<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 September 30, 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.)


                10835 Altman Row, Suite A, San Diego, CA, 92121
            (Address of principal executive offices)    (Zip code)

      Registrant's Telephone Number, including area code:  (619) 450-5949

             3099 Science Park Road, Suite A, San Diego, CA, 92121
      (Former name, former address, which has 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
November 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.
                                                              --------
<S>          <C>                                              <C>
Item 1.      Financial Statements
 
             Condensed Balance Sheets
               September 30, 1997 (Unaudited) and
               December 31, 1996.............................     2
 
             Condensed Statements of Operations (Unaudited)       
               Three and Nine Months Ended September 30, 1997
               and 1996 and the period from July 1, 1991
               (inception) to September 30, 1997.............     3
 
             Condensed Statement of Stockholders'/ Division       
               Equity (Unaudited) for the period from July 1,
               1991 (inception) to September 30, 1997........     4 
 
             Condensed Statements of Cash Flows (Unaudited)  
               Nine Months Ended September 30, 1997
               and 1996 and the period from July 1, 1991
               (inception) to September 30, 1997.............     5
 
             Notes to Unaudited Condensed Financial
               Statements....................................     6
 
Item 2.      Management's Discussion and Analysis or
               Plan of Operation.............................     9

 
                          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> 
 
                                                September 30,     December 31,
                                                     1997             1996
                                                -------------     ------------
                                                 (Unaudited)         (Note)
<S>                                             <C>               <C>

ASSETS
------
 
Current assets:
Cash and equivalents                             $   59,252        $  250,255
Accounts receivable                                  25,000                 -
                                                 ----------        ----------
  Total current assets                               84,252           250,255
 
Property and equipment                                3,239             2,739
  Less accumulated depreciation                        (750)             (300)
                                                 ----------        ----------
Net property and equipment                            2,489             2,439
                                                 ----------        ----------
 
Other assets                                          1,065                 -
                                                 ----------        ----------
 
                                                 $   87,806        $  252,694
                                                 ==========        ==========
 
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
 
Current liabilities:
  Accounts payable and accrued liabilities       $   68,321        $   15,460
                                                 ----------        ----------
     Total current liabilities                       68,321            15,460
 
Stockholders' equity:
  Preferred Stock - $0.01 par value,                      
     5,000,000 shares authorized,
     none issued at September 30, 1997
     and December 31, 1996                                -                 -
  Common Stock - $.001 par value,                     
     40,000,000 shares authorized,
     7,537,319 issued at September 30, 1997 
     and 5,979,528 at December 31, 1996               7,538             5,980
  Additional paid-in capital                        751,584           675,252
  Note receivable for common stock issued            (7,242)                -
  Deficit accumulated during development
     stage                                         (732,395)         (443,998)
                                                 ----------        ----------
Total stockholders' equity                           19,485           237,234
                                                 ----------        ----------
                                                 $   87,806        $  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>
 
                                                                                    
                                Three Months Ended          Nine Months Ended        July 1, 1991 
                              -----------------------   -------------------------   (inception) to 
                              Sept. 30,    Sept. 30,     Sept. 30,     Sept. 30,       Sept. 30,
                                 1997         1996          1997          1996           1997
                              ----------   ----------   ------------   ----------   ---------------
<S>                           <C>          <C>          <C>            <C>          <C>
 
Revenue                       $  96,750    $       -     $   96,750    $       -      $    552,330

Costs and expenses:
Cost of sales                         -            -              -            -           821,878
Research and development         77,879       66,224        279,761      176,622         3,453,289
Selling, general and
  administrative                 35,923       40,144        109,286      117,049           817,423
                              ---------    ---------     ----------    ---------      ------------
Total costs and expenses        113,802      106,368        389,047      293,671         5,092,590
                              ---------    ---------     ----------    ---------      ------------
 
Loss from operations            (17,052)    (106,368)      (292,297)    (293,671)       (4,540,260)
 
Gain on disposal of
  fixed assets                        -            -              -            -            63,776
 
Interest income                   1,034        3,345          3,900        9,076            18,296
                              ---------    ---------     ----------    ---------      ------------
 
Net loss                      $ (16,018)   $(103,023)    $ (288,397)   $(284,595)     $ (4,458,188)
                              =========    =========     ==========    =========      ============
 
Net loss per share            $    (.00)   $    (.02)    $     (.04)   $    (.05)
                              =========    =========     ==========    ========= 

Number of shares used in      
 the computation of net
 loss per share               7,537,319    5,979,528     7,311,573     5,979,528
                              =========    =========     =========     ========= 
</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 SEPTEMBER 30, 1997
      ------------------------------------------------------------------
                                   UNAUDITED
                                  ----------
<TABLE> 
<CAPTION> 
                                                                  Note                                                       
                                                               Receivable    Deficit                                    
                                   Common Stock                   for      Accumulated                                
                                -----------------  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 September 30, 1997                -       -           -           -       (288,397)         -             -       (288,397)
                                ---------  ------  ----------  ----------  -----------  -----------  ------------  -----------
 
Balance at September 30,
 1997                           7,537,319  $7,538  $  751,584  $   (7,242) $  (732,395) $       -    $        -    $    19,485
                                =========  ======  ==========  ==========  ===========  ===========  ============  ===========
</TABLE>
                            See accompanying notes.

                                       4
<PAGE>
 
                                 UROGEN CORP.
                       (A Development Stage Enterprise)
                      CONDENSED STATEMENTS OF CASH FLOWS
                      ----------------------------------
                                   UNAUDITED
                                   ---------
<TABLE> 
<CAPTION> 
                                           Three Months Ended                Nine Months Ended             July 1, 1991 
                                      ------------------------------    ------------------------------    (inception) to 
                                      September 30,    September 30,    September 30,    September 30,    September 30,
                                           1997             1996             1997            1996             1997
                                      -------------    -------------    -------------    -------------    ------------
<S>                                   <C>              <C>              <C>              <C>              <C>  
Net loss                                 $(16,018)       $(103,023)       $(288,397)       $(284,595)      $(4,458,188)
Adjustments to reconcile
 net loss to net cash
 used in operating
 activities:
Depreciation                                  150           42,224              450          126,672           458,824
Amortization                                  -             11,804              -             35,410            35,410
Gain on disposal of fixed assets              -                -                -                -             (63,776)
Increase in amount due
 officer / shareholder                        -                -                -              8,000               -
Increase in
 accounts receivable                      (25,000)                          (25,000)                           (25,000)
Increase in other assets                      -                -             (1,065)             -              (1,065)
Increase in
 accounts payable                          18,865           13,004           52,861           13,005            68,321
Non-cash distribution
 of Common Stock                              -              1,200              -             18,150            18,150
Non-cash outside services                     -                -                -                -             106,000
Other, net                                    -                -                -                -             (30,000)
                                         --------        ---------        ---------        ---------       ----------- 
Net cash used in
 operating activities                     (22,003)         (34,791)        (261,151)         (83,358)       (3,891,324)
 
Cash flows from investing
 activities:
Purchase of property and
 equipment                                    -             (2,739)            (500)          (2,739)         (515,506)
Disposal of property and
 equipment                                    -                -                -                -              11,969
                                         --------        ---------        ---------        ---------       ----------- 
Net cash used in
 investing activities                         -             (2,739)            (500)          (2,739)         (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                  (22,003)         (37,530)        (191,003)         413,903            59,252
                                         --------        ---------        ---------        ---------       ----------- 
 
Cash and equivalents,
 beginning of period                       81,255          452,433          250,255            1,000               -
                                         --------        ---------        ---------        ---------       ----------- 
 
Cash and equivalents,
 end of period                           $ 59,252        $ 414,903        $  59,252        $ 414,903       $    59,252
                                         ========        =========        =========        =========       ===========
</TABLE>
                            See accompanying notes.

                                       5
<PAGE>
 
                                 UROGEN CORP.
                       (A Development Stage Enterprise)

               NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
               -------------------------------------------------
                              September 30, 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 $732,395 at September 30, 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.

Net Loss Per Share

Net loss per share is based on the average number of shares of common stock
outstanding during the nine-month periods ended September 30, 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.

New Accounting Standard

In February 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings per Share, which is required to be adopted on December 31, 1997.
At that time, the Company will be required to change the method currently used
to compute earnings per share and to restate all prior periods.  Under the new
requirements for calculating primary earnings per share, the dilutive effect of
stock options will be excluded.  The impact of Statement 128 on the calculation
of earnings per share for these quarters is not expected to be material.

2.  Related Party Transactions

During 1997, the Company paid three shareholders/officers $173,629 cash for
consulting services.

During 1997, the Company paid to a research organization/shareholder $37,861
cash for services and rent.  As of September 30, 1997, the Company's payable to
this research organization/shareholder was approximately $7,123.

                                       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 September 30, 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 September 30, 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.

During the quarter ending September 30, 1997, the Company entered into new
research agreements with two unrelated biotechnology companies.  For the three
months ended September 30, 1997,  the Company had revenues of $96,750 related to
the research agreements.

                                       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
$4,458,188.  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 $59,252 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 three months.
Thereafter, the Company will need to raise substantial additional capital to
fund its operations.  In the next twelve months UroGen will continue to pursue
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 $4,458,188 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 three
months.  Thereafter, the Company will need to raise substantial additional
capital to fund its operations.  The Company has signed a letter of intent with
a placement agent to raise additional funds through a private debt and equity
financing. There can be no assurance this financing will be completed or 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 September 30, 1997,  the Company had revenues of
$96,750 related to two new research agreements (see note 4).  For the three
months ended September 30, 1997 and 1996, the Company had net losses of $16,018
and $103,023, respectively.  The increased expenses for the current period
reflect additional research and development personnel.

For the nine months ended September 30, 1997 and 1996, the Company had revenues
of $96,750 and -0-, and net losses of $288,397 and $284,595, respectively.  The
increased expenses for the current period reflect additional research and
development personnel.

                                       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 September 30, 1997.


           Exhibit 27 - Financial Data Schedule

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

                                       12