<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                  June 30, 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 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 June 30, 1997
------------------------------------        ------------------------------------
     Common stock, par value $1                           1,222,905

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

                                     INDEX

<TABLE>
<CAPTION>
PART I:  FINANCIAL INFORMATION                                          PAGE NO.
<S>                                                                     <C>
     Item 1:  Financial Statements

     Consolidated Balance Sheets -
     June 30, 1997 and December 31, 1996.....................................3
 
     Consolidated Statements of Operations -
     Three Months Ended June 30, 1997 and 1996...............................4
 
     Consolidated Statements of Operations -
     Six Months Ended June 30, 1997 and 1996.................................5
 
     Consolidated Statements of Cash Flows -
     Six Months Ended June 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

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

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


SIGNATURES ..................................................................12
</TABLE> 

                                       2
<PAGE>
 
                         ITEM I:  FINANCIAL STATEMENTS
                     FRAWLEY CORPORATION AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                             JUNE 30,                 DECEMBER 31,
          ASSETS                                              1997                       1996
          ------                                           -------------              ------------
                                                            (Unaudited)
<S>                                                        <C>                        <C>
CURRENT ASSETS
  Cash                                                     $     93,000               $    148,000
  Accounts receivable, net                                      510,000                    431,000
  Note receivable                                                                          547,000
  Prepaid expenses and other deposits                           187,000                    169,000
                                                           ------------               ------------
     TOTAL CURRENT ASSETS                                       790,000                  1,295,000
                                                                                   
  Long-term accounts receivable, net                             91,000                    223,000
  Long-term notes receivable                                     81,000                     93,000
  Real estate investments, net                                3,197,000                  3,164,000
  Property, plant and equipment, net                            460,000                    467,000
                                                           ------------               ------------
          TOTAL ASSETS                                     $  4,619,000               $  5,242,000
                                                           ============               ============
 
     LIABILITIES AND STOCKHOLDERS' EQUITY
     ------------------------------------

CURRENT LIABILITIES
  Notes payable to stockholders                            $  1,543,000               $  1,406,000
  Accounts payable and accrued expenses                         848,000                  1,266,000
  Environmental Reserve                                          47,000                    197,000
  Unearned revenue                                              139,000                    126,000
  Notes payable                                                                             16,000
                                                           ------------               ------------
          TOTAL CURRENT LIABILITIES                           2,577,000                  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                                       (18,085,000)               (17,896,000)
                                                           ------------               ------------
                                                                315,000                    504,000
  Less common stock in treasury,                                                   
  191,312 shares (at cost)                                     (761,000)                  (761,000)
                                                           ------------               ------------
          TOTAL STOCKHOLDERS' EQUITY                           (446,000)                   257,000
                                                           ------------               ------------
                                                                                   
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                 $  4,619,000               $  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
                                               June 30, 
                                         -----------------------
                                            1997         1996
                                         -----------------------
<S>                                      <C>          <C>
REVENUES:
 
  Net revenues                            $ 675,000   $ 744,000
                                          ---------   ---------
 
COSTS AND EXPENSES:
  Cost of operations                        458,000     461,000
  Selling, general and administrative
   expenses                                 145,000     386,000
  Interest expense                           65,000      74,000
                                          ---------   ---------
 
      TOTAL COSTS AND EXPENSES              668,000     921,000
                                          ---------   ---------
 
PROFIT (LOSS) FROM CONTINUING OPERATIONS      7,000    (177,000)
 
NET PROFIT (LOSS)                         $   7,000   $(177,000)
                                          =========   =========
 
NET PROFIT (LOSS) PER SHARE:
  Continuing operations                   $     .01   $    (.14)
                                          =========   =========

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>
                                             Six Months Ended
                                                  June 30,
                                        -----------------------------
                                              1997           1996
                                        -----------------------------
<S>                                     <C>                <C>
REVENUES:
Net Revenues                                  $1,277,000   $1,464,000
                                              ----------   ----------
 
             TOTAL REVENUES                    1,277,000    1,464,000
 
COSTS AND EXPENSES:
Cost of operations                               886,000      946,000
Selling, general and administrative
  expenses                                       453,000      609,000
Interest expense                                 128,000      141,000
                                              ----------   ----------
 
             TOTAL COST AND EXPENSES           1,467,000    1,696,000
                                              ----------   ----------
 
NET LOSS                                      $ (190,000)    (232,000)
                                              ==========   ========== 

NET (LOSS) INCOME PER SHARE:
  Continuing operations                       $    (0.16)  $    (0.19)
                                              ==========   ========== 


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

                See notes to consolidated financial statements

                                       5
<PAGE>
 
                     FRAWLEY CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (UNAUDITED)
                                        
<TABLE>
<CAPTION>
                                                  Six Months Ended
                                                       June 30,
                                                -----------------------
                                                   1997        1996
                                                ----------  -----------
<S>                                             <C>         <C>
 
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss                                        $(190,000)   $(232,000)
                                                ---------    ---------
Adjustments to reconcile net loss to net
  cash used in operating activities:
  Write down of long-term debt                    (11,000)
  Write down of Advertising expense              (156,000)
  Depreciation                                     15,000       78,000
Changes in operating assets and liabilities:
  Short- and long-term accounts
     receivable, net                               53,000        7,000
  Prepaid expenses and deposits                   (18,000)     (14,000)
  Other assets                                                 150,000
  Accounts payable and accrued expenses          (418,000)    (480,000)
  Unearned revenue                                 14,000      (40,000)
                                                ---------    ---------
 
             TOTAL ADJUSTMENTS                   (365,000)    (299,000)
                                                ---------    ---------
             Net cash used in
             operating activities                (555,000)    (531,000)
                                                ---------    ---------
 
CASH FLOW FROM INVESTING ACTIVITIES:
  Equipment purchases                              (8,000)      (8,000)
  Long term debt paydown                           (5,000)
  Payments for environmental reserve             (150,000)
  Payments for real estate investments            (33,000)     (51,000)
  Refunds received on real estate                              153,000
                                                             ---------
             Net cash provided by
             investing activities                (196,000)      94,000
                                                ---------    ---------
 
CASH FLOWS FROM FINANCING ACTIVITIES:
  Short-term debt borrowings                      137,000       76,000
  Short-term notes receivable                     547,000
  Long-term notes receivable                       12,000
                                                ---------    ---------
             Net cash provided or used by
             financing activities                 696,000       76,000
                                                ---------    ---------
Net cash used for continuing operations           (55,000)    (361,000)
                                                ---------    ---------
NET DECREASE IN CASH AND CASH
  EQUIVALENTS                                     (55,000)    (361,000)
 
CASH, BEGINNING OF PERIOD                         148,000      470,000
                                                ---------    ---------
 
CASH, END OF PERIOD                             $  93,000    $ 109,000
                                                =========    =========
</TABLE>

                See notes to consolidated financial statements

                                       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 June 30, 1997, the results of
         operations and changes in cash flow for the six months then ended.

NOTE 2:  Revenues from continued operations for the six months ended June 30,
         1995 totaled $1,277,000.

NOTE 3:  The results of operations for the six months ended June 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 June 30, 1997, operating revenues from Specialized
Health Services decreased by $218,000 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 June 30, 1997 was
$136,000 as compared to a loss of $73,000 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 $38,000 loss
for the six months ended June 30, 1997 compared to a $167,000 profit for the six
months ended June 30, 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>
 
The Company received a payoff from the Bankers Mortgage Note Receivable for the
sale of the Schick Hospital in Santa Barbara in May 1997. Proceeds funded a
contribution of $150,000 to the Chatham Brothers toxic waste cleanup lawsuit.
The Company has also retired some debt for prior years advertising, and legal
expenses; settlements provided savings of $156,000 for advertising and $11,000
for legal long term debt respectively. Total debt settlements therefore reduced
the Company's loss in the second quarter of 1997.

Although the Company has retired some debt obligations, it continues to
encounter a significant burden in servicing remaining debt.

The Company plans 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 expenditure 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.

                                       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.

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 June 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:      September 12, 1997             By: /s/ Michael P. Frawley
     ------------------------------          -------------------------- 
                                              Vice President
                                              (Authorized Officer and Chief
                                              Financial Officer)
 
                                      12