<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                September 30, 1997
                               ------------------------------------------------ 


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



  28720 Roadside Drive. 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 September 30, 1997
-----------------------------------    --------------------------------------

   Common stock, par value $1                       1,222,905


                                         Total Number of Pages 12
                                                              -----
<PAGE>
 
                     FRAWLEY CORPORATION AND SUBSIDIARIES

                                     INDEX



PART I:  FINANCIAL INFORMATION                              PAGE NO.

     Item 1:  Financial Statements

     Consolidated Balance Sheets -
     September 30, 1997 and December 31, 1996............................    3

     Consolidated Statements of Operations -
     Three Months Ended September 30, 1997 and 1996......................    4

     Consolidated Statements of Operations -
     Nine Months Ended September 30, 1997 and 1996.......................    5

     Consolidated Statements of Cash Flows -
     Nine Months Ended September 30, 1997 and 1996.......................    6

     Notes to Consolidated Financial Statements..........................    7 

     Item 2:  Management's Discussion and Analysis
     of Financial Condition and Results of Operations....................  8-9



PART II:  OTHER INFORMATION


     Item 1:  Legal Proceedings..........................................10-11

     Item 5:  Other Information .........................................   11

     Item 6:  Exhibits and Reports on Form 8-K...........................   11


SIGNATURES ..............................................................   12


                                       2
<PAGE>
 
                         ITEM I:  FINANCIAL STATEMENTS
                     FRAWLEY CORPORATION AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                           SEPTEMBER 30,    DECEMBER 31,
           ASSETS                               1997            1996
           ------                          --------------   ------------
                                            (Unaudited)
<S>                                        <C>              <C>
CURRENT ASSETS
 
  Cash                                        $  (31,000)     $  148,000
  Accounts receivable, net                       530,000         431,000
  Note receivable                                                547,000
  Prepaid expenses and other deposits            176,000         169,000
                                              ----------      ----------
     TOTAL CURRENT ASSETS                        675,000       1,295,000
 
 
  Long-term accounts receivable, net              42,000         223,000
 
  Long-term notes receivable                      71,000          93,000
  Real estate investments, net                 3,206,000       3,164,000
  Property, plant and equipment, net             456,000         467,000
                                              ----------      ----------
          TOTAL ASSETS                        $4,450,000      $5,242,000
                                              ==========      ==========
 
           LIABILITIES AND STOCKHOLDERS' EQUITY
           ------------------------------------
 
CURRENT LIABILITIES

  Notes payable to stockholders               $  1,543,000    $  1,406,000
  Accounts payable and accrued expenses            971,000       1,266,000
  Environmental reserve                             47,000         197,000
  Unearned revenue                                 156,000         126,000
  Notes payable                                                     16,000
                                              ------------    ------------
          TOTAL CURRENT LIABILITIES              2,717,000       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                          (18,394,000)    (17,896,000)
                                                     6,000         504,000
  Less common stock in treasury,
  191,312 shares (at cost)                        (761,000)       (761,000)
                                              ------------    ------------
          TOTAL STOCKHOLDERS' EQUITY              (755,000)       (257,000)
                                              ------------    ------------
 
TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY     $  4,450,000    $  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
                                                 September 30,
                                           -------------------------
                                              1997          1996
                                           -----------   -----------
<S>                                        <C>           <C>
REVENUES:
  Net revenue                              $  538,000    $  840,000
                                           ----------    ----------
      TOTAL REVENUES                          538,000       840,000
 
COSTS AND EXPENSES:
  Cost of operations                          474,000       479,000
  Selling, general and administrative
   expenses                                   309,000       404,000
  Interest expense                             63,000        78,000
                                           ----------    ----------
 
      TOTAL COSTS AND EXPENSES                846,000       961,000
                                           ----------    ----------
 
LOSS FROM CONTINUING OPERATIONS              (308,000)     (121,000)
 
NET LOSS                                   $ (308,000)   $ (121,000)
                                           ==========    ==========
 
NET (LOSS) INCOME PER SHARE:
  Continuing operations                    $     (.25)   $     (.10)
                                           ==========    ==========
 
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 STATMENTS OF OPERATIONS
                                  (UNAUDITED)



<TABLE>
<CAPTION>
 
 
                                                   Nine Months Ended
                                                     September 30,
                                             -----------------------------
                                                   1997           1996
                                             -----------------------------
<S>                                            <C>             <C>
 
REVENUES:
Net Revenues                                    $1,815,000     $2,305,000
                                                ----------     ----------
TOTAL REVENUES                                   1,815,000      2,305,000
 
 
COSTS AND EXPENSES:

Cost of operations                               1,360,000      1,425,000
Selling, general and administrative
 expenses                                          762,000      1,013,000
Interest expense                                   191,000        220,000
                                                ----------     ----------
 
  TOTAL COST AND EXPENSES                        2,313,000      2,658,000
                                                ----------     ----------
LOSS FROM CONTINUING OPERATIONS                   (498,000)      (353,000)
 

NET LOSS                                        $ (498,000)    $ (353,000)
                                                ==========     ========== 

NET (LOSS) INCOME PER SHARE:
 Continuing operations                          $    (0.41)    $    (0.29)
                                                ==========     ========== 

Weighted average number of
 common shares outstanding                       1,222,905      1,222,905
                                                ==========     ==========
</TABLE>

                                       5
<PAGE>
 
                     FRAWLEY CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)
<TABLE>
<CAPTION>
                                                            Nine Months Ended
                                                              September 30,
                                                        ------------------------
                                                           1997         1996
                                                        ----------   -----------
<S>                                                     <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Profit (Loss)                                       $(498,000)    $(353,000)
                                                        ---------     ---------
Adjustments to reconcile net loss to net
  cash used in non-operating activities:
  Loss on sale of real estate investment
  Write down of assets                                     38,000
Adjustments to reconcile net loss to net
  cash used in operating activities:
  Depreciation                                            (15,000)      117,000
  Changes in operating assets and liabilities:
  Short and long-term accounts
     receivable, net                                       82,000        30,000
  Prepaid expenses and deposits                            (7,000)       (4,000)
  Notes Receivable                                                       10,000
  Other assets                                                          150,000
  Accounts payable and accrued expenses                  (295,000)     (491,000)
  Notes payable write down                                (11,000)
  Unearned revenue                                         30,000       (55,000)
                                                        ---------     ---------
 
             TOTAL ADJUSTMENTS                           (178,000)     (243,000)
                                                        ---------     ---------
             Net cash used in
               operating activities                      (676,000)     (596,000)
                                                        ---------     ---------
 
CASH FLOW FROM INVESTING ACTIVITIES:
  Equipment purchases                                     (12,000)      (10,000)
  Long term debt paydown                                   (5,000)
  Environmental reserve paydown                          (150,000)
  Payments for real estate improvements                   (42,000)      (63,000)
  Refunds received on real estate                                       169,000
                                                        ---------     ---------
             Net cash provided by
              investing activities                       (209,000)       96,000
                                                        ---------     ---------
 
CASH FLOWS FROM FINANCING ACTIVITES:
  Short-term debt borrowings                              137,000       125,000
  Long-term-debt borrowings                                             800,000
  Long-term notes receivable                              569,000
  Repayment of borrowings                                              (780,000)
                                                        ---------     ---------
             Net cash provided or (used in)
              financing activities                        706,000       145,000)
                                                        ---------     ---------
Net cash used for continuing operations                  (179,000)     (355,000)
                                                        ---------     ---------
NET DECREASE IN CASH AND CASH
  EQUIVALENTS                                            (179,000)     (355,000)
 
CASH, BEGINNING OF PERIOD                                 148,000       470,000
                                                        ---------     ---------
 
CASH, END OF PERIOD                                     $ (31,000)    $ 115,000
                                                        =========     =========
</TABLE>

                                       6
<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 September 30, 1997, the results of
          operations and changes in cash flow for the nine months then ended.

NOTE 2:   Revenues from continued operations for the nine months ended September
          30, 1997 totaled $1,815,000.

NOTE 3:   The results of operations for the nine months ended September 30, 1997
          and 1996 are not necessarily indicative of results to be expected for
          the full year.

                                       7
<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 September 30, 1997, operating revenues from Specialized
Health Services decreased by $403,000 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 September 30, 1997 was
$195,000 when compared to a loss of $147,000 for the same period in 1996. Real
estate losses continue as the company incurs carrying costs, improvements
required to sell the properties, and litigation cost associated 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 programs reported a net operating
loss of $185,000 for the nine months ended September 30, 1997 compared to a
$224,000 profit for the same period in 1996. Management believes the negative
results will continue as the Company goes through the transition from third
party reimbursement to direct payment from patients.

                                       8
<PAGE>
 
Real Estate and Corporate overhead continue to produce losses which the
operating business is unable to absorb. In an effort to reduce Corporate
overhead, Patrick J. Frawley Jr., President and Michael Frawley, Vice President
have reduced their salaries down to $1,000.00 per month respectively.

                                       9
<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 $150,000 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, $150,000 in 1997 with a
        remaining cash call contribution of $47,000.

            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 

                                      10
<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.

        In October 1997, we were informed that our licensee for Classics
        Illustrated is in trade mark dispute regarding Classics Illustrated in
        Greece.
 
ITEM 5: Other Information
        -----------------
 
        None
 
 
ITEM 6: Exhibits and Reports on Form 8-K
        --------------------------------
 
        No reports on form 8-K were filed during the quarter ended
        September 30, 1997.

                                      11
<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:       December 8, 1997         By: /s/ Michael P. Frawley
       ----------------------------       ------------------------------------
                                          Michael P. Frawley, Vice President
                                       (Authorized Officer and Vice-President)
 
                                      12