UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-Q

(Mark One)

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

     For the quarterly period ended September 30, 2000

                                       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. Yes [X] No [ ]

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

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

      30,163,224 shares of common stock outstanding as of October 31, 2000
<PAGE>
                                ORTHOLOGIC CORP.

                                     INDEX

                                                                        PAGE NO.
                                                                        --------
Part I Financial Information

     Item 1. Financial Statements

             Condensed Consolidated Balance Sheets
               September 30, 2000 and December 31, 1999 ......................3

             Condensed Consolidated Statements of Operations and of
               Comprehensive  Income Three months and nine months ended
               September 30, 2000 and 1999 ...................................4

             Condensed Consolidated Statements of Cash Flows
               Nine months ended September 30, 2000 and 1999 .................5

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

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

     Item 3. Quantitative and Qualitative Disclosures About Market Risks ....13

Part II Other Information

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

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

                                       2
<PAGE>
PART I - Financial Information

Item 1. Financial Statements

                                OrthoLogic Corp.
                      Condensed Consolidated Balance Sheets
                                 (in thousands)
                                    Unaudited

                                                   September 30,   December 31,
                                                       2000           1999
                                                     ---------      ---------
ASSETS

Cash and cash equivalents                            $   7,132      $   6,023
Short term investments                                      --            250
Accounts receivable, net                                29,580         30,429
Inventory, net                                          10,326          9,306
Prepaids and other current assets                          843            987
Deferred income tax                                      2,622          2,631
                                                     ---------      ---------
     Total current assets                               50,503         49,626

Rental fleet, furniture and equipment                   28,648         26,361
Accumulated depreciation                               (16,748)       (13,300)
                                                     ---------      ---------
     Fleet, furniture and equipment, net                11,900         13,061

Intangibles, net                                        27,254         28,749
Deposits and other assets                                  674            767
                                                     ---------      ---------

     Total assets                                    $  90,331      $  92,203
                                                     =========      =========

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities
Accounts payable                                     $   3,545      $   2,569
Accrued liabilities                                      5,214          6,192
                                                     ---------      ---------
     Total current liabilities                           8,759          8,761

Deferred rent and capital lease obligations                167            209
                                                     ---------      ---------

     Total liabilities                                   8,926          8,970
                                                     ---------      ---------

Series B Convertible Preferred Stock                     3,690         10,180
                                                     ---------      ---------

Stockholders' Equity
Common stock                                                15             14
Additional paid-in capital                             131,882        125,206
Common stock to be used for legal settlement             2,969
Accumulated deficit                                    (56,955)       (51,992)
Comprehensive loss                                        (196)          (175)
                                                     ---------      ---------

     Total stockholders' equity                         77,715         73,053
                                                     ---------      ---------

     Total liabilities and stockholders' equity      $  90,331      $  92,203
                                                     =========      =========

See notes to condensed consolidated financial statements

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

<TABLE>
<CAPTION>
                                                       Three months ended         Nine months ended
                                                          September 30,             September 30,
                                                      ---------------------     ---------------------
                                                        2000         1999         2000         1999
                                                      --------     --------     --------     --------
<S>                                                   <C>          <C>          <C>          <C>
Revenues                                              $ 21,011     $ 20,258     $ 66,041     $ 62,054
Cost of revenues                                         4,302        4,672       13,406       13,999
                                                      --------     --------     --------     --------
Gross profit                                            16,709       15,586       52,635       48,055

Operating expenses
  Selling, general and administrative                   16,943       14,937       50,446       46,452
  Research and development                               2,645          625        3,859        1,701
  Legal settlement                                       3,552            0        3,552
                                                      --------     --------     --------     --------

Total operating expenses                                23,140       15,562       57,857       48,153

Operating income (loss)                                 (6,431)          24       (5,222)         (98)
                                                      --------     --------     --------     --------
Other income
  Grant/other revenue                                        0            0            0            2
  Interest income                                          112           52          298          153
                                                      --------     --------     --------     --------
Total other income                                         112           52          298          155
                                                      --------     --------     --------     --------

Income (loss) before income taxes                       (6,319)          76       (4,924)          57
                                                      --------     --------     --------     --------

Provision for income taxes                                (112)          24           39           40
                                                      --------     --------     --------     --------

Net income (loss)                                     $ (6,207)    $     52     $ (4,963)    $     17
                                                      ========     ========     ========     ========

Accretion of non-cash preferred stock dividend               0            0            0         (824)
                                                      --------     --------     --------     --------
Net income (loss) applicable to common
  shareholders                                        $ (6,207)    $     52     $ (4,963)    $   (807)
                                                      ========     ========     ========     ========
BASIC EARNINGS PER SHARE

Net income (loss) per common share                    $  (0.21)    $   0.00     $  (0.17)    $  (0.03)
                                                      --------     --------     --------     --------
Weighted average number of common shares
  outstanding                                           30,163       25,860       29,730       25,579
                                                      ========     ========     ========     ========
DILUTED EARNINGS PER SHARE

Net income (loss) per common and equivalent shares    $  (0.21)    $   0.00     $  (0.17)    $  (0.03)
                                                      --------     --------     --------     --------

Weighted shares outstanding                             30,163       30,516       29,730       25,579
                                                      --------     --------     --------     --------
Consolidated Statement of Comprehensive Income

Net income (loss) applicable to common
  shareholders                                        $ (6,207)    $     52     $ (4,963)    $   (807)

Foreign translation adjustment                              53          (63)         (21)        (272)
                                                      --------     --------     --------     --------
Comprehensive loss applicable to common
  shareholders                                        $ (6,154)    $    (11)    $ (4,984)    $ (1,079)
                                                      ========     ========     ========     ========
</TABLE>

See notes to condensed consolidated financial statements

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

                                                            Nine months ended
                                                               September 30,
                                                           --------------------
                                                             2000        1999
                                                           -------      -------
OPERATING ACTIVITIES
Net income (loss)                                          $(4,963)     $    17
  Noncash items:
  Depreciation and amortization                              4,275        4,654
  Common stock to be used for legal settlement               2,969            0
  Net change on other operating items:
  Accounts receivable                                          849       (2,510)
  Inventory                                                 (1,020)       1,849
  Prepaids and other current assets                            153         (337)
  Deposits and other assets                                     93         (292)
  Accounts payable                                             976         (442)
  Accrued liabilities                                         (978)        (197)
                                                           -------      -------
    Cash flows provided by operating activities              2,354        2,742
                                                           -------      -------
INVESTING ACTIVITIES
  Purchase of fixed assets                                  (1,619)      (3,675)
  Cash paid for acquisition                                     --         (171)
  Sales of short-term investments                              250        5,565
                                                           -------      -------
    Cash flows provided by (used in)
      investing activities                                  (1,369)       1,719
                                                           -------      -------
FINANCING ACTIVITIES
  Payments on capital leases                                   (42)         (11)
  Payment on loan payable                                       --         (500)
  Payments under co-promotion agreement                         --       (1,000)
  Foreign exchange                                             (21)        (272)
  Net proceeds from stock option exercises                     187          664
                                                           -------      -------
    Cash flows provided by (used in)
      financing activities                                     124       (1,119)
                                                           -------      -------

NET INCREASE IN CASH AND CASH EQUIVALENTS                    1,109        3,342

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD               6,023        1,714
                                                           -------      -------

CASH AND CASH EQUIVALENTS, END OF PERIOD                   $ 7,132      $ 5,056
                                                           =======      =======

Supplemental disclosure of cash flow information
  Accretion of non-cash preferred stock dividend           $     0      $   824
  Cash paid during the period for interest                     100           70

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 September 30, 2000, and the
     condensed  consolidated  statements of operations and comprehensive  income
     for the three  months  ended  September  30,  2000 and 1999 and nine months
     ended September 30, 2000 and 1999 and the condensed consolidated statements
     of cash flows for the nine  months  ended  September  30, 2000 and 1999 are
     unaudited. However, in the opinion of management, such financial statements
     include all adjustments  (consisting only of normal recurring  adjustments,
     except  for  the  legal  settlement  recorded  in the  three  months  ended
     September 30, 2000)  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,
     1999 is derived from the Company's audited financial statements included in
     the 1999 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 1999 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
     these  estimates.  Significant  estimates  in  the  accompanying  financial
     statements  include the allowance for doubtful accounts and sales discounts
     and  adjustments,  which  are  based  primarily  on  trends  in  historical
     collection statistics, consideration of current events, payer mix and other
     considerations. The Company derives a significant amount of its revenues in
     the United  States  from  third-party  health  insurance  plans,  including
     Medicare.  Amounts paid under these plans are  generally  based on fixed or
     allowable  reimbursement  rates.  In the  opinion of  management,  adequate
     allowances  have  been  provided  for  doubtful  accounts  and  contractual
     adjustments.  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  period
     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. During 1997
     and 1998 the Company paid $3.0 million of this amount.  The remaining  $1.0
     million was paid in the first quarter of 1999.  Subsequent to September 30,
     2000, it was announced  that the Company and Sanofi had mutually  agreed to
     terminate  this  agreement.  The  Company  will  return  the rights to sell
     Hyalgan back to Sanofi.  The Company will receive in the fourth  quarter an
     up-front  cash  payment,  financial  incentives  to  complete a  successful
     transition of the business by January 1, 2001, and continuing royalties for
     the next two years.  Hyalgan  revenues were $2.1 million and 6.2 million in
     the  quarter   ended  and  the  nine  months  ended   September  30,  2000,
     respectively.

                                       6
<PAGE>
3. Licensing Agreement for Chrysalin

     The  Company  announced  in  January  1998 that it had  acquired a minority
     equity  interest  in  a  biotech  firm,   Chrysalis   BioTechnology,   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 option to license  Chrysalin  contingent  upon  regulatory
     approvals,  successful  pre-clinical trials, and certain milestone payments
     to Chrysalis by the Company.  As part of the equity investment,  OrthoLogic
     acquired  options to license  Chrysalin  for  orthopedic  applications.  An
     additional fee of $750,000 for the initial license was expensed in 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 for Chrysalin, for fracture indications. As part of the
     license  agreement,  and  in  conjunction  with  the  U.S.  Food  and  Drug
     Administration  (the  "FDA")  clearance  to begin  human  clinical  trials,
     OrthoLogic  made a  $500,000  milestone  payment  to  Chrysalis  which  was
     expensed in the fourth  quarter of 1999. In January 2000, the Company began
     enrolling patients in the combined Phase I/II clinical trial for Chrysalin.
     The clinical trial is ongoing and is expected to be completed by the end of
     2000.

     In July 2000, the Company  announced it was extending its license agreement
     with Chrysalis to include all Chrysalin orthopedic  indications  worldwide.
     Under the terms of the agreement,  OrthoLogic  paid Chrysalis a license fee
     of $2 million.  This fee resulted in a one-time  charge to earnings  during
     the third  quarter ended  September  30, 2000.  In addition,  the agreement
     calls for the Company to pay certain  milestone  payments and royalty fees,
     based upon products developed and achievement of commercial success.

4. Litigation

     During 1996,  certain  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-5 promulgated thereunder.

     Subsequent to September 30, 2000, the Company announced that it had entered
     into a Memorandum of Understanding regarding settlement of the lawsuit. The
     settlement  consists of $1 million in cash and one million  shares of newly
     issued   OrthoLogic   Common  Stock  valued  at  $2,969,000.   The  Company
     anticipates that a significant portion (approximately $800,000) of the cash
     payment  will  be  funded  from  its  directors'  and  officers'  liability
     insurance policy. During the quarter-ended  September 30, 2000, the Company
     recorded  a  $3.6  million  charge,   including  legal  expenses,  for  the
     settlement of the litigation.  The settlement is subject to approval by the
     lead plaintiffs and the defendants;  the preparation,  execution and filing
     of a formal Stipulation of Settlement;  notice to settlement class 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 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 to or acted  wrongfully in
     any way with respect to the plaintiffs or any other person.

                                       7
<PAGE>
     At September  30, 2000,  in addition to the matters  disclosed  above,  the
     Company is involved in various  other legal  proceedings  that arose in the
     ordinary course of business.  The costs associated with the allegations and
     potential  outcome  cannot be determined at this time and  accordingly,  no
     estimate for such costs have been  included in the  accompanying  Financial
     Statements. In management's opinion, the ultimate resolution of any current
     legal  proceedings  will  not  have a  material  effect  on  the  financial
     position, results of operations, or cash flow of the Company.

5. Commitments

     The Company has a $10 million accounts receivable  revolving line of credit
     with a bank.  The  Company  may borrow up to 75% of the  eligible  accounts
     receivable. The interest rate on the note is at prime. Interest accruing on
     the note and a monthly  administration  fee is due in  arrears on the first
     day of each month.  The revolving note matures 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  that  $43  million,  (2) the  ratio  of  current  assets  to  current
     liabilities  of not less than 2.0 to 1.0,  (3) a debt to tangible net worth
     ratio of not less  that .50 to 1.0,  and (4)  capital  expenditures  not to
     exceed  more than $7.0  million  during  any  fiscal  year.  There  were no
     outstanding borrowings at September 30, 2000.

6. Series B Convertible Preferred Stock

     In July 1998, the Company completed a private placement with two investors,
     an affiliate of Credit  Suisse  First  Boston  Corp.  and Capital  Ventures
     International.  Under the terms of the Purchase Agreement,  OrthoLogic sold
     15,000  shares  of Series B  Convertible  Preferred  Stock for $15  million
     (prior  to  costs).   The  Series  B  Convertible   Preferred   Stock  will
     automatically convert, to the extent not previously converted,  into Common
     Stock four years  following  the date of  issuance.  Each share of Series B
     Convertible Preferred Stock is convertible into Common Stock at a per share
     price  equal to the  lesser of the  average of the 10 lowest  closing  bids
     during  the 30 days  prior to  conversion  or, $  3.0353.  In the  event of
     certain  Mandatory  Redemption  Events,  each  holder of Series B Preferred
     Shares will have the right to require the  Company to redeem  those  shares
     for cash at the Mandatory  Redemption  Price.  Mandatory  Redemption Events
     include,  but are not  limited  to: the  failure  of the  Company to timely
     deliver Common Shares as required under the terms of the Series B Preferred
     Shares  or  Warrants;   the  Company's  failure  to  satisfy   registration
     requirements  applicable to such securities;  the failure by the Company to
     maintain the listing of its Common Stock on NASDAQ or a national securities
     exchange; and certain transactions involving the sale of assets or business
     combinations  involving  the  Company.  In the  event  of any  liquidation,
     dissolution or winding up of the Company, holders of the Series B Preferred
     Shares are entitled to receive, prior and in preference to any distribution
     of any assets of the  Company to the  holders of Common  Stock,  the Stated
     Value for each  Series B  Preferred  Share  outstanding  at that time.  The
     Purchase  Agreement  contains  covenants that protect  against  hedging and
     short-selling  of OrthoLogic  Common Stock while the purchasers hold shares
     of the Series B Convertible Preferred Stock.

     In  connection  with the  private  placement  of the  Series B  Convertible
     Preferred Stock,  OrthoLogic issued to the purchasers  warrants to purchase
     40 shares of Common Stock for each share of Series B Convertible  Preferred
     Stock,  exercisable at $5.50 per share.  These warrants expire in 2008. The
     warrants  were  valued  at  $1,093,980.  Additional  costs  of the  private
     placement were approximately  $966,000.  Both the value of the warrants and
     the  cost of the  private  placement  were  recognized  over  the 10  month
     conversion  period ended April 1999 as an "accretion of non-cash  Preferred

                                       8
<PAGE>
     Stock Dividends" for the amount of $617,994 per quarter.  The Company filed
     a registration statement covering the underlying Common Stock.

     Proceeds  from the  private  placement  are being used to fund new  product
     opportunities,  including  SpinaLogic  and Chrysalin as well as to complete
     the re-engineering of the Company's key business processes.

     As of September 30, 2000,  11,310 shares of Series B Convertible  Preferred
     Stock had been converted into 4,486,997 shares of Common Stock.

7. Exclusive Sales Agreement for SpinaLogic

     The Company  signed an exclusive  worldwide  sales  agreement for a 10-year
     period,  beginning August 18, 2000 with DePuy AcroMed,  Inc.  ("DePuy"),  a
     unit of Johnson & Johnson  whereby  DePuy will assume sales  responsibility
     for SpinaLogic,  the Company's device used as an adjunctive treatment after
     lumbar spinal fusion  surgeries.  This sales  transition began in the third
     quarter with expected full implementation by the end of 2000.

8. New Accounting Pronouncements

     In June 1998, the FASB issued  Statement of Financial  Accounting  Standard
     No. 133 (SFAS No. 133),  Accounting for Derivative  Instruments and Hedging
     Activities. SFAS No. 133 was amended by SFAS No. 137 and 138. SFAS No. 133,
     as amended, requires that an enterprise recognize all derivatives as either
     assets or  liabilities  in the statement of financial  position and measure
     those  instruments  at fair value.  The statement is effective in the first
     quarter of 2001.  The Company has  substantially  completed  the process of
     evaluating  the impact of adopting  SFAS No. 133 and does not believe  that
     the effect will be material to the financial statements.

                                       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,
     1999.

     RESULTS OF OPERATIONS

     REVENUES

     The Company  reported  revenues of $21.0  million for the third  quarter of
     2000  representing  a 3.4%  increase over revenues of $20.3 million for the
     same  quarter  of 1999.  The  Company's  revenues  increased  6.4% to $66.0
     million for the nine months ended September 30, 2000 from $62.0 million for
     the nine months ended September 30, 1999. The growth in sales was primarily
     driven by increased  sales of SpinaLogic  and the OL-1000.  The Company had
     anticipated that SpinaLogic sales would be adversely  affected by the start
     of the new sales agreement with its new distributor,  however, sales in the
     third quarter were better than  projected.  OL-1000  sales were  positively
     affected by the  introduction  of the Single Coil Size 2 unit and  residual
     benefits from the changes in Medicare  guidelines for reimbursement of bone
     growth stimulators  enacted earlier this year. Sales for Continuous Passive
     Motion ("CPM")  devices  declined for both the third quarter and first nine
     months of the year compared with  comparable  periods in 1999.  The Company
     has focused attention on improving profitability of the CPM business and is
     exploring alternatives.

     GROSS PROFIT

     Gross  profit  increased  from $15.6  million  for the three  months  ended
     September  30, 1999 to $16.7  million for the three months ended  September
     30, 2000,  a 7.0%  increase.  Gross profit as a percentage  of revenues was
     79.5% for the quarter  compared to 76.9% for the same period last year. For
     the nine months ended September 30, 2000, gross profit was $52.6 million as
     compared to $48.1  million for the nine months  ended  September  30, 1999.
     Gross  profit as a  percentage  of  revenues  was 77.4% for the  nine-month
     period ended  September 30, 1999 and increased to 79.7% for the same period
     in 2000.  Gross profit  improved due to  increased  sales of the  Company's
     higher margin products: the OL-1000 and SpinaLogic.

     SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

     Selling,  general and  administrative  ("SGA")  expenses  (including  legal
     settlement)  for the three  months  ended  September  30,  2000 were  $20.5
     million,  an  increase  from  $14.9  million  for the  three  months  ended
     September  30, 1999.  SGA expenses for the nine months ended  September 30,
     2000 were $54.0 million, an increase from $46.4 million for the nine months
     ended  September  30, 1999.  These  increases  occurred due to higher sales
     volume, the launch and transition to a new distributor of SpinaLogic sales,
     and the settlement of the lawsuit.

     The  settlement  of the  lawsuit  is  discussed  in "Part II Item 1,  Legal
     Proceedings"  and  Note  4 of the  Financial  Statements.  The  settlement,
     including legal expenses of approximately $400,000, totaled $3.6 million in
     the quarter-ended September 30, 2000.

                                       10
<PAGE>
     RESEARCH AND DEVELOPMENT

     Research and development  ("R&D") expenses increased to $2.6 million in the
     three-month  period ended  September  30, 2000 compared to $625,000 for the
     same period last year. R&D expenses for the nine months ended September 30,
     2000 totaled $3.9  million,  an increase from the $1.7 million for the nine
     months ended September 30, 1999. This increase reflects expenses associated
     with the Chrysalin clinical trials and, as discussed in Note 3 of the Notes
     to Condensed  Consolidated  Financial  Statements,  a $2 million payment to
     extend the licensing rights for all orthopedic  implications  worldwide for
     Chrysalin.

     OTHER INCOME AND EXPENSES

     Other  income,  consisting  primarily of interest  income,  increased  from
     $52,000 to $112,000 for the  three-month  periods ended  September 30, 1999
     and 2000 respectively.  For the nine-month period ended September 30, 2000,
     other income increased to $298,000 from $153,000 for the same period in the
     previous year.

     LIQUIDITY AND CAPITAL RESOURCES

     On September 30, 2000 the Company had cash and  investments of $7.1 million
     compared  to $6.3  million  as of  December  31,  1999.  Cash  provided  by
     operations  amounted to $2.4  million  during the  nine-month  period ended
     September  30,  2000,  compared to $2.7  million for the same period in the
     previous year. Cash used for investing  amounted to $1.4 million during the
     nine-month  period ended September 30, 2000,  primarily for the purchase of
     fixed assets,  compared to cash provided by investments of $1.7 million for
     the same period last year. Cash provided by financing  activities  amounted
     to $124,000 during the nine-month  period ended September 30, 2000 compared
     to cash used for  financing  of $1.1 million for the same period last year.
     The Company has an available $10 million accounts receivable revolving line
     of credit with a bank. 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 that $43 million,  (2) the ratio of
     current  assets to current  liabilities  of not less than 2.0 to 1.0, (3) a
     debt to  tangible  net  worth  ratio of not less  that .50 to 1.0,  and (4)
     capital expenditures not to exceed more than $7.0 million during any fiscal
     year. There were no outstanding borrowings at September 30, 2000.

     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.

                                       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, matters discussed below.

     OrthoLogic  has  periodically  discussed  with third  parties the  possible
     acquisition 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 the future operating strategies of
     the Company could result in an adjustment to the carrying values of current
     recorded assets.

     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.

     To the extent that the Company  presently  enjoys  perceived  technological
     advantages over competitiors, technological innovation by present or future
     competitors  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;  however,  there  can  be  no
     assurance  that the  Company  will be able to do so or that the market will
     accept any such new products or applications.

     The Company operates in a highly  regulated  environment and cannot predict
     the  actions  of  regulatory  authorities.  The  action  or  non-action  of
     regulatory  authorities may impede the development and  introduction of new
     products and new applications for existing products, and may have temporary
     or permanent effects on the Company's  marketing of its existing or planned
     products. There can be no assurance that the influence of managed care will
     continue to grow either in the United States or abroad, or that such growth
     will result in greater  acceptance or sales of the Company's  products.  In
     particular,  there can be no  assurance  that  existing or future  decision
     makers  and  third  party  payors  within  the  medical  community  will be
     receptive  to the use of the  Company's  products or replace or  supplement
     existing or future treatments. Moreover, the transition to managed care and
     the  increasing  consolidation  underway in the managed  care  industry may
     concentrate  economic power among buyers of the Company's  products,  which
     concentration could foreseeable adversely affect the Company's margins.

     Although the company believes that existing  litigation  initiated  against
     the  Company  is  without  merit and the  Company  intends  to defend  such
     litigation  vigorously,  an adverse outcome of such litigation could have a
     material adverse effect on the Company's business,  financial condition and
     results of operations.

                                       12
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

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

                                       13
<PAGE>
Part II - Other information

Item 1. Legal Proceedings

     On October 2, 2000, the Company entered into a Memorandum of  Understanding
     with plaintiffs  describing the terms of the settlement of the consolidated
     class action  lawsuits in United States  District Court for the District of
     Arizona  alleging  violations of Sections 10(b) of the Securities  Exchange
     Act of 1934 and Rule 10b-5 promulgated thereunder. The terms and conditions
     of such settlement are described in more detail in "Note 4 - Litigation" of
     the Notes to Consolidated Financial Statements above.

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     November 13, 2000
 ---------------------       Officer (Principal
 Thomas R. Trotter            Executive Officer)


 /s/ Terry D. Meier          Sr. Vice-President and Chief      November 13, 2000
 ---------------------       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 September 30, 2000

                                                  Incorporated by       Filed
Exhibit No         Description                      Reference to:      Herewith
----------         -----------                      -------------      --------
  10.2         September 28, 2000 Agreement
               terminating Hyalgan Co-Promotion
               Agreement                                                   X


  27           Financial Data Schedule                                     X