SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549


                                   FORM 10-QSB

               QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE

                         SECURITIES EXCHANGE ACT OR 1934


        For Quarter Ended December 31, 2000Commission file number 0-5223


                              XOLOGIC, INCORPORATED
    ________________________________________________________________________
             (Exact name of registrant as specified in its charter)


             Nevada                                      11-1771806
  _____________________________________________________________________________
    (State or other jurisdiction of                     (I.R.S. Employer
    incorporation or organization)                     Identification No.)



     11777 San Vicente Blvd, Los Angeles, California            90049
      _____________________________________________________________________
        (Address of principal executive offices)              (Zip Code)


        Registrant's telephone number, including area code(310) 979-8055
                                  _____________

                              YELLOWAVE CORPORATION

                                  (Former name)

*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
                                     ____     ____


Number  of  common  shares   outstanding   at  February  9,  2001  is  3,475,117
Transitional Small Business Disclosure:
                                     Yes        No X
                                     ____       ____


                              XOLOGIC INCORPORATED

                                   FORM 10-QSB

                                      INDEX

                                                                            Page

PART I - FINANCIAL INFORMATION

         Item 1.  Financial Statements (Unaudited)

               Accountants' Report                                             1

               Consolidated Balance Sheets -
               December 31, 2000 and June 30, 2000(Audited)                    2

               Consolidated Statements of Operations -
               Six Months Ended December 31, 2000 and 1999                     3

               Consolidated Statements of Operations-
               Three Months Ended December 31, 2000 and 1999                   4

               Consolidated Statement of Shareholders
               Equity - Six Months Ended December 31, 2000                     5

               Consolidated Statements of Cash Flows -
               Six Months Ended December 31, 2000 and 1999                     6

               Notes to Unaudited Consolidated
               Financial Statements                                            7

         Item 2.  Management's Discussion and Analysis of
                   Financial Condition and Results of Operations          8 - 13


PART II - OTHER INFORMATION

         Item 1. Legal Proceedings                                            14

         Item 2. Changes in Securities and Use of Proceeds                    15

         Item 3. Defaults Upon Senior Securities                              15

         Item 4. Submissions of Matters to a Vote of Security Holders         15

         Item 5. Other Information                                            15

         Item 6. Exhibits and Reports on Form 8-K                             15


SIGNATURES                                                                    15

                         INDEPENDENT ACCOUNTANTS' REPORT

We have  reviewed the  accompanying  consolidated  balance  sheet,  statement of
operations,  stockholders'  equity and cash flows of  XOLOGIC  INCORPORATED  and
subsidiaries  (the  "Company") as of December 31, 2000, and for the  three-month
and  six  month  periods  then  ended.   These  financial   statements  are  the
responsibility of the company's management.

We conducted our review in accordance with standards established by the American
Institute  of  Certified  Public  Accountants.  A review  of  interim  financial
information consists principally of applying analytical  procedures to financial
data and making  inquiries of persons  responsible  for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with  generally  accepted  auditing  standards,  the  objective  of which is the
expression of an opinion  regarding the financial  statements  taken as a whole.
Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material  modifications that should
be made to the  accompanying  financial  statements for them to be in conformity
with generally accepted accounting principles.

/s/ Jay J. Shapiro, CPA P.C.

February 27, 2001
Encino, California

                                       1
<PAGE>
                      XOLOGIC INCORPORATED AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS


                                     ASSETS
<TABLE>
<CAPTION>
                                                                     December 31           June 30
                                                                         2000                2000
                                                                     (unaudited)          (audited)
<S>                                                                       <C>                 <C>
Current assets:
         Cash and cash equivalents                                    $1,582,751         $1,752,047
         Marketable securities (cost $232,000)                           217,012          1,192,600
         Prepaid expenses, taxes and miscellaneous receivables            96,375                  0
         Notes and accounts receivable, net                              100,000            450,000
         Note receivable - related party                               1,385,000          1,385,000
                                                                    ------------       ------------

                           Total current assets                        3,381,138          4,779,647
Property and equipment:                                             ------------       ------------
         Furniture, fixtures and equipment                                21,990             21,990
         Less accumulated depreciation                                   (8,000)             (5,000)
                                                                    ------------       ------------
                                                                          13,990             16,990
Other assets:                                                       ------------       ------------
         Deposits                                                          6,790              6,790
                                                                    ------------       ------------
                                                                           6,790              6,790
                                                                    ------------       ------------
                                                                      $3,401,918         $4,803,427
                                                                    ------------       ------------

Current liabilities:
         Accounts payable and accrued expenses                            52,478            173,403
         Income taxes payable                                            675,000            800,000
                                                                    ------------       ------------
                           Total current liabilities                     727,478            973,403
                                                                    ------------       ------------
         Security deposit payable                                         35,867             35,867
                                                                    ------------       ------------
         Total liabilities                                               763,345          1,009,270
                                                                    ------------       ------------
Shareholders' Equity:
         Common stock, $.033 par value, authorized
         50,000,000 shares, issued and outstanding 3,475,117
         shares and 2,564,486 December 31, 2000 and
         June 30, 2000 respectively                                      115,450             85,400
         Additional paid-in capital                                       17,674            310,224
         Retained earnings                                             2,505,449          3,398,533
                                                                    ------------       ------------
                                                                       2,638,573          3,794,157


                                                                    $  3,401,918         $4,803,427
                                                                    ------------       ------------
</TABLE>
                   See notes to unaudited financial statements

                                       2
<PAGE>
                      XOLOGIC INCORPORATED AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>

                                                                          SIX MONTHS ENDED DECEMBER 31
                                                                            2000               1999
<S>                                                                          <C>                <C>
Revenues:
         Investment income                                                26,637             66,299
         Other income (loss)                                              62,315            (17,278)
                                                                    ------------       ------------
                                                                          88,952             49,021
                                                                    ------------       ------------
Cost and expenses:
         Depreciation                                                      3,000              3,550
         Newtech transaction (Note 2)                                    382,637                  0
         General and administrative expenses                             718,914            541,302
                                                                    ------------       ------------
                                                                       1,104,577            544,852
                                                                    ------------       ------------
Loss before income taxes - Continuing Operations                      (1,015,625)          (495,831)

Income taxes                                                             122,541             (1,000)
                                                                    ------------       ------------
Income - Continuing Operations                                          (893,084)          (496,831)

Income - Discontinued Operations,net                                           0            228,811
                                                                    ------------       ------------
Net Loss                                                                (893,084)          (268,020)
                                                                    ------------       ------------

Loss per common share - Basic
         Continuing Operations                                           ($0.30)              ($.56)
         Discontinued Operations                                            0.00               $.26
                                                                    ------------       ------------
                                                                          ($0.30)            ($0.30)
                                                                    ------------       ------------
         Weighted average number of common shares outstanding          2,900,000            894,000
                                                                    ------------       ------------
</TABLE>
                   See notes to unaudited financial statements

                                       3
<PAGE>

                      XOLOGIC INCORPORATED AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>
                                                                       THREE MONTHS ENDED DECEMBER 31
                                                                            2000               1999
<S>                                                                          <C>                <C>
Revenues:
         Investment income                                               (42,870)            38,102
         Other income (loss)                                              27,524             17,278
                                                                    ------------       ------------
                                                                          15,346             55,380
                                                                    ------------       ------------
Cost and expenses:
         Depreciation                                                      2,000              1,775
         Newtech transaction (Note 2)                                     51,988                  0
         General and administrative expenses                             224,957            202,395
                                                                    ------------       ------------
                                                                         278,945            204,170
                                                                    ------------       ------------
Loss before income taxes - Continuing Operations                        (294,291)          (148,790)

Income taxes                                                             122,541             (1,000)
                                                                    ------------       ------------
Income - Continuing Operations                                          (171.750)          (149,790)

Income - Discontinued Operations,net                                           0            177,805
                                                                    ------------       ------------
Net Loss                                                                (171.750)          ( 28,015)
                                                                    ------------       ------------

Loss per common share - Basic
         Continuing Operations                                            ($0.06)            ($0.27)
         Discontinued Operations                                            0.00              $. 24
                                                                    ------------       ------------
                                                                          ($0.06)            ($0.03)
                                                                    ------------       ------------

Weighted average number of common shares outstanding                   2,900,000            894,000
                                                                    ------------       ------------
</TABLE>
                   See notes to unaudited financial statements

                                       4
<PAGE>

                      XOLOGIC INCORPORATED AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)


<TABLE>
<CAPTION>
                                                                        Additional
                                       Common            Stock              Paid-In           Retained
                                       Shares            Amount              Capital           Earnings         Amount

<S>                                      <C>             <C>                  <C>                <C>           <C>
Balance at July 1, 2000             2,564,486        $  85,400             $310,224         $3,398,533       $3,794,157

Newtech transaction (Note 2)        7,425,000

Exercise of stock options           1,060,631           35,000              (35,000)

Retirement of shares @ $1.75         (150,000)          (4,950)            (257,550)                           (262,500)
per share

Cancellation of Newtech Shares     (7,425,000)

Net Loss - six months                                                                         (893,084)        (893,084)
------------------------------------------------------------------------------------------------------------------------



Balance at December 31,
2000 (unaudited)                  3,475,117          $115,450              $17,674         $2,505,449       $2,638,573
=========================================================================================================================
</TABLE>
                   See notes to unaudited financial statements

                                       5
<PAGE>

                      XOLOGIC INCORPORATED AND SUBSIDIARIES

                CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

<TABLE>
<CAPTION>
                                                                          SIX MONTHS ENDED DECEMBER 31,
                                                                              2000               1999

<S>                                                                            <C>               <C>
Cash flows from operating activities:
         Net loss          `                                               ($893,084)         ($268,020)
         Adjustments to reconcile net income (loss) to net cash
          used in operating activities:
             Depreciation                                                      3,000              3,550
             Changes in operating assets and liabilities, net of effect
               of acquisition and sale:
                  Loss on marketable securities                                    0                  0
                  Prepaid expenses, taxes and miscellaneous receivables      (96,917)                 0
                  Deposits                                                         0              6,792
                  Accounts payable and accrued expenses                     (120,925)          (112,782)
                  Income taxes payable                                      (125,000)           (31,558)
                  Other                                                            0             (7,096)
                                                                        ------------       ------------
         Net cash (used) by operating activities                          (1,232,926)           443,269

Cash flows from investing activities:
             (Purchases) of property and equipment                                 0            (16,244)
            Decrease in marketable securities                                976,130            844,903
                          (Increase), decrease in notes receivable           350,000            294,674

            Related party                                                          0         (1,385,000)
                                                                        ------------       ------------
         Net cash used provided in investing activities                    1,326,130           (261,667)
                                                                        ------------       ------------
Cash flows from financing activities:
             Issuance of common stock                                              0            537,500
             Acquisition of treasury stock                                  (262,500)            30,386
                                                                        ------------       ------------
         Net cash provided by financing activities                          (262,500)           507,114   .
         Increase (decrease) in cash and cash equivalents                   (169,296)          (197,822)
         Cash and cash equivalents at beginning of period                  1,752,047          1,528,108
                                                                        ------------       ------------
             Cash and cash equivalents at end of period                   $1,582,751          1,330,284
                                                                        ------------       ------------
Supplemental disclosures of cash flow information:
         Cash paid during the period for:
             Interest paid                                                         0                  0
             Income taxes                                                          0            $31,558
                                                                        ------------       ------------
         Common shares issued for:
             Exercise of options                                           1,060,631                  0
                                                                        ------------       ------------
</TABLE>
                   See notes to unaudited financial statements

                                       6
<PAGE>

                      XOLOGIC INCORPORATED AND SUBSIDIARIES

                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

                                DECEMBER 31, 2000

NOTE 1  -  FINANCIAL STATEMENTS

The accompanying unaudited financial statements have been prepared without audit
in  accordance  with  generally  accepted  accounting   principles  for  interim
financial information and with the instructions to Form 10-QSB of the Securities
and Exchange Commission. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting  principles for complete
financial statements. In the opinion of management,  all adjustments (consisting
of normal recurring accruals)  considered necessary for a fair presentation have
been included. Operating results for the six month period ended December 31,2000
are not necessarily  indicative of the results that may be expected for the year
ending  June 30,  2001.  For  further  information,  refer  to the  consolidated
financial statements and footnotes as of June 30, 2000 included in the Company's
Annual Report on Form 10-KSB for the Company's fiscal year then ended.

NOTE 2 - NEWTECH TRANSACTION

The Company entered into an agreement on July 5, 2000,  with Newtech  Broadwidth
Ltd. to acquire its holdings in four Israeli  technology  companies.  As per the
agreement the Company issued  7,425,000 common shares for all of the outstanding
stock and the Company's  management received consulting fees of $325,000 and was
allowed immediate vesting and exercise of options to purchased  1,060,631 shares
of common stock.

The Company did not receive the required  consideration and initiated litigation
alleging:  breach of contract,  fraud,  rescission  and injunctive  relief.  The
Company  settled the  litigation  in December  2000.  As part of the  settlement
agreement Newtech returned the 7,425,000 shares that the Company then cancelled.
In connection with the Newtech transaction, the Company has incurred legal costs
and corporate costs of $382,637.

Ron Oren  resigned,  as an officer  and  director,  from the  Company  effective
October 31, 2000.  He returned the  $250,000  consulting  fee he had received as
part of the transaction.

                                       7
<PAGE>


ITEM 2.                    Management's Discussion and Analysis of Operations

This statement contains  forward-looking  statements.  The words  "anticipated",
"believe",  "expect", "plan", "intend", "seek", "estimate",  "project",  "will",
"could", "may" and similar expressions are intended to identify  forward-looking
statements.

These statements include, among others, information regarding future operations,
future capital  expenditures  and future net cash flow. Such statements  reflect
our current views with respect to future events and  financial  performance  and
involve risks and uncertainties, including, without limitation, general economic
and  business  conditions,  changes in foreign,  political,  social and economic
conditions, regulatory initiatives and compliance with governmental regulations,
the ability to achieve further market penetration and additional customers,  and
various other matters,  many of which are beyond our control,  including without
limitation, the risks described under the caption "Business". Should one or more
of these risks or uncertainties occur, or should underlying assumptions prove to
be  incorrect,  actual  results may vary  materially  and  adversely  from those
anticipated,   believed,  estimated,  or  otherwise  indicated.  Statements  are
qualified  by the  cautionary  statements  and there can be no  assurance of the
actual results or developments.

Overview.

In February 1999, we sold 30 retail hair salons to Regis Corporation  ("Regis").
We also sold three retail stores and abandoned  nine retail stores during fiscal
1999. As of June 30, 1999, we did not own any retail stores and we were strictly
a  franchising  operation.  In March  2000,  we  agreed  to sell the hair  salon
franchise  assets to Regis.  This  transactioneffectively  discontinued our hair
salon activities.

We are currently seeking,  investigating and ultimately acquiring an interest in
a business with long-term growth  potential.  We currently have no commitment or
arrangement  to  participate  in a business  and cannot now predict what type of
business  we may enter  into or  acquire.  It is  emphasized  that the  business
objectives  discussed  herein are  extremely  general and are not intended to be
restrictive on the discretion of our management.

                                       8
<PAGE>

Management  believes  that there are  perceived  benefits  to being a  reporting
company with a class of publicly-traded  securities.  These are commonly thought
to include:


       the ability to use registered securities to make acquisition of assets or
       businesses;
       increased visibility in the financial community;
       the facilitation of borrowing from institutions;
       improved trading efficiency;
       shareholder liquidity;
       greater ease in subsequently raising capital;
       compensation of key employees through stock options;
       enhanced corporate image; and
       a presence in the United States capital market.

The analysis of new business  opportunities  will be undertaken by, or under the
supervision  of our officers or  directors,  who are not  professional  business
analysts.  Management  does not have the  capacity  to conduct as  extensive  an
investigation  of a target  business as might be undertaken by a venture capital
fund or similar institution.  As a result,  management may elect to merge with a
target  business,  which has one or more  undiscovered  shortcomings and may, if
given the  choice to  select  among  target  businesses,  fail to enter  into an
agreement with the most investment-worthy target business.

No  assurances  can be  given  that we will be  able to  enter  into a  business
combination,  as to the terms of a business combination,  or as to the nature of
the target business.

Selection of a Business.

We  anticipate  that  businesses  for possible  acquisition  will be referred by
various sources,  including its officers and directors,  professional  advisors,
securities  broker-dealers,   venture  capitalists,  members  of  the  financial
community,  and  others  who may  present  unsolicited  proposals.  We will seek
businesses  from all  known  sources,  but will  rely  principally  on  personal
contacts of our officers and directors and their affiliates, as well as indirect
associations  between them and other business and professional  people. While it
is not presently anticipated that we will engage unaffiliated professional firms
specializing  in business  acquisitions  or  reorganizations,  such firms may be
retained if management deems it in our best interest.

                                       9
<PAGE>

Compensation  to a finder or business  acquisition  firm may take various forms,
including one-time cash payments,  payments based on a percentage of revenues or
product sales volume,  payments involving issuance of securities (including ours
), or any combination of these or other compensation arrangements.  We shall not
restrict  our  search to any  particular  business,  industry,  or  geographical
location,  and management reserves the right to evaluate and enter into any type
of business in any location.  The analysis of new businesses  will be undertaken
by or under the supervision of officers and directors.

It is  possible  that we may  propose to acquire a business  in the  development
stage. A business is in the  development  stage if it is devoting  substantially
all of its efforts to establishing a new business,  and either planned principal
operations have not commenced or planned principal operations have commenced but
there has been not  significant  revenue there from.  Under Rule 419 the Company
must  acquire a  business  or assets  for which the fair  value of the  business
represents at least 80% of the Offering proceeds, including funds received or to
be received from the exercise of warrants,  less certain underwriting  expenses.
Accordingly,  we have the ability to acquire a business in the development stage
may be limited to the extent we cannot  locate such  businesses  with fair value
high enough to satisfy the requirements of Rule 419.

We  shall  be  subject  to  requirements  of  Rule  419  and  certain  reporting
requirements under the Exchange Act and will, therefore,  be required to furnish
certain information about significant acquisitions,  including audited financial
statements  for the  company(s)  acquired,  covering  one,  two, or three years,
depending on the relative  size of the  acquisition.  Consequently,  acquisition
prospects  that  do not  have or are  unable  to  obtain  the  required  audited
statements which meet the requirements of Rule 419 and the Exchange Act will not
be appropriate for acquisition.

                                       10
<PAGE>

The decision to participate in a specific  business may be based on management's
analysis  of the  quality of the other  firm's  management  and  personnel,  the
anticipated  acceptability of new products or marketing  concepts,  the merit of
technological changes, and other factors which are difficult, if not impossible,
to analyze through any objective criteria. It is anticipated that the results of
operations of a specific firm may not necessarily be indicative of the potential
for the future  because of the  requirement  to  substantially  shift  marketing
approaches,   expand   significantly,   change  product   emphasis,   change  or
substantially augment management, and other factors.

Acquisition of Business.

In implementing a structure for a particular business acquisition, we may become
a party  to a  merger,  consolidation,  or  other  reorganization  with  another
corporation or entity; joint venture;  license;  purchase and sale of assets; or
purchase and sale of stock,  the exact nature of which cannot now be  predicted.
The  majority  of our  directors  may,  as part of the terms of the  acquisition
transaction,  resign  and be  replaced  by new  directors  without  vote  of our
shareholders.

In connection  with our  acquisition  of a business,  our present  shareholders,
including  officers  and  directors,   may,  as  a  negotiated  element  of  the
acquisition,  sell a  portion  or all of our  common  stock  held  by  them at a
significant  premium over their  original  investment in us. As a result of such
sales,  affiliates of the entity  participating  in the business  reorganization
with us would acquire a higher percentage of equity ownership in us.

It is anticipated that any securities issued in any such reorganization would be
issued in reliance on exemptions from registration  under applicable federal and
state securities laws. In some  circumstances,  however, as a negotiated element
of the transaction,  we may agree to register such securities either at the time
the transaction is consummated,  under certain conditions, or at specified times
thereafter.   The  issuance  of  substantial  additional  securities  and  their
potential sale into any trading market, which may develop in our securities, may
have a depressive effect on such market.

We may be required to either seek additional debt or equity  financing or obtain
funding from third parties,  in exchange for which we would probably be required
to give up a  portion  of our  interest  in any  acquired  product.  There is no
assurance that we will be able either to obtain additional financing or interest
third parties in providing funding for the further development,  marketing,  and
manufacturing of any products acquired.

                                       11
<PAGE>

We will  participate in a business only after the  negotiation  and execution of
appropriate written agreements.  Although the terms of such agreements cannot be
predicted,  generally, such agreements will require specific representations and
warranties  by all of the  parties  thereto,  will  specify  certain  events  of
default,  will  detail the terms of  closing  and the  conditions  which must be
satisfied by each of the parties prior to such closing,  will outline the manner
of bearing costs if the  transaction  is not closed,  will set forth remedies on
default, and will include  miscellaneous other terms. It should be expected that
one of the conditions  will be compliance with Rule 419, and  reconfirmation  by
investors representing at least 80% of the gross proceeds of the offering.

It is  anticipated  that  the  investigation  of  specific  businesses  and  the
negotiation,   drafting,  and  execution  of  relevant  agreements,   disclosure
documents,  and other instruments will require  substantial  management time and
attention and substantial  costs for accountants,  attorneys,  and others.  If a
decision  is  made  not  to  participate  in  a  specific  business,  the  costs
theretofore  incurred in the  related  investigation  would not be  recoverable.
Furthermore, even if an agreement is reached for the participation in a specific
business,  the failure to consummate that  transaction may result in the loss to
us of the  related  costs  incurred  which  could  materially  adversely  affect
subsequent attempts to locate and participate in additional businesses.

Operation of  Business After an Acquisition.

Our operation  following an  acquisition  of a business will be dependent on the
nature of the  business  and the  interest  acquired.  We are  unable to predict
whether we will be in control of the business or whether present management will
be in  control of us  following  an  acquisition.  It may be  expected  that the
business will present various risks to investors.  The specific risks of a given
business cannot be predicted at the present time.

Leverage.

We may be able to  participate  in a  business  involving  the use of  leverage.
Leveraging  a  transaction  involves  the  acquisition  of  a  business  through
incurring  indebtedness  for a portion of the purchase  price of that  business,
which is secured by the assets of the business acquired.

One method by which  leverage  may be used is that we would  locate an operating
business available for sale and arrange for the financing  necessary to purchase
such  business.  Acquisition  of a business in this  fashion  would enable us to
participate in a larger venture that its limited funds would permit, or use less
of our funds to acquire a business and thereby commit our remaining funds to the
operations  of the business  acquired.  Leveraging a  transaction  would involve
significant  risks due to the fact that the  borrowing  involved  in a leveraged
transaction  will  ordinarily  be secured by the  combined  assets of us and the
business to be acquired.  If the combined  enterprises  are not able to generate
sufficient  revenues  to make  payments  on the debt  incurred  to  acquire  the
business,  the lender would be able to exercise the remedies  provided by law or
by contract and foreclose on substantially all of our assets. Consequently,  our
participation in a leveraged transaction may significantly  increase the risk of
loss to us.

                                       12
<PAGE>

We cannot  predict  whether  it will be able to locate any such  business.  As a
general  matter it may be expected that we will have few, if any,  opportunities
to examine businesses where leveraging would be appropriate.

Even if we are able to locate a  business  where  leveraging  techniques  may be
used, there is no assurance that financing for the acquisition will be available
or, if available,  on terms  acceptable to us.  Lenders from which we may obtain
funds for purposes of a leveraged buy-out may impose  restrictions of the future
borrowing,  dividend, and operating policies. It is not possible at this time to
predict the restrictions, if any, which lenders may impose or the impact on us.

Results of Operations

Six Months Ended December 31, 2000 vs. December 31, 1999

In the  six  months  ended  December  31,  1999,  there  were no  revenues  from
Company-owned  salon  operations  and  approximately   $363,000  in  franchising
revenues.  As of March 31, 2000,  the Company  decided to  discontinue  all hair
salon activities and sold its franchising  operations to Regis Corporation for a
$2.8 million gain.  The Company  collected  the final payment of $300,000,  from
Regis Corporation, in July 2000.

Inflation has not materially  affected the Company's  revenues and income during
the past two fiscal years.

Investment income decreased due to securities losses from comparable 1999 second
quarter.

During  fiscal  2001,  the Company  incurred  $382,637  in costs  related to the
Newtech transaction and related litigation.

In the six month period ended  December  31,  1999,  general and  administrative
expenses were comparable to the same period ended December 31, 2000. However the
first  six  months  1999  reflected  $296,000  in  compensation  paid to  former
management  and   approximately   $350,000  of  these  costs  are  reflected  on
discontinued  operations  and the six months ended  December  31, 2000  reflects
$718,914 including  approximately $100,000 of non-recurring  corporate expenses.
The resulting difference reflects managements cost savings program.

Liquidity and Capital Resources

Cash and cash  equivalents  were $1,582,751 at December 31, 2000, as compared to
$1,752,047 at June 30, 2000. During the period ended December 31, 1999 and 2000,
the Company sold marketable securities, for approximately $845,000 and $976,000,
respectively.

The Company had a current  ratio of 4.1 at December 31, 2000, as compared to 4.9
at December 31, 1999.

At December 31, 2000, commitments for capital expenditures and other investments
did not exceed  $20,000.  The Company  believes its cash resources and liquidity
are adequate for at least the next twelve months.

In August 1999, the Company made a $1,385,000 loan with a one year maturity to a
related party.  The loan was renewed to October 31, 2001. In September 2000, the
Company  acquired  150,000 shares of common stock  previously owned by a related
party for $262,500.
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PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

On August 21, 2000,  we announced  that we had obtained a temporary  restraining
order in the U.S.  District  Court for the Central  District of  California  and
commenced an action against Newtech Broadwidth Ltd ("Newtech"),  Myriam Abitbol,
Propser  Abitbol,  Jacques Ben Ezra and  Benayahou  Shemesh  (collectively,  the
"Defendants").  The Court  granted the  temporary  restraining  order based upon
allegations  that  Defendants  made  misrepresentations  and engaged in fraud in
order to induce us to enter into a Share Purchase Agreement.  Under the terms of
the Agreement,  Newtech  agreed to sell to us all of the issued and  outstanding
common stock of Newtech in  consideration of certain shares of our common stock.
The Agreement also provided for the  satisfaction  of certain  conditions by the
Defendants.  It is our allegation that these  conditions were not met. The civil
action is also based on the Defendants' alleged fraudulent conduct in connection
with  the  Agreement.  We are  currently  seeking  monetary  damages  as well as
rescission of the Agreement.

         In our complaint, we asserted five claims for relief:
         o  breach of contract;
         o  fraud;
         o  rescission of the Agreement;
         o  conversion; and
         o  injunctive relief.

On  September  25,  2000 the United  States  Federal  District  Court  ordered a
preliminary   injunction  issued  against  the  defendants   barring  them  from
exercising  any  management or control over us. On October 10, 2000 the District
Court  amended its previous  Order,  ordering us to post a bond in the amount of
$1,500,000.  Our counsel  advises us that there is the  likelihood  that we will
prevail  in this  action.  On August  23,  2000,  the  trading in our shares was
suspended by the American Stock Exchange  ("the  Exchange")  pending a review by
the Exchange of the facts  surrounding the Agreement and this litigation.  For a
more detailed  description of this pending  litigation  please see our Form 8-K,
which is  incorporated  by reference and filed with the  Securities and Exchange
Commission on September 26, 2000. (File No. 000-05223).

On December  24,  2000,  we settled the  litigation.  As part of the  settlement
agreement the  Defendants  returned  7,425,000 of our common  shares  previously
issued which we then cancelled.

In November we voluntarily  delisted  ourselves from the American Stock Exchange
and our common stock is currently being quoted over the counter. We have applied
to have our stock quoted on the OTCBB.

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Item 2. Changes in Securities and Use of Proceeds.

In July  2000,  as part  of the  Newtech  transaction,  management  was  allowed
immediate vesting and exercise of options to purchase 1,060,031 shares of common
stock.  Pursuant  to the stock  option  plan all  options  were  exercised  in a
cashless transaction.

Item 3. Defaults Upon Senior Securities

None

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

None

Item 5. Other Information

Ron Oren  resigned,  as an officer  and  director,  from the  Company  effective
October 31, 2000.  He returned the  $250,000  consulting  fee he had received as
part of the Newtech transaction and he was paid one year compensation ($192,000)
as provided for termination of his employment  agreement.  Also in October 2000,
Richard Arons resigned as an officer and director. -13-

Item 6.  Exhibits and Reports on Form 8-K


                      XOLOGIC INCORPORATED AND SUBSIDIARIES

                                   SIGNATURES


In accordance with the  requirements of the Exchange Act, the Registrant  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.



                                                            XOLOGIC INCORPORATED

                                                                    (Registrant)


                                                             /s/ Laura Ballegeer
                                                ________________________________
                                                                 Laura Ballegeer
                                            President, Chief Executive Officer &
                                                          Chief Fiancial Officer



DATE:    February 28, 2001

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