        Deed of Trust on the 23 acres. In 1994 Shula Inc. filed for protection
        under Chapter 11 Bankruptcy Code. Sun Sail Development wrote off the
        $400,000 note due to the bankruptcy filing. In 1996 Shula attempted to
        disallow Sun Sail as a secured creditor. Also in 1996, Sun Sail
        Development settled the matter by agreeing to a $300,000 note due in
        eight years at 10% interest payable in installments of $2,000 per month.
        The balance of the interest and principal is due at maturity. The note
        continues to be secured by a second Deed of Trust behind a $875,000
        first Deed of Trust.

 

        The Shula bankruptcy plan reorganization and stipulated settlement were
        approved by the Bankruptcy Court on December 10, 1996. In April 1997
        Shula Inc. made a principal payment of $15,000 and interest of $2,000.
        Since collection remains doubtful the Company will recognize income from
        recovery of bad debt as payments are received.

 

ITEM 5: Other Information
        -----------------

 
        None
 
ITEM 6: Exhibits and Reports on Form 8-K
        --------------------------------
 

        The Company filed a report on form 8-K on April 9, 1997 regarding a
        change in Registrant's Certifying Accountant.

                                       10
<PAGE>
 
                                    SIGNATURES

 

 
 

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

 
 
 
 
 
                              FRAWLEY CORPORATION
                    ---------------------------------------
                                 (REGISTRANT)
 
 
 
 
 
Date:       August 13, 1997         By: /s/ Michael P. Frawley
     ---------------------------        ------------------------------------
                                        MICHAEL P. FRAWLEY, Vice President
                                        (Authorized Officer and Chief
                                           Financial Officer)
 

                                       11