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 March 31, 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                            (I.R.S. 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)


              (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.

       31,437,001 shares of common stock outstanding as of April 30, 2001
<PAGE>
                                ORTHOLOGIC CORP.

                                      INDEX

                                                                        PAGE NO.
                                                                        --------
PART I. FINANCIAL INFORMATION

     Item 1. Financial Statements

     Condensed Consolidated Balance Sheets as of March 31, 2001
       and December 31, 2000.............................................  3

     Condensed Consolidated Statements of Operations and of
       Comprehensive Income for the Three months ended March 31,
       2001 and 2000.....................................................  4

     Condensed Consolidated Statements of Cash Flows for the
       Three months ended March 31, 2001 and 2000........................  5

     Notes to Condensed Consolidated Financial Statements................  6

     Item 2. Management's Discussion and Analysis of
             Financial Condition and Results of Operations............... 10

     Item 3. Quantitative & Qualitative Disclosures about
             Market Risk................................................. 11

     Special Note Regarding Forward-Looking Statements................... 12

PART II. OTHER INFORMATION

     Item 1. Legal Proceedings........................................... 14

     Item 6. Exhibits and Reports on Form 8-K............................ 16

                                       2
<PAGE>
PART I - Financial Information
Item 1.  Financial Statements

                                OrthoLogic Corp.
                      Condensed Consolidated Balance Sheet
                                 (in thousands)

                                                        March 31,   December 31,
                                                          2001         2000
                                                        ---------    ---------
                                                       (Unaudited)
ASSETS

Cash and cash equivalents                               $   9,829    $   6,753
Short term investments                                      1,159        2,492
Accounts receivable, net                                   27,449       29,951
Inventory, net                                              8,594       10,007
Prepaids and other current assets                           1,536        1,019
Deferred income tax                                         2,631        2,631
                                                        ---------    ---------
     Total current assets                                  51,198       52,853

Rental fleet, furniture, and equipment                     29,305       28,891
Accumulated depreciation                                  (18,062)     (17,797)
                                                        ---------    ---------
     Fleet, furniture and equipment, net                   11,243       11,094

Intangibles, net                                              750          750
Deposits and other assets                                     257          338
                                                        ---------    ---------

     Total assets                                       $  63,448    $  65,035
                                                        =========    =========
LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities

Accounts payable                                        $   2,189    $   3,030
Accrued liabilities                                         5,773        6,767
                                                        ---------    ---------
     Total current liabilities                              7,962        9,797

Deferred rent and capital lease obligations                   105           88
                                                        ---------    ---------

     Total liabilities                                      8,067        9,885
                                                        ---------    ---------

Series B Convertible Preferred Stock                          600        3,240
                                                        ---------    ---------

Stockholders' Equity

Common stock                                                   16           15
Additional paid-in capital                                135,011      132,332
Common stock to be used for legal settlement                2,969        2,969
Accumulated deficit                                       (82,979)     (83,183)
Other comprehensive loss                                     (236)        (223)
                                                        ---------    ---------
     Total stockholders' equity                            54,781       51,910
                                                        ---------    ---------

          Total liabilities and stockholders' equity    $  63,448    $  65,035
                                                        =========    =========

See Notes to Condensed Consolidated Financial Statements

                                       3
<PAGE>
                                OrthoLogic Corp.
   Condensed Consolidated Statement of Operations and of Comprehensive Income
                      (in thousands, except per share data)
                                    Unaudited

                                                               Three months
                                                              ended March 31,
                                                           --------------------
                                                             2001        2000
                                                           --------    --------
Revenues                                                   $ 21,682    $ 22,490

Cost of revenues                                              4,733       4,808
                                                           --------    --------
Gross profit                                                 16,949      17,682

Operating expenses
  Selling, general and administrative                        16,103      16,316
  Research and development                                      704         666
                                                           --------    --------

     Total operating expenses                                16,807      16,982

Operating income                                                142         700
Other income                                                    129          85
                                                           --------    --------

Income before income taxes                                      271         785

Provision for income taxes                                       67          91
                                                           --------    --------

     Net income                                            $    204    $    694
                                                           ========    ========
BASIC EARNINGS PER SHARE
  Net income per common share                              $   0.01    $   0.02
                                                           --------    --------

  Weighted average number of common shares outstanding       31,140      29,060
                                                           --------    --------
DILUTED EARNINGS PER SHARE
  Net income per common and equivalent shares              $   0.01    $   0.02
                                                           --------    --------

  Weighted shares outstanding                                31,649      30,628
                                                           --------    --------

Consolidated Statement of Comprehensive Income
  Net income applicable to common shareholders             $    204    $    694
  Foreign translation adjustment                                (13)        (13)
                                                           --------    --------

  Comprehensive income applicable to common shareholders   $    191    $    681
                                                           ========    ========

See Notes to Condensed Consolidated Financial Statements

                                       4
<PAGE>
                                ORTHOLOGIC, CORP.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                    UNAUDITED

                                                               Three months
                                                              ended March 31,
                                                           --------------------
                                                             2001         2000
                                                           -------      -------
OPERATING ACTIVITIES
Net income                                                 $   204      $   694

   Noncash items:
   Depreciation and amortization                               281        1,441
   Net change on other operating items:
   Accounts receivable                                       2,502         (557)
   Inventory                                                 1,413          362
   Prepaids and other current assets                          (517)        (147)
   Deposits and other assets                                    81          128
   Accounts payable                                           (841)        (126)
   Accrued liabilities                                        (994)        (596)
                                                           -------      -------

     Cash flows provided by operating activities             2,129        1,199
                                                           -------      -------
INVESTING ACTIVITIES
  Purchase of fixed assets                                    (430)        (702)
  Officer note receivable, net                                  --          158
  Sales of short-term investments                            1,333          250
                                                           -------      -------
     Cash flows provided by (used in) investing
            activities                                         903         (294)
                                                           -------      -------
FINANCING ACTIVITIES
  Payments on capital leases                                    17          (19)
  Foreign exchange                                             (13)         (13)
  Net proceeds from stock option exercises                      40          157
                                                           -------      -------

     Cash flows provided by financing activities                44          125
                                                           -------      -------

NET INCREASE IN CASH AND CASH EQUIVALENTS                    3,076        1,030

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD               6,753        6,023
                                                           -------      -------
CASH AND CASH EQUIVALENTS, END OF PERIOD                   $ 9,829      $ 7,053
                                                           =======      =======

Supplemental disclosure of cash flow information
  Cash paid during the period for interest                      20           44
  Cash paid during the period for income taxes                  --            1

See Notes to Condensed Consolidated Financial Statements

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

1.   FINANCIAL STATEMENT PRESENTATION

     The  Condensed  Consolidated  Balance  Sheet as of March 31, 2001,  and the
     Condensed  Consolidated  Statements of Operations and Comprehensive  Income
     for the  Three  Months  Ended  March  31,  2001 and 2000 and the  Condensed
     Consolidated  Statements of Cash Flows for the Three Months Ended March 31,
     2001 and 2000 are unaudited.  However,  in the opinion of management,  such
     financial  statements  include all adjustments  (consisting  only of normal
     recurring adjustments) necessary for the fair presentation of the financial
     position,  results of operations and cash flows.  The results of operations
     for the interim periods are not necessarily indicative of the results to be
     expected for the complete fiscal year. 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.  A  significant  estimate in the  accompanying  financial
     statements is 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.  Another significant estimate includes the
     carrying value of the Continuous  Passive Motion ("CPM") business (See Note
     7). In the opinion of management,  adequate  allowances  have been provided
     for doubtful accounts and contractual adjustments. However, these estimates
     are subject to adjustments in the near term,  which could be material.  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
     has returned the rights to sell Hyalgan back to Sanofi. Royalty revenue for
     Hyalgan  were  $716,000  in the quarter  ended  March 31, 2001  compared to
     Hyalgan  sales  revenues of $1.8  million in the same  period in 2000.  The
     Company  received $4 million over the fourth  quarter of 2000 and the first
     quarter of 2001 for the return of the rights and a successful transition of
     the business back to Sanofi, and will receive continuing  royalties for the
     next two years.  Of the $4 million cash  received,  $1 million was received
     the quarter ended March 31, 2001.

                                       6
<PAGE>
3.   LICENSING AGREEMENT FOR CHRYSALIN

     The  Company  announced  in  January  1998 that it had  acquired a minority
     interest in a biotech firm,  Chrysalis Bio Technology,  Inc.  ("Chrysalis")
     for  $750,000.  As part of the  transaction,  the  Company  was  awarded  a
     nine-month   world-wide   exclusive   option  to  license  the   orthopedic
     applications of Chrysalin,  a patented 23-amino acid peptide that has shown
     promise in accelerating  the healing process and has completed an extensive
     pre-clinical  safety and efficacy  profile of the product.  In pre-clinical
     animal  studies,  Chrysalin  was also 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
     and expand its  options to license  Chrysalin  contingent  upon  regulatory
     approvals, successful preclinical 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.  An
     additional  fee of  $750,000  for the initial  license was  expensed in the
     third  quarter of 1998 and the  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 fresh
     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.
     In July 2000, the Company paid $2 million to Chrysalis and announced it was
     expanding  its  license  agreement  to  include  all  Chrysalin  orthopedic
     indications worldwide.  In addition, the agreement calls for the Company to
     pay certain  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.

4.   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  OL 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. Plaintiffs also sought extraordinary,
     equitable  and/or  injunctive  relief as permitted by law. 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's  Motion to
     Dismiss and entered an order  dismissing all claims in the suit against the

                                       7
<PAGE>
     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,  and  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
     injunctive and/or equitable  relief.  The Company filed a Motion to Dismiss
     the Complaint in the Arizona State Court in May 1999.  The Court denied the
     motion in July  1999,  and  granted  the  plaintiffs'  motion for the class
     certification on November 24, 1999.

     In  October  2000,  the  Company  announced  that  it  had  entered  into a
     Memorandum of  Understanding  regarding  settlement of the remaining  class
     action claims and the Norman Cooper lawsuits. The settlement consists of $1
     million in cash and one million  shares of newly issued  OrthoLogic  Common
     Stock valued at $2,969,000.

     A  significant  portion of the cash payment was funded from its  directors'
     and  officers'  liability  insurance  policy.  The Company  recorded a $3.6
     million charge, including legal expenses, for settlement of the litigation.
     The  settlement  is  subject  to  approval  by  the  lead   plaintiffs  and
     defendants; the preparation, execution and filing of the formal Stipulation
     of Settlement;  notice to the settlement members; and final approval of the
     settlement by the courts at a hearing.

     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 agreement to the Memorandum of
     Understanding  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.

     At March 31, 2001, in addition to the matters  disclosed above, the Company
     is involved in other various legal proceedings and product liability claims
     that arose in the ordinary  course of business.  The costs  associated with
     defending  these  other  matters  cannot  be  determined  at this  time and
     accordingly,  no  estimates  for such  costs  have been  included  in these
     financial  statements.  In management's opinion, the ultimate resolution of
     these legal  proceedings  will not have a material  effect on the financial
     position, results of operations, or liquidity of the Company.

5.   LINE OF CREDIT

     The Company has secured a $10.0 million accounts receivable  revolving line
     of credit with a lending  institution.  The Company may borrow up to 75% of
     the eligible accounts 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 $43 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.

                                       8
<PAGE>
6.   SERIES B CONVERTIBLE PREFERRED STOCK

     As of March 31, 2001, 14,400 shares of Series B Convertible Preferred Stock
     had been converted into 5,746,584 shares of Common Stock.

7.   PLANS TO DIVEST THE CONTINUOUS PASSIVE MOTION BUSINESS

    In January 2001, the Company  announced  plans to divest its CPM business to
    refocus  the Company on its core  business  of  fracture  healing and spinal
    repair.  After  careful  consideration,  the Board felt the  emphasis on the
    rehabilitation  segment  of  the  orthopedic  business  no  longer  fit  the
    Company's  long-term  strategic  plan. As a result of the decision to divest
    this  business  in the fourth  quarter of 2000,  the  Company  wrote off the
    remaining  $23.3  million  of  Goodwill  related  to the CPM  business.  The
    goodwill  was  assessed to be  impaired  in  accordance  with  Statement  of
    Financial Standards ("SFAS") No. 121.

    The  Company  announced  on May 9, 2001  that it  signed  an Asset  Purchase
    Agreement  to sell the assets of the CPM  business to  OrthoRehab,  Inc. The
    structure of the transaction  calls for the purchaser to make a cash payment
    at  closing,  additional  contingent  payment  at  a  later  date  based  on
    performance,  and  the  assumption  of  certain  liabilities.  In  addition,
    OrthoLogic  would retain certain accounts  receivable.  The total cash to be
    received  from the sale could be as much as $15  million,  assuming the full
    amount of contingent  payment is received by OrthoLogic.  In accordance with
    SFAS No. 121, the Company has assessed the carrying  value of the net assets
    to be sold, considering the terms and conditions of the Definitive Agreement
    signed with OrthoRehab,  Inc. and currently believes that the carrying value
    of the net  assets  will be  recovered  from cash  proceeds  expected  to be
    received from the sale to OrthoRehab, Inc. and cash expected to be generated
    from continuing to operate the CPM business  through the expected close date
    in June 2001.  Adjustments to the carrying value of the CPM net assets to be
    sold may be  necessary  in the  future if  expected  cash flows from the CPM
    business  are not  realized.  Once the  closing of the  transaction  occurs,
    management  anticipates  that the Company  would  record a one-time  charge,
    currently  estimated  to be $7 million to $10 million  for costs,  primarily
    severance and other exit costs, associated with the final divestiture of the
    CPM business.

                                       9
<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

REVENUES

The Company  reported  revenues of $21.7  million for the first  quarter of 2001
representing a 3.6% decrease from revenues of $22.5 million for the same quarter
of 2000. The decrease in sales is  attributable to a decline in CPM sales due to
the Company's decision to increase efficiency and improve  profitability as well
as  the  loss  of  Hyalgan  sales  due  to  the  termination  of  the  Company's
distribution  of Hyalgan.  Sales from the CPM products were $14.1 million in the
quarter  ended March 31, 2001  compared to $15.5 million in the same period last
year. The revenue decline was partially offset by increased sales of the OL 1000
and  SpinaLogic  in the quarter  ended March 31,  2001,  as compared to the same
quarter last year.

GROSS PROFIT

Gross profits  decreased from $17.7 million for the three months ended March 31,
2000 to $16.9  million  for the  three  months  ended  March  31,  2001,  a 4.5%
decrease.  Gross  profits as a percentage  of revenues was 77.8% for the quarter
compared to 78.6% for the same period last year. The decline in the gross profit
is primarily attributable to the loss of Hyalgan distribution revenue, which had
no  associated  cost of goods  expense.  Gross  profits for the CPM business was
$10.6  million for the quarter  ended March 31, 2001,  compared to $11.8 million
for the same period in 2000.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling,  general and administrative expenses ("SG&A")for the three months ended
March 31, 2001 were $16.1  million,  a decrease from $16.3 million for the three
months ended March 31, 2000. Most operating  expenses are not directly allocated
between  the  Company's  various  lines of  business.  The  decline in 2001 SG&A
expenses is primarily  attributed to reductions in marketing and other  expenses
compared to the same period in 2000 which were  partially  offset by an increase
in  commission  expenses  paid to a  third-party  distributor  due to  increased
SpinaLogic sales.

RESEARCH AND DEVELOPMENT

Research and  development  expenses  increased  with expenses of $704,000 in the
three-month period ended March 31, 2001 compared to $666,000 for the same period
last year. This increase is primarily  attributable to costs associated with the
combined Phase I/II human clinical trials for Chrysalin.

                                       10
<PAGE>
OTHER INCOME AND EXPENSES

Other income, consisting primarily of interest income, increased from $85,000 to
$129,000 for the three-month periods ended March 31, 2000 and 2001 respectively.

LIQUIDITY AND CAPITAL RESOURCES

On March 31,  2001 the  Company had cash and cash  equivalents  of $9.8  million
compared to $6.8 million as of December 31, 2000.  Cash  provided by  operations
amounted  to $2.1  million for the  three-month  period  ended  March 31,  2001,
compared to $1.2 million for the same period in the previous year. Cash provided
from  investing  activities  amounted  to  $900,000  compared to cash needed for
investing activities of $294,000 for the same period last year. Cash provided by
the sales of securities in the normal course of investment  activities more than
offset the purchase of fixed  assets in the period  ended March 31,  2001.  Cash
provided by  financing  activities  amounted to $44,000  during the  three-month
period ended March 31, 2001  compared to cash used for financing of $125,000 for
the same period last year. The Company has an available  $10.0 million  accounts
receivable revolving line of credit with a bank.

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,  continue  profitability  and
collect amounts due from third party payers. Additional funds may be required if
the Company is not  successful in any of these areas.  The Company's  ability to
continue funding its planned  operations  beyond the next 12 months is dependent
on its ability to generate  sufficient  cash flow to meet its  obligations  on a
timely basis, or to obtain additional funds through equity or debt financing, or
from other sources of financing, as may be required.

On May 9, 2001, the Company  announced it had signed an agreement to sell assets
of the CPM business to another company (See Note 7). It is anticipated  that the
sale will have an affect on the  collateral  of the existing $10 million line of
credit, and therefore the terms of the line of credit will be changed. While the
final  disposition of this sale and  subsequent  affects on the cash position of
the Company have not been determined,  the Company anticipates that its cash and
short-term  investments on hand, cash from operations,  funds generated from the
asset sale, and the funds available from the renegotiated line of credit will be
sufficient to meet the Company's projected cash and working capital requirements
for the next 12 months.

ITEM 3. MARKET RISKS.

The Company has no debt and no derivative instruments at March 31, 2001.

The Company has exposure to foreign  exchange  rates  through its  manufacturing
subsidiary  in  Canada.  The  Company  does  not use  foreign  currency  forward
contracts or  commodity  contracts  to limit this  exposure.  The Company is not
currently  vulnerable to a material extent to fluctuations in interest rates and
commodity prices.

                                       11
<PAGE>
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  periodically   discussed  with  third  parties  the  possible
acquisition or disposition of technology,  product lines,  and businesses in the
orthopedic health care market.  Additionally,  the Company continues to evaluate
strategies  and   alternatives   that  will  position  the  Company  to  compete
effectively  in the future.  Any change in future  operating  strategies  of the
Company could result in an adjustment to the carrying values of current recorded
assets.  In particular,  upon closing the  divestiture of the CPM business,  the
Company's  balance sheet will reflect the loss of the sold assets  (particularly
in inventory and accounts receivable) and the corresponding increase in cash. In
addition,  the  Company  plans to record a $3 million to $5 million  loss on the
sale of the assets,  as well as recognize a one-time charge of $7 million to $10
million to cover ongoing costs  associated  with the sale. If the closing occurs
as planned in June,  the charges  and losses  will appear in the second  quarter
financial statements.  Further, the sale of the CPM business, which historically
was one of the Company's core businesses,  could have an effect in the long-term
results of the operations as the Company  concentrates  its efforts on the sales
of the OL 1000  (and  related  products)  and  SpinaLogic.  The loss of  product
diversification and the CPM sales force will make the Company

To  the  extent  that  the  Company  presently  enjoys  perceived  technological
advantages  over  competitiors,  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.

                                       12
<PAGE>
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.

The Company  intends to pursue  sales in  international  markets.  The  Company,
however, has had little experience in such markets. Expanded efforts at pursuing
new markets necessarily involves  expenditures to develop such markets and there
can be no assurance that the results of those efforts will be profitable.  There
can be no assurance  that the  Company's  estimates of the market will not cause
the nature and extent of that market to deviate  materially  from the  Company's
expectations.

                                       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 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

     None

ITEM 6. EXHIBITS AND REPORTS

     (a)  Exhibit Index

          See Exhibit Index  following the signature page which is  incorporated
          herein by reference.

     (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)


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


/s/ Thomas R. Trotter     President and Chief Executive          May 11, 2001
---------------------     Officer (Principal Executive
Thomas R. Trotter         Officer)



/s/ Terry D. Meier        Sr. Vice-President and Chief           May 11, 2001
---------------------     Financial Officer (Principal
Terry D. Meier            Financial and Accounting Officer)

                                       15
<PAGE>
                                OrthoLogic Corp.
                 Exhibit Index to Quarterly Report on Form 10-Q
                  For the Quarterly Period Ended March 31, 2001

Exhibit No          Description                               Filed Herewith
----------          -----------                               --------------
  10-22        Employment Agreement effective As of
                 December 4, 2000 between The Company
                 and Shane Kelly                                     X

  10-23        Employment Agreement effective As of
                 January 2, 2001 between The Company
                 and Donna Lucchesi                                  X