<PAGE>
 
 ============================================================================

                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                  FORM 10-QSB
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
                               ---------------

                                      OR

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


                        COMMISSION FILE NUMBER 0-27264


                                 UROGEN CORP.
                                 ------------
            (Exact name of registrant as specified in its charter)


              DELAWARE                                 33-0687976
              --------                                 ----------
  (State or other jurisdiction of                    (I.R.S. Employer
  incorporation or organization)                    Identification no.)


             3099 SCIENCE PARK ROAD, SUITE A, SAN DIEGO, CA, 92121
             (Address of principal executive offices)   (Zip code)

      REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (619) 450-5949

                                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 the Common Stock of the registrant outstanding as of May
10, 1997, was 7,537,319.  This Common Stock is restricted from transfer until
December 31, 1997, except as specified on Page 11 (See Item 5. "Other
Information" - "Market for Registrant's Common Equity").
<PAGE>
 
                                 UROGEN CORP.
                       (A DEVELOPMENT STAGE ENTERPRISE)

                             INDEX TO FORM 10-QSB

                        PART I.  FINANCIAL INFORMATION
                        ------------------------------

<TABLE>
<CAPTION>
                                                                 PAGE NO.
                                                                 --------
Item 1.      Financial Statements
<S>          <C>                                                 <C>
 
             Condensed Balance Sheets........................... 2
               March 31, 1997 (Unaudited) and
               December 31, 1996
 
             Condensed Statements of Operations (Unaudited)..... 3
               Three Months Ended March 31, 1997
               and 1996 and the period from July 1, 1991
               (inception) to March 31, 1997
 
             Condensed Statement of Stockholders'/ Division..... 4
               Equity (Unaudited) for the period from July 1,
               1991 (inception) to March 31, 1997
 
             Condensed Statements of Cash Flows (Unaudited)..... 5
               Three Months Ended March 31, 1997
               and 1996 and the period from July 1, 1991
               (inception) to March 31, 1997
 
             Notes to Unaudited Condensed Financial
               Statements....................................... 6
 
Item 2.      Management's Discussion and Analysis or............ 9
               Plan of Operation
 
                          PART II.  OTHER INFORMATION
                          ---------------------------
 
Item 1.      Legal Proceedings.................................. 11
Item 2.      Changes in Securities.............................. 11
Item 3.      Defaults Upon Senior Securities.................... 11
Item 4.      Submission of Matters to a Vote
             of Security Holders................................ 11
Item 5.      Other Information.................................. 11
             Market For Registrant's Common Equity
Item 6.      Exhibits and Reports on Form 8-K................... 11
             Signatures......................................... 12
</TABLE>

                                       1
<PAGE>
 
                                 UROGEN CORP.
                       (A DEVELOPMENT STAGE ENTERPRISE)
                           CONDENSED BALANCE SHEETS
                           ------------------------
<TABLE> 
<CAPTION> 
 
                                                     March 31,       December 31,
                                                       1997             1996
                                                    ----------       ----------
ASSETS                                             (Unaudited)          (Note)
------                                    
<S>                                               <C>                <C> 
 
Current assets:
Cash and equivalents                                $  221,914       $  250,255
                                                    ----------       ----------
  Total current assets                                 221,914          250,255
 
Property and equipment                                   3,239            2,739
  Less accumulated depreciation                           (450)            (300)
                                                    ----------       ----------
Net property and equipment                               2,789            2,439
                                                    ----------       ----------
 
                                                    $  224,703       $  252,694
                                                    ==========       ==========
 
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
 
Current liabilities:
  Accounts payable and accrued liabilities          $   22,745       $   15,460
                                                    ----------       ----------
     Total current liabilities                          22,745           15,460
 
Stockholders' equity:
  Preferred Sock - $0.01 par value,                          -                -
     5,000,000 shares authorized,
     none issued at March 31, 1997
     and December 31, 1996
  Common Stock - $.001 par value,                        7,538            5,980
     40,000,000 shares authorized,
     7,537,319 issued at March 31,
     1997 and 5,979,528 at December 31,
       1996
  Additional paid-in capital                           751,584          675,252
  Note receivable for common stock issued               (7,242)              -
  Deficit accumulated during development
     stage                                            (549,922)        (443,998)
                                                    ----------       ----------
Total stockholders' equity                             201,958          237,234
                                                    ----------       ----------
                                                    $  224,703       $  252,694
                                                    ==========       ==========
 
</TABLE>
Note:  The Balance Sheet at December 31, 1996 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.




                            See accompanying notes.

                                       2
<PAGE>
 
                                 UROGEN CORP.
                        (A Development Stage Enterprise)
                       CONDENSED STATEMENTS OF OPERATIONS
                       ----------------------------------
                                   UNAUDITED
                                   ---------
<TABLE>
<CAPTION>
 
                                                                    July 1, 1991
                                          Three Months Ended       (inception) to
                                      --------------------------   
                                       March 31,     March 31,        March 31,
                                         1997           1996            1997
                                      -----------   ------------   ---------------
<S>                                   <C>           <C>            <C>
Net laboratory sales                  $              $                $   455,580
                                               -              -
 
Costs and expenses:
Cost of sales                                  -              -           821,878
Research and development                  74,668         42,224         3,248,196
Selling, general and
     administrative                       32,746         44,237           740,883
                                      ----------      ---------      ------------
 
Total costs and expenses                 107,414         86,461         4,810,957
                                      ----------      ---------      ------------
 
Loss from operations                     107,414         86,461         4,355,377
 
Gain on disposal of fixed assets               -              -            63,776
 
Interest income                           (1,490)          (904)          (15,886)
                                      ----------      ---------      ------------
 
Net loss                              $ (105,924)    $  (85,557)     $ (4,275,715)
                                      ==========     ==========      ============
 
Net loss per share                         $(.01)    $     (.02)
                                      ==========     ==========

Number of shares used in the
computation of net loss per
share                                  7,537,319      5,616,528
                                      ==========     ==========

</TABLE> 

                            See accompanying notes.

                                       3
<PAGE>
 
                                 UROGEN CORP.
                       (A DEVELOPMENT STAGE ENTERPRISE)
             CONDENSED STATEMENT OF STOCKHOLDERS'/DIVISION EQUITY
             ----------------------------------------------------
        FOR THE PERIOD FROM JULY 1, 1991 (INCEPTION) TO MARCH 31, 1997
        --------------------------------------------------------------
                                   UNAUDITED
                                   ---------
<TABLE> 
<CAPTION> 
 
                                                                         Note
                                                                      Receivable     Deficit
                                                                          for      Accumulated
                                   Common Stock          Additional      Common       During     Advances     Divisional
                                   ------------ 
                               Number of                   paid-in        Stock     Development     from     Accumulated
                                shares      Amount         Capital        Issued        Stage    Medstone    (Deficit)     Total
                              ----------    ----------   ----------   ----------   ----------   ----------  ----------   ----------
<S>                           <C>           <C>          <C>          <C>          <C>          <C>         <C>          <C> 
Advances from Medstone
 July 1, 1991 to
 December 31, 1994                     -    $        -   $        -   $        -   $        -   $3,852,465  $        -   $3,852,465
 
Net loss July 1, 1991
 to December 31, 1994                  -             -            -            -            -            -  (3,651,153)  (3,651,153)
                              ----------    ----------   ----------   ----------   ----------   ----------  ----------   ----------
 
Balance at December 31,
 1994                                  -             -            -            -            -    3,852,465  (3,651,153)     201,312
 
Advances from Medstone
 January 1, 1995 to
 December 31, 1995                     -             -            -            -            -       36,410           -       36,410
 
Net loss January 1, 1995
 to December 31, 1995                  -             -            -            -            -            -     (74,640)     (74,640)
                              ----------    ----------   ----------   ----------   ----------   ----------  ----------   ----------
 
Balance at December 31,
 1995                                  -             -            -            -            -    3,888,875  (3,725,793)     163,082
 
Capital contribution by
 Medstone                              -             -            -            -            -      500,000           -      500,000
 
Distribution of stock
 dividend and net assets
 February 9, 1996              5,616,528         5,617      657,465            -            -   (4,388,875)  3,725,793            -
                              ----------    ----------   ----------   ----------   ----------   ----------  ----------   ----------
                               5,616,528         5,617      657,465            -            -            -           -      663,082
 
Distribution of Common
 Stock for services at $.05
 per share - June &
 September 1996                  363,000           363       17,787            -            -            -           -       18,150
 
Net loss January 1,
 1996 to December 31,
 1996                                  -             -            -            -     (443,998)           -           -     (443,998)
                              ----------    ----------   ----------   ----------   ----------   ----------  ----------   ----------
                                                                                                                                  
 
Balance at December 31,
 1996                          5,979,528         5,980      675,252            -     (443,998)           -           -      237,234
 
Issuance of common stock
 for cash upon exercise of
 options                       1,410,000         1,410       69,090            -            -            -           -       70,500
 
Issuance of common stock
 for cash and note receivable    147,791           148        7,242       (7,242)           -            -           -          148
 
Net loss January 1, 1997
 to March 31, 1997                     -             -            -            -     (105,924)           -           -     (105,924)
                              ----------    ----------   ----------   ----------   ----------   ----------  ----------   ----------
                                                                                                                         
 
Balance at March 31,
 1997                          7,537,319    $    7,538   $  751,584   $   (7,242)  $ (549,922)   $       -  $        -   $  201,958
                              ==========    ==========   ==========   ==========   ==========   ==========  ==========   ========== 

</TABLE>
                                 See accompanying notes.

                                       4
<PAGE>
 


                                 UROGEN CORP.
                       (A DEVELOPMENT STAGE ENTERPRISE)
                      CONDENSED STATEMENTS OF CASH FLOWS
                      ----------------------------------
                                   UNAUDITED
                                   ---------
 
<TABLE> 
<CAPTION> 
 
                                                                             
                                                   Three Months Ended           July 1, 1991   
                                                  ------------------------       (inception) to
                                                   March 31,     March 31,       March 31,
                                                     1997          1996             1997
                                                  ----------     ---------       -----------
<S>                                               <C>            <C>             <C> 
Net loss                                          $ (105,924)    $ (85,557)      $(4,275,715)
Adjustments to reconcile net loss
 to net cash used in operating activities:
    Depreciation                                         150        42,224           458,524
    Amortization                                           -        11,803            35,410
    Increase in accounts payable and
     accrued liabilities                               7,285             -            22,745
    Increase in amount due officer/
     shareholder                                           -         5,000                 -
    Non-cash distribution of common
     stock                                                 -             -            18,150
    Non-cash outside service cost                          -             -           106,000
    Gain on disposal of fixed assets                       -             -           (63,776)
    Other, net                                             -             -           (30,000)
                                                  ----------     ---------      ------------
    Net cash used in
      operating activities                           (98,489)      (26,530)       (3,728,662)
 
Cash flows from investing activities:
    Purchase of property and equipment                  (500)            -          (515,506)
    Disposal of property and  equipment                    -             -            11,969
                                                  ----------     ---------      ------------
    Net cash used in investing activities               (500)            -          (503,537)
 
Cash flows from financing activities:
    Proceeds from issuance of common
     stock upon exercise of options                   70,500             -            70,500
    Proceeds from sale of common stock                   148             -               148
    Net advances from Medstone                             -             -         3,883,465
    Capital contribution of cash
      by Medstone                                                  500,000           500,000
                                                  ----------     ---------      ------------
    Net cash provided by
      financing activities                            70,648       500,000         4,454,113
                                                  ----------     ---------      ------------
Net increase (decrease) in cash
    and equivalents                                  (28,341)      473,470           221,914
                                                  ----------     ---------      ------------
Cash and equivalents,
     beginning of period                             250,255         1,000                 -
                                                  ----------     ---------      ------------
Cash and equivalents,
     end of period                                $  221,914     $ 474,470      $    221,914
                                                  ==========     =========      ============
</TABLE>
                                  See accompanying notes.

                                       5
<PAGE>
 
                                 UROGEN CORP.
                       (A DEVELOPMENT STAGE ENTERPRISE)

               NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
               -------------------------------------------------
                                March 31, 1997
                                --------------


1.  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

UroGen Corp. (the "Company"), a Delaware corporation, was incorporated on June
30, 1995, as a wholly-owned subsidiary of Medstone International, Inc.
("Medstone").  The Company was formed from the medical biology and small
molecule pharmaceuticals divisions of Medstone to continue the effort, started
in 1991, to develop pharmaceuticals to treat diseases in urology, with a
particular interest in prostate cancer.  UroGen operated as two divisions of
Medstone from July 1, 1991 to December 29, 1995.

DISTRIBUTION AND CAPITALIZATION

On December 29, 1995, Medstone declared a dividend of all of the stock of UroGen
Corp. to be distributed to all Medstone stockholders.  Each stockholder of
Medstone received, on February 9, 1996, one share of UroGen Common Stock for
each share of Medstone Common Stock held on the Record Date, December 29, 1995.
The Distribution resulted in the receipt by record holders of Medstone Common
Stock of all of UroGen's outstanding Common Stock.  Upon completion of the
Distribution, there were 5,616,528 shares of UroGen Common Stock outstanding.

The Distribution occurred on February 9, 1996, on which date Medstone also
contributed to the capital of UroGen Corp. $500,000 cash.  For financial
reporting purposes, the Distribution and contribution to capital have been
considered effective as of January 1, 1996, and the operations of the business
have been considered those of UroGen Corp. effective that date.

Additionally, effective January 1, 1996, Medstone executed a forgiveness of all
intercompany advances resulting from the prior divisional funding of operations
between Medstone and UroGen.

BASIS OF PRESENTATION

The accompanying financial statements for the year ended December 31, 1996 have
been prepared assuming the Company will continue as a going concern.  However,
the Company incurred net losses of $443,998 during 1996 and has a deficit
accumulated during development stage of $549,922 at March 31, 1997.  During
1997, management intends to raise additional debt and/or equity financing to
fund future operations and to provide additional working capital.  However there
is no assurance that such financing will be consummated or obtained in
sufficient amounts necessary to meet the Company's needs.

                                       6
<PAGE>
 
The accompanying financial statements do not include any adjustments to reflect
the possible future effects on the recoverability and classification of assets
or the amounts and classifications of liabilities that may result from the
possible inability of the Company to continue as a going concern.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.

PROPERTY AND EQUIPMENT

Property and equipment is stated on the basis of cost.  Depreciation is computed
under the straight-line method over the estimated useful lives of the assets.

STOCK BASED COMPENSATION

As permitted by FASB Statement No. 123, the Company accounts for stock option
grants in accordance with APB Opinion No. 25, Accounting for Stock Issued to
Employees, and, accordingly, recognizes no compensation expense for the stock
option grants.

NET LOSS PER SHARE

Net loss per share is based on the average number of shares of common stock
outstanding during the three month periods ended March 31, 1997 and 1996.
Equivalent shares of outstanding stock options have not been included in the
computation of net loss per share as their effect would be antidilutive.

INCOME TAXES

Income taxes have been provided using the liability method in accordance with
FASB Statement No. 109, Accounting for Income Taxes.


2.  RELATED PARTY TRANSACTIONS

During 1997, the Company paid two shareholders/officers $35,000 cash for
consulting services.

During 1997, the Company paid a research organization/shareholder $29,000 cash
for services rendered.

                                       7
<PAGE>
 
3.  SHAREHOLDERS' EQUITY

PREFERRED STOCK

The Company is authorized to issue 5,000,000 shares of Preferred Stock $0.01 par
value.  As of March 31, 1997 there are no shares issued or outstanding.

COMMON STOCK

The Company is authorized to issue 40,000,000 shares of Common Stock $0.001 par
value.  As of March 31, 1997 there are 7,537,319 shares issued and outstanding.


4.  LICENSE AGREEMENT

In February 1997, the Company entered into a License Agreement with an unrelated
public biotechnology company.  The Company obtained an exclusive license to use
certain patented technologies to develop and commercialize products based upon
the licensed patent rights.  The License Agreement requires the Company to pay
future cash royalties to the licensee based upon net sales.  In connection with
this License Agreement, the Company entered into a Stock and Warrant Purchase
Agreement with the licensee whereby the Company issued 147,791 shares of Common
Stock at $.05 per share for total cash proceeds of $148 and a note receivable of
$7,242.  Additionally, the Agreement granted to the licensee a Warrant to
purchase additional shares in the Company to maintain a fully-diluted ownership
percentage of two percent (2%) or increase its ownership percentage up to three
percent (3%).  Such warrant rights are exercisable at prices ranging from $.03
to $.04 per share.  Such Warrant rights expire the later of March 5, 1999 or the
first date on which the aggregate outstanding shares of the Company equals or
exceeds 15,000,000 shares on a fully diluted basis.

                                       8
<PAGE>
 
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
         ---------------------------------------------------------

GENERAL

UroGen Corp. (the "Company") is a development stage company which is primarily
engaged in the development of pharmaceuticals to treat prostate cancer.  The
Company was incorporated in Delaware on June 30, 1995.  It was inactive until
January 1, 1996, at which date, the operations of the business, which previously
operated as a division of Medstone International, Inc. ("Medstone") from July 1,
1991 through December 31, 1995, were transferred to the new company.

The Company, a division of Medstone prior to January 1, 1996, had no independent
operating history of its own and, to date, has generated an operating loss of
$4,275,715.  Accordingly, there can be no assurances that the Company will be
able to generate sufficient revenue and cash flow to maintain its operations
beyond the $221,914 existing cash balance.  The Company must develop new
products and raise substantial additional financing.

PLAN OF OPERATION

The Company expects that its capital resources will enable it to maintain its
current and planned operations for approximately the next six to twelve months.
Thereafter, the Company will need to raise substantial additional capital to
fund its operations.  In the next twelve months Urogen will be actively pursuing
opportunities to develop and/or license new prostate cancer therapeutics and
diagnostics.

Depending on the Company's success in identifying promising opportunities in
prostate cancer therapy, and if it is successful in attracting additional
capital, Urogen could substantially increase its number of employees.  However,
it is the Company's current intention to use human resources on a part-time and
consulting basis for the near-term, if at all possible.

LIQUIDITY AND CAPITAL RESOURCES

From inception on July 1, 1991, substantially all of the Company's operations
have been funded by Medstone, however, such funding was completed with the
$500,000 capital contribution of cash on February 9, 1996.  The Company has
incurred net losses of $4,275,715 since its inception and has never been
profitable during its existence.  The Company expects to incur significant
additional operating losses over the next several years as the Company's
research and development efforts expand.  The Company's ability to achieve
profitability depends upon its ability, alone or with others, to successfully
complete development of pharmaceutical products, obtain required regulatory
approvals and manufacture and market its products.

                                       9
<PAGE>
 
The Company's operations to date have consumed substantial amounts of cash.  The
negative cash flow from operations is expected to continue and to accelerate in
the foreseeable future.  The development of the Company's products will require
a commitment of substantial funds to conduct the costly and time-consuming
research, preclinical and clinical testing necessary to bring such products to
market and to establish manufacturing and marketing capabilities.  The Company's
future capital requirements will depend on many factors, including scientific
progress in its research and development programs, the ability of the Company to
establish collaborative arrangements with others for drug development, progress
with preclinical and clinical trials, the time and costs involved in obtaining
regulatory approvals and effective commercialization activities.

The Company expects that its existing capital resources will enable the Company
to maintain its current and planned operations for approximately the next six to
twelve months.  Thereafter, the Company will need to raise substantial
additional capital to fund its operations.  The Company intends to seek such
additional funding either through collaborative arrangements or through public
or private equity or debt financings. There can be no assurance that additional
financing will be available on acceptable terms or at all.  If additional funds
are raised by issuing equity securities, further dilution to stockholders will
result.  If adequate funds are not available, the Company may be required to
delay or reduce the scope of its operations or obtain funds through arrangements
with collaborative partners or others that may require the Company to relinquish
rights it may have acquired in the interim.

RESULTS OF OPERATIONS

For the three months ended March 31, 1997 and 1996, the Company had no operating
revenues and net losses of $105,924 and $85,557, respectively.  The increased
loss for the current period reflects primarily increased contract research and
development fees incurred.

                                       10
<PAGE>
 
                                 UROGEN CORP.
                       (A DEVELOPMENT STAGE ENTERPRISE)

                          PART II.  OTHER INFORMATION
                          ---------------------------
                                        

ITEM 1.  LEGAL PROCEEDINGS

     None.

ITEM 2.  CHANGES IN SECURITIES

     None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

     None.

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

     None.

ITEM 5.  OTHER INFORMATION

     Market for Registrant's Common Equity

          No market for the Company's shares of capital stock presently exists
          and no assurance can be given that any active trading market will
          develop or be sustained. None of the shares of capital stock of the
          Company issued in the Distribution or otherwise, or acquired through
          the exercise of stock options prior to December 31, 1997, may be
          transferred before December 31, 1997 unless such restriction is
          earlier terminated by the Company as to all such shares, except for
          the following transfers: (i) transfers by gift, will, bequest or the
          applicable laws of descent and distribution; (ii) non-sale
          distributions by partnerships, corporations or trusts to their
          partners, shareholders or beneficiaries; (iii) transfers to the
          Company; and (iv) transfers pursuant to qualified domestic relations
          order as defined by the Code or the rules thereunder. In the case of
          any such permitted transfers, the shares in the hands of the
          transferees will continue to be subject to the same transfer
          restriction.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

     There were no reports on Form 8-K filed with the Commission during the
     quarter ended March 31, 1997.

                                       11
<PAGE>
 
                                 SIGNATURES


Pursuant to the requirements of Section 13 or 15 (d) of Securities Exchange Act
of 1934, the Registrant has duly caused this Report to be signed on its behalf
by the undersigned, hereunto duly authorized.



                                UROGEN CORP.
                                ------------
                                A Delaware Corporation



Date:  May 10, 1997             /s/ PAUL D. QUADROS
                                    ---------------------
                                    Paul D. Quadros
                                    Chief Executive Officer
                                    Chief Financial Officer
                                    (Principal financial and accounting officer)

                                       12