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                                                           Exhibit 10.12

                               September 23, 1998

VIA FACSIMILE

OrthoLogic Corporation
1275 West Washington Street
Tempe, AZ 85281

Ladies and Gentlemen:

         By this Letter of Amendment (the "LOA") it is understood that
OrthoLogic Corp., ("OrthoLogic") a Delaware corporation, with offices at 1275
West Washington Street, Tempe, Arizona, and Chrysalis BioTechnology, Inc.
("Chrysalis") a Texas corporation, with offices at 2200 Market, Galveston,
Texas, agree to modify the original Definitive Agreement regarding the TP508 (or
Chrysalin) technology ("Technology") for orthopedic applications signed by the
two parties as of December 31, 1997 as follows:

         1.       Extension of License Option. Chrysalis and OrthoLogic agree to
extend the evaluation period and the outside exercise date for the option for US
fracture applications described in Section IV(a) of the Definitive Agreement
from the original date of September 30th, 1998 to the earlier of January 1, 1999
or until OrthoLogic collects sufficient additional preclinical data to complete
its evaluation of the Technology.

         2.       Payments. OrthoLogic agrees to make a non-refundable partial
payment of $250,000 for the extension, payable to Chrysalis by September 30,
1998. If OrthoLogic decides to exercise its option by the date agreed to in
paragraph (1) above, the partial payment will be applied to the originally
agreed upon amount of $750,000, and OrthoLogic shall then immediately pay only
$500,000 to Chrysalis to exercise its option for the Technology for United
States fracture applications.

         3.       Other Payments. All other payments due to Chrysalis will be
made by OrthoLogic by the dates specified in the Definitive Agreement except
that the $250,000 payment pursuant to Section IV(b) in the Definitive Agreement
may instead be paid by January 1, 1999. The timing and amounts of all other
milestone payments shall remain unchanged.

         4.       Limited Modification. Except as modified herein, all terms and
conditions of the original Definitive Agreement shall remain in full force and
effect.



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OrthLogic Corporation
September 23, 1998
Page 2

         5.       Counterparts. This LOA may be executed by facsimile or manual
signatures. It may be executed in several counterparts, each of which shall be
deemed an original, but such counterparts shall together constitute one
agreement.

                                          Chrysalis BioTechnology, Inc.

                                          By:  /s/ Darrell H. Carney
                                               ---------------------------------
                                               Darrell H. Carney, Ph.D.
                                               Title:  President

                                   ACCEPTANCE

         The foregoing LOA correctly sets forth our agreement concerning the
Amendments to the Definitive Agreement.

         Dated:  September 29, 1998

                                             OrthoLogic Corp.

                                             By: /s/ Thomas R. Trotter
                                                 -------------------------------
                                                 Thomas R. Trotter
                                                 Title:  President/CEO