<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, 1998
                              --------------------------------------------------
 
                                      OR

 _____TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXHCANGE 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
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(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
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             (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 20, 1998
-----------------------------------  -------------------------------------------
  Common stock, par value $1                        1,222,905

                                         Total Number of Pages 11
                                                              -----

 
<PAGE>
 
                     FRAWLEY CORPORATION AND SUBSIDIARIES

                                     INDEX


PART I:  FINANCIAL INFORMATION                                  PAGE NO.

     Item 1:  Financial Statements

     Consolidated Balance Sheets -
     March 31, 1998 and December 31, 1997............................3

     Consolidated Statements of Operations -
     Three Months Ended March 31, 1998 and 1997......................4

     Consolidated Statements of Cash Flows -
     Three Months Ended March 31, 1998 and 1997......................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



                                       2
<PAGE>
 
                         ITEM I:  FINANCIAL STATEMENTS

                     FRAWLEY CORPORATION AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                      MARCH 31,     DECEMBER 31,
           ASSETS                                       1998           1997
           ------                                    -----------    ------------
                                                     (Unaudited)
<S>                                                  <C>           <C>
CURRENT ASSETS
  Cash                                              $      7,000    $     73,000
  Accounts receivable, net                               529,000         473,000
  Prepaid expenses and other deposits                    135,000         173,000
                                                    ------------    ------------
                   TOTAL CURRENT ASSETS                  671,000         719,000
 
  Long-term accounts receivable, net                      78,000         113,000
  Long-term notes receivable                                   0          25,000
  Real estate investments, net                         3,234,000       3,226,000
  Property, plant and equipment, net                     447,000         455,000
                                                    ------------    ------------
 
                   TOTAL ASSETS                     $  4,430,000    $  4,538,000
                                                    ============    ============
 

                     LIABILITIES AND STOCKHOLDERS' EQUITY
                     ------------------------------------
 
CURRENT LIABILITIES
<S>                                                 <C>             <C>             
  Notes payable to stockholders                     $  1,654,000    $  1,647,000
  Accounts payable and accrued expenses                  965,000       1,020,000
  Environmental reserve                                  100,000         100,000     
  Unearned revenue                                       219,000         139,000
                                                    ------------    ------------
                   TOTAL CURRENT LIABILITIES           2,938,000       2,906,000
 
LONG TERM LIABILITIES
  Notes payable to Stockholders                          800,000         800,000     
  Notes payable                                           70,000          70,000
  Environmental reserve                                1,497,000       1,497,000
                                                    ------------    ------------
                   TOTAL LONG TERM LIABILITIES         2,367,000       2,367,000
 
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                                (18,514,000)    (18,374,000)
                                                        (114,000)         26,000
  Less common stock in treasury,
  191,312 shares (at cost)                              (761,000)       (761,000)
                                                    ------------    ------------
                   TOTAL STOCKHOLDERS' EQUITY           (875,000)       (735,000)
                                                    ------------    ------------
 
TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY           $  4,430,000    $  4,538,000
                                                    ============    ============
</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,
                                           -----------------------
                                              1998         1997
                                           ----------   ----------
<S>                                        <C>          <C>
REVENUES:
 
  Net revenues                             $ 645,000    $ 602,000
                                           ---------    ---------
 
COSTS AND EXPENSES:
  Cost of operations                         445,000      428,000
  Selling, general and administrative
   expenses                                  271,000      308,000
  Interest expense                            69,000       63,000
                                           ---------    ---------
 
          TOTAL COSTS AND EXPENSES           785,000      799,000
                                           ---------    ---------
 
NET LOSS                                   $(140,000)   $(197,000)
                                           =========    =========
 
NET LOSS PER SHARE:
 Continuing operations                     $    (.11)   $    (.16)
                                           ---------     -------- 
                                                (.11)        (.16)
                                           =========     ======== 
 

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,
                                                    -----------------------
                                                       1998         1997
                                                    ---------     ---------
<S>                                                 <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss                                            $(140,000)    $(197,000)
                                                    ---------     ---------
Adjustments to reconcile net loss to net
  cash used in operating activities:
    Depreciation                                        8,000       (31,000)
    Disposals of property, plant and equipment         36,000
Changes in operating assets and liabilities:
  Short- and long-term accounts
     receivable, net                                    4,000        58,000
  Prepaid expenses and deposits                        38,000        22,000
  Accounts payable and accrued expenses               (55,000)      (84,000)
  Unearned revenue                                     80,000       (21,000)
                                                    ---------     ---------
 
             TOTAL ADJUSTMENTS                         75,000       (20,000)
                                                    ---------     ---------
             Net cash used in
             operating activities                    ( 65,000)     (217,000)
                                                    ---------     ---------
 
CASH FLOW FROM INVESTING ACTIVITIES:
  Equipment purchases                                  (8,000)       (2,000)
  Refunds received on real estate
             Net cash provided by
             investing activities                      (8,000)       (2,000)
                                                    ---------     ---------
 
CASH FLOWS FROM FINANCING ACTIVITES:
  Short-term debt borrowings                            7,000         6,000
                                                    ---------     ---------
             Net cash provided or used by
             financing activities                       7,000         6,000
                                                    ---------     ---------
 
 
NET DECREASE IN CASH AND CASH
  EQUIVALENTS                                        ( 66,000)     (213,000)
 
CASH, BEGINNING OF PERIOD                              73,000       148,000
                                                    ---------     ---------
 
CASH, END OF PERIOD                                 $   7,000     $ (65,000)
                                                    =========     =========
 
</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, 1998, 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, 1998 totaled $645,000.

NOTE 3:   The results of operations for the three months ended March 31, 1998
          and 1997 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, 1998, operating revenues from Specialized
  Health Services increased by $45,000 when compared to the same period in 1997.
  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, 1998 was
  $62,000 as compared to a loss of $106,000 for the same period in 1997. 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. In the first quarter, the Company entered into an agreement to sell
  one small parcel of land which sold in May of 1998 for $102,000. Also, the
  President and Chairman of the Board agreed to finance the construction of a
  water mainline in Lobo Canyon adjacent to some of the Company's property which
  will improve the properties marketability.

  Los Angeles County Regional Planning Commission which governs real estate
  development has announced that they will have public hearings to review a plan
  to down zone undeveloped land in the Santa Monica Mountains. The effect of
  this plan is not clear yet.
 

                                       7
<PAGE>
 
  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 $27,000 loss
  for the three months ended March 31, 1998 compared to a $24,000 loss for the
  three months ended March 31, 1997. Management believes the results will
  continue as the Company continues to experience a 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.
 
  The Company continues to incur legal expenses and has an obligation in 1998 to
  contribute to the Chatham Brothers toxic waste cleanup lawsuit.
 
  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 reduction of non-producing assets.


                                       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 $190,000 in May of 1997.

 
          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.
 
                                      9
<PAGE>
 
          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. The last
          payment received was in February 1998.
 

  ITEM 5: Other Information
          -----------------
 
          None
 
  ITEM 6: Exhibits and Reports on Form 8-K
          --------------------------------

          None

 
                                      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:     September 22, 1998           By: /s/ Michael P. Frawley
       ------------------------------       ----------------------------------
                                            Michael P. Frawley, Vice President
                                            (Authorized Officer and Chief
                                               Financial Officer)
 
  

                                      11