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:
September 30, 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 November 14, 1997.

         Transitional Small Business Disclosure Format:  YES      NO  X


<PAGE>


                                      Index

PART I.    FINANCIAL INFORMATION                                      Page No.

   Item 1:     Financial Statements:

     Balance Sheets as of September 30, 1997 and June 30, 1997             3

     Statement of Operations for the Three Months
     Ended September 30, 1997 and 1996 and from inception to
     September 30, 1997                                                    4

     Statement of Stockholders' Equity from inception                      5
     to September 30, 1997

     Statement of Cash Flows for the Three Months  ended  
     September  30, 1997 and 1996 and from inception to
     September 30, 1997                                                    6

     Notes to Financial Statements                                         7

   Item 2:      Management's Discussion and Analysis or Plan of Operation  8

   Item 3:      Quantitative and Qualitative Disclosure About Market Risk 11

PART II.    OTHER INFORMATION                                             12



<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  September  30,  1997 and the results of  operations  and its cash
flows for the three month periods ended September 30, 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  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.  The original  license
agreement  allowed  Ares-Serono  to  develop  and  market,  under  its own name,
products  using the SPR  technology.  In  November  1997  Ares-Serono  agreed to
eliminate this  provision of the license  agreement in return for two additional
minimum  royalty  payments of $150,000 on each of December 31, 1998 and 1999. As
of September 30, 1997, the Company had paid $850,000 of the  cumulative  royalty
payments.  In order to maintain its exclusive  rights under the revised  license
agreement,  the Company must make its final original minimum payment of $150,000
by December 31, 1997, and the additional  $150,000 payments in December 1998 and
1999. The Company has ratably accrued  additional  minimum  royalty  payments of
$131,250 as of September 30, 1997, because sales or sublicense  revenues through
December  31, 1997 may not be adequate to meet the  cumulative  minimum  royalty
payments.  The Company  intends to accrue  $150,000 by December  31,  1997,  and
continue  accruing for future payments until royalty  accruals based on revenues
exceed the minimum payment amounts.

Note 3. ISSUED BUT NOT YET ADOPTED ACCOUNTING STANDARD
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.  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 to reduce a loss or increase the income
per common share from continuing  operations.  All entities  required to present
per-share  amounts must initially apply Statement No. 128 for annual and interim
periods  ending after December 15, 1997.  Earlier  application is not permitted.
The adoption of Statement No. 128 would have had no effect on reported  earnings
(loss) per share.

<PAGE>

                                  QUANTECH LTD.
                          (A Development Stage Company)
                                  BALANCE SHEET

<TABLE>
<CAPTION>

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

CURRENT ASSETS
  Cash and cash equivalents                                             $           187,154    $         718,893
  Deferred debt issue costs                                                          64,751               78,699
  Other current assets                                                               35,133               35,452
                                                                          ------------------   ------------------
Total Current Assets                                                                287,038              833,044
                                                                          ------------------   ------------------

EQUIPMENT
  Equipment                                                                         331,133              329,780
  Leasehold Improvements                                                             15,000               15,000
                                                                          ------------------   ------------------
                                                                                    346,133              344,780
   Less accumulated depreciation                                                   (154,870)            (139,267)
                                                                          ------------------   ------------------
Total Equipment                                                                     191,263              205,513
                                                                          ------------------   ------------------

OTHER ASSETS
  License agreement, at cost, less amortization                                   2,980,779            2,096,558
  Patents, at cost, less amortization                                                 9,029                8,895
  Organization expenses, at cost, less amortization                                     -                    113
                                                                          ------------------   ------------------
Total Other Assets                                                                2,989,808            2,105,566
                                                                          ------------------   ------------------

TOTAL  ASSETS                                                           $         3,468,109    $       3,144,123
                                                                          ==================   ==================

LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)

CURRENT LIABILITIES
  Short term debt                                                       $          1,645,00    $       1,070,000
  Accounts Payable                                                                   73,130              100,794
  Accrued Expenses:
    Spectrum Diagnostics Inc. obligations                                            32,060               36,509
    Minimum Royalty Commitment                                                      131,250              112,500
    Accrued Interest                                                                 49,379               10,685
    Accrued Severance                                                                36,912               77,265
    Accrued Payroll/Vacation                                                         20,501               54,226
    Other                                                                               -                  4,019
                                                                          ------------------   ------------------
Total Current Liabilities                                                         1,988,232            1,465,998
                                                                          ------------------   ------------------

STOCKHOLDERS EQUITY (DEFICIT)
  Common stock, $.01 par value; authorized 90,000,000                                           
   shares; issued and outstanding 51,040,759 shares at
   September 30, 1997; and 48,040,759 at June 30, 1997                              510,408              480,408
  Additional paid-in capital                                                     15,966,189           15,606,017
  Deficit accumulated during the development stage                              (14,996,720)         (14,408,300)
                                                                          ------------------   ------------------
Total Stockholders Equity                                                         1,479,877            1,678,125
                                                                          ------------------   ------------------

TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                               $         3,468,109 $          3,144,123
                                                                          ==================   ==================

</TABLE>


<PAGE>


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

<TABLE>
<CAPTION>

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

<S>                                                <C>                    <C>                      <C>    
Interest Income                                    $            6,824     $           34,692        $          177,605
                                                  --------------------   --------------------      --------------------

Expenses:
  General and Administrative                                  222,857                357,494                 7,881,065
  Research and Development                                    314,261                362,832                 4,959,966
  Sales and Marketing                                             -                      -                     282,380
  Minimum Royalty expense                                      18,750                 18,750                   981,250
  Losses resulting from transactions                                      
   with Spectrum Diagnostics Inc.                                 -                      -                     556,150
  Net Exchange (gain)                                             -                      -                     (67,172)
  Financing                                                    39,376                  2,413                   538,091
                                                  --------------------   --------------------      --------------------
Total Expenses                                                595,244                741,489                15,131,730
                                                  --------------------   --------------------      --------------------

Loss before income taxes                                     (588,420)              (706,797)              (14,954,125)

Income Taxes                                                      -                      -                      42,595
                                                  --------------------   --------------------      --------------------

Net Loss                                           $         (588,420)    $         (706,797)       $      (14,996,720)
                                                  ====================   ====================      ====================

Loss per common share                              $            (0.01)    $            (0.02)
Weighted average common shares                                            
  outstanding                                              48,497,281             46,902,063

                                                   
</TABLE>



<PAGE>
                                  QUANTECH LTD
                          (A Development Stage Company)
                   STATEMENT OF STOCKHOLDERS' EQUITY-UNAUDITED
    Period From September 30, 1991 (date of Inception), to September 30, 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
 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                                                                   ($588,420)
 Warrants issued with notes payable                                   $7
 Common stock issued, September 1997   3,000,000     $30,000    $360,000
 Warrants issued, September 1997                                    $165
                                       =============================================================================================
Balance, September 30, 1997           51,040,759    $510,408 $15,966,189 ($14,996,720)         $0          $0         $0         $0
                                       =============================================================================================

</TABLE>

<PAGE>

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

<TABLE>
<CAPTION>

                                                                                                          Period From
                                                                                                         September 30,
                                                                   Three Months        Three Months      1991 (Date of
                                                                      Ended               Ended          Inception), to
                                                                   September 30,       September 30,     September 30,
                                                                      1997                1996                1997
                                                                ------------------  ------------------  -----------------
<S>                                                           <C>                   <C>                 <C>    
Cash Flows From Operating Activities
 Net Loss                                                     $          (588,420)   $       (706,797)   $   (14,996,720)
 Adjustments to reconcile net loss to net cash used in
  operating activities:
  Elimination of cumulative translation adjustment                             -                  -             (178,655)
  Depreciation                                                             15,603              13,841            201,224
  Amortization                                                             80,408              59,732          1,437,025
  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                                319             (27,705)            41,305
    Increase (decrease)in accounts payable                                (27,664)             40,932             71,575
    Increase (decrease) in accrued expenses                               (25,102)             23,367            544,226
                                                                ------------------  ------------------  -----------------
     Net cash used in operating activities                               (544,856)           (596,630)       (11,719,120)
                                                                ------------------  ------------------  -----------------
                                                                                                         
Cash Flows From Investing Activities                                                                     
 Purchase of property and equipment                                        (1,353)            (64,654)          (422,891)
 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                                  (11,890)            (64,654)        (4,413,397)
                                                                ------------------  ------------------  -----------------
                                                                                                         
Cash Flows From Financing Activities
 Net proceeds from the sale of common stock & warrants                          7               2,500         12,880,804
 Proceeds on debt obligations                                              25,000                 -            3,753,435
 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                                25,007             (14,415)        16,116,429
                                                                ------------------  ------------------  -----------------

Effect of Exchange Rate Changes on Cash                                         -                 -              203,242
                                                                ------------------  ------------------  -----------------
   Net increase (decrease) in cash                                       (531,739)           (675,699)           187,154
Cash
 Beginning                                                                718,893           2,942,871                 -
                                                                ------------------  ------------------  -----------------
 Ending                                                       $           187,154    $      2,267,172    $       187,154
                                                                ==================  ==================  =================
                                                                 
Non-Cash Investing and Financing Activities
 Issuance of debt, common stock and warrants for
  sublicensing rights                                         $           940,165    $              0    $       940,165
                                                                ==================  ==================  =================

</TABLE>



<PAGE>

ITEM 2                     MANAGEMENT'S DISCUSSION AND ANALYSIS
                              OR PLAN OF OPERATION

History

     Quantech Ltd.  ("Quantech"  or the  "Company") was formed under the laws of
Minnesota  for the  purpose of  effecting  the change of  domicile  of  Spectrum
Diagnostics  S.p.A.  ("SDS")  from Italy to the state of  Minnesota  through the
merger  with SDS on April 14,  1993.  Quantech  had no  operations  prior to the
merger and is continuing the business of SDS to  commercialize  Surface  Plasmon
Resonance  ("SPR")  technology  licensed  from  Ares-Serono,  S.A. SPR, the core
technology of Quantech's proposed medical diagnostic system, enables the Company
to integrate the existing diagnostic  methodologies of immunoassays,  DNA probes
and chemical binding into a single, simple economical system in order to provide
rapid,  quantitative,  diagnostic  results.  The Quantech  system  configuration
consists  of a small  bench  top  instrument  and a series of  disposables  each
offering  a  particular  test or  series of tests.  It is  anticipated  that the
Quantech system will have the ability to analyze body fluids (e.g.  whole blood,
urine) without  preparation or addition of reagents.  The Company plans to first
market its system and  related  disposables  to  hospital  Critical  Care Units,
initially  the  Emergency  Department.  Its first tests will aid  physicians  in
assessing whether a patient has suffered a heart attack.

     During November 1997 the Company and Ares-Serono agreed in principle to the
amendment  to the terms of the license  agreement,  which  amendment is awaiting
final  execution.  Ares-Serono  agreed to  eliminate a provision of the contract
that allowed it to market, under its own name, products using the SPR technology
in return for an increase in minimum royalty payments.  In order to maintain its
exclusive rights under the revised license agreement,  the Company must make its
original  minimum  payment of $150,000  by December  31,  1997,  and  additional
$150,000 payments in each of December 1998 and 1999.

     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 product.  The Company's product  development
must be completed,  FDA approval obtained, the product 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 $14,996,720  from September 30, 1991
(date of  inception)  through  September  30,  1997 due to  expenses  related to
formation and operation of SDS in Italy,  continuing  costs of raising  capital,
normal expenses of operating over an extended  period of time,  funds applied to
research and development, royalty payments related to the SPR technology, losses
due to  expenses of  Quantech's  predecessor,  Spectrum  Diagnostics  Inc.,  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  months  ended  September  30, 1997 the Company had  interest
income of $6,824  compared to $34,692 for the same period in 1996. This decrease
is 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 $222,857 for the three
months  ended  September  30,  1997 from  $357,494  for the three  months  ended
September 30, 1996. The decrease in general and administrative  spending was the
result of the restructuring that the Company began in June 1997 and completed in
October 1997. The  restructuring was aimed at reducing expenses and focusing the
Company's resources on completing  development of its diagnostic system. Changes
that were implemented 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.


<PAGE>

     Research and  development  costs  decreased to $314,261 in the three months
ended September 30, 1997 from $362,832 in the same period of 1996. This decrease
was 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 led by Thomas R. Witty,  Ph.D. who recently joined the Company
as Vice  President  of Research  and  Development.  It is  expected  that future
research and development  expenditures  will increase  significantly 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 quarter
ended  September  30, 1997  compared to the same quarter for the previous  year.
Royalty  expense is expected  to  increase  to $37,500  per quarter  starting in
January 1998 as the Company begins accruing for minimum  payments  scheduled for
December  1998 and 1999 (see  Notes to  Financial  Statements,  Note 2 - License
Agreement).

     Financing  expenses  were higher for the quarter  ended  September 30, 1997
compared  to the same  period  in 1996 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  ended  September  30,  1997  Quantech  had a loss of
$588,420 as compared to $706,797 for the same period ended  September  30, 1996.
This decreased loss was the result of lower operating  expenses partially offset
by lower interest income.

     The Company has made significant progress in the development of its system,
but this progress has been much slower than  anticipated.  Although Quantech has
been able to complete prototype systems that demonstrate that its SPR technology
does  work to  detect  certain  conditions,  it has  not  been  able to  achieve
reproducible  results at sensitivity levels necessary for quantitative  analysis
throughout the entire required  clinical range for its initial test.  Quantech's
development is focused upon the system reproducibility and sensitivity necessary
for FDA approval and market acceptance.  After such development is complete, the
next  major  step will be to submit  its  system  and first  test to the FDA for
approval,  which submission is expected in early 1998.  Product  introduction is
anticipated in the later part of 1998, which introduction is expected to include
at least two tests for the system.

     In addition to development  activity,  the Company is in  discussions  with
potential strategic partners regarding the sublicensing of Quantech's technology
outside of its core medical area,  research and development  collaborations  for
medical and industrial  applications of Quantech's  technology,  distribution of
its system once developed and device manufacturing. The timetable for submitting
the  Company's  system  to the  FDA  and  introduction  to the  market  will  be
influenced  by the  Company's  ability  to obtain  further  funding,  enter into
strategic relationships, complete prototype development of its system, necessary
testing for  submission of its FDA filing and delays it may  encounter  with the
FDA in its review of the 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 system.

Liquidity and Capital Resources

     From  inception to September  30, 1997,  Quantech has raised  approximately
$17,600,000 through a combination of public stock sales, private stock sales and
debt  obligations.  Additional funds are needed  immediately to continue current
operations.  To provide these additional funds, the Company is currently seeking
up to a maximum  of  $1,405,000  through  the sale 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

<PAGE>


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) $0.25 per share; (b) the average market value of Quantech's  Common
Stock for the ten trading  days prior to December  20,  1997;  or (c) 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 are 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
$1,405,000  of the Notes by December  20,  1997,  and  Directors,  and  Director
affiliates,  of the Company have already purchased  $150,000 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 $1,405,000 will be sufficient to allow it
to complete development of its system, start its FDA work, and make its December
31, 1997 $150,000 minimum royalty payment to Ares-Serono. Funds of at least $7.5
million will be needed to complete  its FDA work,  begin  developing  additional
tests,  establish  manufacturing  capabilities,  launch 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 $1,353 in the three month period
ended  September  30,  1997.  The  Company   anticipates   significant   capital
expenditures  in the 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  23,143,903
shares.

Cautionary Statements

     As provided for under the Private  Securities  Litigation  Act of 1995, 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 new
business  enterprise,  including  completion of commercial  development  and FDA
approval  of  its  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.

<PAGE>

Immediate and Future Capital Needs

     The Company does not have sufficient  funds to complete  development of its
system, submit its system to the FDA or commence commercial production and sales
of its system.  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 ,
effects of government  regulation on Quantech's product and its sale, ability to
manufacture  its product,  exposure to the risk of product  liability and 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  September  1997,  the Company  entered  into an  agreement to cancel
        certain  sublicense  rights that had been granted to other  parties.  In
        return for these sublicense  rights, the Company issued 3,000,000 shares
        of the Company's  Common Stock,  convertible  secured  promissory  notes
        totaling  $550,000,  and warrants to purchase 1,650,000 shares of Common
        Stock to the sublicense owners.

        The convertible secured promissory notes carry an interest rate of 13.5%
        and are payable June 1, 1998. The notes are also convertible into shares
        of Common  Stock at a price the  lessor of (I) $0.35 per share or (II) a
        price  equal to 80 percent of the market  price of the Common  Stock for
        (i) the 20  consecutive  trading days prior to the issuance of the notes
        or June 1, 1998, if the notes have not been paid by June 1, 1998 or (ii)
        the price at which the  transaction  which  triggers  prepayment  of the
        notes is  completed.  The warrants  exercise  price is calculated in the
        same manner as the notes conversion  price,  except the maximum price is
        limited to $0.25.

Item 3. Defaults upon Senior Securities
        Not Applicable

Item 4. Submission of Matters to a Vote of Security Holders
        Not Applicable

Item 5. Other Information
        Not Applicable

Item 6. Exhibits and Reports on 8-K
        a.   Exhibits -
         10.1 Form of convertible note issued to affiliate in private placement.
         10.2 Form of warrant issued to affiliate in private placement.
         10.3 Form of amended royalty agreement with Ares-Serono.
         27. Financial Data Schedule (filed in electronic format only)
        b. Reports on 8-K - None


                                   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: November 14, 1997                            Chief Financial Officer


<PAGE>



                                  EXHIBIT INDEX
                                  QUANTECH LTD.
                          FORM 10-QSB for Quarter Ended
                               September 30, 1997


Exhibit Number                             Description
-------------------    -----------------------------------------------------
        10.1           Form of convertible note issued to affiliate in
                       private placement.
        10.2           Form of warrant issued to affiliate in private placement.
        10.3           Form of amended royalty agreement with Ares-Serono.
        27             Financial Data Schedule (filed in electronic format only)