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, 1996
                                        ----------------------------------------

                                       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)

<TABLE>
<CAPTION>
  Delaware                                                                   86-0585310
----------------------------------------------------------------------------------------------------
<S>                                                             <C>
(State of other jurisdiction of incorporation or organization)  (I.R.S. Employer Identification No.)
</TABLE>

 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.

      25,022,346 shares of common stock outstanding as of October 31, 1996
                                                                    Page 1 of 13
<PAGE>
                         PART I - FINANCIAL INFORMATION

Item 1.    Financial Statements
                                ORTHOLOGIC CORP.
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                      September 30,     December 31,
                                                                          1996             1995
                                                                      -------------    -------------
<S>                                                                   <C>              <C>
ASSETS                                                                 (Unaudited)

CURRENT ASSETS:
    Cash and cash equivalents                                         $  16,382,542    $   8,830,514
    Short-term investments                                               37,070,149        9,149,360
    Accounts receivable, net                                             24,989,396        6,488,203
    Inventories, net                                                      5,597,530        1,829,865
    Prepaids and other current assets                                     1,186,914          273,237
    Deferred income taxes                                                 2,401,000             --
                                                                      -------------    -------------
       Total current assets                                              87,627,531       26,571,179

FURNITURE, RENTAL FLEET AND EQUIPMENT:
    Furniture, rental fleet and equipment                                10,803,730        1,891,987
    Less accumulated depreciation and amortization                       (1,687,403)      (1,196,055)
                                                                      -------------    -------------
       Furniture, rental fleet and equipment - net                        9,116,327          695,932

INTANGIBLES, net                                                         16,403,115             --

DEPOSITS AND OTHER ASSETS                                                    93,113           97,748

NOTE RECEIVABLE - Officer                                                      --            125,000
                                                                      -------------    -------------
                                                                      $ 113,240,086    $  27,489,859
                                                                      =============    =============

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
    Accounts payable                                                  $   3,125,755    $   1,053,323
    Accrued expenses                                                      7,557,555        1,999,924
                                                                      -------------    -------------

           Total current liabilities                                     10,683,310        3,053,247

DEFFERRED RENT AND CAPITAL LEASE OBLIGATION                                 296,823             --

STOCKHOLDERS' EQUITY:
    Common stock, $.0005 par value - authorized, 40,000,000 shares;
       25,022,346 and 19,251,728 shares issued                               12,509            9,626
    Additional paid-in capital                                          118,832,041       43,882,991
    Retained deficit                                                    (16,584,597)     (19,456,005)
                                                                      -------------    -------------
       Total stockholders' equity                                       102,259,953       24,436,612
                                                                      -------------    -------------

                                                                      $ 113,240,086    $  27,489,859
                                                                      =============    =============
</TABLE>

See notes to consolidated financial statements.
                                                                    Page 2 of 13
<PAGE>
                                ORTHOLOGIC CORP.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                               Three months ended             Nine months ended
                                                  September 30,                 September 30,
                                          ----------------------------    ----------------------------
                                              1996            1995            1996            1995
                                          ------------    ------------    ------------    ------------
<S>                                       <C>             <C>             <C>            <C>         
NET REVENUES                              $ 10,407,527    $  4,049,603    $ 25,079,188   $  9,640,189

COST OF REVENUES                             1,990,951         800,914       4,365,325      2,003,308
                                          ------------    ------------    ------------   ------------

GROSS PROFIT                                 8,416,576       3,248,689      20,713,863      7,636,881

OPERATING EXPENSES:
    Selling, general and administrative      8,506,765       2,995,926      18,487,545      7,936,509
    Research and development                   529,784         456,647       1,627,404      1,612,878
                                          ------------    ------------    ------------   ------------
               Total operating expenses      9,036,549       3,452,573      20,114,949      9,549,387
                                          ------------    ------------    ------------   ------------

             Operating income (loss)          (619,973)       (203,884)        598,914     (1,912,506)
                                          ------------    ------------    ------------   ------------

OTHER INCOME (EXPENSE):
    Grant revenue                               37,103          85,494         131,250        158,871
     Interest income                         1,039,345          27,285       2,141,244        127,892
    Interest expense                              --            (8,750)           --          (42,188)
                                          ------------    ------------    ------------   ------------
                Total other income           1,076,448         104,029       2,272,494        244,575
                                          ------------    ------------    ------------   ------------


Net income (loss)                         $    456,475    $    (99,855)   $  2,871,408   $ (1,667,931)
                                          ============    ============    ============   ============

NET INCOME (LOSS) PER WEIGHTED
   AVERAGE NUMBER OF COMMON
   SHARES OUTSTANDING                     $       0.02    $      (0.01)   $       0.12   $      (0.11)
                                          ============    ============    ============   ============

WEIGHTED AVERAGE NUMBER OF
   COMMON SHARES OUTSTANDING                25,800,962      15,038,402      23,759,306     14,772,294
                                          ============    ============    ============   ============
</TABLE>

See notes to consolidated financial statements.
                                                                    Page 3 of 13
<PAGE>
                                ORTHOLOGIC CORP.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                           Nine months ended
                                                                              September 30,
                                                                       ----------------------------
                                                                           1996            1995
                                                                       ------------    ------------
<S>                                                                    <C>             <C>
OPERATING ACTIVITIES:
    Net income (loss)                                                  $  2,871,408    $ (1,667,931)
    Adjustment to reconcile net income (loss) to net cash
       used in operating activities:
             Depreciation and amortization                                  824,735         226,469
    Change in operating assets and liabilities net of effects from
         purchase of Sutter Corporation:
           Accounts receivable                                           (6,718,447)     (2,719,237)
            Inventories                                                  (2,217,596)       (680,628)
            Prepaids and other current assets                              (811,858)       (136,866)
            Deposits and other assets                                         4,635          (1,866)
            Accounts payable                                                375,676         259,867
            Accrued expenses                                              1,082,429         638,215
                                                                       ------------    ------------
                       Net cash used in operating activities             (4,589,018)     (4,081,977)

INVESTING ACTIVITIES:
    Intangibles from dealer transactions                                 (9,278,912)           --
    Expenditures for furniture and equipment, net                          (828,744)        (93,653)
    Purchase of short-term investments, net                             (27,920,789)           --
    Repayment of note receivable                                            125,000            --
    Payment for purchase of Sutter Corporation, net of cash acquired    (24,907,442)           --
                                                                       ------------    ------------
         Net cash used in investing activities                          (62,810,887)        (93,653)

FINANCING ACTIVITIES:
    Payments under long term debt                                              --           (19,706)
    Proceeds from issuance of common stock                               74,951,933       2,057,714
                                                                       ------------    ------------
         Net cash provided by financing activities                       74,951,933       2,038,008
                                                                       ------------    ------------

NET INCREASE (DECREASE) IN CASH AND                                       7,552,028      (2,137,622)
    CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS,
    BEGINNING OF PERIOD                                                   8,830,514       3,265,350

CASH AND CASH EQUIVALENTS, END OF PERIOD                               $ 16,382,542    $  1,127,728
                                                                       ============    ============



SUPPLEMENTAL DISCLOSURES OF CASH FLOW
    INFORMATION - Cash paid during the period for interest                     --      $     42,188
                                                                       ============    ============
</TABLE>

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
The  Company  purchased  all of the  capital  stock of  Sutter  Corporation  and
incurred certain costs related to this acquisition for a total purchase price of
$25,047,000.  In connection with this  acquisition,  liabilities were assumed as
follows:

             Fair value of assets acquired                       $ 31,516,000
             Cash paid and costs related to the acquisition of
             capital stock                                        (25,047,000)
                                                                 ------------
                  Liabilities assumed                            $  6,469,000
                                                                 ============

See notes to consolidated financial statements.
                                                                    Page 4 of 13
<PAGE>
                                ORTHOLOGIC CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



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

      The consolidated  financial  statements include the accounts of OrthoLogic
      Corp. ("OrthoLogic") since its inception in July 1987 and its wholly-owned
      subsidiary  Sutter  Corporation  (collectively  the  "Company")  since its
      acquisition  on August 30, 1996.  All material  intercompany  accounts and
      transactions have been eliminated.

      The  consolidated  balance  sheet  as  of  September  30,  1996,  and  the
      consolidated  statements of operations for the three and nine months ended
      September 30, 1996 and 1995 and the  statements of cash flows for the nine
      months ended  September  30, 1996 and 1995 are unaudited  however,  in the
      opinion of management,  include all adjustments (consisting only of normal
      recurring  adjustments)  necessary  for a fair  presentation  of 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.

      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 1995 Annual Report
      and Form 10-K.


2.    Net Income (Loss) per Common Share
      ----------------------------------

      Net income  (loss) per common  share is computed on the  weighted  average
      number of common and common  equivalent  shares  outstanding  during  each
      period after  giving  effect to a 2 for 1 stock split in the form of a 100
      percent  common  share  dividend  which  was  paid on June  25,  1996,  to
      stockholders  of record as of June 4,  1996.  The  accompanying  financial
      statements  have  been  restated  to  give  effect  to the  split.  Common
      equivalent shares represent the dilutive effect of the assumed exercise of
      outstanding stock options.

3.    Acquisition of Sutter Corporation
      ---------------------------------

      On August 30, 1996,  OrthoLogic  acquired all of the  outstanding  capital
      stock of  Sutter  Corporation  ("Sutter")  for  $24,500,000  in cash.  The
      acquisition  was  accounted  for as a purchase  and,  accordingly  the net
      assets and results of  operations  of Sutter  have been  included in these
      consolidated financial statements commencing August 30, 1996. The purchase
      resulted in  goodwill of $7.4  million  which is being  amortized  over 15
      years. The following unaudited pro-forma summary combines the consolidated
      results of operations of OrthoLogic and Sutter as if the  acquisition  had
      occurred  on  January 1 of that  period  after  giving  effect to  certain
      adjustments including  amortization of the purchase price in excess of net
      assets acquired, interest income, and income taxes. This pro-forma summary
      is not necessarily indicative of the results of operations that would have
      occurred if OrthoLogic  and Sutter had been combined  during such periods.
      Moreover,  the  pro-forma  summary is not intended to be indicative of the
      results of operations to be attained in the future.
                                                                    Page 5 of 13
<PAGE>
                                ORTHOLOGIC CORP.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

3.    Acquisition of Sutter Corporation  (continued)
      ---------------------------------

                                              Nine Months Ended
                                                September 30,
                                    ------------------------------------
                                    (in thousands, except per share data)

                                            1996            1995
                                            ----            ----

Net revenues                              $  48,818        $ 34,745
                                          =========        ========
Net income (loss)                         $   1,752        $ (2,513)
                                          =========        ========
Net income (loss) per common share        $     .07        $   (.17)
                                          =========        ========


4.    Inventories
      -----------

      Inventories  are stated at the lower of cost  (FIFO  method) or market and
consisted of the following:

                                                         September 30, 1996
                                                      --------------------------

                   Raw materials                              $3,743,040
                   Work-in process                               292,100
                   Finished goods                              1,922,256
                                                              ----------
                                                               5,957,396
                   Less reserve for obsolescence               (359,866)
                                                              ----------
                                                              $5,597,530
                                                              ==========

5.    Intangibles
      -----------

      The Company is in the  process of  converting  from a dealer  network to a
      network of direct  salespeople.  In connection  with this  conversion  the
      Company had paid $9.3 million as of September 30, 1996, to certain  former
      independent    dealers    for   the    return   of    territory    rights,
      covenants-not-to-compete  with varying  terms and the right to hire former
      independent dealer sales representatives as Company employees. This amount
      is  being   amortized   over  seven   years.   Intangibles   also  include
      approximately $7.4 million of goodwill discussed in Note 3.


6.    Income Taxes
      ------------

      The Company has  recorded a deferred  tax asset of $9.9  million  relating
      primarily to NOL carry forwards and  allowances for doubtful  accounts and
      inventory obsolescence.  This amount is offset by a $7.5 million valuation
      allowance.


7.    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.
                                                                    Page 6 of 13
<PAGE>
                                ORTHOLOGIC CORP.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

7.    Litigation (continued)
      ----------

      Plaintiffs in these  actions  allege that  correspondence  received by the
      Company from the Food and Drug  Administration  (the "FDA")  regarding the
      promotion and custom  configurations of the Company's OrthoLogic 1000 Bone
      Growth Stimulator was 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.
      Plaintiffs  further  allege  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 seek class action status, unspecified compensatory damages,
      fees and  costs.  Plaintiffs  also seek  extraordinary,  equitable  and/or
      injunctive  relief  as  permitted  by law.  Management  believes  that the
      allegations are without merit and will  vigorously  defend them. The costs
      associated  with defending  these  allegations  and the potential  outcome
      cannot be  determined at this time and  accordingly,  no estimate for such
      costs have been included in these financial statements.
                                                                    Page 7 of 13
<PAGE>
Item 2.        MANAGEMENT'S  DISCUSSION  AND ANALYSIS OF FINANCIAL CONDITION AND
               RESULTS OF OPERATIONS


Introduction

               Since  receiving   approval  of  its  PMA  (pre-market   approval
               application)  from the Food and Drug  Administration  ("FDA")  in
               March 1994 of its  OrthoLogic  1000 Bone Growth  Stimulator,  the
               Company has marketed its products  primarily through a network of
               independent  orthopaedic  specialty dealers and a small number of
               direct sales representatives.  During the second quarter of 1996,
               the Company  initiated  a plan to convert  the primary  marketing
               channel  from an  independent  dealer  network to a direct  sales
               force.  As of September 30, 1996, the Company paid  approximately
               $9.3 million to certain former independent dealers for the return
               of territory rights,  covenants-not-to-compete with varying terms
               and  the  right  to  hire   former   independent   dealer   sales
               representatives  as Company  employees.  The  Company  expects to
               continue   negotiating   additional  similar   transactions  with
               remaining independent dealers.

               On August 30, 1996 the Company  acquired  all of the  outstanding
               capital stock of Sutter  Corporation,  for  $24,500,000  in cash.
               Accordingly,  the net assets and results of  operations of Sutter
               have  been  included  in these  financial  statements  commencing
               August 30, 1996.


Results of Operations

              Net Revenues.  Total net revenues during the three and nine months
              ended  September 30, 1996,  were $10.4 million and $25.1  million,
              respectively, compared to $4.0 million and $9.6 million during the
              comparable periods in 1995,  respectively,  reflecting an increase
              of 157% and 160%,  respectively.  The increase in the net revenues
              was  primarily   attributable   to  higher  sales  levels  of  the
              OrthoLogic 1000 and Sutter revenues..

              Gross Profit.  The increased revenue levels generated gross profit
              of $8.4  million  and $20.7  million for the three and nine months
              ended  September 30, 1996,  which was an increase of 159% and 171%
              over the comparable periods in 1995, respectively. Gross profit as
              a percentage  of net revenues  remained  flat for the three months
              ended  September  30, 1996  versus the same period in 1995.  Gross
              profit as a  percentage  of net revenues  increased  from 79.2% to
              82.6%  for the nine  months  ended  September  30,  1995 and 1996,
              respectively.  The gross profit percentage improved as a result of
              the fixed  manufacturing costs being absorbed over a higher volume
              of  manufactured  product and from a change in product revenue mix
              to a higher gross profit product in 1996 compared to 1995.
                                                                    Page 8 of 13
<PAGE>
Item 2.       MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF FINANCIAL CONDITION AND
              RESULTS OF OPERATIONS (continued)


Results of Operations (continued)


              Selling, General and Administrative.  Total selling,  general, and
              administrative  expenses ("SG&A")  increased 184% and 133% for the
              three and nine  months  ended  September  30, 1996 versus the same
              periods  during 1995,  respectively.  As a percentage of revenues,
              SG&A went from 74.0% to 81.7% for the three months ended September
              30, 1995 versus  1996,  respectively,  and from 82.3% to 73.7% for
              the  nine  months   ended   September   30,   1995  versus   1996,
              respectively.  The  increased  SG&A dollars are due in part to the
              variable  component of SG&A  (commissions,  bad debts,  royalties)
              associated  with the increased  revenues.  The fixed  component of
              SG&A has also increased due to the additional  personnel and other
              infrastructure  required to support the  growing  revenue  volume,
              salespeople  added as a result of the transition to a direct sales
              force and  expenses of Sutter.  As a result SG&A is expected to be
              higher throughout 1996 compared to 1995.

              Research and Development. Research and development expenses during
              the three months ended September 30, 1996 increased  approximately
              16% compared to the same period  during 1995.  The increase is due
              primarily to the timing of various clinical  trials.  Expenditures
              for the nine months ended  September 30, 1996 are relatively  flat
              compared to the same period in 1995.

              Other Income.  Other income increased during 1996 due primarily to
              interest  income  which was $1.0  million and $2.1 million for the
              three and nine months  ended  September  30,  1996,  respectively,
              versus $27,000 and $128,000 in the comparable periods during 1995,
              respectively. This increase is due primarily to an increased level
              of cash  and  short-term  investments  resulting  from the sale of
              common stock.


Liquidity and Capital Resources

              On April 30, 1996 the Company  issued  2,530,000  shares of common
              stock upon the closing of a public  offering of its common  stock.
              Net proceeds to the Company were approximately $73.5 million.

              At September 30, 1996, the Company had cash, cash  equivalents and
              short-term investments of $53.5 million. Working capital increased
              over 227% from $23.5 million at December 31, 1995 to $76.9 million
              at September  30, 1996,  primarily  due to proceeds from the stock
              offering.

              The Company is in the process of converting  from a dealer network
              to a  network  of  direct  salespeople.  In  connection  with this
              conversion,  the Company had paid approximately $9.3 million as of
              September 30, 1996, to certain former independent  dealers for the
              return of territory rights,  covenants-not-to-compete with varying
              terms  and the  right  to hire  former  independent  dealer  sales
              representatives  as  Company  employees.  It is  anticipated  that
              approximately  $1 million  will be paid for  similar  transactions
              during the remainder of 1996.

              As noted above,  OrthoLogic  acquired Sutter Corporation on August
              30, 1996 and  accounted  for the  transaction  using the  purchase
              method.  The Company  paid  $25,047,000  and  assumed  liabilities
              totaling $6,469,000 for assets with a fair value of $31,516,000.
                                                                    Page 9 of 13
<PAGE>
Item 2.       MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF FINANCIAL CONDITION AND
              RESULTS OF OPERATIONS (continued)


Liquidity and Capital Resources (continued)

              The Company  anticipates that the cash generated from the proceeds
              of the stock offering,  product revenues and current cash balances
              will be sufficient to meet the Company's capital  requirements for
              the foreseeable  future.  There can be no assurance however,  that
              the Company will not require  additional  financing in the future,
              or that  such  sources  of  capital  will be  available  on  terms
              favorable to the Company, if at all.


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,  projections  of results of  operations  and
              financial condition, statements of future economic performance and
              other forward-looking statements within the meaning of the Private
              Securities Litigation Reform Act of 1995, 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.
                                                                   Page 10 of 13
<PAGE>
PART II - OTHER INFORMATION


Item 1.        Legal Proceedings

                  Reference is made to the disclosure under the Caption "Part II
      - Item 1. Legal  Proceedings"  of the Company's  Quarterly  Report on Form
      10-Q for the quarter ended June 30, 1996.

                  Commencing  on June 24, 1996,  certain  lawsuits were filed in
      the United States District Court for the District Court of Arizona against
      the Company and certain  officers and  directors  alleging  violations  of
      Sections 10 (b) of the Securities  Exchange Act of 1934  ("Exchange  Act")
      and SEC Rule 10b-5  promulgated  thereunder,  and, as to other defendants,
      Sections 20 (a) of the Exchange Act. In addition to the lawsuits  referred
      to above, the following were filed:

                  Scott Longacre, Rickie Trainor, W. Preston Battle, III, Taylor
      D. Shepherd,  Dianna Lynn Shepherd,  Gordon H. Hogan,  Trustee, and Dallas
      Warehouse  Corp.,  Inc., on behalf of themselves and all others  similarly
      situated v. Allan M. Weinstein, Allen R. Dunaway, David E. Derminio, Frank
      P. Magee,  and OrthoLogic  Corp.,  Cause No. CIV 96-1891 PHX PGR, filed in
      the United  States  District  Court for the  District of Arizona  (Phoenix
      Division) on August 16, 1996.

                  Jeffrey D. Bailey,  Milton Berg, Bryan Boatwright,  Charles R.
      Campbell,  Mark and Cathy Daniel, Tom Drotar, Rudy Gonnella,  David Gross,
      Janet  Gustafson,  Willa P.  Koretz,  Dr.  Richard  Lewis,  John  Maynard,
      Margaret Milosh,  Michelle Milosh,  Theresa L. Onn, Ward B. Perry, William
      Schillings,  Darwin and Merle Sen,  Nestor Serrano and Larry E. and Gloria
      M. Swanson v. Allan M. Weinstein,  Allen R. Dunaway, David E. Derminio and
      OrthoLogic Corporation, Cause No. CIV 96-1910 PHX PGR, filed in the United
      States  District Court for the District of Arizona  (Phoenix  Division) on
      August 19, 1996.

                  Nancy Z. Kyser and Mark L.  Nichols,  on behalf of  themselves
      and all others  similarly  situated v.  OrthoLogic  Corporation,  Allan M.
      Weinstein, Frank P. Magee and David E. Derminio, Cause No. CIV 96-1937 PHX
      ROS, filed in the United States District Court for the District of Arizona
      (Phoenix Division) on August 22, 1996.

                  Plaintiffs in these actions allege the correspondence received
      by  the  Company  from  the  FDA   regarding   the  promotion  and  custom
      configuration of the Company's  OrthoLogic 1000 Bone Growth Stimulator was
      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.  Plaintiffs further
      allege that once the FDA letter  became known,  a material  decline in the
      stock price of the Company occurred, causing damage to plaintiffs.

                  All   plaintiffs   seek  class  action   status,   unspecified
      compensatory damages, fees and costs.  Plaintiffs also seek extraordinary,
      equitable and/or injunctive relief as permitted by law.

                  Additionally,  on or about July 16,  1996,  Jacob B.  Rapoport
      filed a Shareholder  Derivative Complaint for Breach of Fiduciary Duty and
      Misappropriation of Confidential  Corporate  Information (based on similar
      factual issues underlying the above lawsuits) in the Superior Court of the
      State of
                                                                   Page 11 of 13
<PAGE>
PART II - OTHER INFORMATION

Item 1.        Legal Proceedings (continued)

      Arizona,  Maricopa County, No. CV96-12406 against Allan M. Weinstein, John
      M.  Holliman,  Augustus A. White,  Frederic J.  Feldman,  Elwood D. Howse,
      George A.  Oram,  Frank P.  Magee and David E.  Derminio,  Defendants  and
      OrthoLogic Corp.,  Nominal  Defendant.  On October 29, 1996 the defendants
      removed the case to the United States  District  Court for the District of
      Arizona (Phoenix  Division) No. CIV 2451 PHX RCB pursuant to 28 U.S.C. ss.
      1332 on the grounds of diversity.  Defendants  have also filed a motion to
      dismiss the complaint.

                  The Court ordered the July 10, 1996 complaint filed by Randall
      Hutchens in the  California  Superior  Court,  Small Claims  Division (No.
      SSB1415) against Allan M. Weinstein, dismissed without prejudice on August
      27, 1996.

                  On June  24,  1996,  the  Company  received  notice  that  the
      National Association of Securities Dealers, Inc., ("NASD") is conducting a
      routine review of the trading activity in the Company's stock. The Company
      responded  to this  inquiry  in July  1996 and to a follow up  inquiry  in
      September 1996.

                  On August 7, 1996,  the Company  received a subpoena  from the
      Arizona Corporation  Commission  Securities Division for the production of
      records regarding the above lawsuits and the NASD review.  The Company has
      responded to the subpoena.


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.

                  On September 13, 1996,  the Company filed a current  report on
                  Form 8-K  dated  August  30,  1996,  to  report  in Item 2 the
                  consummation of its acquisition of the capital stock of Sutter
                  Corporation.  The Form 8-K was amended on November 14, 1996 to
                  include the following financial statements:

                        -     Unaudited  Pro-Forma  Balance Sheet as of June 30,
                              1996.

                        -     Unaudited  Pro-Forma  Statement  of Income for the
                              six month period ended June 30, 1996.

                        -     Unaudited  Pro-Forma  Statement of Operations  for
                              the year ended December 31, 1995.

                        -     Audited financial statements of Sutter Corporation
                              for the years ended  December 31,  1995,  1994 and
                              1993 and independent auditors report.

                        -     Unaudited  balance sheet of Sutter  Corporation as
                              of June 30, 1996.

                        -     Unaudited  statements  of income for the six month
                              periods ended June 30, 1996 and 1995.
                                                                   Page 12 of 13
<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.


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


<S>                             <C>                                               <C>
/s/ Allan M. Weinstein          Chairman of the Board of Directors and            November 14, 1996
----------------------
Allan M. Weinstein              Chief Executive Officer
                                (Principal Executive Officer)



/s/ Allen R. Dunaway            Vice-President and Chief Financial Officer        November 14, 1996
--------------------
Allen R. Dunaway                (Principal Financial and Accounting Officer)
</TABLE>
                                                                   Page 13 of 13
<PAGE>
                                ORTHOLOGIC CORP.
                 EXHIBIT INDEX TO QUARTERLY REPORT ON FORM 10-Q
                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996


<TABLE>
<CAPTION>
    Exhibit                                                                Incorporated by                       Filed
      No.                        Description                                Reference to:                       Herewith
      ---                        -----------                                -------------                       --------
<S>                <C>                                         <C>                                                 <C>
      3.1          Amended and Compiled Certificate of         Exhibit 3.1 to the Company's Quarterly
                   Incorporation of the Company                Report on Form
                                                               10-Q for the period ended March 31, 1996

      3.2          Bylaws of the Company                       Exhibit 3.4 to the Company's Amendment
                                                               No. 2 to Registration Statement on Form
                                                               S-1 (No. 33-47569) filed with the SEC
                                                               on January 25, 1993

     10.1          Stock purchase agreement dated August       Exhibit 2.1 to the Company's Form 8-K
                   30, 1996 by and among OrthoLogic Corp.,     filed on September 13, 1996
                   Sutter Corporation and Smith
                   Laboratories, Inc.

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

      27           Financial Data Schedule                                                                         X
</TABLE>