<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, 1998
                               -------------- 

                                      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

                                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
13, 1998, was 7,537,319.  

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

                             INDEX TO FORM 10-QSB

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

                                                                        Page No.
                                                                        --------
Item 1.  Financial Statements
 
         Condensed Balance Sheets
           March 31, 1998 (Unaudited) and December 31, 1997............    2
 
         Condensed Statements of Operations (Unaudited)
           Three Months ended March 31, 1998 and 1997 and the period
           from July 1, 1991 (inception) to March 31, 1998.............    3
 
         Notes to Unaudited Condensed Financial Statements.............    4
 
Item 2.  Management's Discussion and Analysis or Plan of Operation.....    8
 
                          PART II.  OTHER INFORMATION
                          ---------------------------
 
Item 1.  Legal Proceedings.............................................   10
Item 2.  Changes in Securities.........................................   10
Item 3.  Defaults Upon Senior Securities...............................   10
Item 4.  Submission of Matters to a Vote of Security Holders...........   10
Item 5.  Other Information.............................................   10
           Market For Registrant's Common Equity
Item 6.  Exhibits and Reports on Form 8-K..............................   10
         Signatures....................................................   11

                                       1
<PAGE>
 
                                 UROGEN CORP.
                       (A Development Stage Enterprise)
                           CONDENSED BALANCE SHEETS
                           ------------------------

<TABLE> 
<CAPTION>  
                                                        March 31,   December 31,
                                                          1998          1997
                                                       -----------  ------------
                                                       (Unaudited)     (Note)
<S>                                                    <C>          <C> 
ASSETS
------
 
Current assets:
Cash and equivalents                                    $  50,144     $  74,353
Accounts Receivable                                        71,750
                                                        ---------     ---------
  Total current assets                                    121,894        74,353
 
Property and equipment                                      3,239         3,239
  Less accumulated depreciation                            (1,374)       (1,128)
                                                        ---------     ---------
Net property and equipment                                  1,865         2,111
                                                        ---------     ---------
 
Other assets                                                1,065         1,065
                                                        ---------     ---------
 
                                                        $ 124,824     $  77,529
                                                        =========     =========
 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
 
Current liabilities:
  Accounts payable and accrued liabilities              $ 234,439     $  68,824
                                                        ---------     ---------
    Total current liabilities                             234,439        68,824
 
Stockholders' equity(deficit):
  Preferred Stock - $0.01 par value, 5,000,000 shares
    authorized, none issued at March 31, 1998 and
    December 31, 1997                                           -             -
  Common Stock - $.001 par value, 40,000,000 shares
    authorized, 7,537,319 issued at March 31, 1998
    and at December 31, 1997                                7,538         7,538
  Additional paid-in capital                              751,584       751,584
  Note receivable for common stock issued                  (7,242)       (7,242)
  Deficit accumulated during development stage           (861,495)     (743,175)
                                                        ---------     ---------
Total stockholders' equity (deficit)                     (109,615)        8,705
                                                        ---------     ---------
                                                        $ 124,824     $  77,529
                                                        =========     =========
</TABLE>

Note:  The Balance Sheet at December 31, 1997 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      July 1, 1991
                                          ---------------------   (inception) to
                                          March 31,   March 31,      March 31,
                                            1998        1997           1998
                                          ---------   ---------   --------------
<S>                                       <C>         <C>         <C>
Revenue                                   $ 120,550   $       -     $   769,630
                                                                    
Costs and expenses:                                                 
Cost of sales                                     -           -         821,878
Research and development                    145,830      74,668       3,664,950
Selling, general and administrative          93,517      32,746         952,969
                                          ---------   ---------     -----------
Total costs and expenses                    239,347     107,414       5,439,797
                                          ---------   ---------     -----------
                                                                    
Loss from operations                       (118,797)   (107,414)     (4,670,167)
                                                                    
Gain on disposal of fixed assets                  -           -          63,776
                                                                    
Interest income                                 477       1,490          19,103
                                          ---------   ---------     -----------
                                                                    
Net loss                                  $(118,320)  $(105,924)    $(4,587,288)
                                          =========   =========     ===========
                                                      
Net loss per share                        $    (.02)  $    (.01)
                                          =========   =========
                                                      
Number of shares used in the                          
  computation of Basic and diluted
  loss per share                          7,537,319   7,537,319
                                          =========   =========
</TABLE>

                            See accompanying notes.

                                       3
<PAGE>
 
                                  UROGEN CORP.
                        (A Development Stage Enterprise)

               NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
               -------------------------------------------------
                                 March 31, 1998
                                 --------------
                                        
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 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, 1997 have
been prepared assuming the Company will continue as a going concern.  However,
the Company incurred net losses of $299,177 during 1997 and has a deficit
accumulated during its development stage of $861,495 at March 31, 1998.  During
1998, 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.

                                       4
<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

In accordance with the Financial Accounting Standards Board's Statement of
Financial Accounting Standards ("SFAS") No. 128, Earnings 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, 1998 and 1997.  Equivalent shares
arising from outstanding stock options have not been included in the computation
of net loss per share as their effect would be antidilutive.

New Accounting Standards

In 1997, the Financial Accounting Standards Board issued SFAS No. 130, Reporting
Comprehensive Income, (SFAS 130) and SFAS No. 131, Segment Information, (SFAS
131).  Both these standards are effective for the year ending December 31, 1998.
SFAS 130 requires that all components of comprehensive income, including net
income, be reported in the financial statements in the period in which they are
recognized.  Comprehensive income is defined as the change in equity during a
period from transactions and other events and circumstances from non-owner
sources.  Net income and other comprehensive income, including foreign currency
translation adjustments, and unrealized gains and losses on investments, shall
be reported, net of their related tax effect, to arrive at comprehensive income.
The Company believes that comprehensive income or loss will not be materially
different than net income or loss.  SFAS 131 amends the requirements for public
enterprises to report financial and descriptive information about its reportable
operating segments.  Operating segments, as defined in SFAS 131, are components
of an enterprise for which separate financial information is available and is
evaluated regularly by the Company in deciding how to allocate resources and in
assessing performance. The financial information is required to be reported on
the basis that is used internally for evaluating the segment performance. The
Company believes it operates in one business and operating segment and the
adoption of this standard will not have a material impact on the Company's
financial statements.

2.  Related Party Transactions

During 1998, the Company paid three shareholders/officers $48,750 cash for
consulting services.

During 1998, the Company paid a research organization/shareholder $4,541 cash
for rent and services.

                                       5
<PAGE>
 
3.  Stockholders' Equity

Preferred Stock

The Company is authorized to issue 5,000,000 shares of Preferred Stock $0.01 par
value.  As of March 31, 1998 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, 1998 there are 7,537,319 shares issued and outstanding.

In 1997, the Company entered into a License Agreement with a 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 proceeds of $7,390.

Warrants

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.

In 1997 the Company issued 200,000 warrants to purchase Common Stock to an
officer of the Company.  These warrants are exercisable at $.05 per share and
expire on July 31, 2001.

4.  License Agreement

In 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.

                                       6
<PAGE>
 
5. Technology Acquisition Agreement

On March 18, 1998, the Company's Board of Directors entered into an agreement
with a major international healthcare company to merge that company's gene
therapy program and its advanced gene therapy technology into UroGen's existing
technology base.  Under the terms of the agreement, UroGen will acquire rights
to all of the related intellectual property and equipment needed to continue
research and product development in exchange for newly issued UroGen stock.  At
the conclusion of the asset acquisition, the corporate partner would be issued a
number of common shares equal to approximately 19% of the fully diluted number
of UroGen shares outstanding at that time.  In addition, the corporate partner
would also receive a larger number of shares of preferred stock that will be
convertible into common stock at a future time and under certain conditions.
Under the proposed terms, the corporate partner will also provide funding to
UroGen to continue research and product development of this technology.

The agreement has three important contingencies.  UroGen must raise a specific
minimum amount of capital by May 27, 1998, the transaction must be approved by
the board of directors of the corporate partner, and other ancillary agreements
must be negotiated and approved by both parties.  These agreements include the
financial and business relationship defining the corporate partner's ongoing
support of research and product development, and a plan for the corporate
partner to distribute UroGen products for the treatment of selected genetic
disorders.  The name of the corporate partner will be disclosed when the
contingencies are resolved.  The transaction will be accounted for upon the
issuance of the shares.

6. Commitments and Contingencies

In conjunction with the aforementioned technology acquisition agreement the
Company has agreed to reimburse the corporate partner for all reasonable cancer
related research expenses that the corporate partner has incurred since January
1, 1998, not to exceed $35,000 per month.  As such, the Company has accrued a
total of $105,000 as of March 31, 1998 which has been included in research and
development costs.

                                       7
<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 prostate cancer therapies.  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
$4,587,288.  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 $50,144 existing cash balance.  The Company must develop new products
and raise substantial additional financing.

Plan of Operation

The Company expects that its existing capital resources will enable it to
maintain its current and planned operations for approximately the next three to
six months.  Thereafter, the Company will need to raise substantial additional
capital to fund its operations.  In the next twelve months the Company 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, the Company could substantially increase its number of employees later
in 1998.  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.

Year 2000 Compliance

Many currently installed computer systems and software products are coded to
accept only two-digit entries to represent years.  These systems and products
will need to be able to accept four-digit entries to distinguish years beginning
with 2000 from prior years.  As a result, systems and products that do not
accept four-digit year entries will need to be upgraded or replaced to comply
with such "Year 2000" requirements.  The Company believes that its internal
systems are Year 2000 compliant or will be replaced in connection with
previously planned upgrades to information systems prior to the need to comply
with Year 2000 requirements.  However, a number of the Company's customers and
vendors may be affected by Year 2000 issues that require that they expend
significant resources to modify or replace their existing systems.

                                       8
<PAGE>
 
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 $4,587,288 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.

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
to six 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, 1998 and 1997, the Company had operating
revenues of $120,550 and -$0-, respectively, and net losses of $118,320 and
$105,924, respectively.  The increased loss for the current period reflects
primarily the increased research and development costs, including costs
associated with the new technology acquisition agreement, which are offset by
the revenue from a research agreement.

                                       9
<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

       None of the shares of capital stock of the Company issued in the
       Distribution or otherwise, or acquired through the exercise of stock
       options could be sold prior to December 31, 1997 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.  No market for the Company's shares of capital stock existed
       prior to January 1, 1998.  A limited market on the Electronic Bulletin
       Board has recently been established.  The Company trades under the symbol
       UROG.  No assurance can be given that any active trading market will be
       sustained.

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, 1998.

                                       10
<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 13, 1998           /s/ Paul D. Quadros
                              -----------------------
                              Paul D. Quadros
                              Chief Executive Officer
                              Chief Financial Officer
                              (Principal financial and accounting officer)

                                       11