UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-Q

(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, 2001

                                       or

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

           For the transition period from ___________ to ___________

                        Commission File Number: 0-21214


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


           Delaware                                              86-0585310
(State of other jurisdiction of                                (IRS Employer
 incorporation or organization)                              Identification No.)


1275 W. Washington Street, Tempe, Arizona                          85281
(Address of principal executive offices)                         (Zip Code)


                                 (602) 286-5520
              (Registrant's telephone number, including area code)


                                      N/A
              (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 [ ]

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

      31,831,980 shares of common stock outstanding as of October 31, 2001
<PAGE>
                                ORTHOLOGIC CORP.
                                      INDEX

                                                                        Page No.
                                                                        --------
Part I -- Financial Information

        Item 1. Financial Statements

        Condensed Consolidated Balance Sheets
        September 30, 2001 and December 31, 2000                               3

        Condensed Consolidated Statements of Operations and of
        Comprehensive Income for the Three months and Nine months
        ended September 30, 2001 and 2000                                      4

        Condensed Consolidated Statements of Cash Flows for the Nine
        months ended September 30, 2001 and 2000                               5

        Notes to the Condensed Consolidated Financial Statements               6

        Item 2. Management's Discussion and Analysis of the Financial
                Condition and Results of Operations                           11

        Item 3. Quantitative and Qualitative Disclosure about Market Risk     13

Part II -- Other Information

        Item 1. Legal Proceedings                                             14

        Item 6. Exhibits and Reports on Form 8-K                              14

                                       2
<PAGE>
                         PART I -- FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                                ORTHOLOGIC CORP.
                      Condensed Consolidated Balance Sheets
                                 (in thousands)

<TABLE>
<CAPTION>
                                                   September 30, 2001     December 31, 2000
                                                   ------------------     -----------------
                                                      (Unaudited)
<S>                                                <C>                    <C>
ASSET
Cash and cash equivalents                               $  12,872             $   6,753
Short term investments                                     15,055                 2,492
Accounts receivable, net                                   11,371                29,951
Inventory, net                                              2,303                10,007
Prepaids and other current assets                             824                 1,019
Deferred income tax                                         2,631                 2,631
                                                        ---------             ---------
   Total current assets                                    45,056                52,853

Furniture, rental fleet and equipment                       8,332                28,891
Accumulated depreciation                                   (6,282)              (17,797)
                                                        ---------             ---------
    Furniture, rental fleet and equipment, net              2,050                11,094

Investments                                                   750                   750
Deposits and other assets                                     178                   338
                                                        ---------             ---------
  Total assets                                          $  48,034             $  65,035
                                                        =========             =========

LIABILITIES & STOCKHOLDERS' EQUITY

Liabilities

Accounts payable                                        $     721             $   3,030
Accrued liabilities                                         5,810                 6,767
                                                        ---------             ---------
    Total current liabilities                               6,531                 9,797

Deferred rent and capital lease obligations                   176                    88
                                                        ---------             ---------
   Total liabilities                                        6,707                 9,885
                                                        ---------             ---------

SERIES B CONVERTIBLE PREFERRED STOCK                          600                 3,240

STOCKHOLDERS' EQUITY

Common stock                                                   16                    15
Additional paid-in capital                                135,101               132,332
Common stock to be used for legal settlement                2,969                 2,969
Accumulated deficit                                       (97,359)              (83,183)
Other comprehensive loss                                       --                  (223)
                                                        ---------             ---------
   Total stockholders' equity                              40,727                51,910
                                                        ---------             ---------

    Total liabilities and stockholders' equity          $  48,034             $  65,035
                                                        =========             =========
</TABLE>

            See Notes to Condensed Consolidated Financial Statements

                                       3
<PAGE>
                                ORTHOLOGIC CORP.
   Condensed Consolidated Statements of Operations and of Comprehensive Income
                      (in thousands, except per share data)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                     Three months ended             Nine months ended
                                                        September 30,                  September 30,
                                                   -----------------------        ----------------------
                                                     2001           2000            2001          2000
                                                   --------       --------        --------      --------
<S>                                                <C>            <C>             <C>           <C>
Revenues                                              9,553         21,011          53,330        66,041
Cost of Revenues                                      1,254          4,302           9,885        13,406
                                                   --------       --------        --------      --------
Gross Profit                                          8,299         16,709          43,445        52,635

Operating expenses
  Selling, general and administrative                 7,430         16,943          40,621        50,446
  CPM divestiture and non-recurring charges                             --          14,327            --
  Legal settlement                                                   3,552                         3,552
  Research and development                              486          2,645           3,147         3,859
                                                   --------       --------        --------      --------
      Total operating expenses                        7,916         23,140          58,095        57,857

Operating income (loss)                                 383         (6,431)        (14,650)       (5,222)

Other income                                            223            112             482           298
                                                   --------       --------        --------      --------
Income (loss) before income taxes                       606         (6,319)        (14,168)       (4,924)

Provision (benefit) for income taxes                     --           (112)              8            39

Net income (loss)                                  $    606       $ (6,207)       $(14,176)     $ (4,963)
                                                   ========       ========        ========      ========

BASIC EARNINGS PER SHARE
Net income (loss) per common Share                 $   0.02       $  (0.21)       $  (0.45)     $  (0.17)
                                                   --------       --------        --------      --------
Weighted average number of Common
  share outstanding                                  31,467         30,163          31,352        29,730
                                                   --------       --------        --------      --------
DILUTED EARNINGS PER SHARE
Net income (loss) per common
  and equivalent share                             $   0.02       $  (0.21)       $  (0.45)     $  (0.17)
                                                   --------       --------        --------      --------
Weighted  shares outstanding                         31,942         30,163          31,352        29,730
                                                   --------       --------        --------      --------
Consolidated Statement of Comprehensive Income

Net income (loss)                                  $    606       $ (6,207)       $(14,176)     $ (4,963)
                                                   --------       --------        --------      --------
Foreign translation adjustment                                          53             223           (21)
                                                   --------       --------        --------      --------

Comprehensive income (loss)                        $    606       $ (6,154)       $(13,953)     $ (4,984)
                                                   ========       ========        ========      ========
</TABLE>

           See Notes to Condensed Consolidated Financial Statements.

                                       4
<PAGE>
                                ORTHOLOGIC CORP.
                 Condensed Consolidated Statements of Cash Flows
                                 (in thousands)
                                   (Unaudited)

                                                        Nine months ended
                                                           September 30,
                                                       --------------------
                                                         2001        2000
                                                       --------    --------
OPERATING ACTIVITIES

Net loss                                               $(14,176)   $ (4,963)
Non-cash items:
Depreciation and amortization                               798       4,275
Common stock to be used for legal settlement                          2,969
Loss on sale of CPM assets and non-recurring charges     14,327           0

Net change on other operating items:
Accounts receivable                                      10,719         849
Inventory                                                 1,422      (1,020)
Prepaids and other current assets                          (215)        153
Deposits and other assets                                   160          93
Accounts payable                                           (897)        976
Accrued liabilities                                      (5,114)       (978)
                                                       --------    --------
Cash flows provided by operating activities               7,024       2,354
                                                       --------    --------

INVESTING ACTIVITIES

Purchase of fixed assets, net                              (783)     (1,619)
Proceeds from sale of CPM assets                         12,000
Sales (purchases) of short-term investments             (12,563)        250
                                                       --------    --------
Cash flows used in investing activities                  (1,346)     (1,369)
                                                       --------    --------

FINANCING ACTIVITIES

Payments on capital leases                                   88         (42)
Proceeds from stock option exercises and other              353         166
                                                       --------    --------
Cash flows provided by financing activities                 441         124
                                                       --------    --------

NET INCREASE IN CASH AND CASH EQUIVALENTS                 6,119       1,109

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD            6,753       6,023
                                                       --------    --------
CASH AND CASH EQUIVALENTS, END OF PERIOD               $ 12,872    $  7,132

Supplemental disclosure of cash flow information
   Cash paid during the period for interest            $     70    $    100
   Cash paid during the period for income taxes        $      0    $    (32)

            See Notes to Condensed Consolidated Financial Statements

                                        5
<PAGE>
                                ORTHOLOGIC CORP.
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.   FINANCIAL STATEMENT PRESENTATION

     The Condensed  Consolidated  Balance Sheet as of September 30, 2001 and the
Condensed Consolidated Statements of Operations and Comprehensive Income for the
three months and nine months ended September 30, 2001 and 2000 and the Condensed
Consolidated  Statements  of Cash Flows for the nine months ended  September 30,
2001 and  2000  are  unaudited.  However,  in the  opinion  of  management,  the
unaudited interim financial statements include all adjustments necessary for the
fair presentation of the Company's  financial  position,  results of operations,
and cash  flows,  including  adjustments  to accrue for costs of exiting the CPM
business (See Note 3). The results of operations for the interim periods are not
indicative of the results to be expected for the complete  fiscal year primarily
because the Company  exited the CPM business in July 2001,  and the CPM business
accounted for approximately  two-thirds of the Company's  revenues . The Balance
Sheet as of December 31, 2000 is derived from the  Company's  audited  financial
statements  included in the 2000  Annual  Report on Form 10-K.  These  financial
statements should be read in conjunction with the financial statements and notes
thereto included in the Company's 2000 Annual Report on Form 10-K.

     The  preparation  of financial  statements  in  conformity  with  generally
accepted accounting principles necessarily requires management to make estimates
and assumptions  that affect the reported  amounts of assets and liabilities and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.  Significant estimates
in the  accompanying  financial  statements  include the  allowance for doubtful
accounts  and sales  discounts  and  adjustments,  which are based  primarily on
trends in historical  collection  statistics,  consideration  of current events,
payer mix and other considerations.  The Company derives a significant amount of
its  revenues in the United  States from  third-party  health  insurance  plans,
including Medicare.  Amounts paid under these plans are generally based on fixed
or  allowable  reimbursement  rates.  In the  opinion  of  management,  adequate
allowances have been provided for doubtful accounts and contractual adjustments.
Any differences  between estimated  reimbursement and final  determinations  are
reflected in the year finalized.

2.   CO-PROMOTION AGREEMENT FOR HYALGAN

     The  Company  entered  into  an  exclusive   Co-Promotion   Agreement  (the
"Agreement")  with Sanofi  Pharmaceuticals,  Inc.  ("Sanofi")  at a cost of $4.0
million on June 23, 1997 for the purpose of marketing Hyalgan, a hyaluronic acid
sodium salt,  to  orthopedic  surgeons in the United States for the treatment of
pain in patients with osteoarthritis of the knee.

     The Company's  sales force began to promote Hyalgan in the third quarter of
1997. Fee revenue of $9.3,  $8.3,  and $8.7 million was recognized  during 2000,
1999,  and 1998  respectively.  In the fourth  quarter of 2000,  the Company and
Sanofi  mutually agreed to terminate this  Agreement.  The Company  returned the
rights to sell Hyalgan back to Sanofi.  The Company  received  $4.0 million cash
during the fourth  quarter of 2000 and the first  quarter of 2001 for the return
of the rights and successful transition of the business back to Sanofi, and will
receive  continuing  royalties for the next two years.  Of the $4.0 million cash
received, $1.0 million was received in the quarter ended March 31, 2001. Royalty
revenues  for Hyalgan  were  $972,000 in the quarter  ended  September  30, 2001
compared to Hyalgan sales revenues of $2.2 million in the same period in 2000.

                                       6
<PAGE>
3.   LOSS ON SALE OF ASSETS AND OTHER NON-RECURRING CHARGES

     On July 13, 2001, the Company announced the sale of its Continuous  Passive
Motion ("CPM") business.  In early July 2001, the Company received $12.0 million
in cash, with the purchaser  assuming  approximately $2.0 million in liabilities
in connection with the sale of certain CPM related assets that had been recorded
in the Company's financial statements at a carrying value of approximately $20.7
million.  The Company  recorded a $6.9 million charge in the 2001 second quarter
financial statements to write down the sold CPM assets to their fair value, less
the  direct  costs of selling  the  assets.  The  Company  may  receive up to an
additional  $2.5  million  of cash if certain  objectives  are  achieved  by the
purchaser of the business.  Because there is no reasonable  basis for estimating
the degree of certainty that these  objectives  will be reached,  the additional
contingent  consideration  has not and will not be recorded in the  accompanying
financial statements until the cash is actually received by the Company.

     The Company retained all the billed account  receivable  related to the CPM
business,  with a net carrying value of approximately  $10.8 million.  (Net of a
$5.2  million  allowance  for  doubtful  accounts).  The  collection  staff  and
supervisor  previously  responsible for the collection of these  receivables are
part of the employee team hired by the  purchaser of the CPM  business.  Company
management  believes that there may be some negative effect to the efficiency of
the collection team as the Company has hired contractors to replace the previous
collection personnel. As a result, a charge of $2.8 million was included in "CPM
divestiture and  non-recurring  charges" in the  accompanying  2001 Statement of
Operations.  Actual  collection  results  could  differ  materially  from  these
estimates.   Any   difference   between   estimated   reimbursement   and  final
determinations will be reflected in the period finalized.

     In connection  with the sale of the CPM business,  in June 2001 the Company
notified  approximately  331 of the Company's 505 employees that their positions
were eliminated.  The accompanying  Statement of Operations includes a charge of
approximately  $3.3  million  included  in "CPM  divestiture  and  non-recurring
charges" for  severance  and stay-on  bonuses  that will be paid to  individuals
during the next year.  The Company  also  recorded  additional  exit  charges of
approximately $1.4 million for various costs relating to the CPM divestiture.

     A summary of the severance and other reserve balances at September 30, 2001
are as follows:

                                 Total    Amount Charged    Cash      Reserves
                                Charges   Against Assets    Paid     @ 9/30/01
                                -------   --------------   -------   ---------
Severance and stay-on bonus     $ 3,300            0       ($2,058)   $ 1,242
Other exit costs                  1,387      ($  245)         (963)       179
                                -------      -------       -------    -------
Total non-recurring charges     $ 4,687      ($  245)      ($3,021)   $ 1,421

                                       7
<PAGE>
     As noted above, the CPM business and related assets were sold in early July
2001. Subsequent to the sale, the Company is no longer in the CPM business.  The
revenues and cost of revenues attributable to the CPM business were:

                              Three months ended September 30,
                              --------------------------------
                                    2001             2000
                                  -------          -------
     Revenues                     $   845          $14,078
     Cost of revenues                (134)           3,371
                                  -------          -------
     Gross profit                 $   979          $10,707

                               Nine months ended September 30,
                              --------------------------------
                                    2001             2000
                                  -------          -------
     Revenues                     $28,860          $44,752
     Cost of revenues               5,809           10,518
                                  -------          -------
     Gross profit                 $23,051          $34,234

     Most operating  expenses were not directly  allocated between the Company's
various lines of business.  Cash  requirements  for the severance and exit costs
are currently estimated to be funded from the Company's current cash balances.

4.   LICENSING AGREEMENT FOR CHRYSALIN

     The  Company  announced  in  January  1998 that it had  acquired a minority
interest in a Biotech firm,  Chrysalis  BioTechnology,  Inc.  ("Chrysalis")  for
$750,000.  As part of the  transaction,  the Company  was awarded a  nine-month,
worldwide, exclusive option to license the orthopedic applications of Chrysalin,
a patented  23-amino  acid peptide that has shown  promise in  accelerating  the
healing  process.  The Company has  completed  pre-clinical  safety and efficacy
profile of the product. In pre-clinical  animal studies,  Chrysalin was shown to
double  the rate of  fracture  healing  with a single  injection  into the fresh
fracture gap. The Company's agreement with Chrysalis contains provisions for the
Company to continue to expand its options to license Chrysalin,  contingent upon
regulatory  approvals,  successful  pre-clinical  trials,  and certain milestone
payments  to  Chrysalis  by the  Company.  As  part  of the  equity  investment,
OrthoLogic acquired options to license Chrysalin for orthopedic applications.  A
fee of $750,000  for the initial  license was  expensed in the third  quarter of
1998 and the license  agreement  was extended to January  1999. In January 1999,
the Company exercised its option to license the U.S. development,  marketing and
distribution  rights  of  Chrysalin  for  fracture  indications.  As part of the
license agreement,  and in conjunction to the U.S. Food and Drug  Administration
(the "FDA") clearance to begin human clinical trials, OrthoLogic made a $500,000
milestone  payment to Chrysalis in the fourth  quarter of 1999. In January 2000,
the Company began  enrolling  patients in the combined Phase I/II clinical trial
for Chrysalin.  The Company is preparing to file an application  for a Phase III
human clinical  trial.  In July 2000, the Company paid $2.0 million to Chrysalis
and announced it was  expanding  its license  agreement to include all Chrysalin
orthopedic indications worldwide. In July 2001, the Company paid $1.0 million to
Chrysalis to extend its  worldwide  license for  Chrysalin to include the rights
for orthopedic  "soft tissue"  indications,  including  cartilage,  tendon,  and
ligament repair. In addition, the agreement calls for the Company to pay certain
other  milestone  payments and royalty fees,  based upon products  developed and
achievement  of commercial  services.  Except for the $750,000  minority  equity
interest,  all  payments  made to Chrysalis  have been  expensed as research and
development expenses.

                                       8
<PAGE>
5.   LITIGATION

     During 1996,  certain class action lawsuits were filed in the United States
District  Court for the  District  of Arizona  against  the  Company and certain
officers and directors,  alleging  violations of Section 10(b) of the Securities
Exchange  Act of 1934 and SEC Rule  10b-6  promulgated  thereunder  and to other
defendants Section 20(a) of the Exchange Act.

     Plaintiffs in these actions alleged  generally that information  concerning
the May 31, 1996  letter  received by the  Company  from the FDA  regarding  the
Company's  OrthoLogic  1000 Bone  Growth  Stimulator,  and the matters set forth
therein,  were material and  undisclosed,  leading to an  artificially  inflated
stock price. Plaintiffs further allege that the Company's  non-disclosure of the
FDA   correspondence   and  of  the  alleged   practices   referenced   in  that
correspondence  operated  as a fraud  against  plaintiffs,  in that the  Company
allegedly made untrue  statements of material facts or omitted to state material
facts in order to make the statement not misleading.  Plaintiffs further alleged
that once the FDA letter  became known a material  decline in the stock price of
the Company  occurred,  causing damage to the plaintiffs.  All plaintiffs sought
class action  status,  unspecified  compensatory  damages,  fees and costs.  The
actions were  consolidated  for all purposes in the United States District Court
for the District of Arizona.  On March 31, 1999,  the judge in the  consolidated
case before the United  States  District  Court  granted  the Company  Motion to
Dismiss  and  entered an order  dismissing  all claims in the suite  against the
Company and two individual officers/directors.  The judge allowed certain narrow
claims based on insider trading  theories to proceed against certain  individual
defendants.  On December 21, 1999, the District Court granted plaintiffs' motion
for class  certification  to include  purchasers  of common stock between June 4
through June 18, 1996, inclusive.

     On or about June 20, 1996, a lawsuit  entitled  Norman  Cooper,  et. al. v.
OrthoLogic,  Corp.,  et. al, and Case No. CV 96-10799  was filed in the Superior
Court,  Maricopa County,  Arizona.  The plaintiffs  allege violations of Arizona
Revised Statutes sections 44-1991 (state securities fraud) and 44-1522 (consumer
fraud) and common law fraud based upon factual allegations substantially similar
to those  alleged in the federal  court  class  action  complaints.  Plaintiffs'
sought class action status,  unspecified compensatory and punitive damages, fees
and costs.  Plaintiffs also sought injunction and or equitable relief. The court
granted the plaintiffs' motion for the class certification on November 24, 1999.

     In October 2000, the Company  announced that it had entered a Memorandum of
Understanding  regarding settlement of the remaining class action claims and the
Norman Cooper lawsuits.  The settlement consists of $1.0 million in cash and one
million shares of newly issued OrthoLogic common stock valued at $2,969,00.  The
settlement was approved and the Norman Cooper lawsuits  dismissed with prejudice
by the  Arizona  Supreme  Court on August 13,  2001.  Subsequently,  the parties
submitted a request for  dismissal  of the federal  class  action suit which was
granted. The federal class action suit was dismissed with prejudice.

     A  significant  portion of the cash  payment was funded from the  Company's
directors' and officers' liability insurance policy. The Company recorded a $3.6
million charge, including legal expenses, for settlement of the litigation.

     Management  believes the settlement is in the best interests of the Company
and its  shareholders  as it frees  the  Company  from the cost and  significant
distraction of the ongoing litigation.  The settlement does not constitute,  and
should not be construed as, an admission that the defendants  have any liability
or acted  wrongfully  in any way with  respect  to the  plaintiffs  or any other
person.

                                       9
<PAGE>
     At September  30, 2001,  in addition to the matters  disclosed  above,  the
Company  is  involved  in  various  other  legal  proceedings  that arose in the
ordinary  course of business.  The costs  associated  with  defending  the above
allegations  and the  potential  outcome  cannot be  determined at this time and
accordingly,  no estimate for such costs have been included in the  accompanying
Financial  Statements.  In management's  opinion, the ultimate resolution of the
above  legal  proceedings  will  not have a  material  effect  on the  financial
position of the Company.

6.   LINE OF CREDIT

     The Company reduced its revolving line of credit with a lending institution
from $10 million to $4 million  after  completing  the sale of the CPM business.
The Company may borrow up to 75% of the eligible account receivable,  as defined
in the agreement.  The interest rate is at prime rate.  Interest accruing on the
outstanding  balance and a monthly  administration  fee is due in arrears on the
first day of each month. The line of credit expires February 28, 2003. There are
certain financial covenants and reporting requirements associated with the loan.
Included in the financial  covenants are (1) tangible net worth of not less than
$30  million,  (2) a quick  ratio  of not less  than  2.0 to 1.0,  (3) a debt to
tangible  net  worth  ratio  of not  less  than  0.50  to 1.0,  and (4)  capital
expenditures  will not exceed more than $7.0 million during any fiscal year. The
Company has not utilized this line of credit.

7.   SERIES B CONVERTIBLE PREFERRED STOCK

     As of September 30, 2001,  14,400 shares of Series B Convertible  Preferred
Stock had been converted into 5,746,584 Shares of common stock.

                                       10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
        OF OPERATIONS.

     The  following  is  management's  discussion  of  significant  factors that
affected the Company's  interim  financial  condition and results of operations.
This should be read in conjunction with Management's  Discussion and Analysis of
Financial  Condition and Results of Operations  included in the Company's Annual
Report on Form 10-K for the year ended December 31, 2000.

RESULTS OF OPERATIONS

     For the quarter ended September 30, 2001, the Company reported a net profit
of $606,000, or $0.02 cents per diluted share, on sales of $9.6 million compared
with a net loss of $6.2 million, or ($0.21) cents per diluted share, on sales of
$21.0 million for the third  quarter of 2000.  Revenues for the third quarter of
2000 included a full quarter of sales from the Continuous Passive Motion ("CPM")
business,  which was sold July 2001. Financial results from the third quarter of
2000 included a research and development  charge of $2.0 million for an extended
license for Chrysalin.

     For the first nine months ended September 30, 2001, the Company  reported a
net loss of $14.2  million,  or ($0.45)  per  diluted  share,  on sales of $53.3
million  compared  with the net loss of $5.0  million,  or ($0.17)  per  diluted
share, on sales of $66.0 million for the first nine months of 2000. The loss for
the first nine months of 2001 included  $14.3 million in costs  associated  with
the sale of the CPM business as well as a $1.0 million  research and development
charge to obtain certain additional rights for Chrysalis.

REVENUES

     The Company reported revenues of $9.6 million for the third quarter of 2001
representing  a 55% decrease from revenues of $21.0 million for the same quarter
of 2000.  The  Company's  revenues  decreased  19% to $53.3 million for the nine
months  ended  September  30, 2001 from $66.0  million for the nine months ended
September 30, 2000. The decline in sales was primarily  attributable to the loss
of sales due to the  termination  of Company's  distribution  of Hyalgan and the
sale of the CPM business. This decrease was partially off set by increased sales
of the OL1000 and sales of SpinaLogic  for the three months ended  September 30,
2001 over the same period in 2000.

     As noted above, the CPM business and related assets were sold in early July
2001. Subsequent to the sale, the Company is no longer in the CPM business.  The
revenues and cost of revenues attributable to the CPM business were:

                              Three months ended September 30,
                              --------------------------------
                                    2001             2000
                                  -------          -------
     Revenues                     $   845          $14,078
     Cost of revenues                (134)           3,371
                                  -------          -------
     Gross profit                 $   979          $10,707


                              Nine months ended September 30,
                              --------------------------------
                                    2001             2000
                                  -------          -------
     Revenues                     $28,860          $44,752
     Cost of revenues               5,809           10,518
                                  -------          -------
     Gross profit                 $23,051          $34,234

                                       11
<PAGE>
GROSS PROFIT

     Gross  profit  decreased  from $16.7  million  for the three  months  ended
September  30, 2000 to $8.3  million for the three months  ended  September  30,
2001.  Gross  profit,  as a  percentage  of  revenues  was 86.9% for the quarter
compared  to 79.5% for the same  period  last year.  For the nine  months  ended
September 30, 2001,  gross profit was $43.4 million as compared to $52.6 million
for the nine months ended  September  30, 2000.  Gross profit as a percentage of
revenues  were 79.7% for the  nine-month  period  ended  September  30, 2000 and
increased  to  81.5%  for the same  period  in 2001.  Gross  profit  percentages
improved due to increased  sales of the Company's  higher margin  products,  the
OL-1000 and SpinaLogic, and the sale of the CPM business.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

     Selling,  general and administrative ("SG&A") expenses for the three months
ended  September 30, 2001 were $7.4  million,  a decrease from $20.5 million for
the three months ended  September  30, 2000.  SG&A  expenses for the nine months
ended  September 30, 2001 were $40.6 million,  a decrease from $54.0 million for
the nine months ended September 30, 2000. SG&A costs between the two periods are
not comparable due to the sale of the CPM business.

RESEARCH AND DEVELOPMENT

     Research and development  ("R&D")  decreased to $486,000 in the three-month
period  ended  September  30, 2001  compared to $2.6 million for the same period
last year.  R&D expenses for the nine months  ended  September  30, 2001 totaled
$3.1  million,  a  decrease  from the $3.9  million  for the nine  months  ended
September  30,  2000.  The  2001  and  2000  expenses  reflect  continued  costs
associated  with the  Chrysalin  clinical  trials and  payments to  Chrysalis to
extend  the  Company's   worldwide  license  for  soft  tissue  indications  for
Chrysalin.

OTHER INCOME AND EXPENSES

     Other  income,  consisting  primarily of interest  income,  increased  from
$112,000 to $223,000 for the  three-month  periods ended  September 30, 2000 and
2001,  respectively.  For the nine-month  period ended September 30, 2001, other
income  increased to $482,000  from $298,000 for the same period in the previous
year.

LIQUIDITY AND CAPITAL RESOURCES

     On September 30, 2001 the Company had cash and equivalents of $12.9 million
compared to $6.8 million as of December 31, 2000.  The Company had $15.1 million
of short-term investments as of September 30, 2001. In addition, the Company has
an available $4.0 million  accounts  receivable  revolving line of credit with a
bank. The Company received a cash payment of $12 million in conjunction with the
CPM divestiture in the quarter ended September 30, 2001.

     The Company  anticipates that its cash and short-term  investments on hand,
cash from  operations  and the funds  available  from the line of credit will be
sufficient to meet the Company's  presently  projected cash and working  capital
requirements for the next 12 months. There can be no assurances,  however,  that
this will prove to be the case.  The timing and amounts of cash used will depend
on many  factors,  including  the  Company's  ability to  continue  to  increase
revenues,  reduce and control  its  expenditures,  and collect  amounts due from
third  party  payers.  Additional  funds may be  required  if the Company is not
successful in any of these areas.  Cash  requirements  to fund the severance and
costs of exiting the CPM  businesses  are currently  estimated to be funded from
the Company's current cash balances.

                                       12
<PAGE>
ITEM 3. MARKET RISKS

     The Company has no debt and no  derivative  instruments  at  September  30,
2001.

     The Company's  Canadian  operations  were sold as part of the CPM sale, and
the Company has no exposure to foreign exchange rates at September 30, 2001.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

     This report contains  forward-looking  statements within the meaning of the
Private  Securities  Litigation  Reform Act of 1995,  including  projections  of
results of operations  and financial  condition,  statements of future  economic
performance,  and  general or specific  statements  of future  expectations  and
beliefs. The matters covered by such  forward-looking  statements are subject to
known and unknown  risks,  uncertainties  and other  factors which may cause the
actual results,  performance or achievements of the Company to differ materially
from those contemplated or implied by such forward-looking statements. Important
factors which may cause actual  results to differ  include,  but are not limited
to, the following  matters,  which are discussed in more detail in the Company's
Form 10-K for the 2000 fiscal year.

     The Company has  recently  sold its CPM  division in the United  States and
Canada. There will be costs to the Company associated with the smooth transition
of this  business and the related  employees  to the buyer.  Some of these costs
will be directly  monetary;  others will involve the costs  associated  with the
time and effort of the Company's  executives  involved in the transition and the
time it takes to reposition the Company's direction after the sale. In addition,
the  Company  will be moving  portions  of its  operations  within  its  current
principal office to make room to sublet space to the buyers of the CPM business.
Although the Company does not expect these transition costs to have a materially
adverse effect on the Company, there can be no assurance how long the transition
will take and what the total cost will be.

     To the extent that the Company  presently  enjoys  perceived  technological
advantages  over  competitors,  technological  innovation  by  present or future
competitors  many of whom are larger than the  Company  may erode the  Company's
position in the market. To sustain  long-term  growth,  the Company must develop
and introduce new products and expand  applications of existing products,  as it
is currently doing with the human trials of Chrysalin;  however, there can be no
assurance  that  the  Company  will be able to do so or that the  market  or FDA
regulators  will accept any such new products or applications or will do so in a
timely manner.

     The Company operates in a highly  regulated  environment and cannot predict
the actions of  regulatory  authorities.  The action or non-action of regulatory
authorities may impede the development and  introduction of new products and new
applications for existing products,  and may have temporary or permanent effects
on the Company's marketing of its existing or planned products.

     There can be no assurance  that the influence of managed care will continue
to grow either in the United  States or abroad,  or that such growth will result
in greater acceptance or sales of the Company's products.  In particular,  there
can be no  assurance  that  existing or future  decision  makers and third party
payors  within  the  medical  community  will  be  receptive  to the  use of the
Company's  products  or replace or  supplement  existing  or future  treatments.
Moreover,  the  transition  to  managed  care and the  increasing  consolidation
underway in the managed  care  industry  may  concentrate  economic  power among
buyers  of  the  Company's  products,   which  concentration  could  foreseeable
adversely affect the Company's margins.

     Although the Company believes that existing securities litigation initiated
against  the  Company  is  without  merit and the  Company  has  entered  into a
Memorandum of  Understanding  with the plaintiffs to settle the litigation.  The
settlement  must still be  approved  by the class of  plaintiffs  and the court.
Further,  members of the class have the option to opt out of the  settlement and
pursue  claims on their own. If the class or court rejects the  settlement,  the
litigation  could continue.  An adverse outcome of such litigation  could have a
material  adverse  effect on the  Company's  business,  financial  condition and
results of operation.

                                       13
<PAGE>
                          PART II -- OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See "Note 4 - Litigation" of the Notes to the Condensed  Consolidated  Financial
Statements above.

ITEM 6. EXHIBITS AND REPORTS

     (a) Exhibit Index

          None

     (b) Reports on Form 8-K

          None

                                       14
<PAGE>
                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

ORTHOLOGIC CORP.
 (Registrant)


<TABLE>
<CAPTION>
Signature                          Title                                               Date
---------                          -----                                               ----
<S>                                <C>                                                 <C>

/s/ Thomas R. Trotter              President and Chief Executive Officer               November 9, 2001
------------------------------     (Principal Executive Officer)
Thomas R. Trotter


/s/ Sherry A. Sturman              Vice-President and Chief Financial Officer          November 9, 2001
------------------------------     (Principal Financial and Accounting Officer)
Sherry A. Sturman
</TABLE>

                                       15
<PAGE>
                                ORTHOLOGIC CORP.
                 Exhibit Index to Quarterly Report on Form 10-Q
                For the Quarterly Period Ended September 30, 2001

                                        Incorporated by          Filed
Exhibit No          Description         Reference to:            Herewith
----------          -----------         -------------            --------

None