##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



---



Amendment No. 1 to Form 10-Q
On Form 10-Q/A

(Mark One)



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

For the Quarterly Period Ended June 30, 2001
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 0-28328
UROCOR, INC.
(Exact name of registrant as specified in its charter)

|                                                                                                                   |  |                                                              
|------------------------------------------------------------------------------------------------------------------ |  | -------------------------------------------------------------
|Delaware
(State of incorporation)
840 Research Parkway, Oklahoma City, OK
(Address of principal executive offices) |  | 75-2117882
(IRS Employer Identification No.)
73104
(zip code)

(405) 290-4000
(Registrants telephone number, including area code)
Not Applicable
(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

The number of shares of issuers Common Stock, $.01 par value, outstanding on
September 28, 2001 was 10,029,218 shares.





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TABLE OF CONTENTS



|           |                                                                                               |  |  |  |  |  |  | 
|---------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|           | Item 1. Financial Statements                                                                 
|           | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|SIGNATURES



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##### Table of Contents



PART I  FINANCIAL INFORMATION




Item 1. Financial Statements

UROCOR, INC.
CONSOLIDATED BALANCE SHEETS

|                                                                                                         |                                                                                                                                                                                                   |                                            |                                      |             |            |             |            |             |              |  |  | 
|-------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------------------------------------ | ----------- | ---------- | ----------- | ---------- | ----------- | ------------ |  |  | 
|                                                                                                         |                                                                                                                                                                                                   |                                            |                                      |             |            | June 30,    |            |             | December 31, | 
|                                                                                                         |                                                                                                                                                                                                   |                                            |                                      |             |            | 2001        |            |             | 2000         | 
|                                                                                                         |                                                                                                                                                                                                   |                                            |                                      |             |            |             |            |             |              | 
|                                                                                                         |                                                                                                                                                                                                   |                                            |                                      |             |            | (Unaudited) |            |             |              |  | 
|                                                                                                         |                                                                                                                                                                                                   |                                            |                                      | ASSETS      |            |             |            |             |              |  |  | 
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                        
|CURRENT ASSETS:                                                                                          |                                                                                                                                                                                                   |                                            |                                      |             |            |             |            |            
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                         | Cash and cash equivalents                                                                                                                                                                         |                                            | $                                    | 9,198,435   |            |             | $          | 11,006,568  |             
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                         | Short-term marketable investments                                                                                                                                                                 |                                            |                                      | 3,573,014   |            |             |            | 488,587     |             
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                         | Accounts receivable, net of allowance for doubtful accounts of $5,215,582 at June 30, 2001 and $4,130,275 at December 31, 2000                                                                    |                                            |                                      | 13,494,280  |            |             |            | 12,476,454  |             
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                         | Prepaid expenses                                                                                                                                                                                  |                                            |                                      | 621,983     |            |             |            | 565,167     |             
|
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                         | Laboratory supplies, at average cost                                                                                                                                                              |                                            |                                      | 490,161     |            |             |            | 473,205     |             
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                         | Inventory                                                                                                                                                                                         |                                            |                                      | 247,716     |            |             |            | 309,308     |             
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                         | Deferred tax asset, net                                                                                                                                                                           |                                            |                                      | 1,026,108   |            |             |            | 2,286,619   |             
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                         | Other current assets                                                                                                                                                                              |                                            |                                      | 428,349     |            |             |            | 760,726     |             
|                                                                                                         |                                                                                                                                                                                                   |                                            |                                      |             |            |            
|                                                                                                         |                                                                                                                                                                                                   | Total current assets                       |                                      |             | 29,080,046 |             |            |             | 28,366,634   | 
|                                                                                                         |                                                                                                                                                                                                   |                                            |                                      |             |            |            
|LONG-TERM MARKETABLE INVESTMENTS                                                                         |                                                                                                                                                                                                   |                                            | 511,713                              |             |            |             | 996,261    |            
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                        
|PROPERTY AND EQUIPMENT, net                                                                              |                                                                                                                                                                                                   |                                            | 9,595,965                            |             |            |             | 10,037,696 |            
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                        
|NON-CURRENT DEFERRED TAX ASSET, net                                                                      |                                                                                                                                                                                                   |                                            | 2,616,149                            |             |            |             | 4,371,456  |            
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                        
|GOODWILL, net of accumulated amortization of $254,381 at June 30, 2001
and $155,224 at December 31, 2000 |                                                                                                                                                                                                   |                                            | 3,754,940                            |             |            |             | 3,859,336  |            
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                        
|INTANGIBLE AND OTHER ASSETS, net                                                                         |                                                                                                                                                                                                   |                                            | 2,012,967                            |             |            |             | 3,697,979  |            
|                                                                                                         |                                                                                                                                                                                                   |                                            |                                      |             |            |            
|                                                                                                         |                                                                                                                                                                                                   | Total assets                               |                                      | $           | 47,571,780 |             |            | $           | 51,329,362   | 
|                                                                                                         |                                                                                                                                                                                                   |                                            |                                      |             |            |            
|                                                                                                         |                                                                                                                                                                                                   |                                            | LIABILITIES AND STOCKHOLDERS EQUITY |             |            |             |            |             |              |  | 
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                        
|CURRENT LIABILITIES:                                                                                     |                                                                                                                                                                                                   |                                            |                                      |             |            |             |            |            
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                         | Accounts payable                                                                                                                                                                                  |                                            | $                                    | 2,364,820   |            |             | $          | 3,257,018   |             
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                         | Accrued compensation                                                                                                                                                                              |                                            |                                      | 2,196,409   |            |             |            | 856,648     |             
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                         | Current installments of obligations under capital leases                                                                                                                                          |                                            |                                      | 352,373     |            |             |            | 249,679     |             
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                         | Accrued special charges                                                                                                                                                                           |                                            |                                      |            |            |             |            | 9,892,432   |             
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                         | Other accrued liabilities                                                                                                                                                                         |                                            |                                      | 942,884     |            |             |            | 728,516     |             
|                                                                                                         |                                                                                                                                                                                                   |                                            |                                      |             |            |            
|                                                                                                         |                                                                                                                                                                                                   | Total current liabilities                  |                                      |             | 5,856,486  |             |            |             | 14,984,293   | 
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                        
|DEFERRED COMPENSATION                                                                                    |                                                                                                                                                                                                   |                                            | 594,393                              |             |            |             | 469,855    |            
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                        
|OBLIGATIONS UNDER CAPITAL LEASES, net of current installments                                            |                                                                                                                                                                                                   |                                            | 531,753                              |             |            |             | 594,280    |            
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                        
|LONG-TERM DEBT                                                                                           |                                                                                                                                                                                                   |                                            |                                     |             |            |             | 175,000    |            
|                                                                                                         |                                                                                                                                                                                                   |                                            |                                      |             |            |            
|                                                                                                         |                                                                                                                                                                                                   | Total liabilities                          |                                      |             | 6,982,632  |             |            |             | 16,223,428   | 
|                                                                                                         |                                                                                                                                                                                                   |                                            |                                      |             |            |            
|STOCKHOLDERS EQUITY:                                                                                    |                                                                                                                                                                                                   |                                            |                                      |             |            |             |            |            
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                         | Preferred stock, $.01 par value, authorized 6,000,000 shares at
June 30, 2001 and at December 31, 2000; no shares issued
and outstanding at June 30, 2001 or at December 31, 2000                 |                                            |                                      |            |            |             |            |            |             
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                         | Common stock, $.01 par value, authorized 20,000,000 shares at June 30, 2001
and at December 31, 2000; 11,145,751 shares issued at
June 30, 2001 and 11,030,131 shares issued at December 31, 2000 |                                            |                                      | 111,458     |            |             |            | 110,301     |             
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                         | Additional paid-in capital                                                                                                                                                                        |                                            |                                      | 60,185,946  |            |             |            | 59,536,736  |             
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                         | Common stock held in treasury at cost, 1,172,060 shares at June 30, 2001
and 1,194,604 at December 31, 2000                                                                                       |                                            |                                      | (5,301,837  | )          |             |            | (5,397,308  | )           
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                         | Accumulated deficit                                                                                                                                                                               |                                            |                                      | (14,406,419 | )          |             |            | (19,143,795 | )           
|                                                                                                         |                                                                                                                                                                                                   |                                            |                                      |             |            |            
|                                                                                                         |                                                                                                                                                                                                   | Total stockholders equity                 |                                      |             | 40,589,148 |             |            |             | 35,105,934   | 
|                                                                                                         |                                                                                                                                                                                                   |                                            |                                      |             |            |            
|                                                                                                         |                                                                                                                                                                                                   | Total liabilities and stockholders equity |                                      | $           | 47,571,780 |             |            | $           | 51,329,362   | 
|                                                                                                         |                                                                                                                                                                                                   |                                            |                                      |             |            |            

The accompanying notes are an integral part of these consolidated financial
statements.

2



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##### Table of Contents



UROCOR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

|                           |                                                                                      |                          |            |                    |            |   |                  |           |            |      |            |            |            |   |            |            |            | 
|-------------------------- | ------------------------------------------------------------------------------------ | ------------------------ | ---------- | ------------------ | ---------- | - | ---------------- | --------- | ---------- | ---- | ---------- | ---------- | ---------- | - | ---------- | ---------- | ---------- | 
|                           |                                                                                      |                          |            | Three Months Ended |            |   | Six Months Ended |          
|                           |                                                                                      |                          |            | June 30,           |            |   | June 30,         |          
|                           |                                                                                      |                          |            | 2001               |            |   | 2000             |           |            | 2001 |            |            | 2000       |  
|                           |                                                                                      |                          |            |                    |            |   |                  |           |            |      |            |            |            |  
|REVENUE                    |                                                                                      | $                        | 15,857,756 |                    |            | $ | 12,320,146       |           |            | $    | 31,328,177 |            |            | $ | 24,360,703 |           
|                          
|                          
|                          
|                          
|OPERATING EXPENSES:        |                                                                                      |                          |            |                    |            |   |                  |           |            |      |            |            |            |   |            |           
|                          
|                          
|                          
|                          
|                           | Direct cost of services and products                                                 |                          |            | 5,638,557          |            |   |                  | 4,655,424 |            |      |            | 10,866,918 |            |   |            | 9,031,747  |           
|                          
|                          
|                          
|                          
|                           | Selling, general and administrative expenses                                         |                          |            | 6,732,331          |            |   |                  | 5,688,971 |            |      |            | 13,286,008 |            |   |            | 11,411,594 |           
|                          
|                          
|                          
|                          
|                           | Provision for bad debts                                                              |                          |            | 1,284,902          |            |   |                  | 984,464   |            |      |            | 2,816,108  |            |   |            | 2,018,093  |           
|                          
|                          
|                          
|                          
|                           | Research and development                                                             |                          |            | 309,115            |            |   |                  | 388,092   |            |      |            | 636,458    |            |   |            | 786,807    |           
|                           |                                                                                      |                          |            |                    |            |   |                  |           |            |      |            |           
|                           |                                                                                      | Total operating expenses |            |                    | 13,964,905 |   |                  |           | 11,716,951 |      |            |            | 27,605,492 |   |            |            | 23,248,241 | 
|                           |                                                                                      |                          |            |                    |            |   |                  |           |            |      |            |           
|OPERATING INCOME           |                                                                                      |                          | 1,892,851  |                    |            |   | 603,195          |           |            |      | 3,722,685  |            |            |   | 1,112,462  |           
|                          
|                          
|                          
|                          
|OTHER INCOME (EXPENSE):    |                                                                                      |                          |            |                    |            |   |                  |           |            |      |            |            |            |   |            |           
|                          
|                          
|                          
|                          
|                           | Gain on termination of therapeutic agreement                                         |                          |            |                   |            |   |                  |          |            |      |            | 4,597,010  |            |   |            |           |           
|                          
|                          
|                          
|                          
|                           | Interest, net                                                                        |                          |            | 27,965             |            |   |                  | 164,742   |            |      |            | 249,471    |            |   |            | 336,271    |           
|                          
|                          
|                          
|                          
|                           | Other                                                                                |                          |            | (786,867           | )          |   |                  | (4,459    | )          |      |            | (815,972   | )          |   |            | (28,642    | )         
|                           |                                                                                      |                          |            |                    |            |   |                  |           |            |      |            |           
|                           |                                                                                      | Total other income, net  |            |                    | (758,902   | ) |                  |           | 160,283    |      |            |            | 4,030,509  |   |            |            | 307,629    | 
|                           |                                                                                      |                          |            |                    |            |   |                  |           |            |      |            |           
|Income before income taxes |                                                                                      |                          | 1,133,949  |                    |            |   | 763,478          |           |            |      | 7,753,194  |            |            |   | 1,420,091  |           
|                          
|                          
|                          
|                          
|Income tax provision       |                                                                                      |                          | 440,932    |                    |            |   | 305,875          |           |            |      | 3,015,818  |            |            |   | 555,395    |           
|                           |                                                                                      |                          |            |                    |            |   |                  |           |            |      |            |           
|NET INCOME                 |                                                                                      | $                        | 693,017    |                    |            | $ | 457,603          |           |            | $    | 4,737,376  |            |            | $ | 864,696    |           
|                           |                                                                                      |                          |            |                    |            |   |                  |           |            |      |            |           
|NET INCOME PER SHARE:      |                                                                                      |                          |            |                    |            |   |                  |           |            |      |            |            |            |   |            |           
|                          
|                          
|                          
|                          
|Basic:                     |                                                                                      |                          |            |                    |            |   |                  |           |            |      |            |            |            |   |            |           
|                          
|                          
|                          
|                          
|                           | Net Income Per Common Share                                                          |                          | $          | .07                |            |   | $                | .05       |            |      | $          | .48        |            |   | $          | .09        |           
|                           |                                                                                      |                          |            |                    |            |   |                  |           |            |      |            |           
|                           | Weighted Average Common and Common Equivalent
Shares Outstanding                     |                          |            | 9,897,001          |            |   |                  | 9,768,329 |            |      |            | 9,877,585  |            |   |            | 9,568,243  |           
|                           |                                                                                      |                          |            |                    |            |   |                  |           |            |      |            |           
|Diluted:                   |                                                                                      |                          |            |                    |            |   |                  |           |            |      |            |            |            |   |            |           
|                          
|                          
|                          
|                          
|                           | Net Income Per Common Share  Assuming Dilution                                      |                          | $          | .06                |            |   | $                | .05       |            |      | $          | .44        |            |   | $          | .09        |           
|                           |                                                                                      |                          |            |                    |            |   |                  |           |            |      |            |           
|                           | Weighted Average Common and Common Equivalent
Shares Outstanding  Assuming Dilution |                          |            | 10,830,185         |            |   |                  | 9,962,083 |            |      |            | 10,707,977 |            |   |            | 9,805,686  |           
|                           |                                                                                      |                          |            |                    |            |   |                  |           |            |      |            |           

The accompanying notes are an integral part of these consolidated financial statements.

3



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##### Table of Contents



UROCOR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

|                                                                      |                                                                                   |                                                                |                                           |                                                    |            |                  |            |         |            |        |            |  
|--------------------------------------------------------------------- | --------------------------------------------------------------------------------- | -------------------------------------------------------------- | ----------------------------------------- | -------------------------------------------------- | ---------- | ---------------- | ---------- | ------- | ---------- | ------ | ---------- | -
|                                                                      |                                                                                   |                                                                |                                           |                                                    |            | Six Months Ended |           
|                                                                      |                                                                                   |                                                                |                                           |                                                    |            | June 30,         |           
|                                                                      |                                                                                   |                                                                |                                           |                                                    |            | 2001             |            |         | 2000       |       
|                                                                      |                                                                                   |                                                                |                                           |                                                    |            |                  |            |         |            |       
|CASH FLOWS FROM OPERATING ACTIVITIES:                                 |                                                                                   |                                                                |                                           |                                                    |            |                  |            |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Net income                                                                        |                                                                | $                                         | 4,737,376                                          |            |                  | $          | 864,696 |           
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Adjustments to reconcile net income to net cash provided by operating activities: |                                                                |                                           |                                                    |            |                  |            |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                   |                                                                |                                           | Depreciation and amortization                      |            |                  | 1,388,589  |         |            |        | 1,438,955  |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                   |                                                                |                                           | Deferred income tax provision                      |            |                  | 3,015,818  |         |            |        | 555,395    |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                   |                                                                |                                           | Deferred compensation expense                      |            |                  | 124,538    |         |            |        | 156,583    |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                   |                                                                |                                           | Stock option compensation expense                  |            |                  |           |         |            |        | 4,126      |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                   |                                                                |                                           | Loss on disposition of equipment                   |            |                  | 85,353     |         |            |        | 3,857      |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                   |                                                                |                                           | Loss on asset write downs                          |            |                  | 49,998     |         |            |        |           |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                   |                                                                |                                           | Gain on termination of therapeutic agreement       |            |                  | (4,597,010 | )       |            |        |           |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                   |                                                                |                                           | Equity in net income of subsidiary                 |            |                  | (9,889     | )       |            |        |           |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Changes in assets and liabilities:                                                |                                                                |                                           | (1,017,826                                         | )          |                  |            | 921,145 |           
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | (Increase) decrease in accounts receivable                                        |                                                                |                                           |                                                    |            |                  |            |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                   |                                                                |                                           | (Increase) decrease in prepaid expense             |            |                  | (56,816    | )       |            |        | 69,024     |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                   |                                                                |                                           | (Increase) decrease in laboratory supplies         |            |                  | (16,956    | )       |            |        | 40,327     |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                   |                                                                |                                           | (Increase) decrease in inventory                   |            |                  | 61,592     |         |            |        | (296,970   | )
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                   |                                                                |                                           | (Increase) decrease in other current assets        |            |                  | 332,377    |         |            |        | (83,141    | )
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                   |                                                                |                                           | (Decrease) in accounts payable                     |            |                  | (892,198   | )       |            |        | (622,431   | )
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                   |                                                                |                                           | Increase in accrued compensation                   |            |                  | 1,339,761  |         |            |        | 5,622      |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                   |                                                                |                                           | Increase in accrued liabilities                    |            |                  | 214,368    |         |            |        | 158,329    |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                   |                                                                |                                           | Decrease in accrued special charges                |            |                  | (9,892,432 | )       |            |        |           |  
|                                                                      |                                                                                   |                                                                |                                           |                                                    |            |                 
|                                                                      |                                                                                   | Net cash (used in) provided by operating activities            |                                           |                                                    | (5,133,357 | )                |            |         | 3,215,517  |       
|                                                                      |                                                                                   |                                                                |                                           |                                                    |            |                 
|CASH FLOWS FROM INVESTING ACTIVITIES:                                 |                                                                                   |                                                                |                                           |                                                    |            |                  |            |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                   |                                                                |                                           | Purchases of short-term marketable investments     |            |                  | (3,084,427 | )       |            |        | (241,109   | )
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                   |                                                                |                                           | Maturities of long-term marketable investments     |            |                  | 484,548    |         |            |        | 2,687,292  |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                   |                                                                |                                           | Cash acquired in acquisition of subsidiary         |            |                  |           |         |            |        | (30,543    | )
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                   |                                                                |                                           | Cash paid for acquisition of subsidiary            |            |                  |           |         |            |        | (650,000   | )
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                   |                                                                |                                           | Capital expenditures                               |            |                  | (900,127   | )       |            |        | (1,683,823 | )
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                   |                                                                |                                           | Milestone payments for therapeutic product         |            |                  |           |         |            |        | (750,000   | )
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                   |                                                                |                                           | Proceeds from termination of therapeutic agreement |            |                  | 7,000,000  |         |            |        |           |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                   |                                                                |                                           | Intangibles and other assets                       |            |                  | (785,775   | )       |            |        | (866,643   | )
|                                                                      |                                                                                   |                                                                |                                           |                                                    |            |                 
|                                                                      |                                                                                   | Net cash provided by (used in) investing activities            |                                           |                                                    | 2,714,219  |                  |            |         | (1,534,826 | )     
|                                                                      |                                                                                   |                                                                |                                           |                                                    |            |                 
|CASH FLOWS FROM FINANCING ACTIVITIES:                                 |                                                                                   |                                                                |                                           |                                                    |            |                  |            |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                   |                                                                |                                           | Proceeds from employee stock purchase plan         |            |                  | 58,034     |         |            |        | 55,687     |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                   |                                                                |                                           | Repurchases of Common Stock                        |            |                  |           |         |            |        | (311,996   | )
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                   |                                                                |                                           | Proceeds from exercise of stock options            |            |                  | 687,804    |         |            |        | 274,839    |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                   |                                                                |                                           | Proceeds from exercise of warrants                 |            |                  |           |         |            |        | 27,000     |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                   |                                                                |                                           | Payment of long term debt                          |            |                  | (175,000   | )       |            |        |           |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                   |                                                                |                                           | Proceeds from fixed asset sale/leaseback           |            |                  | 236,253    |         |            |        |           |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                   |                                                                |                                           | Principal payments under capital lease obligations |            |                  | (196,086   | )       |            |        | (8,454     | )
|                                                                      |                                                                                   |                                                                |                                           |                                                    |            |                 
|                                                                      |                                                                                   |                                                                | Net cash provided by financing activities |                                                    |            | 611,005          |            |         |            | 37,076 |           
|                                                                      |                                                                                   |                                                                |                                           |                                                    |            |                 
|Net increase in cash and cash equivalents                             |                                                                                   |                                                                | (1,808,133                                | )                                                  |            |                  | 1,717,767  |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|CASH AND CASH EQUIVALENTS, beginning of year                          |                                                                                   |                                                                | 11,006,568                                |                                                    |            |                  | 5,259,218  |        
|                                                                      |                                                                                   |                                                                |                                           |                                                    |            |                 
|CASH AND CASH EQUIVALENTS, end of period                              |                                                                                   | $                                                              | 9,198,435                                 |                                                    |            | $                | 6,976,985  |        
|                                                                      |                                                                                   |                                                                |                                           |                                                    |            |                 
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                     |                                                                                   |                                                                |                                           |                                                    |            |                  |            |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                   | Cash paid for interest                                         |                                           | $                                                  | 193,267    |                  |            | $       |           |       
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: |                                                                                   |                                                                |                                           |                                                    |            |                  |            |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                   | Obligations under therapeutic product distribution agreement   |                                           | $                                                  |           |                  |            | $       | 1,000,000  |       
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                   | Current liabilities assumed in acquisition of subsidiary       |                                           | $                                                  |           |                  |            | $       | 265,740    |       
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                   | Long-term liabilities assumed in acquisition of subsidiary     |                                           | $                                                  |           |                  |            | $       | 175,000    |       
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      |                                                                                   | Issuance of 477,700 common shares in acquisition of subsidiary |                                           | $                                                  |           |                  |            | $       | 1,910,800  |       

The accompanying notes are an integral part of these consolidated financial statements.

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##### Table of Contents



UROCOR, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2001

NOTE 1  BASIS OF PRESENTATION:

The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. 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 items) considered necessary for a
fair presentation have been included. These interim financial statements should
be read in conjunction with the financial statements and notes included in the
Companys Annual Report on Form 10-K for the year ended December 31, 2000 filed
with the Securities and Exchange Commission on April 2, 2001.

The consolidated financial statements include the accounts of all
majority-owned subsidiaries. All significant intercompany transactions have
been eliminated. Operating results for the six-month period ended June 30, 2001
are not necessarily indicative of the results that may be expected for the full
year ending December 31, 2001.

NOTE 2  INVESTMENTS:

Pursuant to the Companys investment policy, idle and excess funds are
invested in high grade, fixed income securities generally for no more than two
years. These securities are considered available-for-sale as of June 30, 2001
and December 31, 2000. The Company considers any net unrealized gain or loss on
these investments to be temporary, and reflects such gains or losses as a
component of stockholders equity. As of June 30, 2001 and December 31, 2000,
there was not a material net unrealized gain or loss on these investments.

NOTE 3  COMMITMENTS AND CONTINGENCIES:

Effective June 29, 2001, the Company received final judicial and
governmental approvals of a settlement agreement with the United States
Department of Justice (DOJ) previously announced on February 16, 2001,
concerning matters covered by the DOJs investigation into actions of UroCor
during 1992 through 1998 in connection with billing claims submitted by UroCor
to Medicare and other federal and state insurance programs for its diagnostics
testing services. Under the final settlement agreement, UroCor refunded the
various programs a total of $9.0 million that was accrued at December 31, 2000.
The settlement covers UroCor liabilities to the federal government and the
state insurance programs with respect to matters under investigation through
December 31, 2000. Under the terms of the settlement, there was no admission by
UroCor of any wrongdoing in connection with matters covered by the
investigation. UroCor also has agreed to operate under a corporate integrity
agreement for a period of up to five years. Among other things, the corporate
integrity agreement requires UroCor to cooperate with the United States
Attorneys Office for the Western District of Oklahoma in connection with a
criminal investigation of others related to the DOJ investigation. UroCor has
incurred and expects to continue to incur expenses relating to the DOJ
investigation, including without limitation, the administration of the DOJ
settlement (including compliance with the corporate integrity agreement), and
may incur additional expenses in connection with any related governmental
investigations or proceedings (including the criminal investigation) and any
potential indemnification of legal and other fees and costs for current and
past directors, officers and employees of UroCor. UroCor currently estimates
that it could incur up to $6 million in potential indemnification expenses.

NOTE 4  STOCK REPURCHASE PROGRAM:

On April 20, 1999, the Companys Board of Directors authorized the
repurchase by the Company of up to $10 million of UroCor common stock.
Management expects that the repurchase program will be conducted from time to
time on the open market or in privately negotiated transactions, depending upon
market conditions, securities regulations and other factors. As of June 30,
2001, the Company had repurchased approximately $7.6 million (or approximately
1.7 million shares) of common stock, reissued 477,700 treasury shares for the
acquisition of Mills Biopharmaceuticals, Inc. and reissued 22,544 shares
pursuant to the terms of the employee stock purchase plan. There were no stock
repurchases during the six months ended June 30, 2001.

5



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##### Table of Contents



NOTE 5  SEGMENT REPORTING:

Statement of Financial Accounting Standards (SFAS) No. 131, Disclosures
about Segments of an Enterprise and Related Information, requires selected
information about reportable segments in interim financial reports that is
consistent with that made available to management to assess financial
performance. The Company operates in two reportable segments1) diagnostic
services and 2) therapeutic products. The diagnostic services segment provides
testing services to urologists for diagnosing, selecting appropriate therapies
and managing patients with urologic diseases. The therapeutic products segment
currently offers ProstaSeed® for early stage prostate cancer and offered PACIS
BCG® for bladder cancer until February 2001, when an agreement was reached with
the manufacturer of PACIS BCG to terminate the related distribution agreement,
resulting in a gain of approximately $4.6 million. The Companys management
evaluates performance based on several factors. However, the primary
measurement focus is Gross Profit (revenue less direct costs) and Operating
Income, excluding special charges and any other unusual items. The accounting
policies of the segments are the same as those described in the summary of
significant accounting policies contained in the Companys Annual Report on
Form 10-K filed with the Securities and Exchange Commission for the year ended
December 31, 2000. Corporate expenses include overhead expenses not allocated
to specific business segments, including administrative expenses and
information services expenses. The expenses that are allocated to business
segments after the gross profit calculation to result in the operating income
figures include sales and marketing expenses, certain administrative expenses
directly attributable to the segments and bad debt expense. Asset information
by segment is not reported, because the Company does not yet produce such
information internally. The following table presents information about the
Companys segments for the three months ended June 30, 2001 and 2000:

|                            |  |                     |            |  |                      |   |            |       |  |   |            | 
|--------------------------- |  | ------------------- | ---------- |  | -------------------- | - | ---------- | ----- |  | - | ---------- | 
|                            |  | Diagnostic Services |            |  | Therapeutic Products |   |            | Total | 
|                            |  |                     |            |  |                      |   |            |       | 
|Three
months ended June 30: |  |                     |            |  |                      |   |            |       |  |   |            | 
|2001:                       |  |                     |            |  |                      |   |            |       |  |   |            | 
|                           
|                           
|                           
|                           
|Revenue                     |  | $                   | 15,245,027 |  |                      | $ | 612,729    |       |  | $ | 15,857,756 | 
|                           
|                           
|                           
|                           
|Gross Profit                |  | $                   | 10,375,135 |  |                      | $ | (155,936   | )     |  | $ | 10,219,199 | 
|                           
|                           
|                           
|                           
|Operating Income (Loss)     |  | $                   | 5,234,357  |  |                      | $ | (615,356   | )     |  | $ | 4,619,001  | 
|                           
|                           
|                           
|                           
|2000:                       |  |                     |            |  |                      |   |            |       |  |   |            | 
|                           
|                           
|                           
|                           
|Revenue                     |  | $                   | 12,040,407 |  |                      | $ | 279,739    |       |  | $ | 12,320,146 | 
|                           
|                           
|                           
|                           
|Gross Profit                |  | $                   | 7,812,194  |  |                      | $ | (147,472   | )     |  | $ | 7,664,722  | 
|                           
|                           
|                           
|                           
|Operating Income (Loss)     |  | $                   | 3,707,035  |  |                      | $ | (915,407   | )     |  | $ | 2,791,628  | 
|                           
|                           
|                           
|                           
|Six months ended June 30:   |  |                     |            |  |                      |   |            |       |  |   |            | 
|2001:                       |  |                     |            |  |                      |   |            |       |  |   |            | 
|                           
|                           
|                           
|                           
|Revenue                     |  | $                   | 30,155,922 |  |                      | $ | 1,172,255  |       |  | $ | 31,328,177 | 
|                           
|                           
|                           
|                           
|Gross Profit                |  | $                   | 20,779,326 |  |                      | $ | (318,067   | )     |  | $ | 20,461,259 | 
|                           
|                           
|                           
|                           
|Operating Income (Loss)     |  | $                   | 10,510,292 |  |                      | $ | (1,357,882 | )     |  | $ | 9,152,410  | 
|                           
|                           
|                           
|                           
|2000:                       |  |                     |            |  |                      |   |            |       |  |   |            | 
|                           
|                           
|                           
|                           
|Revenue                     |  | $                   | 24,025,727 |  |                      | $ | 334,976    |       |  | $ | 24,360,703 | 
|                           
|                           
|                           
|                           
|Gross Profit                |  | $                   | 15,460,213 |  |                      | $ | (131,257   | )     |  | $ | 15,328,956 | 
|                           
|                           
|                           
|                           
|Operating Income (Loss)     |  | $                   | 6,957,109  |  |                      | $ | (1,530,553 | )     |  | $ | 5,426,556  | 

Reconciliation of operating income above to corresponding totals in the
accompanying financial statements:

|                              |  |                    |           |  |                  |   |           |      |  |   |           |  |  |   |           | 
|----------------------------- |  | ------------------ | --------- |  | ---------------- | - | --------- | ---- |  | - | --------- |  |  | - | --------- | 
|                              |  | Three Months Ended |           |  | Six Months Ended |  
|                              |  | June 30,           |           |  | June 30,         |  
|                              |  | 2001               |           |  | 2000             |   |           | 2001 |  |   | 2000      | 
|                              |  |                    |           |  |                  |   |           |      |  |   |           | 
|Total for reportable segments |  | $                  | 4,619,001 |  |                  | $ | 2,791,628 |      |  | $ | 9,152,410 |  |  | $ | 5,426,556 | 
|                             
|                             
|                             
|                             
|Less: Corporate expenses      |  |                    | 2,726,150 |  |                  |   | 2,188,433 |      |  |   | 5,429,725 |  |  |   | 4,314,094 | 
|                              |  |                    |           |  |                  |   |           |      |  |   |           | 
|Operating income              |  | $                  | 1,892,851 |  |                  | $ | 603,195   |      |  | $ | 3,722,685 |  |  | $ | 1,112,462 | 
|                              |  |                    |           |  |                  |   |           |      |  |   |           | 

6



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##### Table of Contents



NOTE 6  BASIC EARNINGS PER SHARE AND DILUTED EARNINGS PER SHARE:

Basic earnings per share of common stock has been computed on the basis of
the weighted average number of shares outstanding during each period. The
diluted net income per share of common stock includes the dilutive effect of
the outstanding stock options and warrants.

The following table summarizes the calculation of basic earnings per share
(EPS) and the diluted EPS components:

|                                                       |  |                                  |         |  |                                  |  |            |     |  |   |             |        |  |               |         |  |     |  |           |  |  |   |    
|------------------------------------------------------ |  | -------------------------------- | ------- |  | -------------------------------- |  | ---------- | --- |  | - | ----------- | ------ |  | ------------- | ------- |  | --- |  | --------- |  |  | - | ---
|                                                       |  | Three months ended June 30, 2001 |         |  | Three months ended June 30, 2000 |  |           
|                                                       |  |                                  |         |  |                                  | 
|                                                       |  | Income                           |         |  | Shares                           |  |            |     |  |   |             | Income |  |               | Shares  |  |     |  |           | 
|                                                       |  | (Numerator)                      |         |  | (Denominator)                    |  |            | EPS |  |   | (Numerator) |        |  | (Denominator) |         |  | EPS | 
|                                                       |  |                                  |         |  |                                  |  |            |     |  |   |             |        |  |               |         |  |     | 
|Net income/shares                                      |  | $                                | 693,017 |  |                                  |  | 9,897,001  |     |  |   |             |        |  | $             | 457,603 |  |     |  | 9,768,329 |  |  |   |    
|                                                      
|                                                      
|                                                      
|                                                      
|Basic EPS                                              |  |                                  |         |  |                                  |  |            |     |  | $ | .07         |        |  |               |         |  |     |  |           |  |  | $ | .05
|                                                      
|                                                      
|                                                      
|                                                      
|Effect of Dilutive
Securities (stock
options/warrants) |  |                                  |         |  |                                  |  | 933,184    |     |  |   |             |        |  |               |         |  |     |  | 193,754   |  |  |   |    
|                                                      
|                                                      
|                                                      
|                                                      
|Adjusted net income/shares                             |  | $                                | 693,017 |  |                                  |  | 10,830,185 |     |  |   |             |        |  | $             | 457,603 |  |     |  | 9,962,083 |  |  |   |    
|                                                      
|                                                      
|                                                      
|                                                      
|Diluted EPS                                            |  |                                  |         |  |                                  |  |            |     |  | $ | .06         |        |  |               |         |  |     |  |           |  |  | $ | .05

|                                                       |  |                                |           |  |                                |  |            |     |  |   |             |        |  |               |         |  |     |  |           |  |  |   |     | 
|------------------------------------------------------ |  | ------------------------------ | --------- |  | ------------------------------ |  | ---------- | --- |  | - | ----------- | ------ |  | ------------- | ------- |  | --- |  | --------- |  |  | - | --- | 
|                                                       |  | Six months ended June 30, 2001 |           |  | Six months ended June 30, 2000 |  |           
|                                                       |  |                                |           |  |                                |  |           
|                                                       |  | Income                         |           |  | Shares                         |  |            |     |  |   |             | Income |  |               | Shares  |  |     |  |           | 
|                                                       |  | (Numerator)                    |           |  | (Denominator)                  |  |            | EPS |  |   | (Numerator) |        |  | (Denominator) |         |  | EPS | 
|                                                       |  |                                |           |  |                                |  |            |     |  |   |             |        |  |               |         |  |     | 
|Net income/shares                                      |  | $                              | 4,737,376 |  |                                |  | 9,877,585  |     |  |   |             |        |  | $             | 864,696 |  |     |  | 9,568,243 |  |  |   |     | 
|                                                      
|                                                      
|                                                      
|                                                      
|Basic EPS                                              |  |                                |           |  |                                |  |            |     |  | $ | .48         |        |  |               |         |  |     |  |           |  |  | $ | .09 | 
|                                                      
|                                                      
|                                                      
|                                                      
|Effect of Dilutive
Securities (stock
options/warrants) |  |                                |           |  |                                |  | 830,392    |     |  |   |             |        |  |               |         |  |     |  | 237,443   |  |  |   |     | 
|                                                      
|                                                      
|                                                      
|                                                      
|Adjusted net income/shares                             |  | $                              | 4,737,376 |  |                                |  | 10,707,977 |     |  |   |             |        |  | $             | 864,696 |  |     |  | 9,805,686 |  |  |   |     | 
|                                                      
|                                                      
|                                                      
|                                                      
|Diluted EPS                                            |  |                                |           |  |                                |  |            |     |  | $ | .44         |        |  |               |         |  |     |  |           |  |  | $ | .09 | 

NOTE 7  RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:

In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 142 (SFAS 142), Goodwill and Other
Intangible Assets. SFAS 142 addresses financial accounting and reporting for
intangible assets and goodwill. The statement requires that goodwill and
intangible assets having indefinite useful lives not be amortized, rather
tested at least annually for impairment. Intangible assets that have finite
useful lives will continue to be amortized over their useful lives. As required
by SFAS 142, UroCor will adopt this new accounting standard January 1, 2002.
The Company is currently analyzing the provisions of SFAS 142 and have not yet
determined the impact on our financial statements.

NOTE 8  PROPOSED ACQUISITION OF UROCOR BY DIANON SYSTEMS, INC.:

On June 28, 2001, DIANON Systems, Inc. and UroCor announced that the
companies had signed a definitive merger agreement for the acquisition of
UroCor by DIANON. Pursuant to the terms of the merger agreement, at the closing
of the transaction, each stockholder of UroCor would receive 0.4064 shares of
common stock of DIANON for each share of UroCor common stock, subject to
adjustment as described in the merger agreement. The consummation of the merger
is subject to customary conditions, including approval of the stockholders of
both companies and necessary regulatory approvals and is expected to close in
the fourth quarter of 2001.

7



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##### Table of Contents






Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of financial condition and results of operations
of UroCor, Inc. (UroCor or the Company) should be read in conjunction with
the Consolidated Financial Statements and Notes thereto included elsewhere in
this Quarterly Report on Form 10-Q. Special Note: Certain statements set forth
below constitute forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. See Special Note Regarding Forward-Looking
Statements and Cautionary Statements included elsewhere in this Report.

Overview

UroCor markets a comprehensive range of integrated products and services
directly to urologists and managed care organizations to assist in detecting,
diagnosing, treating and managing prostate cancer, bladder cancer, kidney
stones and other complex urologic disorders. The Companys primary focus is
helping urologists improve patient care and outcomes while reducing the total
cost of managing these diseases.

During the six months ended June 30, 2001, the Company derived
approximately 96% of its revenue from diagnostic products and services that
UroCor Labs provides to the urology market to assist in the diagnosis,
prognosis and management of prostate cancer, bladder cancer and kidney stones
disease. The Company recognizes revenue when products are sold or services are
rendered. The Company typically bills various third-party payors for its
products and services, such as private insurance, managed care plans and
governmental programs (e.g., Medicare), as well as individual patients and
physicians. During the six months ended June 30, 2001, approximately 44%, 43%,
9% and 4% of the Companys diagnostic revenue was attributable to Medicare,
private insurance and managed care, individual patients, and physicians and
hospitals, respectively.

During the six months ended June 30, 2001, the Company derived
approximately 4% of its revenue from the sales of its therapeutic product,
ProstaSeed. ProstaSeed is a UroCor-branded line of radiation implants (also
referred to as seeds) used in brachytherapy for early stage prostate cancer
that received regulatory approval for marketing in January 2000.

On June 28, 2001, DIANON Systems, Inc. and UroCor announced that the
companies had signed a definitive merger agreement for the acquisition of
UroCor by DIANON. Pursuant to the terms of the merger agreement, at the closing
of the transaction, each stockholder of UroCor would receive 0.4064 shares of
common stock of DIANON for each share of UroCor common stock, subject to
adjustment as described in the merger agreement. The consummation of the merger
is subject to customary conditions, including approval of the stockholders of
both companies and necessary regulatory approvals and is expected to close in
the fourth quarter of 2001.

Results of Operations

Revenue.Revenue for the three months ended June 30, 2001 increased
28.7% to approximately $15.9 million compared to $12.3 million for the three
months ended June 30, 2000, and increased from approximately $24.4 million for
the first six months of 2000 to approximately $31.3 million for the first six
months of 2001.

Diagnostic services revenue increased 26.6% for the three-month period
ending June 30, 2001 and 25.5% for the six-month period ending June 30, 2001
resulting primarily from the Companys price increase effective August 14, 2000
and an overall positive reimbursement change from Medicare effective January 1,
2001. The Companys price increase and the overall increase in Medicare
reimbursement resulted in an increase of approximately $2.0 million in revenue
for the three months ended June 30, 2001 compared to the same period in 2000
and $3.8 million for the six months ended June 30, 2001 compared to the 2000
period. Case volume for the three months ended June 30, 2001 increased 6.2%
compared to the three months ended June 30, 2000, while case volume for the six
months ended June 30, 2001 decreased 1.9% compared to the 2000 period. The
decline in diagnostic volumes for the six-month period was primarily the result
of the revision of pricing on contractual programs during the first quarter of
2000 that resulted in the loss of some clients and decreased product usage from
other clients. The Companys client base for the second quarter of 2001 was
approximately 2,540 urologists of which approximately 46% used two or more
products compared to approximately 2,475 urologists and approximately 46% using
more than one product for the second quarter of 2000.

8



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Therapeutic products revenue increased from approximately $280,000 during
the three months ended June 30, 2000 to approximately $613,000 during the three
months ended June 30, 2001 and increased from approximately $335,000 for the
six months ended June 30, 2000 to approximately $1.2 million for same period in
2001. The Companys marketing of ProstaSeed accounted for substantially all of
the therapeutic products revenue in both periods. Increases in therapeutic
products revenue in subsequent periods is contingent upon success in increasing
the sales of ProstaSeed and the success in the acquisition of rights for, and
the obtaining of appropriate United States Food and Drug Administration (the
FDA) or other regulatory approvals for, any other therapeutic products that
could be marketed by the Company.

Direct Cost of Services and Products.As a percentage of revenue, direct
expenses decreased to 35.6% for the three months ended June 30, 2001 from 37.8%
for the three months ended June 30, 2000 and decreased to 34.7% for the six
months ended June 30, 2000 from 37.1 % for the six months ended June 30, 2001.
In the aggregate, direct cost of services and products increased 21.1%, from
approximately $4.7 million for the three months ended June 30, 2000 to
approximately $5.6 million for the three months ended June 30, 2001 and
decreased 20.3% from approximately $9.0 million for the six months ended June
30, 2000 to approximately $10.9 million for the six months ended June 30, 2001.

Direct costs for diagnostic services, as a percentage of revenue,
decreased to 31.9% for the three months ended June 30, 2001 from 35.1% for the
three months ended June 30, 2000 and decreased to 31.1% for the six months
ended June 30, 2001 from 35.7% for the six months ended June 30, 2000. The
Companys price increases discussed above in Revenue contributed to these
decreased percentages, along with shifts in volume mix towards the Companys
higher margin tests. In the aggregate, direct costs for diagnostic services
increased 15.2%, from approximately $4.2 million for the three months ended
June 30, 2000 to approximately $4.9 million for the three months ended June 30,
2001 and increased 9.5% from approximately $8.6 million for the six months
ended June 30, 2000 to approximately $9.4 million for the six months ended June
30, 2001. These increases were primarily related to personnel costs for initial
data-entry and specimen processing.

Direct costs for therapeutic products for the three and six months ended
June 30, 2001 and 2000 were principally comprised of the manufacturing and
overhead costs related to ProstaSeed. Before the Company acquired the
manufacturer of ProstaSeed in April 2000, direct costs were for acquisition of
the product. These direct costs exceeded revenue by 25.4% for the three-month
period ended June 30, 2001 and 52.7% for the three-month period ended June 30,
2000 and 27.1% for the six months ended June 30, 2001 and 39.2% for the six
months ended June 30, 2000. In aggregate, the direct costs for therapeutic
products increased to approximately $769,000 for the three-month period ended
June 30, 2001 from approximately $427,000 for the three-month period ended June
30, 2000 and to approximately $1.5 million for the six months ended June 30,
2001 from approximately $466,000 for the six months ended June 30, 2000.
Attainment of positive gross profit margins for the Companys ongoing
ProstaSeed marketing efforts is contingent upon increasing sales volumes, which
is dependent on the efforts and results of the Companys product distributors.

Selling, General and Administrative Expenses.As a percentage of
revenue, selling, general and administrative expenses decreased to 42.5% for
the three months ended June 30, 2001 from 46.2% for the three months ended June
30, 2000 and to 42.4% for the six months ended June 30, 2001 from 46.8% for the
six months ended June 30, 2000. In the aggregate, selling, general and
administrative expenses increased 18.3%, from approximately $5.7 million in the
three months ended June 30, 2000 to approximately $6.7 million in the three
months ended June 30, 2001 and increased 16.4% from approximately $11.4 million
for the six months ended June 30, 2000 to $13.3 million for the six months
ended June 30, 2001. The increase in selling, general and administrative
expenses for the three-month period was due principally to increased sales and
administrative personnel costs of approximately $808,000, increased
professional service costs of approximately $276,000 and increased facilities
and equipment rent of approximately $109,000, offset by a decrease in
therapeutic advertising and promotions of approximately $120,000. The increase
in selling, general and administrative expenses for the six-month period was
due principally to increased sales and administrative personnel costs of
approximately $1.6 million, increased professional service costs of
approximately $294,000, increased facilities and equipment rent of
approximately $208,000 and increased conventions and meetings costs of
approximately $161,000, offset by a decrease in therapeutic advertising and
promotions of approximately $238,000.

Provision for Bad Debts.As a percentage of revenue, provision for bad
debts increased to 8.1% for the three months ended June 30, 2001 from 8.0% for
the three months ended June 30, 2000 and to 9.0% for the six months ended June
30, 2001 from 8.3% for the six months ended June 30, 2000. In the aggregate,
provision for bad debts increased 30.5%, from approximately $1.0 million in the
three months ended June 30, 2000 to approximately $1.3 million in the three
months ended June 30, 2001 and increased 39.5%, from approximately $2.0 million
for the six months ended June 30, 2000 to approximately $2.8 million for the
six months ended June 30, 2001. The Company monitors the collection quality of
its accounts receivable through analytical review of aging categories by payor
group and collections performance. The Company provides an amount on a monthly
basis for estimated future bad debts on current period revenues. In addition,
from time to time, there are specific events for which management makes an
additional provision. There have been no such additional provisions made in
the three- or six-month periods ended June 30, 2000 or June 30, 2001.

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Research and Development Expenses.As a percentage of revenue, research
and development expenses decreased to 1.9% for the three months ended June 30,
2001 from 3.1% for the three months ended June 30, 2000 and to 2.0% for the six
months ended June 30, 2001 from 3.2% for the six months ended June 30, 2000. In
the aggregate, research and development costs decreased 20.4%, from
approximately $388,000 in the three months ended June 30, 2000 to approximately
$309,000 in the three months ended June 30, 2001 and decreased 19.1% from
approximately $787,000 for the six months ended June 30, 2000 to approximately
$636,000 in the six months ended June 30, 2001. The decrease in expenses was
due primarily to the Companys focus on strategic projects that it has
determined have the highest commercial potential, which has resulted in overall
lower base research and development program costs.

Other Income (Expense).Other income, net of interest expense decreased
from income of approximately $160,000 in the three months ended June 30, 2000
to expense of approximately $759,000 in the three months ended June 30, 2001,
primarily due to approximately $694,000 of costs related to the proposed merger
of the Company with DIANON Systems, Inc. and increased from approximately
$308,000 for the six months ended June 30, 2000 to approximately $4.0 million
in the six months ended June 30, 2001. This increase was due principally to the
realized gain of approximately $4.6 million attributable to the termination in
February 2001 of the Companys distribution agreement with the manufacturer of
PACIS BCG, a therapeutic product previously distributed by the Company.

Income Taxes.Income tax expense recorded in the three months ended June
30, 2001 was approximately $441,000 resulting in an effective 38.9% federal and
state income tax rate. Income tax expense recorded in the three months ended
June 30, 2000 was approximately $306,000 based upon an effective 40.1% federal
and state income tax rate. For the six months ended June 30, 2001, income tax
expense was approximately $3.0 million at an effective tax rate of 38.9%, while
income tax expense of approximately $555,000 was recorded for the six months
ended June 30, 2000 based upon a 39.1% effective tax rate.

Liquidity and Capital Resources

As of June 30, 2001, cash, cash equivalents and marketable investments
totaled approximately $13.3 million, and the Companys working capital was
approximately $23.2 million. As of June 30, 2001, the components of cash, cash
equivalents and marketable investments were approximately $9.2 million of cash
and cash equivalents, and short-term and long-term marketable investments of
approximately $3.6 million and $512,000, respectively, consisting principally
of high-grade fixed income securities with maturities of less than one year.

Accounts receivable, net of allowance for doubtful accounts, totaled
approximately $13.5 million at June 30, 2001, an increase of approximately $1.0
million from December 31, 2000, or 8.2%, principally attributable to increased
revenue.

At June 30, 2001 and December 31, 2000, the Companys average number of
days sales in net diagnostics receivables was approximately 78 and 77,
respectively.

Virtually all of the Companys diagnostic services are rendered on a
fee-for-service basis. Accordingly, the Company assumes the financial risk
related to collection, including potential inability to collect accounts, long
collection cycles for accounts receivable, difficulties in gathering complete
and accurate billing information and delays attendant to reimbursement by
third-party payors, such as governmental programs such as Medicare, private
insurance plans and managed care organizations.

The Company monitors the collection quality of its accounts receivable
through analytical review of aging categories by payor group and collections
performance. While the Company maintains what it believes to be an adequate
allowance for doubtful accounts, there can be no assurance that the Companys
ongoing assessment of accounts receivable will not result in the need for
additional provision for doubtful accounts. Such additional provision could
have an adverse effect on the Companys financial position and results of
operations.

Operating activities used net cash of approximately $5.1 million for the
six months ended June 30, 2001 compared to net cash provided of approximately
$3.2 million for the six months ended June 30, 2000. For the six months ended
June 30, 2001, the net cash used by operating activities was primarily the
result of net income of approximately $4.7 million, depreciation and
amortization of approximately $1.4 million, deferred income tax provision of
approximately $3.0 million, and increase in accrued compensation of
approximately $1.3 million, more than offset by the gain on termination of
therapeutic agreement of approximately $4.6 million, an increase in accounts
receivable of approximately $1.0 million, a decrease in accounts payable of
approximately $892,000 and a decrease in accrued liabilities of approximately
$9.7 million.

Net cash provided by investing activities was approximately $2.7 million
for the six months ended June 30, 2001 and consisted primarily of the proceeds
of approximately $7.0 million from the termination of the PACIS BCG
distribution agreement offset by

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capital expenditure purchases of approximately $900,000, net purchases of
marketable securities of $2.6 million and an increase in other assets of
approximately $786,000.

Net cash provided by financing activities was approximately $611,000 for
the six months ended June 30, 2001, consisting primarily of approximately
$688,000 from the exercise of stock options by employees, $58,000 from
issuances of stock pursuant to the Companys employee stock purchase plan and
$236,000 of additional proceeds for financing of fixed assets, offset by
payment of debt of $175,000 and capital lease principal payments of
approximately $196,000.

The Companys capital expenditures of approximately $900,000 for the six
months ended June 30, 2001, were primarily for leasehold improvements,
furniture and fixtures, and computer equipment and software. Of the total
amount, approximately $353,000 related to internal software development costs
related primarily to installation and customization of third-party software.
While future capital expenditures will depend upon a number of factors, the
Company expects such expenditures to be comparable to recent levels as the
Company continues to expand to deliver therapeutics and information services
and to enhance current diagnostic services and operational capabilities. The
Company intends to finance the majority of these capital expenditures with
existing cash and investment balances and possibly debt.

Effective June 29, 2001, the Company received final judicial and
governmental approvals of a settlement agreement with the United States
Department of Justice (DOJ) previously announced on February 16, 2001,
concerning matters covered by the DOJs investigation into actions of UroCor
during 1992 through 1998 in connection with billing claims submitted by UroCor
to Medicare and other federal and state insurance programs for its diagnostics
testing services. Under the final settlement agreement, UroCor refunded the
various programs a total of $9.0 million and agreed to operate under a
corporate integrity agreement for a period of up to five years. Among other
things, the corporate integrity agreement requires UroCor to cooperate with the
United States Attorneys Office for the Western District of Oklahoma in
connection with a criminal investigation of others related to the DOJ
investigation. UroCor has incurred and expects to continue to incur expenses
relating to the DOJ investigation, including without limitation, the
administration of the DOJ settlement (including compliance with the corporate
integrity agreement), and may incur additional expenses in connection with any
related governmental investigations or proceedings (including the criminal
investigation) and any potential indemnification of legal and other fees and
costs for current and past directors, officers and employees of UroCor. UroCor
currently estimates that it could incur up to $6 million in potential
indemnification expenses.

In March 2001, the Company entered into a collaborative agreement with a
manufacturer of therapeutic products giving UroCor the exclusive rights to
distribute one of the manufacturers products in the United States. Under the
terms of the agreement, UroCor paid $750,000 during the first quarter of 2001
and will pay up to an additional $2.3 million in milestone payments in
subsequent years during the development and potential product launch of the
product. As milestones are achieved, the Company intends to make the additional
payments from existing cash and investment balances or debt.

The Company intends to pursue the acquisition, licensing or co-promotion
of new therapeutic products and to acquire diagnostic products or possibly
existing business. As such opportunities are identified, the Company intends to
make any related acquisition payments from existing cash and investment
balances or new debt.

In April 1999, the Companys Board of Directors authorized the repurchase
of up to $10 million of the Companys common stock. As of June 30, 2001, the
Company had repurchased approximately $7.6 million (or approximately 1.7
million shares) of its common stock, reissued 477,700 treasury shares for the
acquisition of Mills Biopharmaceuticals, Inc. and reissued 22,544 shares
pursuant to the terms of the employee stock purchase plan.

The Company believes that its existing capital resources will be
sufficient to provide the funds necessary to maintain its present level of
operations and implement its currently planned growth strategy. There may be
circumstances or new business opportunities, however, that would require
additional resources. In such event, the Company may be required to seek
additional financing, and there is no assurance that the Company would be able
to obtain such financing on a timely basis or on acceptable terms.

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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.

|                |  |                                                                                                               
|--------------- |  | --------------------------------------------------------------------------------------------------------------
|                |  | By: /s/ Bruce C. Hayden
Bruce C. HaydenSenior Vice-President, Chief
Financial Officer, Treasurer and Secretary
|               
|               
|               
|               
|October 9, 2001 |  |                                                                                                               

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