SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

                   Quarterly Report Under Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

For Quarter Ended:                                     Commission File Number:
December 31, 1997                                               0 - 19957

                                  Quantech Ltd.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

         Minnesota                                          41-1709417
--------------------------------------------------------------------------------
 (State or other jurisdiction                             (I.R.S. Employer
 of incorporation or organization)                         identification No.)

                             1419 Energy Park Drive
                               St. Paul, MN 55108
--------------------------------------------------------------------------------
      (Address of principal executive offices)                      (Zip code)

                                 (612)-647-6370
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

                                       N/A
--------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                          if changed since last report)

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.

                 YES     X                         NO ____

         Indicate  the  number of  shares  outstanding  of each of the  issuer's
classes of common stock as of the latest practicable date:  51,040,759 shares of
Common Stock, par value $.01 per share, outstanding as of February 12, 1998.

         Transitional Small Business Disclosure Format:  YES ___   NO  X


<PAGE>


                                      Index

PART I.    FINANCIAL INFORMATION                                    Page No.

   Item 1:     Financial Statements:

        Balance Sheets as of December 31, 1997 and June 30, 1997       3

        Statement  of  Operations  for the Three  Months  and
        Six  Months  Ended December 31, 1997 and 1996 and
        inception to December 31, 1997                                 4
        
        Statement of Stockholders' Equity from inception               6
        to December 31, 1997

        Statement of Cash Flows for the Six Months  ended  
        December 31, 1997 and 1996 and from inception to
        December 31, 1997                                              7

        Notes to Financial Statements                                  8

   Item 2:      Management's Discussion and Analysis or Plan of 
                Operation                                              9

   Item 3:      Quantitative and Qualitative Disclosure About 
                Market Risk                                           12

PART II.    OTHER INFORMATION                                         13



<PAGE>

                                  QUANTECH LTD.
                          (A Development Stage Company)
                                  BALANCE SHEET

<TABLE>
<CAPTION>

                                                                             (Unaudited)     
                                                                              December 31,         June 30,
                                                                                1997                 1997
                                                                          ------------------   ------------------
<S>                                                                     <C>                  <C>    
ASSETS

CURRENT ASSETS
  Cash and cash equivalents                                             $            50,216   $          718,893
  Deferred debt issue costs                                                          40,450               78,699
  Other current assets                                                               35,558               35,452
                                                                          ------------------  ------------------
Total Current Assets                                                                126,224              833,044
                                                                          ------------------  ------------------
EQUIPMENT
  Equipment                                                                         335,195              329,780
  Leasehold Improvements                                                             15,000               15,000
                                                                          ------------------  ------------------
                                                                                    350,195              344,780
   Less accumulated depreciation                                                   (169,897)            (139,267)
                                                                          ------------------  ------------------
Total Equipment                                                                     180,298              205,513
                                                                          ------------------  ------------------

OTHER ASSETS
  License agreement, at cost, less amortization                                   2,899,122            2,096,558
  Patents, at cost, less amortization                                                 9,029                8,895
  Organization expenses, at cost, less amortization                                     -                    113
                                                                          ------------------  ------------------
Total Other Assets                                                                2,908,151            2,105,566
                                                                          ------------------  ------------------
TOTAL  ASSETS                                                           $         3,214,673   $        3,144,123
                                                                          ==================   ==================

LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)

CURRENT LIABILITIES
  Short term debt                                                       $           2,107,00  $        1,070,000
  Accounts Payable                                                                   86,305              100,794
  Accrued Expenses:
    Spectrum Diagnostics Inc. obligations                                            27,546               36,509
    Minimum Royalty Commitment                                                          -                112,500
    Accrued Interest                                                                109,341               10,685
    Accrued Severance                                                                   -                 77,265
    Accrued Payroll/Vacation                                                         23,143               54,226
    Other                                                                               -                  4,019
                                                                          ------------------  ------------------
Total Current Liabilities                                                         2,353,335            1,465,998
                                                                          ------------------  ------------------
                                                                                             
STOCKHOLDERS EQUITY (DEFICIT)
  Common stock, $.01 par value; authorized 200,000,000                                          
   shares; issued and outstanding 51,040,759 shares at
   December 31, 1997; and 48,040,759 at June 30, 1997                               510,408              480,408
  Additional paid-in capital                                                     15,966,244           15,606,017
  Deficit accumulated during the development stage                              (15,615,314)         (14,408,300)
                                                                          ------------------  ------------------
Total Stockholders Equity                                                           861,338            1,678,125
                                                                          ------------------  ------------------
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                               $         3,214,673   $        3,144,123
                                                                          ==================   ==================
                                                                                              

</TABLE>



<PAGE>

                                  QUANTECH LTD.
                          (A Development Stage Company)
                        STATEMENT OF OPERATIONS-UNAUDITED

<TABLE>
<CAPTION>

                                                                                                       Period From
                                                                                                      September 30,
                                                      Six Months             Six Months               1991 (Date of
                                                         Ended                  Ended                Inception), to
                                                     December 31,           December 31,              December 31,
                                                         1997                   1996                      1997
                                                  --------------------   --------------------      --------------------

<S>                                                <C>                   <C>                     <C>    
Interest Income                                    $            9,907    $            61,232     $             180,688
                                                  --------------------   --------------------      --------------------

Expenses:
  General and Administrative                                  484,251                724,664                 8,142,459
  Research and Development                                    595,349              1,063,413                 5,241,054
  Sales and Marketing                                             -                   70,424                   282,380
  Minimum Royalty expense                                      37,500                 37,500                 1,000,000
  Losses resulting from transactions                                      
   with Spectrum Diagnostics Inc.                                 -                      -                     556,150
  Net Exchange (gain)                                             -                      -                     (67,172)
  Financing                                                    99,821                  4,442                   598,536
                                                  --------------------   --------------------      --------------------
Total Expenses                                              1,216,921              1,900,443                15,753,407
                                                  --------------------   --------------------      --------------------
Loss before income taxes                                   (1,207,014)            (1,839,211)              (15,572,719)

Income Taxes                                                      -                      -                      42,595
                                                  --------------------   --------------------      --------------------
Net Loss                                           $       (1,207,014)  $         (1,839,211)     $        (15,615,314)
                                                  ====================   ====================      ====================
Basic and diluted loss per share                   $            (0.02)  $              (0.04)
Weighted average common shares                                            
  outstanding                                              49,769,020             47,010,487


</TABLE>


                                                   
<PAGE>




                                  QUANTECH LTD.
                          (A Development Stage Company)
                        STATEMENT OF OPERATIONS-UNAUDITED

                                                   
<TABLE>
<CAPTION>
                                                   
                                                   
                                                     Three Months            Three Months
                                                         Ended                  Ended
                                                     December 31,            December 31,
                                                         1997                    1996
                                                  --------------------   ---------------------

<S>                                                <C>                    <C>    
Interest Income                                    $            3,083     $            26,540
                                                  --------------------   ---------------------
Expenses:
  General & Administrative                                    261,394                 367,170
  Research and development                                    281,088                 700,581
  Sales and Marketing                                             -                    70,424
  Minimum royalty expense                                      18,750                  18,750
  Loses resulting from transactions                                       
   with Spectrum Diagnostics Inc.                                 -                       -
  Net exchange (gain)                                             -                       -
  Financing                                                    60,445                   2,029
                                                  --------------------   ---------------------
Total Expenses                                                621,677               1,158,954
                                                  --------------------   ---------------------
Loss before income taxes                                     (618,594)             (1,132,414)

Income taxes                                                      -                       -
                                                  --------------------   ---------------------
Net loss                                           $         (618,594)    $        (1,132,414)
                                                  ====================   =====================
Basic and diluted loss per share                   $            (0.01)    $             (0.02)
Weighted average common shares                                            
  outstanding                                              51,040,759              47,119,129



</TABLE>


<PAGE>

                                  QUANTECH LTD
                          (A Development Stage Company)
                   STATEMENT OF STOCKHOLDERS' EQUITY-UNAUDITED
    Period From September 30, 1991 (date of Inception), to December 31, 1997

<TABLE>
<CAPTION>

                                                                             Deficit
                                                                           Accumulated
                                                                             During
                                                      Par     Additional       the                  Paid for      Due     Cumulative
                                         Shares      Value      Paid-In    Development  Subscriptions  Not       From    Translation
                                         Issued     Amount      Capital       Stage     Receivable   Issued    Officers   Adjustment
                                        --------------------------------------------------------------------------------------------
<S>                                     <C>        <C>        <C>           <C>         <C>         <C>        <C>        <C>
Balance at Inception
 Net Loss for 15 months                                                     ($3,475,608)
 Common stock transactions:
  Common stock issued, October 1991     3,200,000  $3,154,574  
  Common stock issued, November 1991      600,000    $611,746  $1,788,254
  Common stock issuance costs                                   ($889,849)
  Cumulative translation adjustment                                                                                        $387,754
  Common stock issued, September 1992     700,000    $699,033    $875,967                 ($53,689)
  Common stock issuance costs                                   ($312,755)
  Common stock to be issued                                                                           $120,000
  Cumulative translation adjustment                                                                                       ($209,099)
  Elimination of cumulative
    translation adjustment                                                                                                ($178,655)
 Officers advances, net                                                                                         ($27,433)
                                        --------------------------------------------------------------------------------------------
Balance, December 31, 1992              4,500,000  $4,465,353  $1,461,617   ($3,475,608)  ($53,689)   $120,000  ($27,433)        $0
 Net loss                                                                     ($996,089)
 Common stock transactions:
  Common stock issued, January 1993       160,000      $1,600    $118,400                            ($120,000)
  Common stock issued, April 1993          30,000        $300     $11,700
  Change in common stock par
   value resulting from merger                    ($4,420,353) $4,420,353
 Repayments                                                                                                       $5,137
                                        --------------------------------------------------------------------------------------------
Balance,June 30, 1993                   4,690,000     $46,900  $6,012,070   ($4,471,697)  ($53,689)         $0  ($22,296)        $0
 Net loss                                                                   ($1,543,888)
 240,000 shares of common
 stock to be issued                                                                                    $30,000
 Repayments                                                                                $53,689               $22,296
                                        --------------------------------------------------------------------------------------------
Balance, June 30, 1994                  4,690,000     $46,900  $6,012,070   ($6,015,585)        $0     $30,000        $0         $0
 Net loss                                                                   ($2,070,292)
 Common stock issued, June 1995         2,150,000     $21,500    $276,068                 ($20,000)   ($30,000)
 Warrants issued for services                                     $40,200                                       
                                        --------------------------------------------------------------------------------------------
Balance June 30, 1995                   6,840,000     $68,400  $6,328,338   ($8,085,877)  ($20,000)         $0         $0        $0
 Net loss                                                                   ($2,396,963)
 Common stock issued, net of
  issuance costs of $848,877:                                  
     July, 1995                         6,160,000     $61,600  $1,304,450
     August, 1995                         717,600      $7,176    $161,460
     September, 1995                   13,807,296    $138,073  $2,370,389
     November, 1995                     1,897,840     $18,978    $425,482
     December, 1995                    11,217,157    $112,172  $1,292,473
     May, 1996                          6,275,000     $62,750  $3,300,422
     June, 1996                             5,058         $51      $3,650
 Payments received on                                          
  subscription receivable                 (19,192)       (192)   ($14,808)                 $20,000
 Compensation expense recorded
  on stock options                                               $125,000
                                        --------------------------------------------------------------------------------------------
Balance, June 30, 1996                  46,900,759   $469,008 $15,296,856  ($10,482,840)        $0          $0        $0         $0

</TABLE>


<PAGE>

<TABLE>
<CAPTION>

<S>                                      <C>          <C>        <C>        <C>          <C>              <C>       <C>         <C>
 Net loss                                                                   ($3,925,460)
 Stock offering costs                                            ($12,310)
 Common stock issued upon exercise of
 options and warrants
     September 1996                        10,000        $100      $2,400
     October 1996                         170,000      $1,700     $40,800
     November 1996                         15,000        $150      $3,600
     December 1996                        270,000      $2,700     $64,800                 ($57,500)
     January 1997                          20,000        $200      $4,800
     February 1997                        150,000      $1,500     $17,250
     March 1997                           140,000      $1,400     $33,600
 Payments received on
  subscription receivable                                                                  $57,500
 Compensation expense recorded
  on stock options                                                $48,000
 Common stock issued, June 1997           365,000      $3,650    $105,850
 Warrants issued with notes payable                                  $371
                                        --------------------------------------------------------------------------------------------
Balance, June 30, 1997                 48,040,759    $480,408 $15,606,017  ($14,408,300)        $0          $0        $0         $0
 Net Loss                                                                   ($1,207,014)
 Common stock issued, September 1997    3,000,000     $30,000    $360,000
 Warrants issued with notes payable                                  $227
                                        ============================================================================================
Balance, December 31, 1997             51,040,759    $510,408 $15,966,244  ($15,615,314)        $0          $0        $0         $0
                                        ============================================================================================


</TABLE>


<PAGE>

                                  QUANTECH LTD
                          (A Development Stage Company)
                        STATEMENT OF CASH FLOWS-UNAUDITED

<TABLE>
<CAPTION>

                                                                                                          Period From
                                                                                                         September 30,
                                                                   Six Months          Six Months        1991 (Date of
                                                                      Ended               Ended          Inception), to
                                                                   December 31,        December 31,       December 31,
                                                                      1997                1996                1997
                                                                ------------------  ------------------  -----------------
<S>                                                           <C>                   <C>                <C>                 
Cash Flows From Operating Activities
 Net Loss                                                     $        (1,207,014)  $      (1,839,211)  $    (15,615,314)
 Adjustments to reconcile net loss to net cash used in
  operating activities:
  Elimination of cumulative translation adjustment                            -                    -            (178,655)
  Depreciation                                                             30,630              13,841            216,251
  Amortization                                                            186,366              59,732          1,542,983
  Noncash compensation and interest                                           -                    -             537,250
  Losses resulting from transactions with
   Spectrum Diagnostics Inc.                                                  -                    -             556,150
  Write down of investment                                                    -                    -              67,500
  Change in assets and liabilities, net of effects from
   purchase of Spectrum Diagnostics Inc.:
   (Increase) decrease in other current assets                               (106)            (27,705)            40,880
    Increase (decrease)in accounts payable                                (14,489)             40,932             84,750
    Increase (decrease) in accrued expenses                              (135,174)             23,367            434,154
                                                                ------------------  ------------------  -----------------
     Net cash used in operating activities                             (1,139,787)         (1,729,044)       (12,314,051)
                                                                ------------------  ------------------  -----------------
Cash Flows From Investing Activities                                                                     
 Purchase of property and equipment                                        (5,415)            (64,654)          (426,953)
 Proceeds on disposition of property                                          -                    -              37,375
 Organization expenses                                                        -                    -             (97,547)
 Patent spending                                                             (134)                 -              (9,029)
 Officer advances, net                                                        -                    -            (109,462)
 Purchase of investment                                                       -                    -            (225,000)
 Purchase of license agreement                                                -                    -          (1,950,000)
 Advances to Spectrum Diagnostics, Inc.                                       -                    -            (320,297)
 Prepaid securities issuance costs                                        (10,403)                 -            (112,046)
 Purchase of Spectrum Diagnostics, Inc., net of cash                                                     
  and cash equivalents acquired                                               -                    -          (1,204,500)
                                                                ------------------  ------------------  -----------------
   Net cash used in investing activities                                  (15,952)            (64,654)        (4,417,459)
                                                                ------------------  ------------------  -----------------
Cash Flows From Financing Activities
 Net proceeds from the sale of common stock & warrants                         62               2,500         12,880,859
 Proceeds on debt obligations                                             487,000                              4,215,435
 Payments received on stock subscription receivables                          -                    -               5,000
 Stock offering costs                                                         -               (12,310)               -
 Payments on debt obligations                                                 -                (4,605)          (522,810)
                                                                ------------------  ------------------  -----------------
  Net cash provided by financing activities                               487,062             (14,415)        16,578,484
                                                                ------------------  ------------------  -----------------
Effect of Exchange Rate Changes on Cash                                       -                    -             203,242
                                                                ------------------  ------------------  -----------------
   Net increase (decrease) in cash                                       (668,677)         (1,808,113)            50,216
Cash
 Beginning                                                                718,893           2,942,871               -
                                                                ------------------  ------------------  -----------------
 Ending                                                      $             50,216 $         1,134,758 $           50,216
                                                                ==================  ==================  =================
Non-Cash Investing and Financing Activities
 Issuance of debt, common stock and warrants for
  sublicensing rights                                        $            940,165 $                -  $          940,165
                                                                ==================  ==================  =================

</TABLE>


<PAGE>



                                                                  
                                  QUANTECH LTD.
                         ( A Development Stage Company )

                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

Note 1. BASIS OF PRESENTATION

In the opinion of the  management  of the Company,  the  accompanying  unaudited
financial  statements  contain  all  adjustments  (consisting  of  only  normal,
recurring adjustments) necessary to present fairly the financial position of the
Company as of December 31, 1997 and the results of operations  for the three and
six month periods and its cash flows for the six month  periods  ended  December
31, 1997 and 1996.  The  results of  operations  for any interim  period are not
necessarily  indicative  of the results for the year.  These  interim  financial
statements  should be read in conjunction  with the Company's  annual  financial
statements  and related notes in the Company's  Annual Report on Form 10-KSB for
the year ended June 30, 1997.

Note 2. LICENSE AGREEMENT

The Company has a license  agreement  as amended  with  Ares-Serono  for certain
patents,   proprietary  information  and  associated  hardware  related  to  SPR
technology.  The  license  calls for an  ongoing  royalty  of 6  percent  on all
products  utilizing  the  SPR  technology  which  are  sold by the  Company.  In
addition,  if the Company  sublicenses  the  technology,  the Company will pay a
royalty  of 15  percent  of all  revenues  received  by the  Company  under  any
sublicense.  As of  December  31,  1997,  the  Company  had paid  $1,000,000  of
cumulative royalty payments,  which includes a $150,000 payment made on December
31, 1997. In order to maintain its exclusive rights under the license agreement,
the  Company  must make a $150,000  payment by December  31, 1998 and 1999.  The
Company intends to accrue  $150,000 by December 31, 1998, and continue  accruing
for future payments until royalty  accruals based on revenues exceed the minimum
payment amounts.

Note 3. NET LOSS PER SHARE

The FASB has issued Statement No. 128, Earnings Per Share,  which supersedes APB
Opinion No. 15.  Statement  No. 128  requires the  presentation  of earnings per
share by all entities that have common stock or potential common stock,  such as
options,  warrants,  and  convertible  securities,  outstanding  that trade in a
public  market.  Those  entities  that have only common  stock  outstanding  are
required to present basic  earnings per share  amounts.  Basic per share amounts
are computed,  generally, by dividing net income or loss by the weighted average
number of common shares outstanding.  All other entities are required to present
basic and  diluted  per share  amounts.  Diluted  per share  amounts  assume the
conversion,  exercise,  or issuance of all  potential  common stock  instruments
unless the effect is  anti-dilutive  thereby reducing the loss or increasing the
income per common share.

The Company  initially applied Statement No. 128 for the periods ended December
31,  1997  and,  as  required  by the  Statement,  has  restated  all per  share
information for the prior years to conform to the Statement. Because the Company
has incurred a loss in all periods presented,  the inclusion of potential common
shares in the  calculation of diluted loss per share would have an  antidilutive
effect. Therefore, Basic and Diluted loss per share amounts are the same in each
period presented.



<PAGE>


ITEM 2

            MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

History

         Quantech Ltd. ("Quantech" or the "Company") is a Minnesota  corporation
originally founded in 1991. Quantech is completing development of a near patient
("NP")  medical  diagnostic  testing  system  which is based  upon its  patented
Surface Plasmon Resonance ("SPR")  technology.  Quantech's  critical care system
will  have the  ability  to  perform a  complete  range of  clinically  related,
quantitative  whole blood tests on a single instrument near the patient in 10 to
20 minutes.  The system will be marketed to hospital  Critical Care Units,  with
the initial focus being  Emergency  Departments.  Hospital  Critical Care Units,
such as the  Emergency  Department,  are best able to  recognize  the  immediate
positive  impact   Quantech's   system  will  have  on  patient   treatment  and
satisfaction,   determination  of  appropriate   clinical  care  path  and  cost
containment.

         Quantech's  system will consist of an easy to use bench top  instrument
and test  disposables.  Each  disposable  will  contain one test,  or a panel of
clinically related tests, which will define the particular tests to be conducted
by the instrument.  The Company has begun data collection and other  preparation
necessary to file a pre-market notification,  known as a 510(k), with the FDA on
its first  test for the  detection  and  quantification  of the  cardiac  marker
Myoglobin.  This cardiac  marker is an aid to  physicians in the diagnosis of an
early stage heart attack. Further tests, including the cardiac markers CK-MB and
Troponin,  are being  developed to provide the Quantech system with a full range
of testing capabilities along with multiple tests per disposable.

         Quantech and The Perkin-Elmer Corporation  ("Perkin-Elmer"),  a leading
supplier of life science  systems and analytical  instruments,  are parties to a
technology and development agreement.  Such agreement provides Perkin-Elmer with
exclusive licenses to certain Quantech  technology for use outside of Quantech's
core area of  non-nucleic  medical  diagnostics.  Perkin-Elmer,  pursuant to the
agreement,   provides   technical   assistance  related  to  Quantech's  medical
diagnostic  system and possible future royalty  payments if  Perkin-Elmer  sells
products using Quantech's technology.

         Quantech is a development  stage company which has suffered losses from
operations and will require additional financing to complete development, obtain
FDA approval and  commercialize  its  diagnostic  system.  Additional  tests and
system  development must be completed,  FDA approval  obtained on these multiple
tests and the system, Quantech's diagnostic system introduced to the market, and
ultimately,  Quantech will need to successfully  attain  profitable  operations.
These factors raise substantial doubt about the Company's ability to continue as
a going concern.

Results of Operations

         The Company has incurred a net loss of  $15,615,314  from September 30,
1991 (date of inception)  through  December 31, 1997 due to expenses  related to
formation and operation of its predecessor, continuing costs of raising capital,
normal expenses of operating over an extended  period of time,  funds applied to
research and development,  minimum royalty  payments on the SPR technology,  and
interest on borrowed  funds.  In addition,  an investment of $3,356,629 was made
when Quantech purchased the exclusive rights to the SPR technology.

         For the three and six months  ended  December  31, 1997 the Company had
interest  income of $3,083 and $9,907  compared  to $26,540  and $61,232 for the
same  periods  in 1996.  These  decreases  were a result of less cash on hand as
proceeds  obtained from  Quantech's  private  placements of securities have been
used for operations and research and development.

         General and administration  expenses decreased to $261,394 and $484,251
for the three  months and six months ended  December 31, 1997 from  $367,170 and
$724,664  for the same  periods  in 1996.  There  were no  sales  and  marketing
expenses during the three months and six months ended December 31, 1997 compared
to $70,424 for the three  months and six months ended  December  31,  1996.  The

<PAGE>

decreases  in  general  and  administrative  and  sales and  marketing  spending
resulted  from the  restructuring  that the  Company  implemented  in 1997.  The
restructuring  was  aimed  at  reducing  expenses  and  focusing  the  Company's
resources on completing  development of its diagnostic system. Changes that were
made included reducing the number of employees, consultants and outside services
employed in the administrative and marketing functions.  The Company anticipates
that these  expenses  will increase  significantly  in the future as the Company
completes development of its system and begins to manufacture and distribute its
products.

         Research and  development  costs  decreased to $281,088 and $595,349 in
the three and six months ended December 31, 1997 from $700,581 and $1,063,413 in
the same  periods  of  1996.  The  decreases  were  due to the  above  mentioned
restructuring,  with cost  reductions  resulting  primarily from reduced outside
contract development work as the Company focused its resources on completing the
system development with a reconfigured  internal  development team. Research and
development  spending,  however,  is expected to increase  significantly  during
calendar  1998 as Quantech  completes  development  of its system,  conducts FDA
work, and begins development of additional disposable tests for its system.

         There was no change in the minimum  royalty  expense  recorded  for the
three months and six months ended December 31, 1997 compared to the same periods
for the previous  year.  A royalty  expense of $37,500 per quarter will begin to
accrue starting in January 1998 for minimum payments scheduled for December 1998
and 1999 (see Notes to Financial Statements, Note 2 - License Agreement).

         Financing  expenses  increased  to $60,445  and  $99,821  for the three
months and six months ended  December 31, 1997 compared to $2,029 and $4,442 for
the same  periods  in 1996  primarily  due to  increased  debt  from the sale of
convertible promissory notes in 1997 to fund operations.  Financing expenses are
expected  to  increase  as a  result  of  the  sale  of  additional  convertible
promissory notes and interest on such notes.

         For the three  months and six months ended  December 31, 1997  Quantech
had a loss of $618,594 and $1,207,014,  respectively,  as compared to $1,132,414
and  $1,839,211  for the same  periods in 1996.  The  decreased  losses were the
result of lower operating expenses partially offset by lower interest income.

         During December 1997 the Company entered into a License  Agreement with
The  Perkin-Elmer  Corporation  ("Perkin-Elmer"),  a  leading  supplier  of life
science systems and analytical  instruments.  The Agreement  provides  technical
assistance to Quantech for the  completion of its medical  diagnostic  system in
exchange  for  Perkin-Elmer  receiving  exclusive  licenses to certain  Quantech
technology for use outside of Quantech's core medical markets.  Quantech will be
entitled to royalty  payments on products  sold by  Perkin-Elmer  which  include
Quantech's  technology.  The  royalty  rate on these  sales  will be  reduced as
Perkin-Elmer   assists  Quantech  in  achieving   certain  product   development
milestones  or phases.  In  addition,  the Company has  granted  Perkin-Elmer  a
warrant to purchase Quantech common stock under certain conditions.

         In January  1998,  the Company  announced  that it had  completed  with
Perkin-Elmer  the first  phase of  instrument  development,  a  breadboard-level
instrument  that  detects  bulk  changes of chemical  concentrations.  From this
milestone,  Quantech was able to make further  progress that allowed it to begin
activities  for the  preparation  necessary  to file a  pre-market  notification
510(k) with the FDA for the cardiac  marker  Myoglobin.  It is expected that the
FDA  510(k)  for  Myoglobin  will be  submitted  to the FDA early in the  second
calendar  quarter.  Quantech  is  continuing  development  of further  tests and
receiving assistance from Perkin-Elmer in completing additional phases under the
License Agreement. Introduction of Quantech's system is anticipated in the later
part of 1998,  which  introduction  is expected  to include  three tests for the
system.

         The  Company  is also in  discussions  with other  potential  strategic
partners  regarding  research  and  development  collaborations  for medical and
industrial applications of Quantech's technology, and distribution of its system
once developed and in  manufacturing.  The timetable for  submitting  additional
tests to the FDA and  introduction  of  Quantech's  system to the market will be
influenced  by the  Company's  ability  to obtain  further  funding,  enter into

<PAGE>

strategic  relationships,  complete  commercial  prototype  development  of  its
system,  develop  further tests and delays it may encounter  with the FDA in its
review of  Quantech's  tests and  system.  There  can be no  assurance  that the
Company will be able to obtain the required  funding,  enter into any  strategic
agreements or ultimately complete its commercial system.

Liquidity and Capital Resources

         From inception to December 31, 1997, Quantech has raised  approximately
$17,100,000 through a combination of public stock sales, private stock sales and
debt  obligations,   including  a  $300,000  bank  loan  guaranteed  by  Company
directors.   Additional  funds  are  needed   immediately  to  continue  current
operations. To provide these additional funds, the Company is seeking to sell up
to a maximum of $1,173,000  which is the balance of its $2.5 million offering of
notes (the  "Notes") and warrants  (the  "Warrants").  The Notes will be due and
payable on June 1, 1998, or earlier upon Quantech  completing a transaction that
provides it with a minimum of $5,000,000 (the  "Additional  Funding").  Interest
will be the prime rate plus five percent and the Notes will be secured by all of
the assets of the Company.  For each dollar  invested in the Note,  the investor
will receive a Warrant to purchase  three shares of Quantech  Common Stock at an
exercise  price equal to the lower of (a) $0.17625 per share;  or (b) 80% of the
price of the Additional  Funding or, if the Additional  Funding has not occurred
prior to June 1,  1998,  the lower of 80% of the market  price of the  Company's
Common  Stock for the 20  consecutive  trading days prior to the issuance of the
Warrant or June 1, 1998. The principal  amount of the Notes is convertible  into
shares of the Company's  Common Stock at a price equal to, and calculated in the
same manner as, the Warrant Exercise Price. Terms are subject to negotiation and
may change. The Company believes it will complete the sale of most or all of the
$1,173,000  of the Notes by March  15,  1998,  and the  Directors  and  Director
affiliates of the Company have already  purchased  $200,000 of the Notes.  There
can be no assurance, however, that the Company will be able to raise this or any
other  funding  and  continue  its  operations.  See  "Cautionary  Statements  -
Immediate and Future Capital Needs."

         The Company anticipates that the $1,173,000 will be sufficient to allow
it to  complete  its FDA  work  for  the  cardiac  marker  Myoglobin  and  begin
development of further  tests.  Funds of at least $7.5 million will be needed to
develop  and  submit  to  the  FDA  additional  tests,  establish  manufacturing
capabilities,  introduce  the Quantech  system and repay the Notes.  Quantech is
currently  reviewing  multiple  avenues of future funding  including a secondary
offering of securities,  private sale of equity or debt with equity  features or
arrangements with strategic partners.  The Company does not have any commitments
for any such  financing  and there can be no  assurance  that the  Company  will
obtain additional capital when needed or that additional capital will not have a
dilutive  effect on current  shareholders.  Although  the  Company has a limited
lending arrangement with its bank, it does not anticipate receiving  significant
funding from commercial lenders.

         Quantech  incurred  capital  expenditures  of  $5,415  in the six month
period ended  December 31, 1997.  The Company  anticipates  significant  capital
expenditures  in the near future for  laboratory  and  production  equipment and
office  expansion  as the Company  nears  product  introduction.  The timing and
amount of such  expenditures  will be governed by the Company's  development and
market  introduction  schedules  which are  subject to change due to a number of
factors including  development  delays,  FDA approval and availability of future
financing.

         The  Company  currently  has  outstanding  51,040,759  shares of Common
Stock.  It also has options and warrants  outstanding  to purchase an additional
51,416,561 shares and notes convertible into 10,933,333 shares.

Cautionary Statements

         The Company wishes to caution  investors  that the following  important
factors,  among  others,  in some cases have  affected,  and in the future could
affect,  the Company's  actual  results of operations  and cause such results to
differ materially from those anticipated in  forward-looking  statements made in
this document and elsewhere by or on behalf of the Company.

No History of Operations; Development Stage Company; Going Concern Uncertainty

         To date,  the  Company  does not have a product  ready to be brought to
market and its proposed operations are subject to all of the risks inherent in a

<PAGE>

new business enterprise,  including completion of commercial development and FDA
approval of its tests and instrument within reasonable time frames and financial
constraints,  lack of marketing  experience and lack of production history.  The
likelihood  of the success of the  Company  must be  considered  in light of the
expenses,  difficulties and delays frequently encountered in connection with the
start-up of new businesses,  and specifically those historically  encountered by
Quantech,  the development of a new product and the  competitive  environment in
which the Company will operate.  The report of the  independent  auditors on the
Company's  financial  statements for the period ended June 30, 1997, includes an
explanatory  paragraph  relating to the uncertainty of the Company's  ability to
continue as a going  concern.  The Company is a development  stage company which
has  suffered  losses  from  operations,   requires  additional  financing,  and
ultimately needs to successfully  attain  profitable  operations.  These factors
raise  substantial  doubt  about the  Company's  ability to  continue as a going
concern.  There can be no  assurance  that the Company will be able to develop a
commercially viable product or marketing system or attain profitable operations.

Immediate and Future Capital Needs

         The Company does not have sufficient  funds to complete  development of
its commercial system or additional tests for such system,  submit its system to
the FDA or commence  commercial  production and sales. The Company's  ability to
continue as a going concern,  complete its system,  submit its system to the FDA
and commence  sales will depend upon the  continued  availability  of investment
capital,  funding made by strategic  partner(s)  or  licensing  revenues,  until
revenues  from the sale of  instruments  and  associated  test  disposables  are
sufficient  to  maintain  operations.  Additional  funds  may have to be  raised
through equity or debt financing.  There can be no assurance that any additional
financing  can be  obtained  on  favorable  terms,  if at all.  Such  additional
financing may result in dilution to Company  shareholders and/or additional debt
to the Company.  If funding is not available  immediately and in the future when
needed,  the Company may be forced to cease operations and abandon its business.
In such event, Company shareholders could lose their entire investment.

Other Factors

         As described in the  Company's  Form 10-KSB for the year ended June 30,
1997 under Cautionary  Statements,  there are additional  factors concerning the
Company that should be considered including: uncertainty of market acceptance of
Quantech's product once introduced,  inability or delay in obtaining FDA product
approval, , effects of government regulation on Quantech's product and its sale,
ability to manufacture  its product,  exposure to the risk of product  liability
and the limited market for the Company's shares.


ITEM 3

            QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Not Applicable.


<PAGE>


PART II
                                OTHER INFORMATION

Item 1. Legal Proceedings

        Not Applicable

Item 2. Changes in Securities

        In December 1997 the Company  issued to The  Perkin-Elmer  Corporation a
        warrant  to  purchase  up to  28,000,000  shares  of Common  Stock.  The
        exercise price for each share will be equal to 95% of the average of the
        last  sale  price of the  Common  Stock  for each of the 25  consecutive
        trading  days  immediately  preceding  the date of the  first  notice of
        exercise of the Warrant provided to Quantech by Perkin-Elmer.  Exemption
        from  registration  under the Securities Act of 1933 ("the Act") for the
        issuance  of the  Warrant  is  claimed  under  Section  4(2) of the Act.
        Perkin-Elmer  represented  its  intention  to acquire  the  Warrant  for
        investment  purposes only and a restrictive  securities  legend has been
        placed on the Warrant.

Item 3. Defaults upon Senior Securities

        Not Applicable

Item 4. Submission of Matters to a Vote of Security Holders

        The Company held its annual meeting on December 2, 1997 in  Minneapolis,
        Minnesota.  The Company  solicited  proxies and filed a definitive proxy
        statement  with the  Securities  and  Exchange  Commission  pursuant  to
        Regulation 14A of the  Securities  Act of 1934, as amended.  The matters
        voted upon at the meeting and the votes cast were as follows:

No. 1   Election of Mr. Richard W. Perkins as class 2 director:  Votes for - 
        23,769,597  Votes Withheld - 5,033,730                            
        Election of Mr. Edward E. Strickland as class 2 director:  Votes for - 
        23,788,597  Votes Withheld - 5,014,730
        The terms of the following directors continued after the meeting: 
        Robert Case, James F. Lyons.

No. 2   Amendment  to  Articles of  Incorporation  to increase  the number of
        authorized shares to 250,000,000 shares consisting of 200,000,000 Common
        Shares and 50,000,000 undesignated shares Votes:  for - 16,735,984 Votes
        Against - 1,590,456 Abstain - 291,400 Broker Non-Votes - 10,185,487

Item 5. Other Information

        Not Applicable

Item 6. Exhibits and Reports on 8-K

        a.  Exhibits -

            10.1   Amended royalty agreement with Ares-Serono dated 
                   October 31, 1997
            10.2   License agreement with Perkin-Elmer (incorporated by 
                   reference to Exhibit 1 of Schedule 13D filed by 
                   The Perkin-Elmer Corporation on December 23, 1997, 
                   File No. 0-19957)
            27     Financial Data Schedule (filed in electronic  format only)

        b. Reports on 8-K - None



<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.

                                  QUANTECH LTD

                                  /s/ Robert Case
                                  Robert Case
                                  Chief Executive Officer

                                  /s/ Gregory G. Freitag
                                  Gregory G. Freitag
                                  Chief Operating Officer and
Date: February 12, 1998           Chief Financial Officer


<PAGE>


                                  EXHIBIT INDEX
                                  QUANTECH LTD.
                          FORM 10-QSB for Quarter Ended
                                December 31, 1997


Exhibit Number                   Description

    10.1        Amended royalty agreeement with Ares-Serono dated 
                October 31, 1997
    10.2        License agreement with Perkin-Elmer (incorporated by reference 
                to Exhibit 1 of Schedule 13D filed by The Perkin-Elmer 
                Corporation on December 23, 1997, File No. 0-19957)
    27          Financial Data Scehdule (filed in electronic format only)