UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-Q
(Mark One)


(X)  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

     For the quarterly period ended     SEPTEMBER 30, 2004
                                        ------------------

                                       OR

( )  TRANSITION  REPORT  PURSUANT  TO SECTION  13 OR 15(d) OF THE  SECURITIES
     EXCHANGE ACT OF 1934


         For the transition period from ______________ to ______________


                         Commission file number 01-21617


                             THE QUIGLEY CORPORATION
                             -----------------------
             (Exact Name of Registrant as Specified in its Charter)


     Nevada                                              23-2577138
- --------------------------------------------------------------------------------
(State or Other Jurisdiction of             (I.R.S. Employer Identification No.)
Incorporation or Organization)

              (MAILING ADDRESS: PO Box 1349, Doylestown, PA 18901.)

  KELLS BUILDING, 621 SHADY RETREAT ROAD, DOYLESTOWN, PENNSYLVANIA      18901
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices)                              (Zip Code)


                                 (215) 345-0919
         --------------------------------------------------------------
              (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  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock as of the latest practicable date.

As  of  October  26,  2004,  there  were  11,636,786   shares  of  common  stock
outstanding.





                                TABLE OF CONTENTS


                                                                        Page No.
     PART I - FINANCIAL INFORMATION


Item 1.     Consolidated Financial Statements                               3-14

Item 2.     Management's Discussion and Analysis of
            Financial Condition and Results of Operations                  15-22

Item 3.     Quantitative and Qualitative Disclosures About
            Market Risk                                                       22

Item 4.     Controls and Procedures                                        22-23




     PART II - OTHER INFORMATION


Item 1.     Legal Proceedings                                                 23

Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds       23

Item 3.     Defaults Upon Senior Securities                                   23

Item 4.     Submission of Matters to a Vote of Security Holders               24

Item 5.     Other Information                                                 24

Item 6.     Exhibits                                                          24

Signatures                                                                    25


                                       -2-



                          PART I. FINANCIAL INFORMATION

ITEM 1.   CONSOLIDATED FINANCIAL STATEMENTS

                             THE QUIGLEY CORPORATION
                           CONSOLIDATED BALANCE SHEETS


                                    ASSETS                                     September 30, 2004    December 31, 2003
                                                                                  (Unaudited)
                                                                                  ------------         ------------
CURRENT ASSETS:

   Cash and cash equivalents                                                      $ 11,703,398         $ 11,392,089
   Accounts receivable (net of doubtful accounts of $299,764 and $808,812)           3,968,166            7,861,883
   Inventory                                                                         4,269,799            3,752,903
   Prepaid expenses and other current assets                                           614,947              733,597
                                                                                  ------------         ------------
      TOTAL CURRENT ASSETS                                                          20,556,310           23,740,472
                                                                                  ------------         ------------

PROPERTY, PLANT AND EQUIPMENT - NET                                                  2,192,297            2,418,159
                                                                                  ------------         ------------


OTHER ASSETS:
   Goodwill                                                                             30,763               30,763
   Other assets                                                                         62,813               80,365
                                                                                  ------------         ------------
      TOTAL OTHER ASSETS                                                                93,576              111,128
                                                                                  ------------         ------------

TOTAL ASSETS                                                                      $ 22,842,183         $ 26,269,759
                                                                                  ============         ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

   Accounts payable                                                               $    425,732         $    524,136
   Accrued royalties and sales commissions                                           1,100,375            1,594,457
   Accrued advertising                                                                 434,603            1,354,536
   Other current liabilities                                                         1,797,876            2,009,989
                                                                                  ------------         ------------
      TOTAL CURRENT LIABILITIES                                                      3,758,586            5,483,118
                                                                                  ------------         ------------

MINORITY INTEREST                                                                       59,676                 --

COMMITMENTS AND CONTINGENCIES  (NOTE 11)

STOCKHOLDERS' EQUITY:

   Common stock, $.0005 par value; authorized 50,000,000;
     Issued: 16,169,742 and 16,149,079 shares                                            8,084                8,074
   Additional paid-in-capital                                                       34,295,450           34,281,449
   Retained earnings                                                                 9,908,546           11,685,277
   Less: Treasury stock, 4,646,053 and 4,646,053 shares, at cost                   (25,188,159)         (25,188,159)
                                                                                  ------------         ------------
      TOTAL STOCKHOLDERS' EQUITY                                                    19,023,921           20,786,641
                                                                                  ------------         ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                        $ 22,842,183         $ 26,269,759
                                                                                  ============         ============


           See accompanying notes to consolidated financial statements

                                       -3-




                             THE QUIGLEY CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)


                                                        Three Months Ended                     Nine Months Ended
                                             September 30, 2004  September 30, 2003  September 30, 2004  September 30, 2003
                                             ------------------- ------------------  ------------------  ------------------

NET SALES                                        $  9,690,858       $  9,912,227        $ 26,197,657        $ 25,107,899
                                                 ------------       ------------        ------------        ------------

COST OF SALES                                       5,890,746          5,424,380          15,100,419          14,160,353
                                                 ------------       ------------        ------------        ------------

GROSS PROFIT                                        3,800,112          4,487,847          11,097,238          10,947,546
                                                 ------------       ------------        ------------        ------------

OPERATING EXPENSES:
      Sales and marketing                             915,550          1,095,486           3,373,090           3,438,840
      Administration                                2,313,609          2,046,915           7,118,849           6,800,522
      Research and development                        627,344          1,230,245           2,395,193           2,599,250
                                                 ------------       ------------        ------------        ------------
TOTAL OPERATING EXPENSES                            3,856,503          4,372,646          12,887,132          12,838,612
                                                 ------------       ------------        ------------        ------------

INCOME (LOSS) FROM OPERATIONS                         (56,391)           115,201          (1,789,894)         (1,891,066)
                                                 ------------       ------------        ------------        ------------

OTHER INCOME (EXPENSE)
      Interest and other income                        26,677             18,928              66,073              77,842
      Gain on dividend-in-kind                        207,090               --               207,090                --
                                                 ------------       ------------        ------------        ------------

TOTAL OTHER INCOME (EXPENSE)                          233,767             18,928             273,163              77,842
                                                 ------------       ------------        ------------        ------------

INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE TAXES                              177,376             134,129          (1,516,731)         (1,813,224)
                                                 ------------       ------------        ------------        ------------

INCOME TAXES                                             --                 --                  --                  --
                                                 ------------       ------------        ------------        ------------

INCOME (LOSS) FROM CONTINUING OPERATIONS             177,376             134,129          (1,516,731)         (1,813,224)
                                                 ------------       ------------        ------------        ------------

DISCONTINUED OPERATIONS:
 Loss from discontinued operations                       --                 --                  --               (54,349)

                                                 ------------       ------------        ------------        ------------
NET INCOME (LOSS)                                $    177,376       $    134,129       ($  1,516,731)      ($  1,867,573)
                                                 ============       ============        ============        ============


BASIC EARNINGS PER COMMON SHARE:
  Income (loss) from continuing operations       $       0.02       $       0.01       ($       0.13)      ($       0.16)
  Income (loss) from discontinued operations             --                 --                  --                  --
                                                 ------------       ------------        ------------        ------------
  Net Income (loss)                              $       0.02       $       0.01       ($       0.13)      ($       0.16)
                                                 ============       ============        ============        ============

DILUTED EARNINGS PER COMMON SHARE:
  Income (loss) from continuing operations       $       0.01       $       0.01       ($       0.13)      ($       0.16)
  Income (loss) from discontinued operations             --                 --                  --                  --
                                                 ------------       ------------        ------------        ------------
  Net Income (loss)                              $       0.01       $       0.01       ($       0.13)      ($       0.16)
                                                 ============       ============        ============        ============

WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING:
      Basic                                        11,512,796         11,475,746          11,511,858          11,464,105
                                                 ============       ============         ===========         ===========

      Diluted                                      14,107,313         14,397,286          11,511,858          11,464,105
                                                 ============       ============         ===========         ===========


           See accompanying notes to consolidated financial statements

                                       -4-




                             THE QUIGLEY CORPORATION
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONDENSED)
                                   (UNAUDITED)


                                                                Nine Months Ended
                                                      September 30, 2004   September 30, 2003
                                                      ------------------   ------------------

NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES                                               $    449,701        ($  1,989,766)
                                                         ------------         ------------

INVESTING ACTIVITIES:
   Capital expenditures                                      (152,403)            (410,108)
                                                         ------------         ------------

NET CASH FLOWS USED IN INVESTING
ACTIVITIES                                                   (152,403)            (410,108)
                                                         ------------         ------------

FINANCING ACTIVITIES:
   Proceeds from exercise of options and warrants              14,011               16,250
                                                         ------------         ------------

NET CASH FLOWS PROVIDED BY FINANCING
ACTIVITIES                                                     14,011               16,250
                                                         ------------         ------------

NET CASH PROVIDED BY DISCONTINUED
OPERATIONS                                                       --                133,714
                                                         ------------         ------------

NET INCREASE (DECREASE) IN CASH                               311,309           (2,249,910)

CASH & CASH EQUIVALENTS, BEGINNING OF
PERIOD                                                     11,392,089           12,897,080
                                                         ------------         ------------
CASH & CASH EQUIVALENTS,
END OF PERIOD                                            $ 11,703,398         $ 10,647,170
                                                         ============         ============


           See accompanying notes to consolidated financial statements

                                       -5-




                             THE QUIGLEY CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE 1 - ORGANIZATION AND BUSINESS

The Quigley  Corporation (the "Company"),  organized under the laws of the state
of Nevada,  is engaged  in the  development,  manufacturing,  and  marketing  of
homeopathic and health products that are being offered to the general public and
the research and development of potential  prescription products. The Company is
organized  into  three  business  segments  which are Cold  Remedy,  Health  and
Wellness,  and Ethical  Pharmaceutical.  For the fiscal periods  presented,  the
Company's revenues have come from the Company's Cold Remedy business segment and
the Health and Wellness business segment.

Darius International Inc. ("Darius"),  a wholly owned subsidiary of the Company,
is a direct selling  organization  constituting  the Health and Wellness segment
that was formed in January  2000 to introduce  new  products to the  marketplace
through a network of independent distributors.

In January 2001, the Company formed an Ethical  Pharmaceutical  segment which is
now Quigley Pharma Inc.  ("Pharma"),  a wholly-owned  subsidiary of the Company,
which may enable the Company to diversify into the prescription drug market.

During 2000, the Company acquired a 60% ownership  position in Caribbean Pacific
Natural Products,  Inc. ("CPNP"). On January 22, 2003, the Company completed the
sale of the Company's  60% equity  interest in CPNP to Suncoast  Naturals,  Inc.
("Suncoast"). See discussion in Note 3, "Discontinued Operations."


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The Consolidated  Financial  Statements  include the accounts of the Company and
its wholly owned subsidiaries.  All inter-company transactions and balances have
been  eliminated.  Effective  March 31, 2004, the financial  statements  include
consolidated  variable  interest  entities  ("VIEs") of which the Company is the
primary beneficiary (see discussion in Note 7, "Variable Interest Entity").

These financial  statements  have been prepared by management  without audit and
should be read in conjunction  with the  consolidated  financial  statements and
notes thereto  included in the Company's Annual Report on Form 10-K for the year
ended December 31, 2003. In the opinion of management, all adjustments necessary
for a fair  presentation of the consolidated  financial  position,  consolidated
results of operations and consolidated  cash flows,  for the periods  indicated,
have been made. Prior period amounts have been reclassified to conform with this
presentation.

USE OF ESTIMATES

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent liabilities at the dates of the financial statements and the reported
amounts of revenues and expenses during the reporting periods.  The 2004 results
and balances at September 30, 2004 include a returns  provision of approximately
$1,200,000 in the event of future product returns following the  discontinuation
of the  Cold-Eeze(R)  Cold Remedy Nasal Spray product in September 2004.  Actual
results could differ from those estimates.

CASH EQUIVALENTS

The Company considers all highly liquid  investments with an initial maturity of
three  months  or less at the  time of  purchase  to be cash  equivalents.  Cash
equivalents  include cash on hand and monies invested in money market funds. The
carrying  amount  approximates  the  fair  market  value  due to the  short-term
maturity of these investments.

INVENTORIES

Inventories  are stated at the lower of cost or  market.  The  Company  uses the
first-in,  first-out  ("FIFO") method of determining  cost for all  inventories.
Inventories included raw material amounts of approximately $798,000 and $729,000
at September 30, 2004 and December 31, 2003, respectively.


                                       -6-




PROPERTY, PLANT AND EQUIPMENT

Property,  plant  and  equipment  is  recorded  at  cost.  The  Company  uses  a
combination of straight-line and accelerated  methods in computing  depreciation
for financial reporting purposes. The annual provision for depreciation has been
computed in  accordance  with the  following  ranges of  estimated  asset lives:
building and  improvements  - twenty  years;  machinery  and equipment - five to
seven years; computer software - three years; and furniture and fixtures - seven
years.

GOODWILL

Goodwill is not amortized but reviewed for impairment on an annual basis or when
events and circumstances indicate the carrying amount may not be recoverable.

CONCENTRATION OF RISKS

Financial  instruments  that  potentially  subject  the  Company to  significant
concentrations of credit risk consist  principally of cash investments and trade
accounts receivable.

The  Company  maintains  cash and cash  equivalents  with four  major  financial
institutions.  Since the  Company  maintains  amounts  in  excess of  guarantees
provided by the Federal Depository Insurance  Corporation,  the Company performs
periodic  evaluations  of  the  relative  credit  standing  of  these  financial
institutions and limits the amount of credit exposure with any one institution.

Trade accounts  receivable  potentially  subject the Company to credit risk. The
Company  extends  credit  to its  customers  based  upon  an  evaluation  of the
customer's financial condition and credit history and generally does not require
collateral.  The Company has historically  incurred  minimal credit losses.  The
Company's  broad  range of  customers  includes  many  large  wholesalers,  mass
merchandisers  and  multi-outlet  pharmacy  chains,  five of which account for a
significant percentage of sales volume, representing 30% and 26% of sales volume
for the  respective  three month periods ended  September 30, 2004 and 2003, and
21% and 19% for the nine  month  periods  ended  September  30,  2004 and  2003,
respectively.

Customers  comprising the five largest accounts receivable balances  represented
48% and 34% of total trade  receivable  balances  (net of reserves) at September
30, 2004 and December 31, 2003, respectively. During the nine month period ended
September  30, 2004,  91% of the  Company's  net sales  originated in the United
States compared to 97% for the comparable 2003 period.

The  Company  uses  separate  suppliers  to  produce  Cold-Eeze(R)  in  gum  and
sugar-free  tablet form.  These forms of the product are  manufactured  by third
parties that produce a variety of other products for other customers.  Effective
October 1, 2004, the Company purchased the  manufacturing  assets of JoEl, Inc.,
the former exclusive  manufacturer of the Company's Cold-Eeze(R) lozenge product
since its launch in 1995. This manufacturing  entity will operate under the name
Quigley Manufacturing Inc. Should any of its third party relationships terminate
or discontinue for any reason,  the Company has formulated a contingency plan in
order to prevent such  discontinuance  from  materially  affecting the Company's
operations.  Any such termination may,  however,  result in a temporary delay in
production  until  the  replacement  facility  is  able to  meet  the  Company's
production requirements. The Company's revenues are currently generated from the
sale of Cold Remedy products and from the Health and Wellness segment.

Raw materials used in the production of the products are available from numerous
sources.  The  Cold-Eeze(R)  lozenge product raw material is currently  procured
from a single  vendor in order to secure  purchasing  economies.  In a situation
where this one vendor is not able to supply Quigley  Manufacturing Inc. with the
ingredients, other sources have been identified.

Darius' product for resale is sourced from several suppliers.  In the event that
such sources were no longer in a position to supply Darius with  product,  other
vendors have been identified as reliable  alternatives with minimal adverse loss
of business.

LONG-LIVED ASSETS

The Company  reviews its long-lived  assets for impairment on an exception basis
whenever events or changes in circumstances indicate that the carrying amount of
the assets may not be recoverable through future cash flows. If it is determined
that an impairment  loss has occurred  based on the expected cash flows compared
to the related asset value, an impairment loss is recognized in the Statement of
Operations.


                                       -7-




REVENUE RECOGNITION

Sales are recognized at the time ownership is transferred to the customer, which
for the Cold Remedy segment is the time the shipment is received by the customer
and for the  Health and  Wellness  segment,  when the  product is shipped to the
customer.  Sales returns and  allowances are provided for in the period that the
related sales are recorded,  which are based on historical experience.  The 2004
results  and  balances at  September  30, 2004  include a returns  provision  of
approximately  $1,200,000 in the event of future product  returns  following the
discontinuation of the Cold-Eeze(R) Cold Remedy Nasal Spray product in September
2004.

SHIPPING AND HANDLING

Product sales  relating to the Health and Wellness  products carry an additional
identifiable shipping and handling charge to the purchaser,  which is classified
as revenue.  For Cold Remedy  products,  such costs are  included as part of the
invoiced price. In all cases, costs related to this revenue are recorded in cost
of sales.

STOCK COMPENSATION

Stock options and warrants for purchase of the Company's  common stock have been
granted to both  employees and  non-employees  since the date the Company became
publicly traded. Options and warrants are exercisable during a period determined
by the  Company,  but in no event  later than ten years  from the date  granted.
Stock options granted to employees vest immediately.

The Company  applies  Accounting  Principles  Board Opinion No. 25 ("APB 25") in
accounting  for its grants of options to employees.  Under the  intrinsic  value
method  prescribed  by APB 25, no  compensation  expense  relating  to grants to
employees has been recorded by the Company in periods reported.

In  accordance  with  SFAS  148,  "Accounting  for  Stock-Based  Compensation  -
Transition and  Disclosure,"  the effect on net income and earnings per share if
the  Company  had applied  the fair value  recognition  provisions  of SFAS 123,
"Accounting for Stock-Based Compensation," to stock-based employee compensation,
would  result  in no  additional  expense  compared  to APB 25 for  the  periods
reported.

Expense relating to warrants granted to  non-employees  have been  appropriately
recorded,  which  have been based on either  fair  values  agreed  upon with the
grantees  or fair  values  as  determined  by the  Black-Scholes  pricing  model
dependent upon the circumstances relating to the specific grants.

No stock  options  were granted to employees  in the  nine-month  periods  ended
September 30, 2004 and 2003. During the first quarter of 2003 a total of 250,000
warrants  were  granted to  Forrester  Financial  LLC as part of an Amended  and
Restated  Warrant  Agreement,  relating to consulting  services.  These warrants
expired in March 2004 without being exercised. For further information, see Note
6, "Transactions Affecting Stockholders' Equity".

ROYALTIES AND COMMISSIONS

The Company  includes  royalties and founders'  commissions  incurred as cost of
sales for the Cold Remedy segment and in administration  expenses for the Health
and Wellness  segment based on agreement  terms. The Health and Wellness segment
expense  relates  to the  Company's  agreement  with the  former  owners  of the
Utah-based direct marketing and selling company,  whereby they receive payments,
currently totaling 5% of net sales collected,  for use of product  formulations,
consulting,  confidentiality and non-compete  agreements with such expense being
expensed  as  incurred.   Commission  expense  related  to  independent  brokers
associated with the Cold Remedy segment is included in administration  expenses.
Independent  representative  commissions  incurred  by the Health  and  Wellness
segment are included in cost of sales.

ADVERTISING

Advertising  costs are  expensed  within the period in which they are  utilized.
Advertising  expense is  comprised  of media  advertising,  presented as part of
sales and marketing expense; co-operative advertising, which is accounted for as
a deduction  from sales;  and bonus  product,  which is accounted for as part of
cost of sales.  Advertising  costs  incurred for the three month  periods  ended
September 30, 2004 and 2003 were $668,715 and $1,120,256,  respectively. For the
nine month periods ended  September  30, 2004 and 2003,  advertising  costs were
$2,258,469 and $2,514,575,  respectively. Included in prepaid expenses and other
current  assets was $28,125 and $68,000 at  September  30, 2004 and December 31,
2003, respectively, relating to prepaid advertising expenses.

                                       -8-




RESEARCH AND DEVELOPMENT

Research and development costs are charged to operations in the period incurred.
Expenditures  for the three month periods ended September 30, 2004 and 2003 were
$627,344  and  $1,230,245,  respectively.  For  the  nine  month  periods  ended
September  30,  2004 and 2003,  these  costs  were  $2,395,193  and  $2,599,250,
respectively.  Principally,  research  and  development  costs  are  related  to
Pharma's study activities and costs associated with Cold-Eeze(R).

INCOME TAXES

The  Company  utilizes  an asset  and  liability  approach  which  requires  the
recognition  of  deferred  tax  assets  and   liabilities  for  the  future  tax
consequences  of events that have been  recognized  in the  Company's  financial
statements or tax returns.  In estimating future tax  consequences,  the Company
generally  considers all expected future events other than enactments of changes
in the tax law or rates. See discussion in Note 8, "Income Taxes."

NOTE 3 - DISCONTINUED OPERATIONS

In December 2002, the Board of Directors of the Company  approved a plan to sell
CPNP, which was originally acquired in July 2000. On January 22, 2003, the Board
of  Directors  of the Company  completed  the sale of the  Company's  60% equity
interest in CPNP to Suncoast.  In exchange for its 60% equity  interest in CPNP,
the Company  received:  (i) 750,000  shares of Suncoast's  common  stock,  which
Suncoast  agreed,  at its cost and within 60 days from the closing,  to register
for  public  resale  through  an  appropriate   registration   statement   (this
registration  statement was declared  effective by the  Securities  and Exchange
Commission  in July,  2004)  and (ii)  100,000  shares  of  Suncoast's  Series A
Redeemable  Preferred  Stock,  which bears interest at a rate of 4.25% per annum
and which is  redeemable  from time to time after March 31, 2003 in such amounts
as is equal to 50% of the free cash flow reported by Suncoast in the immediately
preceding  quarterly  financial  statements  divided by the redemption  price of
$10.00 per share. Following the purchase by Suncoast of the Company's 60% equity
interest in CPNP the Company  owned 19.5% of Suncoast's  issued and  outstanding
capital stock valued at $79,365,  which  investment is accounted for on the cost
basis method,  representing the Company's share of the fair value of Suncoast at
the time the transaction was recorded.

As a result of the Company's  dividend-in-kind to stockholders of 499,282 shares
of common  stock of  Suncoast  in  September  2004  (see  Note 6),  representing
approximately  two-thirds of its common stock ownership,  the remaining  250,718
shares,  owned by the  Company are valued at $26,455 and such amount is included
in Other Assets in the Consolidated Balance Sheets.

Net Sales for CPNP for the nine month period  ended  September  30,  2003,  were
$59,824, all arising in the first quarter, with a net loss of $54,349. There was
no activity for CPNP during the nine months ended September 30, 2004.

NOTE 4 - SEGMENT INFORMATION

The basis for  presenting  segment  results is consistent  with overall  Company
reporting.  The Company  reports  information  about its  operating  segments in
accordance  with  Financial   Accounting   Standard  Board  Statement  No.  131,
"Disclosure  About  Segments of an Enterprise  and Related  Information,"  which
establishes  standards for  reporting  information  about a company's  operating
segments. All consolidating items are included in Corporate & Other.

The  Company  has  divided  its  operations  into three  reportable  segments as
follows:   The  Quigley  Corporation  (Cold  Remedy),   whose  main  product  is
Cold-Eeze(R),  a proprietary zinc gluconate glycine lozenge for the common cold;
Darius (Health and Wellness), whose business is the sale and direct marketing of
a  range  of  health  and  wellness   products,   and  Quigley  Pharma  (Ethical
Pharmaceutical),  which  is  currently  involved  in  research  and  development
activity to develop potential  pharmaceutical  products.  Disclosure is provided
relating to sales of products to  international  locations.  Such  products  are
manufactured on behalf of domestic segments.


                                       -9-




Financial information relating to 2004 and 2003 operations, by business segment, follows:

- ---------------------------------------------------------------------------------------------------------------------------------
FOR THE THREE MONTHS ENDED                         Cold         Health and         Ethical         Corporate and
SEPTEMBER 30, 2004                                Remedy         Wellness       Pharmaceutical         Other            Total
- ---------------------------------------------------------------------------------------------------------------------------------
Net Sales
  U.S. Customers                               $  4,998,940    $  4,072,042               --                 --      $  9,070,982
   International                                       --           619,876               --                 --           619,876
                                               ------------    ------------    ---------------    ---------------    ------------
Total Net Sales                                $  4,998,940    $  4,691,918               --                 --      $  9,690,858
                                               ------------    ------------    ---------------    ---------------    ------------

                                               ------------    ------------    ---------------    ---------------    ------------
Segment operating profit (loss)                $     55,837    $    439,398   ($       551,626)              --     ($     56,391)
                                               ------------    ------------    ---------------    ---------------    ------------
- ---------------------------------------------------------------------------------------------------------------------------------
FOR THE NINE  MONTHS ENDED                         Cold         Health and         Ethical         Corporate and
SEPTEMBER 30, 2004                                Remedy         Wellness       Pharmaceutical         Other            Total
- ---------------------------------------------------------------------------------------------------------------------------------
Net Sales
  U.S. Customers                               $ 10,682,611    $ 13,237,158               --                 --      $ 23,919,769
  International                                        --         2,277,888               --                 --         2,277,888
                                               ------------    ------------    ---------------    ---------------    ------------
Total Net Sales                                $ 10,682,611    $ 15,515,046               --                 --      $ 26,197,657
                                               ------------    ------------    ---------------    ---------------    ------------

                                               ------------    ------------    ---------------    ---------------    ------------
Segment operating profit (loss)               ($    873,400)   $  1,321,022   ($     2,237,516)              --     ($  1,789,894)
                                               ------------    ------------    ---------------    ---------------    ------------
- ---------------------------------------------------------------------------------------------------------------------------------
FOR THE THREE MONTHS ENDED                         Cold         Health and         Ethical         Corporate and
SEPTEMBER 30, 2003                                Remedy         Wellness       Pharmaceutical         Other            Total
- ---------------------------------------------------------------------------------------------------------------------------------
Net Sales
  U.S. Customers                               $  4,614,554    $  4,819,296               --                 --      $  9,433,850
  International                                        --           478,377               --                 --           478,377
                                               ------------    ------------    ---------------    ---------------    ------------
Total Net Sales                                $  4,614,554    $  5,297,673               --                 --      $  9,912,227
                                               ------------    ------------    ---------------    ---------------    ------------

                                               ------------    ------------    ---------------    ---------------    ------------
Segment operating profit (loss)                $    460,438    $    500,357   ($       845,594)              --      $    115,201
                                               ------------    ------------    ---------------    ---------------    ------------
- ---------------------------------------------------------------------------------------------------------------------------------
FOR THE NINE  MONTHS ENDED                         Cold         Health and         Ethical         Corporate and
SEPTEMBER 30, 2003                                Remedy         Wellness       Pharmaceutical         Other            Total
- ---------------------------------------------------------------------------------------------------------------------------------
Net Sales
  U.S. Customers                               $  9,434,316    $ 14,976,193               --                 --      $ 24,410,509
  International                                        --           697,390               --                 --           697,390
                                               ------------    ------------    ---------------    ---------------    ------------
Total Net Sales                                $  9,434,316    $ 15,673,583               --                 --      $ 25,107,899
                                               ------------    ------------    ---------------    ---------------    ------------

                                               ------------    ------------    ---------------    ---------------    ------------
Segment operating profit (loss)               ($  1,540,584)   $  1,737,129   ($     2,087,611)              --     ($  1,891,066)
                                               ------------    ------------    ---------------    ---------------    ------------

NOTE 5 - OTHER CURRENT LIABILITIES

Included in other  current  liabilities  are $522,678  and  $458,359  related to
accrued compensation at September 30, 2004 and December 31, 2003, respectively.

NOTE 6 - TRANSACTIONS AFFECTING STOCKHOLDERS' EQUITY

On  September 8, 1998,  the  Company's  Board of  Directors  declared a dividend
distribution  of Common  Stock  Purchase  Rights  (individually,  a "Right"  and
collectively,  the "Rights"),  thereby  creating a Stockholder  Rights Plan (the
"Plan"). The dividend was payable to the stockholders of record on September 25,
1998. Each Right entitles the stockholder of record to purchase from the Company
that number of common shares  having a combined  market value equal to two times
the Rights  exercise  price of $45.  The Rights  are not  exercisable  until the
distribution  date,  which will be the earlier of a public  announcement  that a
person or group of affiliated or associated  persons has acquired 15% or more of
the  outstanding  common  shares,  or  the  announcement  of an  intention  by a
similarly  constituted party to make a tender or exchange offer resulting in the

                                       10


ownership of 15% or more of the outstanding  common shares. The dividend has the
effect of giving the  stockholder a 50% discount on the share's  current  market
value for  exercising  such  right.  In the event of a cashless  exercise of the
Right, and the acquirer has acquired less than a 50% beneficial ownership of the
Company,  a  stockholder  may  exchange  one Right for one  common  share of the
Company. The final expiration of the Plan is September 25, 2008.

Since the inception of the stock buy-back program in January 1998, the Board has
subsequently  increased  the  authorization  on  five  occasions,  for  a  total
authorized  buy-back of 5,000,000  shares or  approximately  38% of the previous
shares  outstanding.  Such shares are  reflected  as treasury  stock and will be
available for general corporate purposes.  From the initiation of the plan until
September  30,  2004,  4,159,191  shares  have  been  repurchased  at a cost  of
$24,042,801  or an  average  cost of  $5.78  per  share.  No  shares  have  been
repurchased during 2003 or 2004 to date.

In March of 1998, as a result of  litigation,  a provision was made for a return
to treasury of 604,928 shares.  As payment for legal services,  118,066 of these
shares were reissued with a market value of approximately $1,145,358. This value
and the cost of  reacquiring  these  shares  then  became  the  value of the net
treasury  stock  ($2.35 per share)  represented  by 486,862  shares  returned to
treasury.

On April 9, 2002, the Company entered into an agreement with Forrester Financial
LLC  ("Forrester")  providing for Forrester to act as a financial  consultant to
the Company.  The consulting  agreement commenced as of March 7, 2002 for a term
of twelve months,  but could be terminated by the Company in its sole discretion
at any time.  As  compensation  for  services to be provided by Forrester to the
Company,  the  Company  granted to  Forrester,  or its  designees,  warrants  to
purchase up to a total of 1,000,000  shares of the Company's  common stock.  The
Company's  financial  statements  reflect a $1,125,000  non-cash  charge in 2002
resulting from the granting and exercising of these warrants.  The warrants have
three exercise prices:  500,000 warrants  exercisable at $6.50 per share,  which
were  exercised  in May 2002,  resulting in cash to the Company in the amount of
$3,250,000;  250,000  warrants  exercisable  at $8.50  per  share;  and  250,000
warrants   exercisable  at  $11.50  per  share.   The  warrants  were  initially
exercisable  until  the  earlier  to  occur  of (i)  March  6,  2003 or (ii) the
termination of the Consulting Agreement.

On December 7, 2002, Forrester commenced an action by a Writ of Summons filed in
the Court of Common Pleas of Bucks County, PA against the Company.  No Complaint
was filed detailing the claim of Forrester against the Company.  This action was
terminated  with  prejudice  by  Forrester  as part of its Amended and  Restated
Warrant Agreement (the "Amended Agreement") with the Company on February 2, 2003
whereby  certain  warrants  that were  scheduled to expire on March 7, 2003 were
extended  to March 7, 2004  (warrants  to purchase  250,000  shares at $8.50 and
warrants to purchase  250,000 shares at $11.50) and are no longer  cancelable by
the Company.  As an  additional  part of this  agreement,  Forrester was granted
warrants to purchase 250,000 shares at any time until March 7, 2004 at the price
of $9.50 a share. As a result of this Amended Agreement,  the Company recorded a
further non-cash charge of $975,000 in the fourth quarter of 2002,  amounting to
a total  expense  of  $2,100,000  classified  as  administrative  expense on the
Consolidated  Statement of  Operations,  relating to this  warrant  agreement in
2002. Additionally,  $975,000 was reflected on the Consolidated Balance Sheet at
December 31, 2002, which  represented the value of the unexercised  warrants and
was  included  in  accrued  liabilities.  On March 7,  2003 this  liability  was
converted  to equity.  All  warrants  subject to the Amended  Agreement  expired
unexercised on March 7, 2004.

In July 2004,  the Company  announced that its Board of Directors had approved a
distribution-in-kind  to its  stockholders  of  approximately  500,000 shares of
common stock of Suncoast Naturals, Inc. (OTCBB: SNTL), which it acquired through
a sale of the  Company's  60%  equity  interest  in  Caribbean  Pacific  Natural
Products, Inc. These shares were distributed on the basis of approximately .0434
shares of Suncoast  common  stock for each share of the  Company's  common stock
owned of record on September 1, 2004, with fractional  shares paid in cash. This
transaction  was  completed in September  2004  resulting in a  dividend-in-kind
distribution  of  $260,000  which   represents  the  fair  value  of  the  asset
transferred  and is reflected as a reduction of retained  earnings and a related
gain on the dividend of stock of $207,090 which is reflected on the statement of
operations.

NOTE 7 - VARIABLE INTEREST ENTITY

In December 2003, the Financial Accounting Standards Board (FASB or the "Board")
issued FASB  Interpretation  No. 46 (revised  December 2003),  CONSOLIDATION  OF
VARIABLE INTEREST ENTITIES (FIN 46R), to address certain  implementation issues.
FIN 46R varies  significantly from FASB Interpretation No. 46,  CONSOLIDATION OF
VARIABLE  INTEREST  ENTITIES("VIE")  (FIN  46),  which  it  supersedes.  FIN 46R
requires the application of either FIN 46 or FIN 46R by "Public Entities" to all
Special  Purpose  Entities  ("SPEs")  at the end of the first  interim or annual

                                       11


reporting  period ending after  December 15, 2003.  FIN 46R is applicable to all
non-SPEs created prior to February 1, 2003 by Public Entities that are not small
business  issuers  at the end of the first  interim or annual  reporting  period
ending after March 15, 2004.

Effective  March 31, 2004, the Company adopted FIN 46R for VIE's formed prior to
February 1, 2003.  The  Company has  determined  that  Scandasystems,  a related
party,  qualifies as a variable interest entity and the Company has consolidated
Scandasystems  beginning  with the quarter ended March 31, 2004. Due to the fact
that the Company has no long-term  contractual  commitments or  guarantees,  the
maximum exposure to loss is insignificant.  As a result of consolidating the VIE
of which the Company is the primary beneficiary,  in the second quarter of 2004,
the  Company  recognized  a minority  interest of  approximately  $59,676 on the
Consolidated Balance Sheet at September 30, 2004 which represents the difference
between  the fair  value of the  assets and the  liabilities  recorded  upon the
consolidation of the VIE.

The liabilities recognized as a result of consolidating the VIE do not represent
additional claims on the Company's general assets. Rather, they represent claims
against  the  specific  assets  of  the  consolidated  VIE.  Conversely,  assets
recognized as a result of  consolidating  this VIE do not  represent  additional
assets  that could be used to  satisfy  claims  against  the  Company's  general
assets. Reflected on the Company's September 30, 2004 Consolidated Balance Sheet
are $70,000 of VIE assets,  representing  all of the assets of the VIE.  The VIE
assists  the  Company  in  acquiring   licenses  and  research  and  development
activities in certain countries.

NOTE 8 - INCOME TAXES

Certain  exercises of options and warrants,  as well as restricted  stock issued
for services that became unrestricted, resulted in reductions to taxes currently
payable and a  corresponding  increase to  additional-paid-in-capital  for prior
years. Certain tax benefits for option and warrant exercises totaling $1,880,390
are deferred  because of a net  operating  loss  carry-forward  for tax purposes
("NOLs")  that  occurred  during the fourth  quarter of 1999,  resulting  from a
cumulative effect of deducting $47,520,526  attributed to options,  warrants and
unrestricted  stock  deductions  from taxable  income.  The net  operating  loss
carry-forwards arising from the option, warrant and stock activities approximate
(i) $15.1  million for federal  purposes,  of which $3.5  million will expire in
2019,  $4.0 million in 2020, and $7.6 million in 2022 and (ii) $15.3 million for
state purposes, of which $9.7 million will expire in 2009, $3.0 million in 2010,
and $2.6  million  in 2012.  Until  sufficient  taxable  income  to  offset  the
temporary timing  differences  attributable to operations and the tax deductions
attributable to option,  warrant and stock  activities are assured,  a valuation
allowance equaling the total deferred tax asset is being provided.

NOTE 9 - EARNINGS PER SHARE

Basic earnings per share ("EPS")  excludes  dilution and is computed by dividing
income  available to common  stockholders  by the  weighted - average  number of
common  shares  outstanding  for the period.  Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were  exercised  or  converted  into common stock or resulted in the issuance of
common  stock  that  shared in the  earnings  of the  entity.  Diluted  EPS also
utilizes the treasury  stock method which  prescribes a theoretical  buy-back of
shares from the  theoretical  proceeds of all options and  warrants  outstanding
during  the  period.  Since  there is a large  number of  options  and  warrants
outstanding,  fluctuations  in the  actual  market  price can have a variety  of
results for each period presented.

A  reconciliation  of the applicable  numerators and  denominators of the income
statement periods presented,  as reflects the results of continuing  operations,
is as follows (millions, except earnings per share amounts):

                     Three Months Ended         Nine Months Ended        Three Months Ended         Nine Months Ended
                     September  30, 2004        September 30, 2004       September 30, 2003         September 30, 2003
                    Income   Shares   EPS      Loss   Shares   EPS      Income   Shares   EPS      Loss   Shares   EPS
                    ----------------------------------------------------------------------------------------------------

Basic EPS           $ 0.2     11.5   $0.02    ($1.5)   11.5  ($0.13)    $ 0.1     11.5   $0.01    ($1.8)   11.5  ($0.16)
Dilutives:
Options/Warrants     --        2.6    --       --      --      --         --       2.9     --       --      --     --
                    -----    -----   -----    -----   -----   -----      -----    -----   -----    -----   -----  -----

Diluted EPS         $ 0.2     14.1   $0.01    ($1.5)   11.5  ($0.13)    $ 0.1     14.4   $0.01    ($1.8)   11.5  ($0.16)
                    =====================================================================================================


Options and warrants  outstanding  at September 30, 2004 and 2003 were 3,827,500
and  4,462,500,  respectively.  They were not  included  in the  computation  of
diluted  earnings  for periods  reporting  losses  because  the effect  would be
anti-dilutive.


                                      -12-




NOTE 10 - RELATED PARTY TRANSACTIONS

An agreement  between the Company and its  founders,  Mr. Guy J. Quigley and Mr.
Charles A. Phillips,  both officers,  directors and stockholders of the Company,
was entered into on June 1, 1995.  The founders are to share a total  commission
of five percent (5%) on sales  collected,  less  certain  deductions,  until the
termination  of this  agreement on May 31, 2005. The amounts paid or payable for
the three month periods ended  September 30, 2004 and 2003 under such  founder's
commission agreements were $267,449 and $269,272, respectively, and for the nine
months  ended  September  30,  2004 and 2003,  the  amounts  were  $492,691  and
$495,297,   respectively.  Such  expense  is  included  in  the  cost  of  sales
classification  on the  Consolidated  Statements of Operations.  Amounts payable
under such  agreements at September 30, 2004 and December 31, 2003 were $274,720
and $456,748,  respectively,  and are  represented in the accrued  royalties and
sales commission classification on the Consolidated Balance Sheets.

The  Company is in the  process  of  acquiring  a license in the United  Kingdom
through related party entities whose  stockholders  include Mr. Gary Quigley,  a
relative of the Company's  Chief Executive  Officer.  Fees amounting to $100,500
and $92,250,  respectively,  have been paid to a related entity during the three
month periods ended September 30, 2004 and 2003, respectively.  The fees for the
nine month  periods  ended  September  30,  2004 and 2003 were  $276,750 in both
periods.  This  expenditure  is used to assist  with the  regulatory  aspects of
obtaining such licenses and is included in the research and development  expense
classification on the Consolidated Statements of Operations.

NOTE 11 - COMMITMENTS AND CONTINGENCIES

Certain  operating  leases for  office and  warehouse  space  maintained  by the
Company resulted in rent expense for the three month periods ended September 30,
2004 and 2003 of $181,837  and  $55,570,  respectively,  and the amounts for the
nine month periods ended September 30, 2004 and 2003 were $344,399 and $163,950,
respectively.  The Company has approximate  future obligations for the remainder
of 2004 and over the next five fiscal years as follows:

                   Research and                    Property
          Year     Development     Advertising      Leases        Total
          ----------------------------------------------------------------
          2004      $  960,000     $1,500,000    $   55,000    $2,515,000
          2005         750,000      1,000,000       213,000     1,963,000
          2006            --             --          98,000        98,000
          2007            --             --          57,000        57,000
          2008            --             --            --            --
          2009            --             --            --            --
          ----------------------------------------------------------------
         Total      $1,710,000     $2,500,000    $  423,000    $4,633,000
          ----------------------------------------------------------------

Additional  advertising  and research and  development  costs are expected to be
incurred for the remainder of 2004 and during 2005.

The Company also maintains a separate  representation and distribution agreement
relating to the development of the zinc gluconate  glycine product  formulation.
The Company must pay the developer a 3% royalty and a 2% consulting fee based on
sales collected, less certain deductions,  throughout the term of this agreement
that expires in 2007. Additionally,  a founder's commission totaling 5% on sales
collected, less certain deductions, is paid to two of the officers, who are also
directors and stockholders of the Company,  and whose agreements expire in 2005.
The expenses for the respective periods relating to such agreements  amounted to
$534,896 and $361,071 for the three month periods  ended  September 30, 2004 and
2003,  respectively,  and $985,382 and $813,130 for the nine month periods ended
September 30, 2004 and 2003, respectively. Amounts accrued for these expenses at
September   30,  2004  and  December  31,  2003  were   $549,445  and  $915,109,
respectively.

The Company has an agreement  with the former  owners of the  Utah-based  direct
marketing and selling company, whereby they receive payments, currently totaling
5% of  net  sales  collected,  for  use  of  product  formulations,  consulting,
confidentiality  and non-compete  agreements with such expense being expensed as
incurred.  Amounts paid or payable under such  agreement  during the three month
periods  ended   September  30,  2004  and  2003  were  $187,432  and  $222,097,
respectively,  and for the nine month periods ended September 30, 2004 and 2003,
the amounts were $612,692 and $662,266, respectively. Amounts payable under such
agreement at September  30, 2004 and December 31, 2003 were $61,305 and $68,388,
respectively.

In August 2003,  the Company  entered into a licensing  agreement  with a patent
holder  relating to the utilization of a nasal spray product in the treatment of

                                       13


symptoms of the common cold.  The Company  agreed to pay the patent holder a two
percent royalty on net sales of nasal spray products,  less certain  deductions,
throughout the term of this  agreement,  which expires no later than April 2014.
As a result of the  discontinuation  of the Cold-Eeze(R) Cold Remedy Nasal Spray
product in  September  2004,  the 2004  results  include a reduction  to related
royalty  expense of $15,691 and  $11,963,  respectively,  for the three and nine
month periods ended  September 30, 2004.  There were no 2003  comparable  period
costs.  Royalty amounts paid in advance  relating to this agreement at September
30, 2004 were $10,350,  and accrued or payable amounts at December 31, 2003 were
$1,613.

An action was  commenced on March 17, 1996 by Goldblum and Wayne in the Court of
Common Pleas of Montgomery  County alleging that the plaintiffs became owners of
500,000 shares each of the Company's common stock in or about 1990 and requested
damages in excess of  $100,000.00  for breach of contract  and  conversion.  The
Company  vigorously  defended this law suit through trial during  January,  2004
when the jury returned a unanimous  verdict in favor of the Company.  Plaintiffs
filed a  Motion  for  Post  Trial  Relief  with the  Court  of  Common  Pleas of
Montgomery  County  but failed to produce a record or file a Brief in Support of
their Motion within the timelines called for by the Pennsylvania  Rules of Civil
Procedure.  The  Quigley  Corporation  has taken  judgment on the verdict in its
favor and the appeal period has expired. This action is now concluded.

Polski vs. The  Quigley  Corporation.  On August 12,  2004,  plaintiff  filed an
action  against The  Quigley  Corporation  in the  District  Court for  Hennepin
County,  Minnesota,  which was not served until  September  2, 2004.  The action
alleges that plaintiff  suffered  certain losses and injuries as a result of the
Company's   nasal  spray  product.   Among  the  allegations  of  plaintiff  are
negligence,   products   liability,   alleged  breach  of  express  and  implied
warranties, and an alleged breach of the Minnesota Consumer Fraud Statute.

The  Company  has  investigated  the claims and  believes  that they are without
merit.  At the  present  time the  matter  is being  defended  by the  Company's
insurance carrier.

The Company  believes  plaintiff's  claims are without  merit and is  vigorously
defending those claims. Based upon the information the Company has at this time,
it believes the action will not have a material impact to the Company.  However,
at this time no prediction as to the outcome can be made.

Angelfire,  Arvin, Edwards,  Hohnstein,  Hoffman, Laurent, Smalley, and Williams
vs. The Quigley Corporation.  On November 4, 2004, plaintiffs filed an action in
the Court of Common  Pleas of Bucks  County,  Pennsylvania,  against The Quigley
Corporation.  The action  alleges that  plaintiffs  suffered  certain losses and
injuries  as a result of using the  Company's  nasal  spray  product.  Among the
allegations of plaintiffs  are claims that The Quigley  Corporation is liable to
them based on alleged  false and  misleading  advertising,  alleged  negligence,
alleged  products  liability for  defective  design,  alleged  breach of express
warranty,  alleged  breach of implied  warranty,  and alleged  violations of the
Pennsylvania  Unfair  Trade  Practices  and  Consumer  Protection  Law and other
Consumer Protection Statutes.

The Company  believes that  plaintiffs'  claims are without merit.  No pre-trial
discovery  and motions have been filed  because the Company has yet to be served
with the complaint.  No prediction can be made as to the outcome of this case at
this time.


NOTE 12 - SUBSEQUENT EVENTS

On October 1, 2004,  the Company  completed the purchase of various  assets from
JoEl, Inc. Pursuant to the terms of the purchase  agreement,  the purchase price
of the transferred  assets was approximately  $5.1 million,  which included $4.1
million in cash and 113,097 shares of the Company's common stock,  valued on the
basis of the average closing price as reported on the NASDAQ National Market for
the four trading days  immediately  preceding  and after the closing date ($8.64
per share). The assets include  inventory,  machinery and equipment and the land
and  buildings  of  two  manufacturing   facilities,   located  in  Lebanon  and
Elizabethtown,  Pennsylvania.  In  addition,  the Company  entered  into various
employment agreements in connection with the above acquisition. These agreements
have an annual  aggregate  commitment  of  approximately  $230,000 and expire in
December 2006.

In  connection  with the asset  acquisition,  the  Company  entered  into a $3.0
million  loan  agreement  with PNC Bank N.A. The term loan is payable in monthly
payments of  approximately  $38,500 plus interest,  and matures in October 2011.
The loan  provides  the  Company  with the option to select,  from time to time,
either  the prime  rate or the  LIBOR  base  rate  plus 2%.  The loan  agreement
requires the maintenance of certain financial ratios.


                                      -14-




ITEM 2.   MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL  CONDITION  AND
          RESULTS OF OPERATIONS


FORWARD-LOOKING STATEMENTS

In addition to  historical  information,  this Report  contains  forward-looking
statements.  These  forward-looking  statements are subject to certain risks and
uncertainties  that could cause actual results to differ  materially  from those
reflected in these forward-looking  statements.  Factors that might cause such a
difference include,  but are not limited to, management of growth,  competition,
pricing pressures on the Company's product, industry growth and general economic
conditions.  Readers  are  cautioned  not  to  place  undue  reliance  on  these
forward-looking  statements,  which reflect management's opinions only as of the
date hereof.  The Company undertakes no obligation to revise or publicly release
the results of any revision to these forward-looking statements.

CERTAIN RISK FACTORS

The Company makes no representation  that the FDA or any other regulatory agency
will  grant an  Investigational  New Drug or take any other  action to allow its
formulations  to be  studied  or  marketed.  Furthermore,  no claim is made that
potential medicine discussed herein is safe, effective,  or approved by the FDA.
Additionally,  data that demonstrates activity or effectiveness in animals or in
vitro tests do not necessarily mean the formula test compound  referenced herein
will be effective in humans.  Safety and effectiveness in humans will have to be
demonstrated  by means of adequate and well controlled  clinical  studies before
the clinical  significance of the formula test compound is known. Readers should
carefully  review the risk factors  described in other sections of the filing as
well as in  other  documents  the  Company  files  from  time to time  with  the
Securities and Exchange Commission.

OVERVIEW

The Company,  headquartered in Doylestown,  Pennsylvania,  is a leading marketer
and distributor of a diversified  range of homeopathic and health products which
comprise  the Cold Remedy and the Health and Wellness  segments.  The Company is
also involved in the research and development of potential prescription products
that comprise the Pharmaceutical segment.

The Health and Wellness  segment has been effective in balancing the seasonality
of the Cold  Remedy  segment  and  producing a more  consistent  revenue  source
throughout the fiscal year.

On October 1, 2004,  the Company  completed the purchase of various  assets from
JoEl, Inc. Pursuant to the terms of the purchase  agreement,  the purchase price
of the transferred  assets was approximately  $5.1 million,  which included $4.1
million in cash and 113,097 shares of the Company's common stock,  valued on the
basis of the average closing price as reported on the NASDAQ National Market for
the four trading days  immediately  preceding  and after the closing date ($8.64
per share). The assets include  inventory,  machinery and equipment and the land
and  buildings  of  two  manufacturing   facilities,   located  in  Lebanon  and
Elizabethtown,  Pennsylvania.  In  addition,  the Company  entered  into various
employment agreements in connection with the above acquisition. These agreements
have an annual  aggregate  commitment  of  approximately  $230,000 and expire in
December 2006.

In  connection  with the asset  acquisition,  the  Company  entered  into a $3.0
million  loan  agreement  with PNC Bank N.A. The term loan is payable in monthly
payments of  approximately  $38,500 plus interest,  and matures in October 2011.
The loan  provides  the  Company  with the option to select,  from time to time,
either  the prime  rate or the  LIBOR  base  rate  plus 2%.  The loan  agreement
requires the maintenance of certain financial ratios.

Future revenues,  costs,  margins, and profits will continue to be influenced by
the Company's  ability to maintain its  manufacturing  availability and capacity
together with its  marketing  and  distribution  capabilities  and  requirements
associated  with the  development of Pharma's  potential  prescription  drugs in
order to  continue  to  compete  on a  national  and  international  level.  The
continued  expansion of Darius is dependent  on the Company  retaining  existing
independent  representatives  and  recruiting  additional  representatives  both
internationally  and  within  the  United  States,   continued  conformity  with
government  regulations,  a reliable  information  technology  system capable of
supporting  continued  growth and  continued  reliable  sources  for product and
materials to satisfy consumer demand.


                                      -15-




COLD REMEDY

Cold-Eeze(R),   a  zinc  gluconate  glycine   formulation   (ZIGG(TM)),   is  an
over-the-counter  consumer  product  used to reduce the duration and severity of
the common  cold and is  currently  sold in lozenge,  sugar-free  tablet and gum
form.   During  2003,  the  Company  launched   Cold-Eeze(R)   Nasal  Spray  and
Kidz-EEZE(TM)  Sore Throat Pops.  In September  2004,  the Company  notified its
customers  of its decision to  discontinue  the  Cold-Eeze(R)  Cold Remedy Nasal
Spray  product  within our line of cold remedy  products.  The decision was made
because  the product had not  developed  into a viable  entry in the nasal spray
cold remedy category.  Since its launch  approximately one year ago, the product
has not met either the Company's sales  expectations or its return on investment
projections.  Based on the Company's preliminary estimates,  the discontinuation
of the nasal  spray  product  will  resulted  in a  write-off  of  inventory  of
approximately  $422,000  and a charge  to net  sales of  approximately  $974,000
during the period ended September 30, 2004 due to anticipated  customer  returns
of the product.

In May 1992,  the Company  entered into an  exclusive  agreement  for  worldwide
representation,  manufacturing,  marketing  and  distribution  rights  to a zinc
gluconate  glycine lozenge  formulation which was patented in the United States,
which expired in August 2004, United Kingdom,  Sweden, France, Italy, Canada and
Germany,  and which patent is pending in Japan.  This  formulation  is presently
being marketed by the Company and through  independent  brokers and marketers in
the United States. A randomized double-blind placebo-controlled study, conducted
at Dartmouth College of Health Science,  Hanover, New Hampshire,  concluded that
the lozenge formulation  treatment,  initiated within 48 hours of symptom onset,
resulted in a significant reduction in the total duration of the common cold.

On May 22, 1992,  "ZINC AND THE COMMON COLD, A CONTROLLED  CLINICAL  STUDY," was
published in England in the "Journal of International  Medical Research," Volume
20, Number 3, Pages 234-246. According to this publication,  (a) flavorings used
in  other  Zinc  lozenge  products  (citrate,   tartrate,   separate,   orotate,
picolinate,  mannitol or sorbitol)  render the Zinc inactive and  unavailable to
the patient's  nasal  passages,  mouth and throat where cold symptoms have to be
treated, (b) this patented formulation delivers  approximately 93% of the active
Zinc to the  mucosal  surfaces  and (c) the  patient  has the same  sequence  of
symptoms  as in the  absence  of  treatment  but goes  through  the phases at an
accelerated rate and with reduced symptom severity.

On July 15, 1996,  results of a new randomized  double-blind  placebo-controlled
study on the common cold, which commenced at the CLEVELAND CLINIC  FOUNDATION on
October 3, 1994, were published.  The study called "ZINC GLUCONATE  LOZENGES FOR
TREATING THE COMMON COLD" was  completed and published in THE ANNALS OF INTERNAL
MEDICINE - VOL. 125 NO. 2. Using a 13.3mg  lozenge  (almost half the strength of
the  lozenge  used in the  Dartmouth  Study),  the  result  still  showed  a 42%
reduction in the duration of the common cold symptoms.

In April 2002, the Company announced the statistical  results of a retrospective
clinical  adolescent  study at the Heritage School facility in Provo,  Utah that
suggests that  Cold-Eeze(R)  is also an effective means of preventing the common
cold and statistically (a) lessens the number of colds an individual suffers per
year,  reducing  the  median  from  1.5 to  zero  and  (b)  reduces  the  use of
antibiotics  for respiratory  illnesses from 39.3% to 3.0% when  Cold-Eeze(R) is
administered as a first line treatment approach to the common cold.

In April 2002,  the Company was  assigned a Patent  Application  which was filed
with the Patent Office of the United States  Commerce  Department for the use of
Cold-Eeze(R) as a prophylactic for cold prevention.  The new patent  application
follows the results of the adolescent study at the Heritage School facility.

In May  2003,  the  Company  announced  the  findings  of a  prospective  study,
conducted at the Heritage School facility in Provo, Utah, in which 178 children,
ages 12 to 18 years, were given Cold-Eeze(R)  lozenges both  symptomatically and
prophylactically  from  October 5, 2001 to May 30,  2002.  The study found a 54%
reduction in the most  frequently  observed cold  duration.  Those  subjects not
receiving  treatment most  frequently  experienced  symptom  duration of 11 days
compared with 5 days when lozenges were administered, a reduction of 6 days.

The business of the Company is subject to federal and state laws and regulations
adopted  for  the  health  and  safety  of  users  of  the  Company's  products.
Cold-Eeze(R)  is a homeopathic  remedy that is subject to regulations by various
federal,  state and local  agencies,  including  the United States Food and Drug
Administration ("FDA") and the Homeopathic Pharmacopoeia of the United States.

HEALTH AND WELLNESS

Darius,  through  Innerlight  Inc.,  its wholly  owned  subsidiary,  is a direct
selling company  specializing in the development and distribution of proprietary

                                       16


health and wellness products,  including herbal vitamins and dietary supplements
for the human condition,  primarily within the United States and internationally
since the second quarter of 2003.

The continued  success of this segment is dependent,  among other things, on the
Company's ability:

      o    To  maintain  existing   independent   representatives   and  recruit
           additional successful independent representatives.  Additionally, the
           loss of key high-level  distributors  could negatively  impact future
           growth and revenues;

      o    To continue to develop and make available new and desirable  products
           at an acceptable cost;

      o    To maintain safe and reliable  multiple-location  sources for product
           and materials;

      o    To maintain a reliable  information  technology  system and  internet
           capability. The Company has expended significant resources on systems
           enhancements  in the past and will continue to do so to ensure prompt
           customer response times,  business  continuity and reliable reporting
           capabilities.  Any  interruption to computer  systems for an extended
           period of time could be harmful to the business;

      o    To  execute   conformity  with  various  federal,   state  and  local
           regulatory  agencies both within the United  States and abroad.  With
           the commencement of international business, difficulties with foreign
           regulatory  requirements could have a significant  negative impact on
           future growth. Any inquiries from government  authorities relating to
           the Company's business and compliance with laws and regulations could
           be harmful to the Company;

      o    To compete with larger more mature organizations operating within the
           same market and to remain  competitive in terms of product  relevance
           and business opportunity;

      o    To successfully  implement methods for progressing the direct selling
           philosophy internationally; and

      o    To plan strategically for general economic conditions.

Any or all of the above risks could result in significant reductions in revenues
and profitability of the Health and Wellness segment.

ETHICAL PHARMACEUTICAL

Pharma's current activity is the development of  naturally-derived  prescription
drugs with the goal to improve  the  quality of life and health of those in need
through scientific research and development. Research and development will focus
on the identification,  isolation and direct use of active medicinal substances.
One aspect of Pharma's research will focus on the combination of isolated active
constituents and whole plant  components.  The search for new natural sources of
medicinal  substances  will  focus not only on world  plants,  fungi,  and other
natural substances, but an intense investigation into traditional medicinals and
historic therapeutics.

The  pre-clinical  development,   clinical  trials,  product  manufacturing  and
marketing  of Pharma's  potential  new products are subject to federal and state
regulation in the United States and other  countries.  Obtaining FDA  regulatory
approval for these pharmaceutical products can require substantial resources and
take several years.  The length of this process depends on the type,  complexity
and novelty of the product and the nature of the disease or other indications to
be  treated.  If the  Company  cannot  obtain  regulatory  approval of these new
products in a timely  manner or if the patents are not granted or if the patents
are subsequently challenged,  these possible events could have a material effect
on the business  and  financial  condition  of the Company.  The strength of the
Company's patent position may be important to its long-term  success.  There can
be no assurance  that these  patents and patent  applications  will  effectively
protect the Company's products from duplication by others.

The areas of focus are:

      o    A Patent (No.  6,555,573 B2) entitled "Method and Composition for the
           Topical Treatment of Diabetic Neuropathy." The patent extends through
           March 27, 2021.

      o    A Patent (No.  6,592,896  B2)  entitled  "Medicinal  Composition  and
           Method of Using It" (for Treatment of Sialorrhea and other Disorders)
           for a product to relieve sialorrhea  (drooling) in patients suffering
           from  Amyotrophic  Lateral  Sclerosis  (ALS),  otherwise known as Lou
           Gehrig's Disease. The patent extends through August 6, 2021.

                                      -17-




      o    A Patent (No.  6,596,313  B2) entitled  "Nutritional  Supplement  and
           Method of Using It" for a product to relieve sialorrhea (drooling) in
           patients   suffering  from  Amyotrophic   Lateral   Sclerosis  (ALS),
           otherwise known as Lou Gehrig's  Disease.  The patent extends through
           April 15, 2022.

      o    A Patent (No.  6,753,325  B2)  entitled  "Composition  and Method for
           Prevention,  Reduction  and  Treatment  of Radiation  Dermatitis",  a
           composition  for  the  preventing,  reducing  or  treating  radiation
           dermatitis. The patent extends through November 5, 2021.

      o    In September  2002,  the Company filed a foreign  patent  application
           entitled  "Method  and  Composition  for  the  Topical  Treatment  of
           Diabetic Neuropathy" in Europe and other foreign markets.

In April 2002, the Company initiated a Phase II Proof of Concept Study in France
for treatment of diabetic neuropathy, which was concluded in 2003. In April 2003
the Company announced that an independently  monitored  analysis of the Phase II
Proof of Concept Study concluded that subjects using this formulation had 67% of
their  symptoms  improve,  suggesting  efficacy.  In  March  2004,  the  Company
announced  that it had completed its first meeting at the United States Food and
Drug  Administration  ("FDA") prior to submitting the Company's  Investigational
New Drug ("IND") application for the relief of symptoms of diabetic  symmetrical
peripheral  neuropathy.  The FDA's  pre-IND  meeting  programs  are  designed to
provide sponsors with advance guidance and input on drug development programs.

In September 2003, the Company announced its intention to file for permission to
study its  patent  pending  potential  treatment  for  psoriasis  and other skin
disorders.  Continued  testing will therefore have to be conducted  under an IND
application following positive preliminary results.

In December 2003, the Company  announced  positive test results of a preliminary
independent  in vitro  study  indicating  that a test  compound  of the  Company
previously tested on the Influenza virus showed "significant  virucidal activity
against a strain of the Severe  Acute  Respiratory  Syndrome  (SARS)  virus." In
January  2004 the  Company  announced  that it intends to  conduct  two  further
studies. The first study is intended to repeat the previously announced results,
which  demonstrated  the  compound to be 100  percent  effective  in  preventing
non-infected  ferrets in close  proximity  to an infected  ferret from  becoming
infected with the Influenza A virus. The second study is a dose ranging study on
the test compound.  Upon dosage determination and confirmation results from this
forthcoming  animal  model study,  a human proof of concept  study using a virus
challenge with  Influenza A virus in a quarantine  unit can be the next step. In
January 2004,  the Company also  reported that its compound has shown  virucidal
and  virustatic  activity  against  the strain 3B of the Human  Immunodeficiency
Virus Type 1 (HIV-1) in an in-vitro study.

In January 2004, a broad  anti-viral  compound was determined to be effective in
in-vitro and in-vivo studies for  applications  such as Influenza A&B, SARS, and
Herpes Simplex 1, and since this Sialorrhea formulation is a derivative compound
of the anti-viral  formulation,  ongoing testing for this Sialorrhea compound is
being reconsidered and probably will be discontinued.

In April 2004, the Company announced the results of a preliminary,  pre-clinical
animal study which  measured the effect of its  proprietary  patent  applied for
formulation  against ionizing  (nuclear)  radiation.  This study determined that
parenteral  (injection)  administration  of the study  compound  was  protective
against the effects of a lethal,  whole body ionizing  radiation dose in a mouse
model. This compound is being  investigated to potentially reduce the effects of
radiation exposure on humans.

In October 2004, the Company announced that the U.S. Patent and Trademark Office
has approved the issuance of a patent for the Company's  QR-440,  filed on April
23,  2003,  for a naturally  derived  compound  developed  for the  treatment of
arthritis and related inflammatory disorders.  The Company is preparing to begin
pre-clinical  testing,  leading to a submission of an  Investigational  New Drug
application to the U. S Food and Drug Administration,  for potential approval as
a prescription drug.


                                      -18-




EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS


FIN 46R, CONSOLIDATION OF VARIABLE INTEREST ENTITIES -- AN INTERPRETATION OF ARB
51 (REVISED DECEMBER 2003)

In December 2003, the Financial Accounting Standards Board (FASB or the "Board")
issued FASB  Interpretation  No. 46 (revised  December 2003),  CONSOLIDATION  OF
VARIABLE INTEREST ENTITIES (FIN 46R), to address certain  implementation issues.
FIN 46R varies  significantly from FASB Interpretation No. 46,  CONSOLIDATION OF
VARIABLE INTEREST  ENTITIES (FIN 46), which it supersedes.  FIN 46R requires the
application  of either FIN 46 or FIN 46R by  "Public  Entities"  to all  Special
Purpose  Entities  ("SPEs") at the end of the first interim or annual  reporting
period  ending after  December 15, 2003.  FIN 46R is  applicable to all non-SPEs
created prior to February 1, 2003 by Public Entities that are not small business
issuers at the end of the first interim or annual  reporting period ending after
March 15, 2004. The Company has determined that  Scandasystems,  a related party
(see Note 7,  "Variable  Interest  Entity"),  qualifies  as a variable  interest
entity and the Company has consolidated Scandasystems beginning with the quarter
ended  March  31,  2004.  Due to the fact  that  the  Company  has no  long-term
contractual  commitments  or  guarantees,   our  maximum  exposure  to  loss  is
insignificant.

CRITICAL ACCOUNTING POLICIES

As   previously   described,   the  Company  is  engaged  in  the   development,
manufacturing,  and marketing of health and homeopathic  products that are being
offered to the general  public and involved in the research and  development  of
potential prescription products. Certain key accounting policies that may affect
the  results of the  Company  are the timing of  revenue  recognition  and sales
incentives (including coupons, rebates, co-operative advertising and discounts),
the classification of advertising  expenses,  and the fact that all research and
development  costs are  expensed  as  incurred.  See Note 1,  "Organization  and
Business" which describes the Company's other significant accounting policies.

REVENUE RECOGNITION

Cold  Remedy  sales are  recognized  at the time  ownership  and risk of loss is
transferred  to the  customer,  which is  primarily  the time  the  shipment  is
received by the customer. In the case of the Health and Wellness segment,  sales
are recognized at the time goods are shipped to the customer.  Sales returns and
allowances  are provided for in the period that the related  sales are recorded,
which are based on  historical  experience.  The 2004  results  and  balances at
September 30, 2004 include a returns  provision of  approximately  $1,200,000 in
the  event of  future  product  returns  following  the  discontinuation  of the
Cold-Eeze(R) Cold Remedy Nasal Spray product in September 2004.

ADVERTISING

Advertising  costs  are  expensed  within  the  period  to  which  they  relate.
Advertising expense is made up of media advertising,  presented as part of sales
and marketing  expense;  co-operative  advertising,  which is accounted for as a
deduction from sales; and bonus product,  which is accounted for as part of cost
of sales.  The level of  advertising  expense to be incurred is determined  each
period to coincide with management's sales and marketing strategies. Advertising
costs  incurred for the three month  periods  ended  September 30, 2004 and 2003
were  $668,715 and  $1,120,256,  respectively.  For the nine month periods ended
September  30,  2004 and 2003,  these  costs  were  $2,258,469  and  $2,514,575,
respectively.  This expense item  decreased  in the 2004  reporting  periods due
primarily to the favorable impact on the co-operative advertising expense due to
the  Cold-Eeze(R)  Nasal Spray returns  provision and the expensing in 2003 of a
prepaid  advertising  item  perceived  as not  having any long term  value.  The
Company  continues to support and promote the  Cold-Eeze(R)  products  through a
combination of trade based advertising and strategic media advertising. Included
in  prepaid  expenses  and other  current  assets  was  $28,125  and  $68,000 at
September  30, 2004 and  December 31,  2003,  respectively,  relating to prepaid
advertising expenses.

RESEARCH AND DEVELOPMENT

Research and  development  costs are charged to operations in the year incurred.
Expenditures  for the three month periods ended September 30, 2004 and 2003 were
$627,344  and  $1,230,245,  respectively,  and  expenditures  for the nine month
periods  ended  September  30,  2004 and 2003 were  $2,395,193  and  $2,599,250,
respectively.  Principally,  research  and  development  is part of the  product
research costs related to Pharma and study costs  associated with  Cold-Eeze(R).
Expenditures  for 2003 also included study costs relating to  Cold-Eeze(R)  Cold
Remedy Nasal Spray.  Pharma is currently  involved in research  activity that is
expected to increase  significantly  over time as product  research  and testing
progresses.  The  Company  is at the  initial  stages  of what may be a  lengthy
process to develop potential commercial prescription products.

                                      -19-




RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 2004 COMPARED WITH THREE MONTHS ENDED SEPTEMBER
30, 2003

Net sales for the three month period ended  September 30, 2004 were  $9,690,858,
reflecting  a decrease  of  $221,369  over the net sales of  $9,912,227  for the
comparable  three month period ended September 30, 2003. The Cold Remedy segment
reported net sales in 2004 of  $4,998,940,  an increase of $384,386 or 8.3% over
the  comparable  2003  period of  $4,614,554.  The Health and  Wellness  segment
reported net sales in 2004 of $4,691,918,  a reduction of $605,755 or 11.4% over
the net sales of $5,297,673 for the comparable 2003 period.

Net sales of the Cold  Remedy  segment in 2004 were  adversely  affected  by the
discontinuation of the Cold-Eeze(R) nasal spray product resulting in a reduction
to net sales of  approximately  $974,000  in  anticipation  of  future  customer
returns  of the  product.  Excluding  the  discontinuation  effects of the nasal
product,  the remaining Cold Remedy  products' net sales exceeded the comparable
2003 period possibly due to the momentum  maintained during 2004 from the strong
performance in the fourth quarter of 2003. The Cold-Eeze(R)  products  continued
to be supported by the Company in the period  through  co-operative  advertising
programs with our customers.

The reduction of net sales  reported by the Health and Wellness  segment in 2004
is  attributable  to the effect of a decline  in the  number of active  domestic
independent   representatives,   which  was   partially   offset  by  increasing
international net sales  contributing  $619,876 during the third quarter of 2004
compared to $478,377 for the comparable period in 2003.

Cost of sales as a percentage of net sales for the three months ended  September
30, 2004 was 60.8% compared to 54.7% for the comparable 2003 period, an increase
of 6.1%.  The primary  influence  during the quarter that  resulted in increased
cost was the  discontinuation  of the nasal spray  product,  which resulted in a
reduction  to net sales of  approximately  $974,000  and a charge for  remaining
obsolete product in the amount of $422,000. Other reasons for the increased cost
were due to  fluctuations  in the product mix.  The Health and Wellness  segment
reported no significant cost of sales variation between the periods.

Sales and marketing  expense for the three month period ended September 30, 2004
was $915,550,  a decrease of $179,936 over the comparable  2003 period amount of
$1,095,486.  The decrease between the periods was primarily due to reduced media
advertising  costs in 2004  influenced by the expensing of an amount of $165,000
in the 2003 period not expected to have a future value.

General and administration  costs for the three month period ended September 30,
2004 was $2,313,609  compared to $2,046,915  during the 2003 period, an increase
of $266,694  between the  periods.  The  increase in 2004 was  primarily  due to
increased payroll costs for the period.

Research and development  costs during the three months ended September 30, 2004
were  $627,344  compared  to  $1,230,245  during  the  2003  comparable  period,
reflecting  a decrease in 2004 of  $602,901,  primarily as a result of decreased
Pharma  segment  study  costs  and  reduced  study   activity   related  to  the
Cold-Eeze(R) products.

Total  assets of the Company at  September  30, 2004 and  December 31, 2003 were
$22,842,183  and  $26,269,759,   respectively.   Working  capital  decreased  by
$1,459,630  to  $16,797,724  at September  30, 2004.  The primary  influences on
working capital during 2004 were effective  account  collections as reflected in
accounts  receivable  balances decreasing by $3,893,717 and decreases in accrued
advertising,  royalties  and  commissions  balances  by  a  combined  amount  of
$1,414,015 due to the slowdown in sales activity  prior to the  commencement  of
the forthcoming cold season.

NINE MONTHS ENDED  SEPTEMBER 30, 2004 COMPARED WITH NINE MONTHS ENDED  SEPTEMBER
30, 2003

Net sales for the nine month period ended  September 30, 2004 were  $26,197,657,
an  increase of  $1,089,758  or 4.3% over the net sales of  $25,107,899  for the
comparable  nine month period ended  September 30, 2003. The Cold Remedy segment
reported net sales in 2004 of  $10,682,611,  an increase of  $1,248,295 or 13.2%
over the comparable 2003 period of $9,434,316.  The Health and Wellness  segment
reported net sales in 2004 of $15,515,046, a decrease of $158,537 or 1% over the
net sales of $15,673,583 for the comparable 2003 period.

Net sales of the Cold Remedy segment in 2004 increased  significantly over 2003,
continuing the momentum  present during the fourth quarter of 2003. The 2004 net
sales  include the impact of a  provision  reducing  net sales by  approximately
$974,000 due to the discontinuation of the Cold-Eeze nasal spray product and the

                                      -20-




need to provide for anticipated  customer  returns.  The Company provides strong
marketing  support  to the  segment  by way of media  advertising,  co-operative
advertising  programs with the trade and product bonus programs that benefit the
consumer.

The Health and  Wellness  segment  reported  decreased  net sales in 2004.  This
decreased activity is largely attributable to reduced domestic sales as a result
of the reduction in active independent  representatives.  International sales in
2004 were $2,277,886 compared to $697,390 for the 2003 period.

Cost of sales as a percentage  of net sales for the nine months ended  September
30, 2004 was 57.6% compared to 56.4% for the comparable 2003 period, an increase
of 1.2%. The cost of sales of the Cold Remedy segment was adversely  affected in
the 2004 period by the discontinuation of the nasal spray product as a result of
the reduction in net sales of approximately  $974,000 and a charge for remaining
obsolete product in the amount of $422,000. Other reasons for the increased cost
were due to  fluctuations  in the product mix.  The Health and Wellness  segment
reflected  a  small  increase  in  the  percentage  demonstrating  variation  in
commissions payable to the independent  representatives  related to product mix,
period sales promotions and product procurement costs.

Sales and marketing  expense for the nine month period ended  September 30, 2004
was $3,373,090,  a decrease of $65,750 over the comparable 2003 period amount of
$3,438,840.  The  decrease  between the periods was  primarily  due to decreased
outside advertising,  increased brokers' commission and payroll costs, mitigated
by reductions in other expense  categories.  The outside advertising expense was
reduced in 2004 due to the  expensing in 2003 of a media item  perceived  not to
have future value.

General and  administration  costs for the nine month period ended September 30,
2004 was $7,118,849  compared to $6,800,522  during the 2003 period, an increase
of $318,327  between the  periods.  The  increase in 2004 was  primarily  due to
reduced  consultancy and tax costs along with increased payroll costs related to
the Health and Wellness  segment,  increased  payroll  costs related to the Cold
Remedy segment and increased legal and insurance costs.

Research and  development  costs during the nine months ended September 30, 2004
were  $2,395,193  compared  to  $2,599,250  during the 2003  comparable  period,
reflecting  a decrease  in 2004 of  $204,057,  the  majority  of which  reflects
reduced expenditure in 2004 associated with Cold-Eeze(R)  related study projects
that more than offset a small increase in Pharma segment study costs in the 2004
period.

LIQUIDITY AND CAPITAL RESOURCES

The Company had working  capital of $16,797,724 and $18,257,354 at September 30,
2004 and December 31, 2003, respectively, resulting in a decrease of $1,459,630.
Changes in working  capital  overall have been  primarily  due to the  following
items: cash balances  increased by $311,309;  accounts  receivable  decreased by
$3,893,717  due to seasonal  fluctuations,  effective  cash  collections,  and a
returns provision of approximately  $1,200,000 related to the discontinued nasal
spray  product;  inventory  balances  increased by $516,896,  such  increase was
lessened by a product obsolescence  provision of approximately  $422,000 related
to the  discontinued  nasal spray  product;  accrued  advertising  decreased  by
$919,933 as a result of the  seasonality of the cold remedy products and related
co-operative  advertising  activity;  royalty and sales  commission  liabilities
decreased by $494,082  related to the  cold-season  cycle and the effect of such
seasonality on account receivables;  and other current liabilities  decreased by
$212,113. Total cash balances at September 30, 2004 were $11,703,398 compared to
$11,392,089  at December 31, 2003. The increase in cash was due to the movements
in working capital.

On October 1, 2004,  the Company  completed the purchase of various  assets from
JoEl, Inc. Pursuant to the terms of the purchase  agreement,  the purchase price
of the transferred  assets was approximately  $5.1 million,  which included $4.1
million in cash and 113,097 shares of the Company's common stock,  valued on the
basis of the average closing price as reported on the NASDAQ National Market for
the four trading days  immediately  preceding  and after the closing date ($8.64
per share). The assets include  inventory,  machinery and equipment and the land
and  buildings  of  two  manufacturing   facilities,   located  in  Lebanon  and
Elizabethtown,  Pennsylvania.  In  addition,  the Company  entered  into various
employment agreements in connection with the above acquisition. These agreements
have an annual  aggregate  commitment  of  approximately  $230,000 and expire in
December 2006.

In  connection  with the asset  acquisition,  the  Company  entered  into a $3.0
million  loan  agreement  with PNC Bank N.A. The term loan is payable in monthly
payments of  approximately  $38,500 plus interest,  and matures in October 2011.
The loan  provides  the  Company  with the option to select,  from time to time,
either  the prime  rate or the  LIBOR  base  rate  plus 2%.  The loan  agreement
requires the maintenance of certain financial ratios.

                                      -21-




Management  believes that its revised  strategy to establish  Cold-Eeze(R)  as a
recognized   brand  name,  its  broader  range  of  products,   its  diversified
distribution  methods as it relates to the Health and Wellness business segment,
adequate manufacturing capacity and growth in international sales, together with
its current  working  capital,  should provide an internal  source of capital to
fund the Company's business operations.  In addition to anticipated funding from
operations,  the  Company  and its  subsidiaries  may in the short and long term
raise capital through the issuance of equity  securities to finance  anticipated
growth.

Management is not aware of any trends or uncertainties  that may have a material
negative impact upon the Company's (a) short-term or long-term liquidity, or (b)
net sales,  revenues or income from  operations.  Any challenge to the Company's
patent rights could have a material  adverse  effect on future  liquidity of the
Company; however, the Company is not aware of any condition that would make such
an event probable.

Management  believes that cash generated from operations  along with its current
cash  balances  will be  sufficient  to  finance  working  capital  and  capital
expenditure requirements for at least the next twelve months.

CAPITAL EXPENDITURES

On October 1, 2004,  the Company  completed the purchase of various  assets from
JoEl, Inc. Pursuant to the terms of the purchase  agreement,  the purchase price
of the transferred  assets was approximately  $5.1 million,  which included $4.1
million in cash and 113,097 shares of the Company's common stock,  valued on the
basis of the average closing price as reported on the NASDAQ National Market for
the four trading days  immediately  preceding  and after the closing date ($8.64
per share). The assets include  inventory,  machinery and equipment and the land
and  buildings  of  two  manufacturing   facilities,   located  in  Lebanon  and
Elizabethtown,  Pennsylvania.  In  addition,  the Company  entered  into various
employment agreements in connection with the above acquisition. These agreements
have an annual  aggregate  commitment  of  approximately  $230,000 and expire in
December 2006.

In  connection  with the asset  acquisition,  the  Company  entered  into a $3.0
million  loan  agreement  with PNC Bank N.A. The term loan is payable in monthly
payments of  approximately  $38,500 plus interest,  and matures in October 2011.
The loan  provides  the  Company  with the option to select,  from time to time,
either  the prime  rate or the  LIBOR  base  rate  plus 2%.  The loan  agreement
requires the maintenance of certain financial ratios.

With the exception of the Cold-Eeze(R) lozenge products,  the Company's products
are manufactured by outside sources,  therefore capital  expenditures during the
remainder of 2004 may not be material.

OFF-BALANCE SHEET ARRANGEMENTS

It is not the Company's usual business  practice to enter into off-balance sheet
arrangements   such  as   guarantees   on  loans  and   financial   commitments,
indemnification arrangements, and retained interests in assets transferred to an
unconsolidated entity for securitization purposes. Consequently, the Company has
no off-balance sheet arrangements that have, or are reasonably likely to have, a
material  current  or  future  effect on its  financial  condition,  changes  in
financial  condition,  revenues or expenses,  results of operations,  liquidity,
capital expenditures or capital resources.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's  operations are not subject to risks of material  foreign currency
fluctuations nor does it use derivative financial  instruments in its investment
practices.  The Company  places its marketable  investments in instruments  that
meet high credit quality standards.  The Company does not expect material losses
with respect to its investment  portfolio or exposure to market risks associated
with interest  rates.  The impact on the Company's  results of a one  percentage
point change in short-term  interest  rates would not have a material  impact on
the Company's future earnings,  fair value, or cash flows related to investments
in cash equivalents or interest earning marketable securities.

ITEM 4. CONTROLS AND PROCEDURES

Based on their  evaluation,  as of the end of the period covered by this report,
the Company's Chief Executive Officer and Chief Financial Officer have concluded
that the  Company's  disclosure  controls  and  procedures  (as defined in Rules
13a-14 and 15d-14  under the  Securities  Exchange  Act of 1934) are  effective.
There have been no significant changes in internal controls or in other  factors

                                      -22-




that could  significantly  affect these controls subsequent to the date of their
evaluation,   including  any  corrective  actions  with  regard  to  significant
deficiencies and material weaknesses.

                           PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

                               GOLDBLUM AND WAYNE.

An action was  commenced on March 17, 1996 by Goldblum and Wayne in the Court of
Common Pleas of Montgomery  County alleging that the plaintiffs became owners of
500,000 shares each of the Company's common stock in or about 1990 and requested
damages in excess of  $100,000.00  for breach of contract  and  conversion.  The
Company  vigorously  defended this law suit through trial during  January,  2004
when the jury returned a unanimous  verdict in favor of the Company.  Plaintiffs
filed a  Motion  for  Post  Trial  Relief  with the  Court  of  Common  Pleas of
Montgomery  County  but failed to produce a record or file a Brief in Support of
their Motion within the timelines called for by the Pennsylvania  Rules of Civil
Procedure.  The  Quigley  Corporation  has taken  judgment on the verdict in its
favor and the appeal period has expired. This action is now concluded.

                       POLSKI VS. THE QUIGLEY CORPORATION.

On August 12, 2004, plaintiff filed an action against The Quigley Corporation in
the District Court for Hennepin  County,  Minnesota,  which was not served until
September 2, 2004. The action alleges that plaintiff suffered certain losses and
injuries as a result of the Company's nasal spray product. Among the allegations
of plaintiff are negligence,  products liability,  alleged breach of express and
implied  warranties,  and an  alleged  breach of the  Minnesota  Consumer  Fraud
Statute.

The  Company  has  investigated  the claims and  believes  that they are without
merit.  At the  present  time the  matter  is being  defended  by the  Company's
insurance carrier.

The Company  believes  plaintiff's  claims are without  merit and is  vigorously
defending those claims. Based upon the information the Company has at this time,
it believes the action will not have a material impact to the Company.  However,
at this time no prediction as to the outcome can be made.

  ANGELFIRE, ARVIN, EDWARDS, HOHNSTEIN, HOFFMAN, LAURENT, SMALLEY, AND WILLIAMS
                          VS. THE QUIGLEY CORPORATION.

On November 4, 2004,  plaintiffs filed an action in the Court of Common Pleas of
Bucks County, Pennsylvania,  against The Quigley Corporation. The action alleges
that  plaintiffs  suffered  certain losses and injuries as a result of using the
Company's  nasal spray product.  Among the  allegations of plaintiffs are claims
that The  Quigley  Corporation  is liable  to them  based on  alleged  false and
misleading  advertising,  alleged  negligence,  alleged  products  liability for
defective design, alleged breach of express warranty,  alleged breach of implied
warranty,  and alleged violations of the Pennsylvania Unfair Trade Practices and
Consumer Protection Law and other Consumer Protection Statutes.

The Company  believes that  plaintiffs'  claims are without merit.  No pre-trial
discovery  and motions have been filed  because the Company has yet to be served
with the complaint.  No prediction can be made as to the outcome of this case at
this time.


ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None
                                      -23-



ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS


(1)  Exhibit 31.1  Certification  by the Chief Executive Officer Pursuant to
                   Section 302 of the Sarbanes-Oxley Act of 2002
(2)  Exhibit 31.2  Certification  by the Chief Financial Officer Pursuant to
                   Section 302 of the Sarbanes-Oxley Act of 2002
(3)  Exhibit 32.1  Certification  by the Chief Executive Officer Pursuant to
                   Section 906 of the Sarbanes-Oxley Act of 2002
(4)  Exhibit 32.2  Certification  by the Chief Financial Officer Pursuant to
                   Section 906 of the Sarbanes-Oxley Act of 2002


                                      -24-




                                   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.


                                      THE QUIGLEY CORPORATION



                                      By: /s/ George J. Longo
                                         --------------------------------------
                                          George J. Longo
                                          Vice President, Chief Financial Officer


Date: November 12, 2004


                                      -25-