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               June 30, 1997
                                 -----------------------------------------------

                                       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             (I.R.S. Employer Identification No.)
incorporation or organization)                         


  2850 S. 36th Street, #16, Phoenix, Arizona                             85034
--------------------------------------------------------------------------------
(Address of principal executive offices)                              (Zip Code)


                                 (602) 437-5520
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)



--------------------------------------------------------------------------------
              (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.
                                                            [X]Yes    [ ]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.

        25,102,846 shares of common stock outstanding as of July 31, 1997
<PAGE>
                                ORTHOLOGIC CORP.



                                      INDEX


                                                                        Page No.
Part I      Financial Information

            Item 1.  Financial Statements

            Condensed Consolidated Balance Sheets
                June 30, 1997 and December 31, 1996 ...........................1

            Consolidated Statements of Operation 
                Three Months and Six Months ended June 30, 1997 and 1996 ......2

            Consolidated Statements of Cash Flows
                Six Months ended June 30, 1997 and 1996 .......................3

            Notes to Consolidated Financial Statements ........................4

            Item 2.  Management's Discussion and Analysis of
                          Financial Condition and Results of Operations .......7


Part II     Other Information

            Item 1.  Legal Proceedings .......................................11

            Item 3.  Quantitative and Qualitative Disclosures
                          About market Risk ..................................11

            Item 4.  Submission of Matters to a Vote of Security Holders .....11

            Item 5.  Other Information .......................................11

            Item 6.  Exhibits and Reports on Form 8-K ........................12
<PAGE>
                                OrthoLogic Corp.
                      Condensed Consolidated Balance Sheets
                                 (in thousands)




                                                         June 30,   December 31,
                                                          1997          1996
                                                        ---------     ---------
ASSETS                                                 (Unaudited)

Cash and cash equivalents                               $   9,046     $  13,494
Short-term investments                                     12,933        35,307
Accounts receivable                                        31,247        26,856
Inventory                                                   9,814         6,551
Prepaids and other current assets                           1,858         1,195
Deferred income taxes                                       2,599         2,401
                                                        ---------     ---------
   Total current assets                                    67,497        85,804

Furniture, rental fleet and equipment                      15,488        11,364
Accumulated depreciation                                   (3,782)       (2,282)
                                                        ---------     ---------
  Furniture and equipment, net                             11,706         9,082

Intangibles, net                                           35,605        17,847
Deposits and other assets                                      91            93
Note receivable - Officer                                    --             200
                                                        ---------     ---------

   Total Assets                                         $ 114,899     $ 113,026
                                                        =========     =========

LIABILITIES AND STOCKHOLDERS' EQUITY


Liabilities

Accounts payable                                        $   3,093     $   2,042
Loan payable - current portion                                455          --
Accrued liabilities                                        10,521         8,777
                                                        ---------     ---------
   Total current liabilities                               14,069        10,819

Deferred rent and capital lease obligation                    189           280
Loan payable - long term portion                              625          --
Obligations under co-promotion agreement                    1,000          --
                                                        ---------     ---------
   Total liabilities                                       15,883        11,099
                                                        ---------     ---------

Commitments                                                  --            --

Stockholders' Equity

Common stock                                                   13            13
Additional paid-in capital                                118,980       118,832
Deficit                                                   (19,977)      (16,918)
                                                        ---------     ---------
   Total stockholders' equity                              99,016       101,927
                                                        ---------     ---------

     Total Liabilities and Stockholders' Equity         $ 114,899     $ 113,026
                                                        =========     =========

See notes to consolidated financial statements.
                                                                          Page 1
<PAGE>
                                OrthoLogic Corp.
                      Consolidated Statements of Operations
                                    Unaudited
                      (in thousands, except per share data)
<TABLE>
<CAPTION>
                                     Three months ended June 30,    Six months ended June 30,
                                     ---------------------------    -------------------------
                                          1997        1996              1997        1996
                                        --------------------          --------------------
<S>                                     <C>         <C>               <C>         <C>     
REVENUES
  Net sales                             $  9,377    $  7,912          $ 18,949    $ 14,671
  Net rentals                              8,940        --              16,670        --
                                        --------------------          --------------------
     Total Revenues                       18,317       7,912            35,619      14,671
                                        --------------------          --------------------

COST OF REVENUES
  Cost of goods sold                       2,304       1,252             5,018       2,374
  Cost of rentals                          2,274        --               4,306        --
                                        --------------------          --------------------
     Total Cost of Revenue                 4,578       1,252             9,324       2,374
                                        --------------------          --------------------

GROSS PROFIT                              13,739       6,660            26,295      12,297

OPERATING EXPENSES
  Selling, general and administrative     16,311       5,527            29,200       9,951
  Research and development                   613         546             1,189       1,097
                                        --------------------          --------------------
     Total Operating Expenses             16,924       6,073            30,389      11,048
                                        --------------------          --------------------

OPERATING INCOME (LOSS)                   (3,185)        587            (4,094)      1,249

OTHER INCOME
 Grant revenue                                25          45                99          94
 Interest income                             389         863               951       1,102
                                        --------------------          --------------------
             Total Other Income              414         908             1,050       1,196
                                        --------------------          --------------------

INCOME (LOSS) BEFORE INCOME TAXES         (2,771)      1,495            (3,044)      2,445

Provision for income taxes                  --            15              --            30
                                        --------------------          --------------------

NET INCOME (LOSS)                       $ (2,771)   $  1,480          $ (3,044)   $  2,415
                                        ====================          ====================

NET INCOME (LOSS) PER COMMON SHARE      $  (0.11)   $   0.06          $  (0.12)   $   0.11
                                        ====================          ====================

WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING                 25,096      24,769            25,066      22,734
                                        ====================          ====================
</TABLE>
See notes to consolidated financial statements.
                                                                          Page 2
<PAGE>
                                OrthoLogic Corp.
                      Consolidated Statements of Cash Flows
                                    Unaudited
                      (in thousands, except per share data)
<TABLE>
<CAPTION>
                                                                                  Six Months Ended
                                                                                --------------------
                                                                                June 30,    June 30,
                                                                                  1997        1996
                                                                                --------    --------
<S>                                                                             <C>         <C>     
OPERATING ACTIVITIES
    Net Income (Loss)                                                           $ (3,044)   $  2,415
                  Noncash items:
                  Depreciation and amortization                                    3,078         183
                  Other                                                              (15)       --

                  Net change in Other Operating items:
                  Accounts receivable                                                524      (5,109)
                  Inventory                                                         (610)     (1,035)
                  Prepaids and other current assets                                 (657)       (668)
                  Deposits and other assets                                            2           5
                  Accounts payable                                                  (496)        254
                  Accrued liabilities                                               (423)        882
                                                                                --------    --------
                                    Cash Flows (used in) Operating Activities     (1,641)     (3,073)
                                                                                --------    --------

INVESTING ACTIVITIES
                  Purchase of fixed assets, net                                   (2,797)       (318)
                  Cash paid for acquisitions, net of other effects               (20,907)       --
                  Sales (Purchases) of short term investments                     22,373     (13,628)
                  Collection of note receivable                                      200         125
                  Payments under co-promotion agreement                           (1,011)       --
                  Intangible from dealer transactions                               (486)     (3,676)
                                                                                --------    --------
                                    Cash Flows (used in) Investing Activities     (2,628)    (17,497)
                                                                                --------    --------

FINANCING ACTIVITIES
                  Payments on Capital Leases                                         (32)       --
                  Payments on Loan Payable                                          (295)       --
                  Proceeds from issuance of common stock                            --        74,867
                  Net proceeds from stock option exercises                           148        --
                                                                                --------    --------
                                    Cash Flows (used in) provided by                (179)     74,867
                                                                                --------    --------
                                    Financing Activities

NET INCREASE (DECREASE) IN CASH AND
    CASH EQUIVALENTS                                                              (4,448)     54,297
CASH AND CASH EQUIVALENTS,
    BEGINNING OF PERIOD                                                           13,494       8,831
                                                                                --------    --------
CASH AND CASH EQUIVALENTS, END OF PERIOD                                        $  9,046    $ 63,128
                                                                                ========    ========


SUPPLEMENTAL DISCLOSURES  OF CASH FLOW  INFORMATION
                  Cash paid  during  the period for:
                  Interest                                                      $     52    $      0
                                                                                ========    ========
                  Income Taxes                                                  $    238    $     10
                                                                                ========    ========
</TABLE>
See notes to consolidated financial statements.
                                                                          Page 3
<PAGE>
                                ORTHOLOGIC CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.    Financial Statement Presentation
      --------------------------------

The  consolidated  financial  statements  have been prepared in accordance  with
generally  accepted  accounting  principles  and  include  the  accounts  of the
OrthoLogic  Corporation and its subsidiaries  (the  "Company").  All significant
intercompany accounts and transactions have been eliminated.

The condensed  consolidated  balance sheet as of June 30, 1997, the consolidated
statements of operations for the three months and six months ended June 30, 1997
and 1996 and the  consolidated  statement of cash flows for the six months ended
June 30, 1997 and 1996 are unaudited; however, in the opinion of management, all
adjustments  (consisting only of normal recurring  adjustments)  necessary for a
fair  presentation of financial  position,  results of operations and cash flows
have been included.  The results of operations  for the interim  periods are not
necessarily  indicative  of the results to be expected for the  complete  fiscal
year.

Certain  information  and footnote  disclosures  normally  included in financial
statements prepared in accordance with generally accepted accounting  principles
have been condensed or omitted. It is suggested that these financial  statements
be read in conjunction with the financial  statements and notes thereto included
in the Company's 1996 Annual Report on Form 10-K.

2.    New Accounting Pronouncements
      -----------------------------

In February  1997, the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement of Financial  Accounting  Standards  ("SFAS") No. 128,  "Earnings  per
Share",  effective for both interim and annual periods ending after December 15,
1997. This statement  specifies the computation,  presentation and disclosure of
earnings per share for  entities  with  publicly  held common stock or potential
common stock. The Company will provide the required  disclosures in its year-end
report.  The  effect  on the  Company's  earnings  per share  disclosure  is not
material for the periods presented.

The  Financial  Accounting  Standards  Board  recently  issued  SFAS No.  130 on
"Reporting Comprehensive Income" and SFAS No. 131 on "Disclosures about Segments
of an Enterprise and Related Information." The "Reporting  Comprehensive Income"
standard is effective for fiscal years  beginning  after  December 15, 1997. The
standard changes the reporting of certain items currently reported in the common
stock equity section of the balance sheet.  The Company is currently  evaluating
what impact this standard will have on the Company's financial  statements.  The
"Disclosures about Segments of an Enterprise and Related  Information"  standard
is effective for fiscal years  beginning  after December 15, 1997. This standard
requires  that public  companies  report  certain  information  about  operating
segments in their financial statements.  It also establishes related disclosures
about products and services,  geographic areas, and major customers. The Company
is currently evaluating what impact this standard will have on its disclosures.

3.    Preferred Stock Purchase Rights
      -------------------------------

On  February  25,  1997 the  Company  declared  a dividend  distribution  of one
Preferred Stock Purchase Right (the "Rights") for each outstanding  share of the
Company's  common  stock,  payable  March 12,  1997 to holders of record on that
date. The Rights will expire on March 11, 2007.
                                                                          Page 4
<PAGE>
                                ORTHOLOGIC CORP.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


Each  Right  will  entitle  shareholders  to buy  1/100 of a share  of  Series A
Preferred Stock at an exercise price of $25.00.

Initially, no separate Rights certificates will be distributed;  the Rights will
trade with the  Company's  common  stock and will not be  exercisable  until the
earlier of 10 business  days  following  the  acquisition  of 15% or more of the
Company's  common stock by a person or group or 15 business  days  following the
commencement of a tender offer for 20% or more of the Company's common stock.

At the  discretion  of the Board of Directors of the Company,  the Rights can be
redeemed at any time prior to the 10th day  following the date the Rights become
exercisable.  If the Rights are not  redeemed  by the Board,  and the Company is
acquired,  holders of the Rights  (other  than an  "acquiring  person")  will be
entitled to purchase  additional shares of common stock of either the Company or
the acquiring corporation (whichever survives) at one-half the market price.

4.    Acquisitions
      ------------

On March 3, 1997 and March 12, 1997,  the Company  acquired  certain  assets and
assumed  certain  liabilities of Toronto  Medical Corp.  (Toronto) and Danninger
Medical   Technology,   Inc.  (DMTI).   After  paying  certain  of  the  assumed
liabilities,  the net cash outlay was approximately $7.5 million for Toronto and
$10.7 million for DMTI. Both acquisitions were accounted for as a purchase which
resulted in goodwill  of $4 million for Toronto and $7.7  million for DMTI.  The
goodwill is being amortized over 20 years.

Management is  restructuring  the operations  related to these  acquisitions and
Sutter  Corporation  (acquired in August 1996).  The  restructuring  activities,
which will continue through the third quarter, include closing and/or relocating
duplicate  facilities and terminating or relocating certain employees.  Once the
estimated costs related to these activities are determined, they will be accrued
and  reflected as  additional  acquisition  costs in the  allocation of purchase
price.

Had the Toronto  and DMTI  acquisitions  occurred  on January 1, 1996,  combined
unaudited  pro forma  results  for the six months  ended June 30, 1997 and 1996,
would have been:  net revenues - $38.9 million and $23.3  million;  net (loss) -
$(3.0)  million  and  $(224,000);  net  (loss) per  common  share - $(0.12)  and
$(0.01).

The pro forma amounts  disclosed  above include  revenue and net income  derived
from   product   sales  to   competing   independent   dealers  of   orthopaedic
rehabilitation products. Subsequent to the acquisition, the Company discontinued
selling products to these dealers.  Excluding the dealer product sales, combined
unaudited  pro forma  results  for the six months  ended June 30, 1997 and 1996,
would have been:  net revenues - $37.5 million and $19.7  million;  net (loss) -
$(3.4)  million  and  $(665,000);  net  (loss) per  common  share - $(0.14)  and
$(0.03).

5.    Co-promotion Agreement
      ----------------------

The Company entered into an exclusive  co-promotion  agreement (the "agreement")
with Sanofi Pharmaceuticals, Inc. ("Sanofi") on June 23, 1997 for the purpose of
marketing Hyalgan, a hyaluronic acid sodium salt, to orthopaedic surgeons in the
United States for the treatment of pain in patients with
                                                                          Page 5
<PAGE>
                                ORTHOLOGIC CORP.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


osteoarthritis  of the knee.  The initial term of the agreement ends on December
31, 2002.  Upon the  expiration  of the initial  term,  Sanofi may terminate the
agreement, extend the agreement for an additional one year period, or enter into
a revised agreement with the Company. Upon termination of the agreement,  Sanofi
shall pay the Company an amount equal to 50% of the gross  compensation  paid to
the Company, pursuant to the agreement, for the immediately preceding year.

Under the terms of the  agreement,  the  Company  is  obligated  to use its best
efforts to market and promote Hyalgan; to pay Sanofi a royalty of 10% of the net
selling  price,  as  defined;  and to pay the  manufacturer  of Hyalgan  certain
pre-determined  amounts  and a  pro-rata  portion of a 10%  royalty on  combined
annual  net  sales of  Hyalgan  by  Sanofi  and the  Company  in excess of $30.0
million. In addition, the Company is obligated to pay a total of $4.0 million in
payments  during the first eighteen  months of the agreement.  During the second
quarter, the Company incurred a $1.0 million payment of this amount. The Company
has recorded the remaining $3 million in its financial statements.

The Company's sales force will commence  efforts to promote Hyalgan in the third
quarter of 1997. The Company does not anticipate  significant  revenues from the
product until after the current year.
                                                                          Page 6
<PAGE>
         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 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, 1996.

Results of Operations

         OrthoLogic  has completed  three recent  acquisitions  which affect the
         year-to-year  comparability of its consolidated  financial position and
         results of operations:  the acquisition of Sutter Corporation  (Sutter)
         on August  30,  1996 and the  acquisition  of  certain  assets  and the
         assumption   of   certain   liabilities   of  two   other   orthopaedic
         rehabilitation related companies in March 1997.

     Six Months Ended June 30, 1997 and June 30, 1996

         Revenues

         OrthoLogic's  revenues  increased  143% from $14.7  million for the six
         months  ended June 30, 1996 to $35.6  million for the six months  ended
         June 30, 1997.  The  increase in revenue was due  primarily to revenues
         from its  orthopaedic  rehabilitation  products  ($22.1  million).  The
         Company  believes  that  revenues  for its  orthopaedic  rehabilitation
         products may be seasonal,  with the  strongest  sales  occurring in the
         fourth  quarter.  Excluding the effects of the Company's  acquisitions,
         revenues from the OrthoLogic 1000 were down 9% to $12.8 million for the
         six months  ended June 30, 1997 from $14.1  million for the  comparable
         period in 1996.  The Company  does not  believe  that there is a single
         factor  causing  the  decline in  OrthoLogic  1000  sales.  The Company
         attributes the decline to multiple factors,  including the shift from a
         distribution  network to a direct sales force,  a lower number of total
         salespeople  selling  the  OrthoLogic  1000 in 1997  compared  to 1996,
         quality  and   effectiveness   of  sales   management,   and  increased
         competitive pressures.

         Additionally,  during the second quarter of 1997,  the Company  changed
         its  estimate  for  allowance  for bad  debt  expense,  increasing  its
         allowance  by $2.0  million  related to  Medicare  receivables  for the
         OrthoLogic 1000 which are outside Medicare's coverage definition. Prior
         to the second quarter, Medicare reimbursed for the OrthoLogic 1000 even
         when  physicians  prescribed use of the device  outside  Medicare's own
         definition of a non-union fracture.  Prescriptions of that kind covered
         by  Medicare  typically  accounted  for  7  percent  to  9  percent  of
         OrthoLogic  1000  revenue.  The Company no longer  recognizes  Medicare
         revenue from prescriptions outside the coverage definition.

         Gross Profit

         Gross profit increased from $12.3 million for the six months ended June
         30, 1996 to $26.3  million for the six months ended June 30, 1997.  The
         increase  in gross  profit  was due  primarily  to the gross  profit of
         Sutter  ($13.3  million) and the  recently  acquired  operations  ($1.8
         million). Gross profit as a percentage of revenue was 73.8% for the six
         months ended June 30, 1997 compared to 83.8% for the comparable  period
         during 1996. The overall gross profit  percentage  declined as a result
         of the recently acquired  orthopaedic  rehabilitation  operations which
         have a lower  gross  profit  percentage  than  the  Company's  fracture
         healing products.
                                                                          Page 7
<PAGE>
         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                        RESULTS OF OPERATIONS (continued)


         Selling, General and Administrative Expenses

         Selling,  general and administrative (SG&A) expenses for the six months
         ended  June 30,  1997 were $29.2  million,  up $19.2  million  from the
         comparable  1996  period.  The 1997 period  included  the SG&A from the
         acquisitions,  which  comprise a  significant  portion of the Company's
         SG&A.  The  increase  from 1996 is also due, in part,  to the  variable
         costs  (commissions,  bad  debts  and  royalties)  associated  with the
         increased revenue. Additionally, SG&A includes $2.0 million in bad debt
         expense  related to Medicare  receivables for the OrthoLogic 1000 which
         are outside Medicare's coverage definition. During late 1996, the fixed
         component of SG&A increased due to the addition of employees, including
         salespeople added to support the Company's transition to a direct sales
         force,  and other  infrastructure  required  to support the growing and
         projected revenue volume.

         OrthoLogic  is  currently   consolidating   duplicate   facilities  and
         eliminating  expenses from redundant  operations  from within the three
         businesses that were recently acquired.

         Research and Development

         Research and  Development  (R&D) expenses were $1.2 million for the six
         months ended June 30, 1997 compared to $1.1 million for the  comparable
         1996 period.  The increase in R&D expenses was due to the acquisitions,
         while R&D for the remainder of the Company remained stable.

         Other Income

         Other  income of $1.1  million  for the six months  ended June 30, 1997
         consisted of interest  income of $951,000 and grant revenue of $99,000.
         Other  income for the  comparable  1996  period  consisted  of interest
         income of $1.1  million and grant  revenue of $94,000.  The decrease in
         interest income was due to cash used for  acquisitions of $18.2 million
         at the end of the first quarter 1997.

     Three Months Ended June 30, 1997 and June 30, 1996

         Revenues  increased  132% to $18.3  million  for the second  quarter of
         fiscal  1997,  as compared to $7.9 million for the same period in 1996.
         Gross  profit  rose 106% to $13.7  million  for the  second  quarter of
         fiscal 1997 from $6.7  million for the second  quarter of fiscal  1996.
         During the second quarter,  SG&A expenses rose 195% to $16.3 million as
         compared to $5.5  million for the same period last year.  Other  income
         fell 54% to $414,000 for the second  quarter of fiscal 1997 compared to
         $908,000 for the second  quarter of fiscal 1996.  The business  factors
         resulting in these changes and relevant trends  affecting the Company's
         business  during the second quarters of 1997 and 1996 are comparable to
         those described in the preceding discussion for the six-month period.
                                                                          Page 8
<PAGE>
         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                        RESULTS OF OPERATIONS (continued)


Liquidity and Capital Resources

         At June 30, 1997, the Company had cash and investments of $22.0 million
         compared  to $48.8  million  at  December  31,  1996.  Working  capital
         decreased  from $75.0  million at December 31, 1996 to $53.4 million at
         June 30, 1997.  The decrease in cash and  investments  is primarily the
         result  of cash  used  for  acquisitions  and  related  costs  of $20.9
         million.  Other  uses of  cash  included  $1.6  million  for  operating
         activities and $2.8 million for the purchase of fixed assets, primarily
         rental assets for its orthopedic  rehabilitation  division.  In January
         1997, the Company paid $486,000 to a former  independent dealer for the
         return of  territory  rights  and  convenants  not to  compete,  as the
         Company completed its transition to a direct sales force.

         Under the terms of the co-promotion  agreement with Sanofi, the Company
         is obligated to pay a total of $4 million in payments  during the first
         eighteen  months of the  agreement.  During  the  second  quarter,  the
         Company  paid  $1.0  million  of  the   required   payment   under  the
         co-promotion agreement for the right to market and promote Hyalgan.

         The Company  currently  believes that cash generated from product sales
         and rentals and its available cash resources will be sufficient to meet
         its  current  operating   requirements  and  internal  development  and
         integration  initiatives  for the foreseeable  future.  There can be no
         assurance,  however,  that  the  Company  will not  require  additional
         financing  in the  future.  If the  Company  were  required  to  obtain
         additional financing in the future, there can be no assurance that such
         sources of capital will be available on terms favorable to the Company,
         if at all.

         The  Company  plans to  relocate  its  corporate  offices in the fourth
         quarter of 1997 to a 100,000 square foot office/manufacturing  facility
         in Tempe,  Arizona.  The proposed terms of the lease are for a ten year
         period commencing December 1, 1997.

         There are currently no other material definitive commitments for future
         use of the Company's  available  cash  resources;  however,  management
         continually  evaluates  opportunities  to expand its operations,  which
         includes   internal   development  of  new  products  and  may  include
         additional acquisitions.
                                                                          Page 9
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS


Certain of the  statements  contained in this document  that are not  historical
facts,  including,  without  limitation,  statements of future  expectations  of
revenue from Hyalgan sales,  availability of cash, and projections of results of
operations and financial  condition,  are forward-looking  statements within the
meaning of the  Private  Securities  Litigation  Reform  Act of 1995,  which 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  in such forward-  looking  statements.  In
addition to the specific matters referred to herein, important factors which may
cause actual results to differ from those  contemplated in such  forward-looking
statements  include:  (i) the results of the Company's  efforts to implement its
business strategy;  (ii) actions of the Company's  competitors and the Company's
ability to respond to such actions;  (iii) changes in  governmental  regulation,
tax rates and similar matters;  (iv) other risks detailed in the Company's other
filings  with  the  Commission;  and  (v)  the  costs  and  results  of  pending
litigation.   Additional   factors  which  might  affect  such   forward-looking
statements  are discussed in  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, 1996.
                                                                         Page 10
<PAGE>
PART II - OTHER INFORMATION


Item 1.  Legal Proceedings

         See the information under the caption "Item 3 Legal Proceedings" of the
         Company's Annual Report on Form 10-K for the fiscal year ended December
         31, 1996.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

         Item not applicable.

Item 4.  Submission of Matters to a Vote of Security Holders

         The annual meeting of  stockholders  of the Company was held on May 16,
         1997 to vote on the election of Class III  Directors  (Proposal  1); an
         amendment  to the  Company's  1987 Stock  Option Plan to  increase  the
         number of shares of common  stock  available  for grant  thereunder  by
         160,000  shares  (Proposal  2); the  ratification  and  approval of the
         Company's 1997 Stock Option Plan (Proposal 3); and the  ratification of
         appointment of Deloitte & Touche,  LLP as independent  accountants  for
         the fiscal year ending  December 31, 1997 (Proposal 4). The results are
         as follows:
<TABLE>
<CAPTION>
                                                                                                            BROKER
                                          FOR                  AGAINST              ABSTAINED              NON-VOTES
                                          ---                  -------              ---------              ---------
<S>                                   <C>                     <C>                    <C>                       <C>
Proposal 1
   Allan M. Weinstein, Ph.D.          22,409,585               826,670                  0                      0
   Elwood D. Howse, Jr.               22,457,710               778,545                  0                      0

Proposal 2                            19,946,990              3,196,325              92,940                    0

Proposal 3                            19,934,307              3,208,932              93,016                    0

Proposal 4                            23,074,833               91,299                70,123                    0
</TABLE>

         A  more  detailed  discussion  of  each  proposal  is  included  in the
         Company's Proxy Statement for the 1997 Annual Meeting of Stockholders.

Item 5.  Other Information

         On May 21, 1997, the Company's Vice President - Marketing and Sales for
         Fracture Healing Products, David E. Derminio, resigned.
                                                                         Page 11
<PAGE>
PART II - OTHER INFORMATION (continued)


Item 6.  Exhibits and Reports on Form 8-K

            (a)   See  Exhibit  Index  following  the  Signatures  page which is
                  incorporated herein by reference.

            (b)   Reports on Form 8-K

                                                                               
                  1)    On March 18, 1997, the Company filed a Current Report on
                        Form 8-K dated  March 3, 1997,  to report in Item 2, the
                        consummation  of its  acquisition  of all the assets and
                        business and the assumption of substantially  all of the
                        liabilities  of  Toronto   Medical  Corp.,   an  Ontario
                        corporation,  pursuant to a Purchase and Sale  Agreement
                        dated as of December 30, 1996.  The Form 8-K was amended
                        on May 19,  1997  to  include  in  Item 7 the  following
                        financial statements:

                           Unaudited   Pro-Forma   Consolidated   Statements  of
                           Income/(Loss)  for the three month period ended March
                           31, 1997 and for the year ended December 31, 1996.

                           Audited  Consolidated  Balance  Sheet at May 31, 1996
                           and 1995;  Consolidated  Statements of  Income/(Loss)
                           and  Consolidated  Statements  of Cash  Flows for the
                           years  ended May 31, 1996 and 1995;  and  independent
                           auditor's report.

                                                                               
                  2)    On March 27, 1997, the Company filed a Current Report on
                        Form 8-K dated  March 12,  1997 to report in Item 2, the
                        consummation  of its  acquisition  of certain assets and
                        the  assumption  of  certain   liabilities  of  each  of
                        Danninger   Medical   Technology,   Inc.,   a   Delaware
                        corporation ("DMTI"), and Danninger Healthcare, Inc., an
                        Ohio corporation and a wholly-owned  subsidiary of DMTI,
                        pursuant to an Asset Purchase Sale Agreement dated March
                        12,  1997.  The Form 8-K was amended on June 11, 1997 to
                        include in Item 7 the following financial statements:

                           Unaudited   Pro-Forma   Consolidated   Statements  of
                           Income/(Loss)  for the three month period ended March
                           31, 1997 and for the year ended December 31, 1996.

                           Unaudited  Consolidated Statement of Net Assets as of
                           March 12, 1997.

                           Unaudited  Consolidated  Statement  of  Revenues  and
                           Expenses of Net Assets for the period January 1, 1997
                           to March 12, 1997 and for the period  January 1, 1996
                           to March 12, 1996.

                           Audited  Consolidated  Statement  of  Net  Assets  at
                           December  31,  1996  and  Consolidated  Statement  of
                           Revenues  and  Expenses  of Net  Assets  for the year
                           ended  December  31, 1996 and  independent  auditor's
                           report.
                                                                         Page 12
<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)


Signature                          Title                              Date
---------                          -----                              ----

/s/ Allan M. Weinstein      Chairman of the Board of             August 14, 1997
-------------------------   Directors, President and Chief
Allan M. Weinstein          Executive Officer (Principal
                            Executive Officer)                
                            
                            
                            

/s/ Allen R. Dunaway        Vice-President and Chief Financial   August 14, 1997
--------------------------  Officer (Principal Financial and
Allen R. Dunaway            Accounting Officer)               
                                                                         Page 13
<PAGE>
                                ORTHOLOGIC CORP.
                 EXHIBIT INDEX TO QUARTERLY REPORT ON FORM 10-Q
                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
     Exhibit                                                                      Incorporated by                   Filed
       No.                           Description                                   Reference to:                   Herewith
----------------      ---------------------------------------     -------------------------------------          -----------
<S>                   <C>                                         <C>                                                 <C>
       2.1            Stock Purchase Agreement dated August       Exhibit 2.1 to the Company's Current
                      30, 1996 by and among the Company,          Report on Form 8-K filed on September
                      Sutter Corporation and Smith                13, 1996
                      Laboratories, Inc.

       2.2            Purchase and Sale Agreement dated as of     Exhibit 2.1 to the Company's Current
                      December 30, 1996 by and among the          Report on Form 8-K filed on March 18,
                      Company and Toronto Medical Corp., an       1997 ("March 18, 1997 8-K")
                      Ontario corporation

       2.3            Amendment to Purchase and Sale              Exhibit 2.2 to March 18, 1997 8-K
                      Agreement dated as of January 13, 1997
                      by and among the Company and Toronto
                      Medical Corp., an Ontario corporation

       2.4            Second Amendment to Purchase and Sale       Exhibit 2.3 to March 18, 1997 8-K
                      Agreement dated as of March 1,  
                      1997 by and among the Company and
                      Toronto Medical Corp., an Ontario 
                      corporation

       2.5            Assignment of Purchase and Sale             Exhibit 2.4 to March 18, 1997 8-K
                      Agreement dated as of March 1, 1997 by
                      and among the Company, Toronto Medical
                      Orthopaedics Ltd., a Canada corporation
                      and Toronto Medical Corp., an Ontario
                      corporation

       2.6            Asset Purchase Agreement dated March        Exhibit 2.1 to the Company's Current
                      12, 1997 by and among the Company,          Report on Form 8-K filed on March 27,
                      Danninger Medical Technology, Inc., a       1997
                      Delaware corporation, and Danninger
                      Healthcare, Inc., an Ohio corporation

       3.1            Composite Certificate of Incorporation      Exhibit 3.1 to the Company's Current
                      of the Company, as amended, including       Report on Form 10-Q filed on May 15,
                      Certificate of Designation in respect       1997 ("First Quarter 1997 10-Q")
                      of Series A Preferred Stock

       3.2            Bylaws of the Company                       Exhibit 3.4 to Company's Amendment No.
                                                                  2 to Registration Statement on Form S-1
                                                                  (No. 33-47569) filed with the SEC on
                                                                  January 25, 1993 ("January 1993 S-1")
</TABLE>
<PAGE>
                                ORTHOLOGIC CORP.
                 EXHIBIT INDEX TO QUARTERLY REPORT ON FORM 10-Q
            FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997 (continued)
<TABLE>
<CAPTION>
     Exhibit                                                                      Incorporated by                   Filed
       No.                           Description                                   Reference to:                   Herewith
----------------      ---------------------------------------     -------------------------------------          -----------
<S>                   <C>                                         <C>                                                 <C>
       4.1            Articles 5, 9 and 11 of Certificate of      Exhibit 3.1 above
                      Incorporation of the Company

       4.2            Articles II and III.2(c)(ii) of Bylaws      Exhibit 3.4 to January 1993 S-1
                      of the Company

       4.3            Specimen Common Stock Certificate           Exhibit 4.1 to January 1993 S-1

       4.4            1987 Stock Option Plan of the Company,                                                          X
                      as amended and approved by stockholders

       4.5            1997 Stock Option Plan of the Company                                                           X

       4.6            Stock Purchase Warrant, dated August        Exhibit 4.6 to the Company's Form 10-K
                      18, 1993, issued to CyberLogic, Inc.        for the fiscal year ended December 31,
                                                                  1994

       4.7            Stock Purchase Warrant, dated September     Exhibit 4.6 to Company's Registration
                      20, 1995, issued to Registered              Statement on Form S-1 (No. 33-97438)
                      Consulting Group, Inc.                      filed with the SEC on September 27, 1995

       4.8            Stock Purchase Warrant, dated October       Exhibit 4.7 to the Company's Form 10-K
                      15, 1996, issued to Registered              for the fiscal year ended December 31,
                      Consulting Group, Inc.                      1996 ("1996 10-K")

       4.9            Rights Agreement dated as of March 4,       Exhibit 4.1 to the Company's
                      1997 between the Company and Bank of        Registration Statement on Form 8-A
                      New York, and Exhibits A, B and C           filed with the SEC on March 6, 1997
                      thereto

       10.1           Co-promotion Agreement dated June 23,
                      1997 by and between the Company and                                                             X
                      Sanofi Pharmaceuticals, Inc.

        11            Statement of Computation of Net Income
                      (Loss) per Weighted Average Number of                                                           X
                      Common Shares Outstanding

        27            Financial Data Schedule                                                                         X
</TABLE>