8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 6, 2004

OrthoLogic Corp.

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation)

000-21214	86-0585310
(Commission File Number)	(IRS Employer Identification Number)
1275 West Washington Street, Tempe, Arizona	85281
(Address of principal executive offices)	(Zip Code)

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

Not Applicable

(Former name or former address, if changed since last report)

Item 2. Acquisition or Disposition of Assets

     On August 5, 2004, OrthoLogic Corp. consummated its previously announced purchase of substantially all of the assets of Chrysalis Biotechnology, Inc. pursuant to an Asset Purchase Agreement and Plan of Reorganization dated as of April 28, 2004, as amended on June 1, 2004, and August 5, 2004 (the “Definitive Agreement”). In accordance with the terms of the Definitive Agreement, which was negotiated in an arm’s length transaction, OrthoLogic paid Chrysalis $2.5 million in cash and issued 3,462,124 shares of OrthoLogic common stock, valued at $25.0 million, for substantially all of Chrysalis’ assets, including its key intellectual property asset, an exclusive worldwide license to develop, manufacture and market Chrysalin-based products for all indications. Prior to the transaction, OrthoLogic held an exclusive sublicense from Chrysalis for all orthopedic indications. In addition to the consideration paid at closing, OrthoLogic will issue the number of shares equal to an additional $7.0 million in OrthoLogic common stock to Chrysalis upon the occurrence within five years from the August 5, 2004 closing date of certain future trigger events, including the acceptance for filing by the U.S. Food and Drug Administration (FDA) of a New Drug Application (NDA) for a Chrysalin-based product or the sale of OrthoLogic or a similar corporate transaction resulting in a change of control.

     Chrysalis has adopted a plan of liquidation and OrthoLogic, which owns approximately 6.7% of Chrysalis’ outstanding stock, will be entitled to receive its pro rata share of all liquidating distributions.

     The foregoing description of the transaction is qualified in its entirety by the complete text of the Asset Purchase Agreement and Plan of Reorganization and Amendment Nos. 1 and 2 to the Asset Purchase Agreement and Plan of Reorganization incorporated by reference herein.

     A copy of the press release announcing the transaction is filed as Exhibit 99.1 to this report.

Item 7. Financial Statements and Exhibits

(a) Financial statements of the business acquired.

The financial statements of Chrysalis Biotechnology are incorporated by reference to pages F-1 through F-15 from the Registration Statement No. 333-116153 filed on July 27, 2004 on Form S-4/A, as amended.

(b) Pro forma financial information.

The unaudited pro forma financial statements of OrthoLogic are incorporated by reference to pages F-16 through F-22 from the Registration Statement No. 333-116153 filed on July 27, 2004 on Form S-4/A, as amended.

(c) Exhibits

Exhibit No.	Description	Filed Herewith
2.1	Amendment No. 2 to the Asset Purchase Agreement and Plan of Reorganization between OrthoLogic Corp. and Chrysalis Biotechnology, Inc., dated August 5, 2004**	X
99.1	Press Release dated August 6, 2004 announcing closing of purchase of assets of Chrysalis Biotechnology, Inc.	X

**OrthoLogic Corp. agrees to furnish supplementally a copy of any schedule to the Asset Purchase Agreement and Plan of Reorganization dated as of April 28, 2004 and to Amendment Nos. 1 and 2 omitted from this filing to the Securities and Exchange Commission upon its request.

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 hereunto duly authorized.

Dated: August 6, 2004	OrthoLogic Corp.
	/s/ Thomas R. Trotter
	Thomas R. Trotter
	Chief Executive Officer

EX-2.1

Exhibit 2.1

AMENDMENT NO. 2
TO
ASSET PURCHASE AGREEMENT AND PLAN OF REORGANIZATION

     THIS AMENDMENT NO. 2 TO THE ASSET PURCHASE AGREEMENT AND PLAN OF REORGANIZATION (this “Amendment”) is entered into as of the 5th day of August 2004, by and between OrthoLogic Corp., a Delaware corporation (“Buyer”), and Chrysalis Biotechnology, Inc., a Delaware corporation (“Seller”).

RECITALS

     WHEREAS, Buyer and Seller are parties to the Asset Purchase Agreement and Plan of Reorganization dated as of April 28, 2004, as amended on June 1, 2004 (the “Asset Purchase Agreement”); and

     WHEREAS, Buyer and Seller desire to further amend the Asset Purchase Agreement.

AGREEMENT

     NOW THEREFORE, in consideration of the premises and the mutual promises hereinafter set forth, and in consideration of the representations, warranties and covenants herein contained, the parties agree as follows:

     1.1       Definitions. Capitalized terms used in this Amendment without definition shall have the meanings ascribed thereto in the Asset Purchase Agreement.

     1.2       Amendment. Exhibit F to the Asset Purchase Agreement shall be replaced in its entirety with the new Exhibit F attached hereto.

     1.3.       Asset Purchase Agreement. Except as expressly modified herein, the Asset Purchase Agreement shall remain in full force and effect.

     1.4.       Counterparts. This Amendment may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument.

[Signature page follows]

     IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date first above written.

BUYER: OrthoLogic Corp., a Delaware corporation
By:	/s/ Thomas R. Trotter
	Name:	Thomas R. Trotter
	Title:	President
SELLER: Chrysalis Biotechnology, Inc., a Delaware corporation
By:	/s/ Darrell H. Carney, Ph.D.
	Name:	Darrell H. Carney, Ph.D.
	Title:	President

EX-99.1

Exhibit 99.1

NEWS BULLETIN	RE:	ORTHOLOGIC CORP.
FROM:		1275 W. Washington St. Tempe, AZ 85281 (602) 286-5520 TRADED: Nasdaq: OLGC

THE BERLIN GROUP, INC.
INVESTOR RELATIONS COUNSEL

FOR FURTHER INFORMATION:

AT THE COMPANY:	AT THE BERLIN GROUP:
Thomas R. Trotter	Lawrence Delaney Jr.
President/CEO	(714) 734-5000
(602) 286-5500

ORTHOLOGIC COMPLETES ACQUISITION OF CHRYSALIS BIOTECHNOLOGY, INC.

Tempe, Ariz., Friday, August 6, 2004-OrthoLogic Corp. (Nasdaq: OLGC) announced today that it has completed the acquisition of Chrysalis BioTechnology, Inc. (CBI).

Under the terms of the definitive agreement previously announced on April 29, 2004, OrthoLogic paid CBI $2.5 million in cash and issued 3,462,124 shares of OrthoLogic common stock, valued at $25.0 million, for substantially all of CBI’s assets and intellectual property. The transaction will be accounted for as an asset acquisition. Approximately $23.0 million will be expensed as In-Process Research and Development. The remainder of the purchase price and acquisition costs will be allocated to patents and trademarks.

An additional $7.0 million in OrthoLogic common stock will be paid to CBI shareholders upon the occurrence of certain future events, including the acceptance for filing by the U.S. Food and Drug Administration (FDA) of a New Drug Application (NDA) for a Chrysalin-based product. If the trigger is met, the additional $7.0 million will be added to the purchase price. CBI has adopted a plan of liquidation and OrthoLogic, which owns approximately 6.7% of CBI’s outstanding stock, will be entitled to receive its pro rata share of all liquidating distributions.

“We are very pleased to have completed this key strategic acquisition,” said Thomas R. Trotter, president and CEO of OrthoLogic. “CBI’s work in the areas of wound healing, dental repair and cardiovascular repair have shown promising results in pre-clinical studies as well as an initial human clinical trial.”

OrthoLogic cited the following additional benefits resulting from the acquisition:

- elimination of all future milestone payments;

- control of the manufacturing process;

- control of all potential sub-licensing and corporate partnership agreements;

- reduction of royalty rates;

- control of the intellectual property rights;

- important additional scientific expertise.

OrthoLogic Completes Acquisition of Chrysalis BioTechnology, Inc.
Page 2

Trotter concluded, “With the completion of this acquisition, OrthoLogic has now become a more diversified drug-development company, with potential Chrysalin-based product candidates for a wide variety of unmet medical needs. We believe that the Chrysalin technology represents an exciting new approach to the development of cost-effective solutions for several of the largest medical market opportunities worldwide.”

About OrthoLogic Corp.

OrthoLogic is a drug-development company focused on commercializing several potential therapeutics comprising the Chrysalin® Product Platform, a series of product candidates aimed at treating traumatic and chronic orthopedic indications in both bone and soft tissue as well as oral/maxillofacial bone repair, cardiovascular repair and wound healing. All of these potential products are based on the Chrysalin synthetic peptide, also known as TP508.

OrthoLogic owns an exclusive license for all worldwide medical indications for the peptide, and is actively pursuing five orthopedic indications for Chrysalin. These include fracture repair and spine fusion, which are in human clinical trials, and cartilage defect repair, which is in late-stage preclinical trials. Ligament and tendon repair indications are in the preclinical planning stage, with preclinical studies planned to initiate in 2004. In non-orthopedic areas, a human clinical trial for chronic diabetic ulcers has been completed. OrthoLogic’s product development pipeline also includes Chrysalin-based product candidates for dental bone formation and myocardial revascularization.

For more information, please visit the company’s Web site: www.orthologic.com.

Statements in this press release or otherwise attributable to OrthoLogic regarding our business that are not historical facts are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, which include the timing and acceptability of FDA filings and the efficacy and marketability of potential products, involve risks and uncertainties that could cause actual results to differ materially from predicted results. These risks include: delays in obtaining or inability to obtain FDA, institutional review board or other regulatory approvals of preclinical or clinical testing; unfavorable outcomes in our pre-clinical and clinical testing; the development by others of competing technologies and therapeutics that may have greater efficacy or lower cost; delays in obtaining or inability to obtain FDA or other necessary regulatory approval of our products; our inability to successfully and cost effectively develop or outsource manufacturing and marketing of any products we are able to bring to market; changes in FDA or other regulations that affect our ability to obtain regulatory approval of our products, increase our manufacturing costs or limit our ability to market our products; our possible need for additional capital in the future to fund the continued development of our Chrysalin Product Platform; and other factors discussed in our Form 10-K for the fiscal year ended December 31, 2003 and other documents we file with the Securities and Exchange Commission.

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