S-3

As filed with the Securities and Exchange Commission on April 13, 2006

Registration No. 333-                    

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-3

REGISTRATION STATEMENT
Under
The Securities Act of 1933

ORTHOLOGIC CORP.

(Exact name of registrant as specified in its charter)

DELAWARE	86-0585310
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1275 West Washington Street
Tempe, Arizona 85281
(602) 286-5520

(Address, including zip code, and telephone number,
including area code, of registrant’s principal executive offices)

John M. Holliman, III, Executive Chairman
and principal executive officer
OrthoLogic Corp.
1275 West Washington Street
Tempe, Arizona 85281
(602) 286-5520

(Name, address, including zip code, and telephone number,
including area code, of agent for service)

Copy to:

Steven P. Emerick, Esq.
Quarles & Brady Streich Lang, LLP
One Renaissance Square, Two North Central Avenue
Phoenix, Arizona 85004
(602) 230-5517

     Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this registration statement.

     If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box.   o

     If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box.    þ

     If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   
o                     

     If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   o                     

     If this Form is a registration statement pursuant to General Instruction I.D. or a post-effective amendment thereto that shall become effective upon filing with the Commission pursuant to Rule 462(e) under the Securities Act, check the following box.   o

     If this Form is a post-effective amendment to a registration statement filed pursuant to General Instruction I.D. filed to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act, check the following box.   o

CALCULATION OF REGISTRATION FEE

						Proposed
			Proposed			maximum
	Amount		maximum			aggregate			Amount of
Title of each class of	to be		offering price			offering			registration
securities to be registered	registered		per unit			price			fee
Common Stock, par value $.0005 per share (with attached Preferred Stock Purchase Rights)		2,359,279 (1)	$	1.83	(2)	$	4,317,481	(2)	$	461.97
Common Stock, par value $.0005 per share (with attached Preferred Stock Purchase Rights) underlying Additional Class A Warrants		260,000 (1)	$	1.83	(3)	$	475,800	(3)	$	50.91
Common Stock, par value $.0005 per share (with attached Preferred Stock Purchase Rights) underlying Initial Class A Warrant and Milestone Warrants		286,706 (1)	$	6.39	(4)	$	1,832,051	(4)	$	196.03
TOTAL		2,905,985 (1)				$	6,625,332		$	708.91	(5)

(1)	Any additional shares of common stock to be issued as a result of stock splits, stock dividends, or similar transactions shall be covered by this registration statement as provided in Rule 416.
(2)	Estimated pursuant to Rule 457(c) of the Securities Act of 1933, based on the average of the high and low prices reported on the NASDAQ National Market on April 10, 2006, solely for the purpose of calculating the registration fee.
(3)	Estimated pursuant to Rule 457(g) and Rule 457(c), based on the average of the high and low prices reported on the NASDAQ National Market on April 10, 2006, solely for the purpose of calculating the registration fee.
(4)	Pursuant to Rule 457(g) of the Securities Act of 1933, the proposed maximum offering price is based upon the higher of the price at which the warrants or options may be exercised and the price of shares of common stock as determined in accordance with Rule 457(c).
(5)	The filing fee of $708.91 has been previously paid. In connection with our registration statement on Form S-3 filed August 9, 2005, as amended on August 17, 2005, Commission File No. 333-127356, OrthoLogic Corp. paid a total of $11,770 in filing fees. The offering was later withdrawn, no securities having been sold thereunder, leaving a balance of $11,770. It is from this balance that we wish to pay the filing fee for this registration statement on Form S-3.

     The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any state where the offer, solicitation or sale is not permitted.

PROSPECTUS

SUBJECT TO COMPLETION, DATED APRIL 13, 2006

ORTHOLOGIC CORP.

2,905,985 SHARES OF COMMON STOCK

     This prospectus relates to the sale of up to an aggregate of 2,905,985 shares of our common stock by PharmaBio Development Inc. (“PharmaBio”). Such shares consist of 2,359,279 shares of common stock and 546,706 shares of common stock underlying warrants. PharmaBio is sometimes referred to in this prospectus as the selling security holder. The prices at which PharmaBio may sell the shares will be determined by the prevailing market price for the shares or in negotiated transactions. We will not receive any of the proceeds from the resale by the selling security holder of any of the securities covered by this prospectus, however, we have received $2 million and may receive, at our option, up to an additional $3 million from the initial sale of shares under a Common Stock and Warrant Purchase Agreement we have entered into with PharmaBio. We will also receive the exercise price of the warrants described in this prospectus (to the extent that the selling security holder does not utilize the cashless exercise feature, if provided).

     Our common stock is quoted on The NASDAQ National Market, under the symbol “OLGC.” Our preferred stock is not listed or quoted on any exchange. On April 11, 2006, the last reported sale price of our common stock on The NASDAQ National Market was $1.80 per share.

     PharmaBio is an “underwriter” within the meaning of the Securities Act of 1933, as amended.

     You should carefully consider the risk factors described under the heading “Risk Factors and Forward-Looking Statements” in this prospectus, in addition to any risk factors which may be included in any supplement, or which are incorporated by reference into this prospectus.

     Investing in our securities involves a high degree of risk. Before buying any of our common stock, you should carefully read the discussion of material risks of investing in our securities under the heading “Risk Factors and Forward-Looking Statements” beginning on page 6 in this prospectus.

     Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of the disclosures in this prospectus. Any representation to the contrary is a criminal offense.

The date of this prospectus is                     , 2006.

TABLE OF CONTENTS

	Page
ABOUT THIS PROSPECTUS		2
PROSPECTUS SUMMARY		3
RISK FACTORS AND FORWARD-LOOKING STATEMENTS		6
THE COMPANY		17
MATERIAL CHANGES		23
THE PHARMABIO TRANSACTION		24
USE OF PROCEEDS		24
SELLING SECURITY HOLDER		25
PLAN OF DISTRIBUTION		26
DESCRIPTION OF WARRANTS		28
DESCRIPTION OF CAPITAL STOCK		31
LEGAL MATTERS		33
EXPERTS		33
WHERE YOU CAN FIND MORE INFORMATION		33
INFORMATION INCORPORATED BY REFERENCE		34
Exhibit 4.8
Exhibit 5.1
Exhibit 10.1
Exhibit 10.2
Exhibit 10.3
Exhibit 23.1

* * *

ABOUT THIS PROSPECTUS

     You should rely only on the information contained or incorporated by reference in this prospectus. We have not, and the selling security holder has not, authorized anyone to provide you with different information. No one is making offers to sell or seeking offers to buy these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information contained in this prospectus is accurate as of the date on the front of this prospectus only and that any information we have incorporated by reference is accurate as of the date of the document incorporated by reference only, regardless of the time of delivery of this prospectus or any sale of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date.

     The information in this prospectus may not contain all of the information that may be important to you. You should read the entire prospectus as well as the documents incorporated by reference into this prospectus before making an investment decision. To obtain additional information that may be important to you, you should also read the exhibits to the registration statement of which this prospectus is a part and the additional information described below under the heading “Where You Can Find More Information.”

     When used in this prospectus, the terms “OrthoLogic,” “we,” “our,” “us” and the “Company” refer to OrthoLogic Corp.

     The address and telephone number of our principal executive offices are 1275 West Washington Street, Tempe, Arizona 85281; telephone (602) 286-5520.

2

PROSPECTUS SUMMARY

     This summary highlights selected information from this prospectus and does not contain all of the information that you need to consider in making your investment decision. You should carefully read the entire prospectus, including the risks of investing discussed under “Risk Factors and Forward-Looking Statements” beginning on page 6, the information incorporated by reference, including our financial statements, and the exhibits to the registration statement of which this prospectus is a part.

Our Company

     OrthoLogic is a biotechnology company focused on the development and commercialization of the novel synthetic peptide Chrysalin® (TP508) in two lead indications, both of which represent areas of significant unmet medical need — fracture repair and diabetic foot ulcer healing. Chrysalin, or TP508, is a 23-amino acid synthetic peptide representing a receptor-binding domain of the human thrombin molecule, a naturally occurring agent responsible for blood clotting and initiating the natural healing cascade of cellular events responsible for tissue repair — both soft tissue and bone.

     Recent Events

     On April 5, 2006, James M. Pusey, MD resigned as our President and Chief Executive Officer and as a Class I director of the company. John M. Holliman, III, a director of OrthoLogic since September 1987 and Chairman of the Board of Directors since August 1997, assumed the title of Executive Chairman on that date. In that position, Mr. Holliman will serve as our principal executive officer and will lead our business and corporate strategic activities. Randolph C. Steer, MD, Ph.D. was named our President on April 5, 2006, and will be responsible for directing our strategy and operations in all clinical development and regulatory areas.

     On March 15, 2006, we reported results of our Phase 3 fracture repair human clinical trial. For the primary endpoint, immobilization removal, no statistically significant difference between placebo and a single injection of Chrysalin were achieved. Consistent with the Phase 1/2 human clinical trial results, a statistically significant difference for a secondary endpoint, radiographic evidence of radial cortical bridging, was achieved. However, no statistically significant difference was noted in the study’s other secondary endpoints. On March 15, 2006, we temporarily halted our Phase 2b fracture repair dosing clinical trial to perform an interim analysis of the data of the 273 patients enrolled to that date. We plan to announce the results of the interim analysis and our future fracture repair indication plans by the 3rd Quarter of 2006.

     On February 23, 2006, we entered into an agreement to purchase certain assets and assume certain liabilities of AzERx, Inc. in exchange for $390,000 in cash and 1,355,000 shares of our common stock. The transaction closed on February 27, 2006. Under the terms of the agreement, we acquired an exclusive license for the core intellectual property relating to AzERx’s lead compound, AZX100, a 24-amino acid peptide. AZX100 is currently being investigated for several applications, including the treatment of vasospasm associated with subarachnoid hemorrhage, prevention of keloid scarring, and treatment of asthma. We will continue to develop the new class of compounds in the field of smooth muscle relaxation called Intracellular Actin Relaxing Molecules, or ICARMs™, based on the AZX100 technology.

     We continue to explore other biopharmaceutical compounds that can complement our research activity internally and broaden our potential pipeline for successful products.

The Offering

     On February 27, 2006, we closed the initial transactions relating to our Common Stock and Warrant Purchase Agreement (the “Purchase Agreement”) dated February 24, 2006 with PharmaBio Development Inc. (“PharmaBio”), which provides for the purchase of shares of our common stock in three tranches together with the issuance of accompanying warrants to purchase shares of our common stock (the “Initial Class A Warrant” and two “Additional Class A Warrants”). We are also parties to a Class B Warrant Agreement (the “Class B Warrant”), Class C Warrant Agreement (the “Class C Warrant”) and a Class D Warrant Agreement (the “Class D Warrant”) with PharmaBio to purchase in the aggregate up to 240,000 shares of our common stock at $6.39 a share (the Class B Warrant, Class C Warrant and Class D Warrant are collectively referred to in this prospectus as the “Milestone Warrants”).

     All of the shares being offered pursuant to this prospectus are being sold by the selling security holder. See, “Selling Security Holder” later in this prospectus.

3

     We are obligated to file a registration statement to cover resale of the shares issued on the Closing Date, the additional shares to be issued at our election pursuant to the Purchase Agreement, as well as the shares to be issued upon exercise of the Initial Class A Warrant, the Additional Class A Warrants and the Milestone Warrants (collectively referred to in this prospectus as the “Warrants”).

Issuer	OrthoLogic Corp.
Common stock offered in this prospectus	359,279 shares as of April 13, 2006
	At our election, up to $3.0 million in shares of our common stock to be issued in two tranches of $1.5 million each on either or both of June 30, 2006 and September 29, 2006 (each, a “PharmaBio Offering”)
Common stock underlying warrants offered in this prospectus:
Shares underlying Initial Class A Warrant	The Initial Class A Warrant, dated February 24, 2006, is fully vested and entitles the selling security holder to purchase 46,706 shares of our common stock at $6.39 per share.
Shares underlying Additional Class A Warrants:
June 30, 2006 Class A Warrant	If we elect to issue stock to the selling security holder at the June 30, 2006 PharmaBio Offering, we will include an Additional Class A Warrant, which will be fully vested and will entitle the selling security holder to purchase the number of shares of our common stock equal to 13% of the shares issued at the June 30, 2006 PharmaBio Offering at an exercise price equal to 115% of the share price applicable to that offering.
September 29, 2006 Class A Warrant	If we elect to issue stock to the selling security holder at the September 29, 2006 PharmaBio Offering, we will include an Additional Class A Warrant, which will be fully vested and will entitle the selling security holder to purchase the number of shares of our common stock equal to 13% of the shares issued at the September 29, 2006 PharmaBio Offering at an exercise price equal to 115% of the share price applicable to that offering.
Shares underlying Class B Warrant	The Class B Warrant, dated February 24, 2006, entitles the selling security holder to purchase up to 80,000 shares of our common stock at $6.39 per share. The Class B Warrant will vest based on the achievement of a milestone identified in the Class B Warrant.
Shares underlying Class C Warrant	The Class C Warrant, dated February 24, 2006, entitles the selling security holder to purchase up to 80,000 shares of our common stock at $6.39 per share. The Class C Warrant will vest based on the achievement of a milestone identified in the Class C Warrant.
Shares underlying Class D Warrant	The Class D Warrant, dated February 24, 2006, entitles the selling security holder to purchase up to 80,000 shares of our common stock at $6.39 per share. The Class D Warrant will vest based on the achievement of a milestone identified in the Class D Warrant.
Use of proceeds	We will not receive any of the proceeds from the resale by the selling security holder of any of the securities covered by this prospectus, however, we have received $2 million and may receive, at our option, up to an additional $3 million from the initial sale of shares under the Purchase Agreement.

4

Issuer	OrthoLogic Corp.
	We will also receive the exercise price of the warrants described in this prospectus (to the extent that the selling security holder does not utilize the cashless exercise feature, if provided). We intend to use the net proceeds we received and may receive in the future from the sale of securities to the selling security holder for general corporate purposes, including capital expenditures, working capital needs, current and future clinical trials of our drug candidates, as well as other research and drug development activities.
The NASDAQ National Market symbol	Our common stock is quoted on The NASDAQ National Market under the symbol “OLGC.” The warrants are not, and will not be, listed on any exchange or quoted on any market.
Risk Factors	You should carefully consider the information under “Risk Factors and Forward-Looking Statements” included in this prospectus beginning on page 6 so that you understand the risks associated with an investment in our securities.
Registration Rights	We agreed to file a registration statement with respect to the shares of common stock issuable upon exercise of the Warrants, as well as other securities issued or to be issued from time to time to PharmaBio as described in this prospectus. Subject to certain suspension periods, we are obligated to use our best efforts to have the registration statement covering these securities declared effective as promptly as practicable following the filing of the registration statement, and to keep it effective until the earlier of: (i) the sale under the registration statement of all of the shares of common stock covered by the applicable registration rights agreement; and (ii) such date as all remaining unsold shares of common stock covered by the applicable registration rights agreement can be sold by the selling security holder without restriction pursuant to the requirements of Rule 144 promulgated under the Securities Act.
	Following the effective date of the registration statement, in certain circumstances, we may suspend the selling security holder’s use of the registration statement to resell their securities for up to 60 days (which need not be consecutive) in any twelve month period. See “Description of Warrants — Registration Rights.”

5

RISK FACTORS AND FORWARD-LOOKING STATEMENTS

Risks Related to Our Business

We are a biopharmaceutical company with no revenue generating operations and high investment costs.

     We expect to incur losses for a number of years as we expand our research and development projects. There is no assurance that our current level of funds will be sufficient to support all research expenses to achieve commercialization of any of our product candidates. On November 26, 2003, we sold all of our revenue generating operations. We are now focused on developing and testing the product candidates in our Chrysalin Product Platform and have allocated most of our resources to bringing these product candidates to the market. However, on February 27, 2006 we acquired the rights to AZX100, and we also intend to continue preclinical activities on AZX100 in 2006. We may invest in other peptide or small molecule-based therapeutics in the future, but there can be no assurance that opportunities of this nature will occur at acceptable terms, conditions or timing. We currently have no pharmaceutical products being sold or ready for sale and do not expect to be able to introduce any pharmaceutical products for at least several years. As a result of our significant research and development, clinical development, regulatory compliance and general and administrative expenses and the lack of any products to generate revenue, we expect to incur losses for at least the next several years and expect that our losses will increase as we expand our research and development activities and incur significant expenses for clinical trials. Our cash reserves, including the cash received from the sale of our bone growth stimulation device business in November 2003, are the primary source of our working capital. There can be no assurance that our cash resources will be sufficient to cover our future operating requirements, or should there be a need, other sources of cash will be available, or if available, at acceptable terms.

     We do not expect to receive any revenue from product sales until we receive regulatory approval and begin commercialization of our product candidates. We cannot predict when that will occur or if it will occur.

     We caution that our future cash expenditure levels are difficult to forecast because the forecast is based on assumptions about the number of research projects we pursue, the pace at which we pursue them, the quality of the data collected and the requests of the FDA to expand, narrow or conduct additional clinical trials and analyze data. Changes in any of these assumptions can change significantly our estimated cash expenditure levels.

Our product candidates are in various stages of development and may not be successfully developed or commercialized.

     If we fail to commercialize our product candidates, we will not be able to generate revenue. We currently do not sell any products. Our product candidates are at the following stages of development:

l	Acceleration of Fracture Repair	Phase 3 / Phase 2b human clinical trials
l	Diabetic Foot Ulcer Healing	Phase 1/2 human clinical trials
l	Spine Fusion	Phase 1/2 human clinical trials
l	Cartilage Defect Repair	Late stage pre-clinical trials
l	Tendon Repair	Early stage pre-clinical trials
l	Cardiovascular Repair	Pre-clinical trials
l	Dental Bone Repair	Pre-clinical trials
l	AZX100	Pre-clinical testing

     We are subject to the risk that:

l	the FDA finds some or all of our product candidates ineffective or unsafe;
l	we do not receive necessary regulatory approvals;
l	we are unable to get some or all of our product candidates to market in a timely manner;
l	we are not able to produce our product candidates in commercial quantities at reasonable costs;
l	our products undergo post-market evaluations resulting in marketing restrictions or withdrawal of our products; or

6

l the patients, insurance and/or physician community does not accept our products.

     In addition, our product development programs may be curtailed, redirected or eliminated at any time for many reasons, including:

l	adverse or ambiguous results;
l	undesirable side effects which delay or extend the trials;
l	inability to locate, recruit, qualify and retain a sufficient number of patients for our trials;
l	regulatory delays or other regulatory actions;
l	difficulties in obtaining sufficient quantities of the particular product candidate or any other components needed for our pre-clinical testing or clinical trials;
l	change in the focus of our development efforts; and
l	re-evaluation of our clinical development strategy.

     We cannot predict whether we will successfully develop and commercialize any of our product candidates. If we fail to do so, we will not be able to generate revenue.

Certain results from a Phase III clinical trial showed that the differences in the primary endpoint analyses between our lead compound, Chrysalin, and the placebo were not statistically significant.

     On March 15, 2006, we reported results of our Phase 3 fracture repair human clinical trial. For the primary endpoint, immobilization removal, no statistically significant difference between placebo and a single injection of Chrysalin were achieved. Consistent with the Phase 1/2 human clinical trial results, a statistically significant difference for a secondary endpoint, radiographic evidence of radial cortical bridging, was achieved. However, no statistically significant difference was noted in the study’s other secondary endpoints. These results may make it more difficult to achieve regulatory approval of Chrysalin. On March 15, 2006, we temporarily halted our Phase 2b fracture repair dosing clinical trial to perform an interim analysis of the data of the 273 patients enrolled to that date. We plan to announce the results of the interim analysis and our future fracture repair indication plans by the 3rd Quarter of 2006.

The results of our late stage clinical trials may be insufficient to obtain FDA approval, which could result in a substantial delay in our ability to generate revenue.

     Positive results from pre-clinical studies and early clinical trials do not ensure positive results in more advanced clinical trials. If we are unable to demonstrate that a product candidate will be safe and effective in advanced clinical trials involving larger numbers of patients, we will be unable to submit the NDA necessary to receive approval from the FDA to commercialize that product.

     On March 15, 2006, as discussed in the risk factor above, we reported results of our Phase 3 fracture repair human clinical trial. For the primary endpoint, immobilization removal, no statistically significant difference between placebo and a single injection of Chrysalin were achieved. Consistent with the Phase 1/2 human clinical trial results, a statistically significant difference for a secondary endpoint, radiographic evidence of radial cortical bridging, was achieved. However, no statistically significant difference was noted in the study’s other secondary endpoints. These results may make it more difficult to achieve regulatory approval of Chrysalin. On March 15, 2006, we temporarily halted our Phase 2b fracture repair dosing clinical trial to perform an interim analysis of the data of the 273 patients enrolled to that date. We plan to announce the results of the interim analysis and our future fracture repair indication plans by the 3^rd Quarter of 2006.

     Upon a receipt of the interim analysis of the results of our Phase 2b fracture repair dosing clinical trial we will have to determine whether to redesign our Chrysalin fracture repair product candidate and our protocols and continue with additional testing, or cease activities in this area. Redesigning the product candidate could be extremely costly and time-consuming. A substantial delay in obtaining FDA approval or termination of the

7

Chrysalin fracture repair product candidate could result in a delay in our ability to generate revenue and could have a material adverse effect on our business going forward.

The majority of our product candidates are all based on the same chemical peptide, Chrysalin. If one of our Chrysalin product candidates reveals safety or fundamental inefficacy issues in clinical trials, it could impact the development path for all our other current Chrysalin product candidates.

     The development of each of our product candidates in the Chrysalin Product Platform is based on our knowledge and understanding of how the human thrombin molecule contributes to the repair of soft tissue and bone. While there are important differences in each of the product candidates in terms of their purpose (fracture repair, diabetic foot ulcer, etc.), each product candidate is focused on accelerating the repair of soft tissue and bone and is based on the ability of Chrysalin to mimic specific attributes of the human thrombin molecule to stimulate the body’s natural healing processes.

     Since we are developing the product candidates in the Chrysalin Product Platform in parallel, we expect to learn from the results of each trial and apply some of our findings to the development of the other product candidates in the platform. The fact that the results from the Phase 3 fracture repair human clinical trial showed no statistical significance between Chrysalin and the placebo for the primary endpoint in the study will likely impact the development path or future development of the other product candidates in the platform, the impact of which will depend on the results of our interim analysis. In addition, if we find that one of our biopharmaceutical product candidates is unsafe in the future, it could impact the development of our other product candidates in clinical trials.

Patients may discontinue their participation in our clinical studies, which may negatively impact the results of these studies and extend the timeline for completion of our development programs.

     As with all clinical trials, we are subject to the risk that patients enrolled in our clinical studies may discontinue their participation at any time during the study as a result of a number of factors, including, withdrawing their consent or experiencing adverse clinical events, which may or may not be judged related to our product candidates under evaluation. We are subject to the risk that if a large number of patients in any one of our studies discontinue their participation in the study, the results from that study may not be positive or may not support an NDA for regulatory approval of our product candidates.

     In addition, the time required to complete clinical trials is dependent upon, among other factors, the rate of patient enrollment. Patient enrollment is a function of many factors, including:

l	the size of the patient population;
l	the nature of the clinical protocol requirements;
l	the diversion of patients to other trials or marketed therapies;
l	our ability to recruit and manage clinical centers and associated trials;
l	the proximity of patients to clinical sites; and
l	the patient eligibility criteria for the study.

Even if we obtain marketing approval, our products will be subject to ongoing regulatory oversight, which may affect our ability to successfully commercialize any products we may develop.

     Even if we receive regulatory approval of a product candidate, the approval may be subject to limitations on the indicated uses for which the product is marketed or require costly post-marketing follow-up studies. After we obtain marketing approval for any product, the manufacturer and the manufacturing facilities for that product will be subject to continual review and periodic inspections by the FDA and other regulatory agencies. The subsequent discovery of previously unknown problems with the product, or with the manufacturer or facility, may result in restrictions on the product or manufacturer, including withdrawal of the product from the market.

     If we fail to comply with applicable regulatory requirements, we may be subject to fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.

8

If we cannot protect the Chrysalin patents, the AZX100 license and patents, or our intellectual property generally, our ability to develop and commercialize our products will be severely limited.

     Our success will depend in part on our ability to maintain and enforce patent protection for Chrysalin and AZX100 and each product resulting from Chrysalin or AZX100. Without patent protection, other companies could offer substantially identical products for sale without incurring the sizable discovery, development and licensing costs that we have incurred. Our ability to recover these expenditures and realize profits upon the sale of products would then be diminished.

     Chrysalin and AZX100 are patented and there have been no successful challenges to the patents. However, if there were to be a challenge to these patents or any of the patents for product candidates, a court may determine that the patents are invalid or unenforceable. Even if the validity or enforceability of a patent is upheld by a court, a court may not prevent alleged infringement on the grounds that such activity is not covered by the patent claims. Any litigation, whether to enforce our rights to use our or our licensors’ patents or to defend against allegations that we infringe third party rights, will be costly, time consuming, and may distract management from other important tasks.

     As is commonplace in the biotechnology and pharmaceutical industry, we employ individuals who were previously employed at other biotechnology or pharmaceutical companies, including our competitors or potential competitors. To the extent our employees are involved in research areas which are similar to those areas in which they were involved at their former employers, we may be subject to claims that such employees and/or we have inadvertently or otherwise used or disclosed the alleged trade secrets or other proprietary information of the former employers. Litigation may be necessary to defend against such claims, which could result in substantial costs and be a distraction to management and which may have a material adverse effect on us, even if we are successful in defending such claims.

     We also rely in our business on trade secrets, know-how and other proprietary information. We seek to protect this information, in part, through the use of confidentiality agreements with employees, consultants, advisors and others. Nonetheless, we cannot assure that those agreements will provide adequate protection for our trade secrets, know-how or other proprietary information and prevent their unauthorized use or disclosure. The risk that other parties may breach confidentiality agreements or that our trade secrets become known or independently discovered by competitors, could adversely affect us by enabling our competitors, who may have greater experience and financial resources, to copy or use our trade secrets and other proprietary information in the advancement of their products, methods or technologies.

Our success also depends on our ability to operate and commercialize products without infringing on the patents or proprietary rights of others.

     Third parties may claim that we or our licensors or suppliers are infringing their patents or are misappropriating their proprietary information. In the event of a successful claim against us or our licensors or suppliers for infringement of the patents or proprietary rights of others, we may be required to, among other things:

l	pay substantial damages;
l	stop using our technologies;
l	stop certain research and development efforts;
l	develop non-infringing products or methods; and
l	obtain one or more licenses from third parties.

     A license required under any such patents or proprietary rights may not be available to us, or may not be available on acceptable terms. If we or our licensors or suppliers are sued for infringement, we could encounter substantial delays in, or be prohibited from, developing, manufacturing and commercializing our product candidates.

9

Some of our product candidates are in early stages of development and may never be commercialized.

     Research, development and pre-clinical testing are long, expensive and uncertain processes. Other than indications for fracture repair and diabetic ulcer healing, none of our other Chrysalin or AZX100 product candidates has reached clinical trial testing. Our development of Chrysalin for the repair of cartilage defects, tendons and cardiovascular repair is currently in pre-clinical testing or the research stage and AZX100 is currently in the pre-clinical testing stage. Our future success depends, in part, on our ability to complete pre-clinical development of these and other product candidates and advance them to the clinical trials.

     If we are unsuccessful in advancing our early stage product candidates into clinical testing for any reason, our business prospects will be harmed.

Acquisition of New Class of Molecules, ICARMs™

     On February 23, 2006, we entered into an agreement to purchase certain assets and assume certain liabilities of AzERx, Inc. for $390,000 in cash and the issuance of 1,355,000 shares of our common stock, with a market value of $7.7 million determined by the closing share price on the date the agreement was entered into. The transaction was completed (closed) on February 27, 2006. Under the terms of the transaction, OrthoLogic acquired an exclusive license for the core intellectual property relating to AZX100, and will continue to develop the new class of compounds in the field of smooth muscle relaxation called Intracellular Actin Relaxing Molecules, or ICARMs™, based on the unique technology developed by AzERx. The acquisition provides us with a new technology platform that diversifies the portfolio, and may provide more than one potential product. AzERx’s lead compound is AZX100, a 24-amino acid peptide. AZX100 is currently being investigated for medically important and commercially significant applications such as the treatment of vasospasm associated with subarachnoid hemorrhage, prevention of keloid scarring, and the treatment of asthma. Preclinical and human in vitro studies have shown that this novel compound has the ability to relax smooth muscle in multiple tissue types. While we performed a reasonable level of due diligence on AZX100 and the rights acquired, there can be no assurances that we will recover the costs of our investment from the future development of AZX100 or that commercially significant applications will be developed.

The loss of our key management and scientific personnel may hinder our ability to execute our business plan.

     As a small company our success depends on the continuing contributions of our management team and scientific personnel, and maintaining relationships with the network of medical and academic centers in the United States that change negatully to adversely conduct our clinical trials. On April 5, 2006, James H. Pusey resigned as our President and Chief Executive Officer and as a director. The resignation or retirement of additional members of senior management or scientific personnel could materially adversely affect our business prospects.

Reliance on Outside Suppliers and Consultants

     We rely on outside suppliers and consultants for the manufacture of Chrysalin and AZX100 and technical assistance in our research and development efforts. The inability of our suppliers to meet our production quality requirements in a timely manner, or the lack of availability of experienced consultants to assist in our research and development efforts, could have a material effect on our ability to perform research or clinical trials.

We face an inherent risk of liability in the event that the use or misuse of our products results in personal injury or death.

     The use of our product candidates in clinical trials, and the sale of any approved products, may expose us to product liability claims, which could result in financial losses. Our clinical liability insurance coverage may not be sufficient to cover claims that may be made against us. In addition, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts or scope to protect us against losses. Any claims against us, regardless of their merit, could severely harm our financial condition, strain our management and other resources and adversely impact or eliminate the prospects for commercialization of the product which is the subject of any such claim.

10

Risks of our Industry

We are in a highly regulated field with high investment costs and high risks.

     Our Chrysalin Product Platform is currently in the human testing phase for three potential products and earlier pre-clinical testing phases for two other potential products. AZX100 is currently in pre-clinical testing. The FDA and comparable agencies in many foreign countries impose substantial limitations on the introduction of new pharmaceuticals through costly and time-consuming laboratory and clinical testing and other procedures. The process of obtaining FDA and other required regulatory approvals is lengthy, expensive and uncertain. Chrysalin and AZX100 are new drugs and subject to the most stringent level of FDA review.

     Even after we have invested substantial funds in the development of our three Chrysalin products and AZX100 and even if the results of our current clinical trials are favorable, there can be no guarantee that the FDA will grant approval of Chrysalin and/or AZX100 for the indicated uses or that it will do so in a timely manner.

     If we successfully bring one or more products to market, there is no assurance that we will be able to successfully manufacture or market the products or that potential customers will buy them if, for example, a competitive product has greater efficacy or is deemed more cost effective. In addition, the market in which we will sell any such products is dominated by a number of large corporations that have vastly greater resources than we have, which may impact our ability to successfully market our products or maintain any technological advantage we might develop. We also would be subject to changes in regulations governing the manufacture and marketing of our products, which could increase our costs, reduce any competitive advantage we may have and/or adversely affect our marketing effectiveness.

The pharmaceutical industry is subject to stringent regulation, and failure to obtain regulatory approval will prevent commercialization of our products.

     Our research, development, pre-clinical and clinical trial activities and the manufacture and marketing of any products that we may successfully develop are subject to an extensive regulatory approval process by the FDA and other regulatory agencies in the United States and abroad. The process of obtaining required regulatory approvals for drugs is lengthy, expensive and uncertain, and any such regulatory approvals may entail limitations on the indicated usage of a drug, which may reduce the drug’s market potential.

     In order to obtain FDA approval to commercialize any product candidate, an NDA must be submitted to the FDA demonstrating, among other things, that the product candidate is safe and effective for use in humans for each target indication. Our regulatory submissions may be delayed, or we may cancel plans to make submissions for product candidates for a number of reasons, including:

l	negative or ambiguous pre-clinical or clinical trial results;
l	changes in regulations or the adoption of new regulations;
l	unexpected technological developments; and
l	developments by our competitors that are more effective than our product candidates.

     Consequently, we cannot assure that we will make our submissions to the FDA in the timeframe that we have planned, or at all, or that our submissions will be approved by the FDA. Even if regulatory clearance is obtained, post-market evaluation of our products, if required, could result in restrictions on a product’s marketing or withdrawal of a product from the market as well as possible civil and criminal sanctions.

     Clinical trials are subject to oversight by institutional review boards and the FDA to ensure compliance with the FDA’s good clinical practice regulations, as well as other requirements for good clinical practices. We depend, in part, on third-party laboratories and medical institutions to conduct pre-clinical studies and clinical trials for our products and other third-party organizations, usually universities, to perform data collection and analysis, all of which must maintain both good laboratory and good clinical practices. If any such standards are not complied with in our clinical trials, the FDA may suspend or terminate such trial, which would severely delay our development and possibly end the development of a product candidate.

11

     We also currently and in the future will depend upon third party manufacturers of our products, which are and will be required to comply with the applicable FDA Good Manufacturing Practice regulations. We cannot be certain that our present or future manufacturers and suppliers will comply with these regulations. The failure to comply with these regulations may result in restrictions in the sale of, or withdrawal of the products from the market. Compliance by third parties with these standards and practices are outside of our direct control.

     In addition, we are subject to regulation under state and federal laws, including requirements regarding occupational safety, laboratory practices, environmental protection and hazardous substance control, and may be subject to other local, state, federal and foreign regulation. We cannot predict the impact of such regulations on us, although they could impose significant restrictions on our business and require us to incur additional expenses to comply.

If our competitors develop and market products that are more effective than ours, or obtain marketing approval before we do, our commercial opportunities will be reduced or eliminated.

     Competition in the pharmaceutical and biotechnology industries is intense and is expected to increase. Several biotechnology and pharmaceutical companies, as well as academic laboratories, universities and other research institutions, are involved in research and/or product development for various treatments for or involving fracture repair and diabetic ulcer healing or smooth muscle relaxation. Many of our competitors have significantly greater research and development capabilities, experience in obtaining regulatory approvals and manufacturing, marketing, financial and managerial resources than we have.

     Our competitors may succeed in developing products that are more effective than the ones we have under development or that render our proposed products or technologies noncompetitive or obsolete. In addition, certain of such competitors may achieve product commercialization before we do. If any of our competitors develops a product that is more effective than one we are developing or plan to develop, or is able to obtain FDA approval for commercialization before we do, we may not be able to achieve significant market acceptance for certain products of ours, which would have a material adverse effect on our business.

     For a summary of the competitive conditions relating to indications in which we are considering for our AZX100 and ICARMs research and development activities, see the section in this prospectus titled “The Company — AZX100 — ICARMs™ — Competition” and the reports we file with the Securities and Exchange Commission and incorporate by reference into the registration statement of which this prospectus is a part. For a summary of the competitive conditions relating to Chrysalin-based indications, please see our Annual Report on Form 10-K for the fiscal year ending December 31, 2005, and other reports we file with the Securities and Exchange Commission and incorporate by reference into the registration statement of which this prospectus is a part.

Our product candidates may not gain market acceptance among physicians, patients and the medical community, including insurance companies and other third party payors. If our product candidates fail to achieve market acceptance, our ability to generate revenue will be limited.

     Even if we obtain regulatory approval for our products, market acceptance will depend on our ability to demonstrate to physicians and patients the benefits of our products in terms of safety, efficacy, and convenience, ease of administration and cost effectiveness. In addition, we believe market acceptance depends on the effectiveness of our marketing strategy, the pricing of our products and the reimbursement policies of government and third-party payors. Physicians may not prescribe our products, and patients may determine, for any reason, that our product is not useful to them. Insurance companies and other third party payors may determine not to reimburse for the cost of the therapy. If any of our product candidates fails to achieve market acceptance, our ability to generate revenue will be limited.

Healthcare reform and restrictions on reimbursements may limit our financial returns.

     Our ability to successfully commercialize our products may depend in part on the extent to which government health administration authorities, private health insurers and other third party payors will reimburse consumers for the cost of these products. Third party payors are increasingly challenging both the need for, and the price of, novel therapeutic drugs and uncertainty exists as to the reimbursement status of newly approved

12

therapeutics. Adequate third party reimbursement may not be available for our drug products to enable us to maintain price levels sufficient to realize an appropriate return on our investments in research and product development, which could restrict our ability to commercialize a particular drug candidate.

Risks Related to Our Common Stock and the Warrants

Our stock price is volatile and fluctuates due to a variety of factors.

     Our stock price has varied significantly in the past (from a high of $8.96 to a low of $2.22 from January 1, 2004 to March 28, 2006) and may vary in the future due to a number of factors, including:

l	announcement of the results of, or delays in, preclinical and clinical studies;
l	fluctuations in our operating results;
l	developments in litigation to which we or a competitor is subject;
l	announcements and timing of potential acquisitions, divestitures, capital raising activities and conversions of preferred stock;
l	announcements of technological innovations or new products by us or our competitors;
l	FDA and other regulatory actions;
l	developments with respect to our or our competitors’ patents or proprietary rights;
l	public concern as to the safety of products developed by us or others; and
l	changes in stock market analyst recommendations regarding us, other drug development companies or the pharmaceutical industry generally.

In addition, the stock market has from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the market price of our stock.

Additional authorized shares of our common stock available for issuance may have dilutive and other material effects on our stockholders.

     We are authorized to issue 100,000,000 shares of common stock. As of March 28, 2006, there were 40,673,489 shares of common stock issued and outstanding. However, the total number of shares of our common stock issued and outstanding does not include shares reserved in anticipation of the exercise of options, warrants or additional investment rights. As of March 28, 2006 we had stock options outstanding to purchase approximately 2,713,096 shares of our common stock, the exercise price of which range between $2.43 per share to $17.38 per share, warrants outstanding to purchase 286,706 shares of our common stock with an exercise price of $6.39, and we have reserved shares of our common stock for issuance in connection with the potential exercise thereof. Additionally, at our Annual Stockholder Meeting on May 12, 2006, we are requesting that our stockholders approve the OrthoLogic 2005 Equity Incentive Plan, which provides an additional 2,000,000 shares of our common stock for incentive awards. To the extent such options are exercised or additional stock is issued, the holders of our common stock will experience further dilution. In addition, in the event that any future financing or consideration for a future acquisition should be in the form of, be convertible into or exchangeable for, equity securities, investors will experience additional dilution.

Certain provisions of our amended and restated certificate of incorporation and bylaws will make it difficult for stockholders to change the composition of our board of directors and may discourage takeover attempts that some of our stockholders may consider beneficial.

     Certain provisions of our amended and restated certificate of incorporation and bylaws may have the effect of delaying or preventing changes in control if our board of directors determines that such changes in control are not in the best interests of OrthoLogic Corp. and our stockholders. These provisions include, among other things, the following:

l a classified board of directors with three-year staggered terms;

13

l	advance notice procedures for stockholder proposals to be considered at stockholders’ meetings;
l	the ability of our board of directors to fill vacancies on the board;
l	a prohibition against stockholders taking action by written consent; and
l	super majority voting requirements for the stockholders to modify or amend our bylaws and specified provisions of our amended and restated certificate of incorporation.

     These provisions are not intended to prevent a takeover, but are intended to protect and maximize the value of our stockholders’ interests. While these provisions have the effect of encouraging persons seeking to acquire control of our company to negotiate with our board of directors, they could enable our board of directors to prevent a transaction that some, or a majority, of our stockholders might believe to be in their best interests and, in that case, may prevent or discourage attempts to remove and replace incumbent directors. In addition, we are subject to the provisions of Section 203 of the Delaware General Corporation Law, which prohibits business combinations with interested stockholders. Interested stockholders do not include stockholders whose acquisition of our securities is pre-approved by our board of directors under Section 203.

We may issue additional shares of preferred stock that have greater rights than our common stock and also have dilutive and anti-takeover effects.

     We are permitted by our amended and restated certificate of incorporation to issue up to 2,000,000 shares of preferred stock. We can issue shares of our preferred stock in one or more series and can set the terms of the preferred stock without seeking any further approval from our common stockholders or other security holders. Any preferred stock that we issue may rank ahead of our common stock in terms of dividend priority or liquidation rights and may have greater voting rights than our common stock.

     In connection with the Rights Agreement dated as of March 4, 1997 between us and the Bank of New York, as amended (the “Rights Agreement”), our board approved the designation of 500,000 shares of Series A Preferred Stock. The Rights Agreement and the exercise of rights to purchase Series A Preferred Stock pursuant to the terms thereof may delay, defer or prevent a change in control because the terms of any issued Series A Preferred Stock would potentially prohibit our consummation of certain extraordinary corporate transactions without the approval of the Board. In addition to the anti-takeover effects of the rights granted under the Rights Agreement, the issuance of preferred stock, generally, could have a dilutive effect on our stockholders.

We have not previously paid dividends on our common stock and we do not anticipate doing so in the foreseeable future.

     We have not in the past paid any dividends on our common stock and do not anticipate that we will pay any dividends on our common stock in the foreseeable future. Any future decision to pay a dividend on our common stock and the amount of any dividend paid, if permitted, will be made at the discretion of our board of directors.

If we do not maintain an effective registration statement or comply with applicable state securities laws, the Warrant holders may not be able to exercise the Warrants.

     For the holders of the Warrants to be able to exercise their Warrants, the shares of our common stock to be issued upon exercise of those Warrants must be covered by an effective and current registration statement and qualify or be exempt under the securities laws of the state or other jurisdiction in which the Warrant holders live. We can give no assurance that we will be able to continue to maintain a current registration statement relating to the shares of our common stock underlying the Warrants or that an exemption from registration or qualification will be available throughout their term. This may have an adverse effect on the ability of the Warrant holders to exercise the Warrants.

14

While the Warrants are outstanding, it may be more difficult to raise additional equity capital.

     While the Warrants are outstanding, we may find it more difficult to raise additional equity capital.

Future sales or the potential for sale of a substantial number of shares of our common stock could cause the trading price of our common stock to decline and could impair our ability to raise capital through subsequent equity offerings.

     Sales of a substantial number of shares of our common stock in the public markets, or the perception that these sales may occur, could cause the market price of our stock to decline and could materially impair our ability to raise capital through the sale of additional equity securities. This prospectus covers the resale of shares that previously were restricted, as well as shares to be issued to the selling security holder from time to time and shares underlying warrants to be issued to the selling security holder from time to time. As a result, the number of our securities eligible to be sold in the market will increase upon the effectiveness of this registration statement. If the selling security holder sells a significant amount of this common stock, or if there is a perception that such sales will be effected, the prices of those securities could drop.

Exercise of the Warrants will dilute the ownership interests of existing stockholders.

     The exercise of the Warrants will dilute the ownership interests of existing stockholders and any sales in the public market of the common stock issuable upon such exercise could adversely affect prevailing market prices of our common stock. In addition, the existence of the Warrants may encourage short selling by market participants because exercise of the Warrants could depress the price of our common stock.

You should consider the United States federal income tax consequences of owning the Warrants and our common stock.

     You are urged to consult your tax advisors with respect to the United States federal income tax consequences resulting from an exercise of the Warrants, as well as the possibility of taxable income resulting from certain changes to the terms of the Warrants.

     We caution that the foregoing list of important factors is not exclusive and may not be up to date. Developments in any of these areas could cause our results to differ materially from results that have been or may be projected by us.

Forward-Looking Statements

     All statements other than statements of historical facts included or incorporated by reference into this prospectus, including statements regarding our future financial position, business strategy, budgets, projected costs, and plans and objectives for future operations are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated as of the date of this prospectus. Forward-looking statements generally can be identified by the use of forward-looking words such as “may,” “could,” “expect,” “intend,” “plan,” “seek,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” or the negative of these terms or other comparable terminology. You should not place undue reliance on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond our control and which could materially affect actual results, levels of activity, performance or achievements. Some of the factors that could cause such a variance may be disclosed in a “Risk Factors” section elsewhere in this prospectus and documents incorporated by reference into this prospectus, and include the following:

l	unfavorable results of our product candidate development efforts;
l	unfavorable results of our pre-clinical or clinical testing;
l	delays in obtaining, or failure to obtain FDA approvals;
l	increased regulation by the FDA and other agencies;

15

l	the introduction of competitive products;
l	impairment of license, patent or other proprietary rights;
l	failure to achieve market acceptance of our products;
l	the impact of present and future collaborative agreements; and
l	failure to successfully implement our drug development strategy.

     We urge you to consider these factors and to review carefully the description of risks in this section titled “Risk Factors and Forward-Looking Statements” for a more complete discussion of the risks of an investment in our securities. The forward-looking statements included in this prospectus or incorporated by reference into this prospectus are made only as of the date of this prospectus or the date of the incorporated document, and we undertake no obligation to publicly update these statements to reflect subsequent events or circumstances.

16

THE COMPANY

Overview of the Business

CHRYSALIN®

     OrthoLogic is a biotechnology company focused on the development and commercialization of the novel synthetic peptide Chrysalin® (TP508) in two lead indications, both of which represent areas of significant unmet medical need – fracture repair and diabetic foot ulcer healing. Chrysalin, or TP508, is a 23-amino acid synthetic peptide representing a receptor-binding domain of the human thrombin molecule, a naturally occurring agent responsible for blood clotting and initiating the natural healing cascade of cellular events responsible for tissue repair – both soft tissue and bone.

     On March 15, 2006, we reported results of our Phase 3 fracture repair human clinical trial. For the primary endpoint, immobilization removal, no statistically significant difference between placebo and a single injection of Chrysalin were achieved. Consistent with the Phase 1/2 human clinical trial results, a statistically significant difference for a secondary endpoint, radiographic evidence of radial cortical bridging, was achieved. However, no statistically significant difference was noted in the study’s other secondary endpoints. On March 15, 2006, we temporarily halted our Phase 2b fracture repair dosing clinical trial to perform an interim analysis of the data of the 273 patients enrolled to that date. We plan to announce the results of the interim analysis and our future fracture repair indication plans by the 3^rd Quarter of 2006.

AZX100 — ICARMs™

     On February 23, 2006 we entered into an agreement to purchase certain assets and assume certain liabilities of AzERx, Inc. The transaction was completed (closed) on February 27, 2006. Under the terms of the transaction, OrthoLogic acquired an exclusive license for the core intellectual property relating to AZX100, and will continue to develop the new class of compounds in the field of smooth muscle relaxation called Intracellular Actin Relaxing Molecules, or ICARMs™, based on the unique technology developed by AzERx. The acquisition provides us with a new technology platform that diversifies the portfolio, and may provide more than one potential product. AzERx’s lead compound is AZX100, a 24-amino acid peptide. AZX100 is currently being investigated for medically important and commercially significant applications such as the treatment of vasospasm associated with subarachnoid hemorrhage (SAH), prevention of keloid scarring, and the treatment of asthma. Preclinical and human in vitro studies have shown that this novel compound has the ability to relax smooth muscle in multiple tissue types. We will continue pre-clinical activities on AZX100 in 2006.

     We continue to evaluate other biopharmaceutical compounds that can complement our research activity internally and broaden our potential pipeline for successful products.

Additional Information about OrthoLogic

     OrthoLogic Corp. was incorporated as a Delaware corporation in July 1987 as IatroMed, Inc. We changed our name to OrthoLogic Corp. in July 1991. Our executive offices are located at 1275 West Washington Street, Tempe, Arizona 85281, and our telephone number is (602) 286-5520.

     Our website address is www.orthologic.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, as well as any amendments to those reports, are available free of charge through our website as soon as reasonably practical after we file or furnish them to the U.S. Securities and Exchange Commission. Once at our website, go to the “Investors” section to locate these filings.

     In March 2004, we adopted a code of conduct that applies to all of our employees and has particular sections that apply only to our principal executive officer and senior financial officers. We posted the text of our code of conduct on our website in the “Investors” section of our website under “Code of Conduct.” In addition, we will promptly disclose on our website (1) the nature of any amendment to our code of conduct that applies to our principal executive officer and senior financial officers, and (2) the nature of any waiver, including an implicit

17

waiver, from a provision of our code of ethics that is granted to one of these specified officers, the name of such officer who is granted the waiver and the date of the waiver.

Chrysalin Product Platform

     Chrysalin, or TP508, is a 23-amino acid synthetic peptide representing a receptor-binding domain of the human thrombin molecule, a naturally occurring molecule in the body responsible for both blood clotting and initiating many of the cellular events responsible for tissue repair. Chrysalin mimics specific attributes of the thrombin molecule, stimulating the body’s natural healing processes. Drugs based on the Chrysalin peptide can be used to mimic part of the thrombin response without stimulating the events associated with blood clotting and therefore has the potential to accelerate the natural cascade of healing events. The Chrysalin molecule serves as the basis for a group of potential therapeutic products we refer to collectively as the “Chrysalin Product Platform.” We have initiated or are conducting clinical trials for three potential Chrysalin products: one trial for acceleration of fracture repair, a second trial for diabetic foot ulcer, and a third pilot study for spine fusion. We have conducted pre-clinical testing for cartilage defect repair, cardiovascular repair, dental bone repair, and tendon repair. As of December 31, 2005 we have focused our efforts on the development and commercialization of fracture repair and diabetic foot ulcer healing indications.

     The development of each of our potential product candidates in the Chrysalin Product Platform is based on our collective knowledge and understanding of how the human thrombin molecule contributes to the repair of soft tissue and bone. While there are important differences in each of the product candidates in terms of purpose (fracture repair, diabetic foot ulcer healing, etc.) each product candidate is focused on accelerating and enhancing tissue repair and is based on the ability of Chrysalin to mimic specific attributes of the human thrombin molecule to stimulate the body’s natural healing process.

     We are developing the Chrysalin-based product candidates in parallel. We expect to learn from the results of each trial and apply the findings to the development of the other product candidates. We believe there are distinct research activities within the product candidates whose outcomes and results will apply across the product platform in terms of safety and efficacy. All of our potential products in research and development are subject to extensive regulation by the U.S. Food and Drug Administration, whose approval we must obtain before we can bring our products to the market.

     Acceleration of Fracture Repair

     Every broken bone is called a fracture and approximately 30 million fractures are treated every year throughout the developed world, as reported by medical reimbursement records in countries with national healthcare systems. The treatment of a fracture depends on the severity of the break. Simple fractures often heal themselves, with more complex closed fractures potentially amenable to treatment by manipulation (also called “reduction”) without requiring surgery. Fractures that break the skin (or “open fractures”) or where the fragments cannot be lined up correctly usually require surgery. Sometimes plates, screws or pins are used for mechanical stabilization, occasionally with the use of bone grafts, all of which are invasive, expensive and time consuming procedures.

     Chrysalin is a substance that, when injected through the skin into the fracture site at the time of fracture reduction, was shown in a preliminary clinical trial to accelerate the healing of the fracture. Chrysalin does this by mimicking certain stimulatory aspects of the thrombin molecule. Fractures that heal faster lead to earlier return of function for the patient and potentially improved clinical outcomes.

     In pre-clinical animal studies, a single injection of Chrysalin into the fracture gap accelerated fracture healing by up to 50% as measured by mechanical testing. In late 1999, we initiated a combined Phase 1/2 human clinical trial to evaluate the safety of Chrysalin and its effect on the rate of healing in adult subjects with unstable distal radius fractures (fractures around and in the wrist joint). We presented the results of this Phase 1/2 human clinical trial for fracture repair at the 57th Annual Meeting of the American Society for Surgery of the Hand in October 2002. The data from x-ray evaluations revealed that a single injection of Chrysalin into the fracture gap resulted in a trend toward accelerated fracture healing compared with the saline placebo control. There were no reportable adverse events attributable to Chrysalin in the study.

18

     We completed patient enrollment in our pivotal Phase 3 human clinical trial evaluating the efficacy of Chrysalin in patients with unstable and/or displaced distal radius (wrist) fractures in May 2005. We enrolled a total of 503 study patients in 27 health centers throughout the United States. The primary efficacy endpoint in the trial is to measure how quickly wrist fractures in patients injected with Chrysalin heal, as measured by the removal of immobilization. Accelerated removal of immobilization allows patients to initiate hand therapy and regain full function of their wrists and hands sooner. The clinical trial’s secondary efficacy endpoints include radiographic analysis of healing, as well as clinical, functional, and patient outcome parameters. On March 15, 2006, we reported results of our Phase 3 fracture repair human clinical trial. For the primary endpoint, immobilization removal, no statistically significant difference between placebo and a single injection of Chrysalin were achieved. Consistent with the Phase 1/2 human clinical trial results, a statistically significant difference for a secondary endpoint, radiographic evidence of radial cortical bridging, were achieved. However, no statistically significant difference was noted in the study’s other secondary endpoints. To date, there have been no adverse events related to Chrysalin reported in this Phase 3 trial.

     We are also conducting a Phase 2b human clinical trial to establish the lower dose range of Chrysalin versus a placebo control, as well as to provide information to support our potential future fracture repair new drug application (“NDA”). Our enrollment goal was 500 patients in approximately 60 sites. On March 15, 2006, we temporarily halted our Phase 2b fracture repair dosing clinical trial to perform an interim analysis of the data of the 273 patients enrolled to that date. We plan to announce the results of the interim analysis and our future fracture repair indication plans by the 3^rd Quarter of 2006.

     Dermal Wound Healing

     Our dermal wound healing studies are focused on healing diabetic foot ulcers, a common problem for diabetic patients. Diabetic patients suffer from open wound foot ulcers because diabetes related nerve damage causes the patient to lose sensation. Patients thus may not notice an injury to the foot and neglect the injury. This fact and the diminished blood flow to extremities caused by diabetes cause a diabetic patient’s wounds to heal more slowly or not at all.

     Current standard treatment for diabetic foot ulcer wounds focuses on sanitation of the wound and non-use of the foot (off loading) to allow for the body’s natural healing processes to occur. These treatments require high patient compliance and effectively heal only approximately 33% of these ulcers. Wounds that do not respond to treatment can sometimes result in amputation of the affected limb.

     We believe topical treatment of the wound with Chrysalin will promote new tissue growth necessary for healing of a diabetic foot ulcer. CBI conducted a multicenter Phase 1/2 double blind human trial with 60 patients, the results of which were presented at the Wound Healing Society in May of 2002. We found no drug related adverse events or patient sensitivity to Chrysalin in the trial and complete wound closure occurred in 70% of Chrysalin-treated ulcers relative to 33% in placebo controls, a statistically significant difference.

     Our pre-clinical studies and the initial Phase 1/2 human clinical trial evaluated Chrysalin in a saline formulation. We are currently evaluating various gel formulations of Chrysalin that will make Chrysalin easier for patients to use. We have developed a gel formulation for this indication and our plan is to test the gel formulation in human clinical trials for diabetic ulcer wound healing starting in the second half of fiscal 2006.

     Spine Fusion

     Spine fusion surgery is most commonly performed to treat degenerative disk disease, spinal instability and other disorders of the spine that are believed to be the cause of back and neck pain. The surgery involves the fusing of one or more vertebrae of the spine by placement of bone graft material around the targeted area of the spine during surgery. The body then heals the grafts over several months, which fuses the vertebrae together with newly formed bone so there is no longer movement between the vertebrae.

     The bone used for the graft in this procedure is taken from another bone in the patient, usually from the iliac crest (hip bone) and is called “autograft bone.” In some procedures the patients and physicians elect to use “allograft” bone which is bone processed from cadavers. Autograft bone is currently the primary type of bone graft

19

used in spinal fusion surgery and is considered the “gold standard.” Allograft bone is often used but has not been an effective stand-alone substitute for autograft bone because it has no bioactive component to stimulate bone growth. The benefit of using allograft bone is it does not require a separate surgical procedure from the same patient to harvest the bone for the graft.

     Our potential solution to this problem is to combine Chrysalin, either in saline or in a sustained release formulation, with commercially available allograft bone for use in spinal fusion surgery as an alternative to autograft. A completed pre-clinical study, which was presented at the North American Spine Society meeting in October 2004 in Chicago, showed that Chrysalin, in several different formulations combined with allograft bone, caused varying degrees of bone formation in spinal fusion models.

     In addition, we completed enrollment in a small pilot Phase 1/2 human clinical trial evaluating Chrysalin for spine fusion in the spring of 2004. This pilot study included approximately 50 patients and no adverse events related to Chrysalin have been reported in this study.

     Cartilage Defect Repair

     Cartilage tissue is the smooth, slippery cushion that exists where two bones meet to make a joint. Because damaged cartilage generally does not heal but slowly breaks down over time, the result can lead to a complete wearing away of the cartilage, leading to osteoarthritis.

     The primary purpose of exploring Chrysalin’s potential role in cartilage defect repair is to develop a technique to restore, rather than entirely replace, the original cartilage damaged due to acute traumatic events. These techniques, if successful, may also provide a novel approach for partial resurfacing of damaged joint (or “articular”) cartilage due to osteoarthritis. Our potential solution to cartilage defects is to deliver Chrysalin within a sustained-release matrix to the damaged cartilage.

     We have completed several pre-clinical studies evaluating Chrysalin in sustained release formulations for cartilage defect repair. The results to date have been presented at two major international conferences on cartilage repair.

     Cardiovascular Repair

     Coronary artery disease is the narrowing of the arteries that carry blood through the heart and is a leading cause of mortality in the United States and other parts of the western world. The narrowing is usually caused by fatty deposits inside the artery walls that restrict the passage of blood carrying oxygen to the heart muscle. This oxygen insufficiency is the primary cause of chest pain (commonly referred to as “angina”) and, if left untreated, can lead to heart failure and, ultimately, death. The most common treatments for the disease are a regimen of pharmaceuticals that reduce the patient’s cholesterol (slowing the buildup of deposits along artery walls) and surgical procedures to increase the blood flow through the arteries. Up to 15% of patients, however, either cannot undergo the treatments or do not achieve sufficient blood flow after the treatment.

     A potentially new treatment for coronary artery disease is therapeutic angiogenesis, the growing of new blood vessels to deliver blood to the diseased heart. In pre-clinical animal studies conducted over the last two years, Chrysalin injections into the damaged heart appear to trigger a complex sequence of events that culminates in the body’s growth of new blood vessels, enhancing blood delivery to the heart muscle.

     Dental Bone Repair

     We’ve focused on the use of Chrysalin in two dental bone repair situations: dental implants and maxillo-facial reconstruction. For some patients who need dental implants to replace missing teeth, the patient’s bones in the jaw are not strong enough to hold the implanted teeth or supporting structure. The standard treatment in these cases is to insert bone graft material into or above the jaw bones and wait for the body to naturally grow bone around the graft material. This process can take a year or longer, during which a patient must use a temporary external plate with the temporary teeth. In a 2004 pre-clinical study done by CBI in conjunction with Louisiana State University, the incorporation of Chrysalin together with a commercially available bone graft material into the space above the

20

rabbit jaw bones resulted in a significant increase in new bone formation. This could translate in a shorter wait for patients to complete their dental implant surgery.

     Tendon Repair

     Tendons are the soft tissue that connects muscles to bone. Tendons are crucial to the biomechanical functions of the body. Injuries to tendons are very common, and typically these injuries are treated either conservatively with rehabilitation techniques or with surgical techniques. These injuries are often slow to heal or do not heal completely. We have conducted preliminary research focused on whether Chrysalin accelerates tendon tissue repair which may result in better restoration of function.

     We are focusing our efforts on the fracture repair and diabetic foot ulcer healing product candidates. The results of our efforts in these two product candidates will determine when and what future actions are taken on the other product candidates described above.

AZX100 — ICARMs™

     AZX100, a 24 amino acid peptide, is one of a new class of compounds in the field of smooth muscle relaxation called Intracellular Actin Relaxing Molecules, or ICARMs™.

     AZX100 relaxes smooth muscle, which modulates the function of blood vessels, sphincters, the gastrointestinal tract, the genitourinary tract, and the airways. Sustained abnormal contraction of any of these muscles is called spasm. Any disorders known to be associated with excessive constriction or inadequate dilation of smooth muscle represent potential applications for AZX100, including:

l	Subarachnoid hemorrhage (SAH) induced spasm of the intracranial blood vessels
l	Spasm of vein grafts after harvest
l	Spasm of the portal vein (PHT)
l	Spasm of airway smooth muscle (asthma)
l	Spasm of lung vessels, which causes pulmonary (lung) hypertension
l	Male and female sexual dysfunction
l	Toxemia of pregnancy (pre-eclampsia/eclampsia)
l	Pre-term labor
l	Reynaud’s disease or phenomenon
l	Achalasia (spasm of the lower esophageal sphincter)
l	Non-occlusive mesenteric ischemia
l	Hemolytic-uremia
l	Prinzmetal’s angina (a form of coronary spasm that causes angina), and
l	Anal fissure.

     AZX100 may also reverse the fibrotic phenotype of fibroblasts and smooth muscle cells in a mechanism similar to that which causes vasorelaxation. Through phenotypic modulation of fibroblasts and smooth muscle cells, AZX100 may inhibit the scarring that results from wound healing and disease states in the dermis, blood vessels, lungs, liver and other organs.

     We are currently evaluating AZX100 for applications such as the treatment of vasospasm associated with subarachnoid hemorrhage, prevention of keloid scarring, and the treatment of asthma. Preclinical and human in vitro studies have shown that this novel compound has the ability to relax smooth muscle in multiple tissue types. We plan to continue pre-clinical activities in support of AZX100 in 2006.

     Competition

     The following provides a summary of the competitive conditions relating to indications for which we are considering for our AZX100 and ICARMs research and development activities. For a summary of the competitive conditions relating to Chrysalin-based indications, please see our Annual Report on Form 10-K for the fiscal year

21

ended December 31, 2005, and other reports we file with the Securities and Exchange Commission and incorporate by reference into the registration statement of which this prospectus is a part.

     Subarachnoid Hemorrhage (SAH)

Approved

     The only current pharmacological treatment for SAH is the calcium channel antagonist Nimotop (nimodipine). Although Nimotop significantly improves the outcome of surviving patients through a neuroprotective effect, it has not been shown to alter the incidence or magnitude of vasospasm or to decrease mortality. Nimotop carries in the label a “black box” warning regarding i.v. or other parenteral administration.

In Development

     The other potential competing products currently under development for SAH are endothelin antagonists (endothelin has been implicated in SAH-induced vasospasm). Elevated plasma levels of endothelin-1 (ET-1) have been shown to occur in patients with SAH-induced vasospasm, although the timing of endothelin elevation has varied from as early as three days after SAH to 8 – 14 days after SAH. Such differences indicate endothelin may not induce vasospasm, but rather may play a role in vasospasm progression. Conflicting results have also been reported regarding the cerebrospinal fluid levels of ET-1. Taken together, these studies indicate that endothelin may contribute to SAH-induced vasospasm. Thus, clinical trials have been conducted for Acetelion’s endothelial antagonists, clazosentan (specific ET_A receptor antagonist) and bosentan (Tracleer®, dual ET_A and ET_B receptor antagonist). Although bosentan appears effective for pulmonary arterial hypertension, the trial for SAH was discontinued because of a lack of efficacy.

     Roche is developing a follow-up compound from bosentan, Ro 61-1790, to improve water solubility and ET_A potency and has demonstrated in vivo efficacy with a canine double hemorrhage model. In the double hemorrhage model two blood clots must be placed to cause vasospasm. While vasospasm can be demonstrated angiographically, it does not typically result in cerebral infarction. Thus, Ro 61-1790 must be tested in humans to determine whether its improvements will increase efficacy.

     The primary disadvantage of endothelin antagonists is that they act on a single vasoconstrictor, although additional mediators have been implicated in SAH. Therefore, targeting downstream vasorelaxing pathways with administration of AZX100 may be more effective. In addition, the ET receptor is internalized once it interacts with the ET peptide. Thus, this drug may only be effective as a prevention measure, not treatment.

     In addition, the recombinant haemostatic agent NovoSeven (activated factor VIIa) is currently registered for treatment of bleeding of hemophelia patients, but has also been shown to be effective against the intracerebral hemorrhage (ICH) in phase 2b clinical trials. NovoSeven accelerates the coagulation process at the site of ICH limiting hematoma.

          Keloid Scarring

Approved

     There is no approved pharmacologic treatment for scarless healing. In the setting of keloid formation, the scars are often excised and treated with steroids with variable results.

In Development

     The potential competing products are recombinant transforming growth ß-3 (TGF- ß-3) and antiTGF- ß-1. Renovo is conducting phase 3 clinical trials in Europe on recombinant TGF- ß-3 (Justiva). While preliminary efficacy has been shown in healing in healthy individuals, like other therapeutics, TGF- ß-3 addresses only part of the pathway that end in phosphorylation of our target molecule and results in scar inhibition. The potential of the AZX100 to completely inhibit the entire scarring pathways suggests that AZX100 may be more effective than TGF- ß-3 at scarless healing, Renovo has also begun clinical trials on antiTGF- ß-1, which like TGF- ß-3 also blocks part

22

of the signaling cascade resulting in scar formation. AZX100 may be more effective than antiTGF- ß-1 through more complete inhibition of the scarring cascade.

     While many other companies are investigating therapeutics for wound healing, these therapeutics will be synergistic with and not competitive with AZX100 as they are targeting more rapid healing and not scar inhibition.

          Asthma

     Asthma ranks as the third highest reason for preventable hospitalizations in the U.S. with 470,000 hospitalizations and more than 5,000 deaths each year (American Academy of Allergy Asthma and Immunology Report). Acute asthma accounts for an estimated two-million emergency department visits annually. There are many competitors with asthma products approved or in development. AZX100 has been shown to relax airway smooth muscle and may be developed for the treatment of asthmatic attacks. Specific markets include severe acute asthma and asthma that is refractory to current therapies. Severe asthma has been defined as asthma that is refractory to current therapeutic approaches in clinical use (anti-inflammatory agents and bronchodilators). The current approach is to use ß-adrenergic agonists, which activate the cAMP/PKA pathway. AZX100 is a mimetic of the molecule downstream of this pathway and hence may be more sensitive and specific for the treatment of severe asthma. In addition, patients with severe asthma present to the emergency room for treatment, hence efficacy can be closely monitored and outcomes will be apparent in a short time frame after treatment. Recent data has demonstrated that one out of every six asthmatics has a mutation in the ß-adrenergic receptor. These patients do not respond to ß-adrenergic agonists and in fact do worse when treated with ß-adrenergic agonists. This patient population would be potentially treated with the AZX100 compound in that it acts downstream of the receptors.

     For more information about the status of our drug development efforts, see “Chrysalin Product Platform” above and review our Annual Report on Form 10-K for the fiscal year ended December 31, 2005, and other reports we file with the Securities and Exchange Commission and incorporate by reference into the registration statement of which this prospectus is a part. Chrysalin, ICARMs and OrthoLogic are registered United States domestic trademarks of OrthoLogic Corp.

MATERIAL CHANGES

     On April 5, 2006, James M. Pusey, MD resigned as our President and Chief Executive Officer and as a Class I director of the company. John M. Holliman, III, a director of OrthoLogic since September 1987 and Chairman of the Board of Directors since August 1997, assumed the title of Executive Chairman on that date. In that position, Mr. Holliman will serve as our principal executive officer and will lead our business and corporate strategic activities. Randolph C. Steer, MD, Ph.D. was named our President on April 5, 2006, and will be responsible for directing our strategy and operations in all clinical development and regulatory areas.

     On March 15, 2006, we reported results of our Phase 3 fracture repair human clinical trial. For the primary endpoint, immobilization removal, no statistically significant difference between placebo and a single injection of Chrysalin were achieved. Consistent with the Phase 1/2 human clinical trial results, a statistically significant difference for a secondary endpoint, radiographic evidence of radial cortical bridging, was achieved. However, no statistically significant difference was noted in the study’s other secondary endpoints. On March 15, 2006, we temporarily halted our Phase 2b fracture repair dosing clinical trial to perform an interim analysis of the data of the 273 patients enrolled to that date. We plan to announce the results of the interim analysis and our future fracture repair indication plans by the 3^rd Quarter of 2006.

     On February 23, 2006, we entered into an agreement to purchase certain assets and assume certain liabilities of AzERx, Inc. The transaction closed on February 27, 2006. Under the terms of the agreement, we acquired an exclusive license for the core intellectual property relating to AzERx’s lead compound, AZX100, a 24-amino acid peptide. AZX100 is currently being investigated for several applications, including the treatment of vasospasm associated with subarachnoid hemorrhage, prevention of keloid scarring, and treatment of asthma. We will continue to develop the new class of compounds in the field of smooth muscle relaxation called Intracellular Actin Relaxing Molecules, or ICARMs™, based on the AZX100 technology.

23

THE PHARMABIO TRANSACTION

     On February 27, 2006 (the “Closing Date”), we closed the initial transactions relating to our Common Stock and Warrant Purchase Agreement (the “Purchase Agreement”) dated February 24, 2006 with PharmaBio Development Inc. (“PharmaBio”), an affiliate of Quintiles Transnational Corp. and Quintiles, Inc., which provides for the purchase of shares of our common stock in three tranches. On the Closing Date, PharmaBio purchased 359,279 shares of our common stock for a purchase price of $2,000,000 based on the average closing stock price for the 15-day period prior to that date. In addition, we also entered into a Class A Warrant Agreement with PharmaBio on the same date, whereby we issued PharmaBio a fully vested warrant to purchase 46,706 shares of our common stock at $6.39 a share (the “Initial Class A Warrant”). At our election, PharmaBio will purchase an additional amount of our common stock for a purchase price of $1,500,000 on each of June 30, 2006 and September 29, 2006 with the number of shares to be determined by the 15-day average closing stock price prior to each such date. Each additional stock purchase will include the issuance of fully vested warrants, exercisable for a ten-year period from the date of issuance, for an amount of shares equal to 13% of the shares purchased on the date of issuance, with the exercise price set at 115% of the share price of each respective share purchase (each, an “Additional Class A Warrant,” and collectively, the “Additional Class A Warrants”). We are also parties to a Class B Warrant Agreement (the “Class B Warrant”), Class C Warrant Agreement (the “Class C Warrant”) and a Class D Warrant Agreement (the “Class D Warrant”) with PharmaBio to purchase in the aggregate up to 240,000 shares of our common stock at $6.39 a share (the Class B Warrant, Class C Warrant and Class D Warrant are collectively referred to in this prospectus as the “Milestone Warrants”). The Milestone Warrants, all dated as of February 24, 2006, will be exercisable for a ten-year period from that date, and will vest based on the achievement of certain milestones.

     In connection with our entry into the Purchase Agreement, we also entered into a Master Services Agreement with Quintiles, Inc. (“Quintiles”) whereby Quintiles will become our exclusive clinical research organization service provider for our Chrysalin Product Platform and will provide certain other technical assistance. As consideration for entry into the Master Services Agreement, we have granted Quintiles the right of first negotiation to promote Chrysalin if it is approved by the U.S. Food and Drug Administration.

     We are obligated to file a registration statement to cover the shares issued on the Closing Date, the additional shares to be issued at our election pursuant to the Purchase Agreement, as well as the shares to be issued upon exercise of the Initial Class A Warrant, the Additional Class A Warrants and the Milestone Warrants (collectively referred to in this prospectus as the “Warrants”).

USE OF PROCEEDS

     This prospectus relates to the sale of shares of our common stock that may be offered and sold from time to time by PharmaBio, the selling security holder. We will not receive any of the proceeds from the resale by the selling security holder of any of the securities covered by this prospectus, however, we have received $2 million and may receive, at our option, up to an additional $3 million from the initial sale of shares under a Common Stock and Warrant Purchase Agreement we have entered into with PharmaBio. We will also receive the exercise price of the warrants described in this prospectus (to the extent that the selling security holder does not utilize the cashless exercise feature, if provided). All of the proceeds from the resale of the securities will go to the selling security holder who offers and sells its securities.

     If we elect to issue stock in connection with the June 30, 2006 PharmaBio offering and/or the September 29, 2006 PharmaBio offering, we intend to use the net proceeds we receive for general corporate purposes, including capital expenditures, working capital needs, current and future clinical trials of our drug candidates, as well as other research and drug development activities. We have not specifically identified the precise amounts we will spend on each of these areas or the timing of these expenditures. The amounts actually expended for each purpose may vary significantly depending upon numerous factors, including progress with clinical trials for our drug candidates, the establishment of new collaborative relationships with other companies, the availability of other financing, and other factors.

24

SELLING SECURITY HOLDER

     The following table provides certain information as of the date hereof regarding the beneficial ownership of our common stock by the selling security holder prior to and after the issuance of our common stock to the selling security holder pursuant to the Purchase Agreement. Beneficial ownership is determined under the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities.

     Our registration of shares does not necessarily mean that the selling security holder will sell all or any of these securities. We have assumed for purposes of the table below that the selling security holder will sell all of the shares offered for sale. The selling security holder may have sold, transferred or otherwise disposed of all or a portion of its shares, or acquired additional shares, since the date on which it provided information regarding its securities.

			Shares of
	Shares of		Common Stock Beneficially
	Common Stock Beneficially		Owned Upon
Selling Security	Owned Before Offering	Shares to be Sold in	Completion of
Holder (1)	(2)(3)	the Offering (2)(4)	the Offering
			Number	%
PharmaBio Development Inc.	405,985	2,905,985	0	6.67 (5)(6)

(1)	Neither PharmaBio nor any of its affiliates has held a position or office, or had any other material relationship (other than for previous purchases under the Purchase Agreement), with us.
(2)	Our registration of these securities does not necessarily mean that the selling security holder will sell any or all of the securities.
(3)	Includes shares underlying the Initial Class A Warrant and the shares of common stock issued to the selling security holder on February 27, 2006 pursuant to the Purchase Agreement, but does not include the shares of common stock issuable upon exercise of the Milestone Warrants, as the milestones contained in those warrants are subject to a confidential treatment request with the SEC and, as of the date of this prospectus, none of those milestones has been achieved. We are also assuming, for purposes of the beneficial ownership determination, that none of the milestones in the Milestone Warrants will be achieved within 60 days from the date of this selling security holder table.
(4)	The figure in this column assumes that the selling security holder will fully exercise the Initial Class A Warrant and all of the Milestone Warrants. The remaining balance includes the shares of common stock issued to the selling security holder on February 27, 2006 (359,279 shares), and our estimate relating to the maximum number of shares issuable in connection with the June 30, 2006 PharmaBio offering (estimated at 1,000,000 shares) the September 29, 2006 PharmaBio offering (estimated at 1,000,000 shares) and the shares issuable upon exercise of the Additional Class A Warrants (estimated at 130,000 shares for each of the two Additional Class A Warrants).
(5)	Applicable percentage of ownership is based on 40,673,489 shares of common stock outstanding as of March 28, 2006.
(6)	Percentage calculation assumes that all of the shares are sold by the selling security holder.

25

PLAN OF DISTRIBUTION

     We will not receive any of the proceeds from the resale by the selling security holder of any of the securities covered by this prospectus, however, we have received $2 million and may receive, at our option, up to an additional $3 million from the initial sale of shares under a Common Stock and Warrant Purchase Agreement we have entered into with PharmaBio. We will also receive the exercise price of the warrants described in this prospectus (to the extent that the selling security holder does not utilize the cashless exercise feature, if provided). The aggregate proceeds to the selling security holder from the sale of our common stock will be the purchase price of the common stock less any discounts and commissions. The selling security holder reserves the right to accept and, together with its agents, to reject, any proposed purchase of common stock to be made directly or through agents. This prospectus covers the resale of shares of our common stock by PharmaBio, the selling security holder. As used in this prospectus, to the extent applicable, “selling security holder” includes holders of shares of our common stock received from the selling security holder after the date of this prospectus and who received such shares by gift or by other transfer by the selling security holder to an immediate family member of such stockholder, by will or through operation of the laws of descent and distribution, and their respective administrators, guardians, receivers, executors or other persons acting in a similar capacity.

     The common stock may be sold from time to time to purchasers:

l	directly by the selling security holder and its successors, which includes its transferees, pledgees or donees or their successors; or
l	through underwriters, broker-dealers or agents who may receive compensation in the form of discounts, concessions or commissions from the selling security holder or the purchasers of the common stock. These discounts, concessions or commissions may be in excess of those customary in the types of transactions involved.

     PharmaBio is an “underwriter” within the meaning of the Securities Act of 1933, as amended (the “Securities Act”). Any broker-dealers or agents that are involved in selling the shares for PharmaBio may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales.

     Neither we nor the selling security holder can presently estimate the amount of compensation that any agent will receive. We know of no existing arrangements between the selling security holder, any other stockholder, broker, dealer, underwriter, or agent relating to the sale or distribution of the shares offered by this prospectus. At the time a particular offer of shares is made, a prospectus supplement, if required, will be distributed that will set forth the names of any agents, underwriters, or dealers and any compensation from the selling security holder, and any other required information.

     The common stock may be sold in one or more transactions at:

l	fixed prices;
l	prevailing market prices at the time of sale;
l	prices related to such prevailing market prices;
l	varying prices determined at the time of sale; or
l	negotiated prices.

     These sales may be effected in transactions:

l	on any national securities exchange or quotation service on which the common stock may be listed or quoted at the time of the sale;
l	in the over-the-counter market;
l	otherwise than on such exchanges or services or in the over-the-counter market;
l	through the writing and exercise of options, whether such options are listed on an options exchange or otherwise; or
l	through the settlement of short sales.

26

     These transactions may include block transactions or crosses. Crosses are transactions in which the same broker acts as an agent on both sides of the trade.

     In connection with the sales of the common stock or otherwise, the selling security holder may enter into hedging transactions with broker-dealers or other financial institutions. These broker-dealers or other financial institutions may in turn engage in short sales of the common stock in the course of hedging their positions. The selling security holder may also sell the common stock short and deliver common stock to close out short positions, or loan or pledge common stock to broker-dealers that in turn may sell the common stock.

     Broker-dealers engaged by the selling security holder may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling security holder (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated. The selling security holder does not expect these commissions and discounts to exceed what is customary in the types of transactions involved.

     The selling security holder may from time to time pledge or grant a security interest in some or all of the shares of common stock owned by it and, if it defaults in the performance of its secured obligations, the pledgees or secured parties may offer and sell the shares of common stock from time to time under this prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending the list of selling security holders to include the pledgee, transferee or other successors in interest as selling security holders under this prospectus.

     We cannot be certain that the selling security holder will sell any or all of the common stock pursuant to this prospectus. Further, we cannot assure you that the selling security holder will not transfer, devise or gift the common stock by other means not described in this prospectus, including sales under Rule 144 of the Securities Act. The common stock may be sold in some states only through registered or licensed brokers or dealers. In addition, in some states the common stock may not be sold unless it has been registered or qualified for sale or an exemption from registration or qualification is available and complied with.

     The selling security holder and any other person participating in the sale of the common stock will be subject to the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have advised PharmaBio that while it is engaged in a distribution of the shares included in this prospectus, it is required to comply with Regulation M promulgated under the Securities Exchange Act of 1934, as amended. With certain exceptions, Regulation M precludes the selling security holder, any affiliated purchasers, and any broker-dealer or other person who participates in the distribution from bidding for or purchasing, or attempting to induce any person to bid for or purchase any security which is the subject of the distribution until the entire distribution is complete. Regulation M also prohibits any bids or purchases made in order to stabilize the price of a security in connection with the distribution of that security. All of the foregoing may affect the marketability of the shares offered by the selling security holder in this Prospectus.

     We have agreed to pay substantially all expenses incidental to the registration, offering and sale of the common stock to the public, other than commissions, fees and discounts of underwriters, brokers, dealers and agents. We have also agreed to indemnify PharmaBio and related persons against specified liabilities, including liabilities under the Securities Act.

     Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers, and controlling persons, we have been informed that in the opinion of the Securities and Exchange Commission, this indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

27

DESCRIPTION OF WARRANTS

     On February 27, 2006 (the “Closing Date”), we closed the initial transactions relating to our Common Stock and Warrant Purchase Agreement (the “Purchase Agreement”) dated February 24, 2006 with PharmaBio Development Inc. (“PharmaBio”), an affiliate of Quintiles Transnational Corp. and Quintiles, Inc. On the Closing Date, PharmaBio purchased 359,279 shares of our common stock for a purchase price of $2,000,000 based on the average closing stock price for the 15-day period prior to that date. In addition, we also entered into a Class A Warrant Agreement with PharmaBio dated as of the Closing Date, whereby we issued PharmaBio a fully vested warrant to purchase 46,706 shares of our common stock at $6.39 a share (the “Initial Class A Warrant”). At our election, PharmaBio will purchase an additional amount of our common stock for a purchase price of $1,500,000 on each of June 30, 2006 and September 29, 2006 with the number of shares to be determined by the 15-day average closing stock price prior to each such date. Each additional stock purchase will include the issuance of fully vested warrants, exercisable for a ten-year period from the date of issuance, for an amount of shares equal to 13% of the shares purchased on the date of issuance, with the exercise price set at 115% of the share price of each respective share purchase (the “Additional Class A Warrants”). We are also parties to a Class B Warrant Agreement, Class C Warrant Agreement and a Class D Warrant Agreement with PharmaBio to purchase in the aggregate up to 240,000 shares of our common stock at $6.39 a share (the “Milestone Warrants”). The Milestone Warrants, all dated as of February 24, 2006, will be exercisable for a ten-year period from that date, and will vest based on the achievement of certain milestones. The Initial Class A Warrant, Additional Class A Warrants and the Milestone Warrants will each be referred to in this prospectus as a “Warrant,” and collectively, as the “Warrants.”

     The following summary description of the Warrants sets forth some general terms and provisions of the Warrants, but the summary does not purport to be complete and is qualified in all respects by reference to the actual text of the Warrants, copies of which have been filed as exhibits to the registration statement, of which this prospectus is a part. In the event of any conflict between this description and the text of the warrants, the text of the Warrants shall govern. We urge you to read the text of the Warrants because the Warrants, and not this description, define your rights as a holder of the Warrants.

Exercise Period

     The Initial Class A Warrant is exercisable at any time on or prior to 5:00pm Eastern Time on February 24, 2016. The Additional Class A Warrants, if issued, will be exercisable at any time on or prior to 5:00pm Eastern Time on the tenth anniversary of the date of such warrants. The Milestone Warrants are exercisable, subject to a vesting schedule based on the achievement of certain milestones, at any time on or prior to 5:00pm Eastern Time on February 24, 2016. The milestones set forth in the Milestone Warrants are subject to a confidential treatment request with the Securities and Exchange Commission. The Milestone Warrants will also fully vest upon the occurrence of certain change of control transactions.

Exercise Price and Other Terms

     Each Warrant will entitle its holder to purchase the shares of common stock specified on the face of the Warrant, subject to adjustment in accordance with the anti-dilution and other adjustment provisions described below. The exercise price for the Initial Class A Warrant and each of the Milestone Warrants is $6.39 per share. If issued, the exercise price for each of the Additional Class A Warrants included as part of the June 30, 2006 and September 29, 2006 potential stock purchase transactions will be 115% of the share price established in connection with each respective stock purchase. The holder of each Warrant will be able to exercise each Warrant, in whole or part, by delivering to us the applicable warrant agreement, the exercise form properly completed and executed and payment of the aggregate exercise price for the number of shares of common stock as to which the Warrant is being exercised. The exercise price will be payable at the option of each Warrant holder:

l	by certified check, official bank check or wire transfer of immediately available funds, payable to the order of OrthoLogic Corp.; or
l	with respect to the Milestone Warrants only, by cashless exercise, pursuant to which the Milestone Warrant holder will receive the number of shares of common stock as is equal to the product of (1) the

28

number of shares of common stock being exercised under the warrant multiplied by (2) a fraction, the numerator of which is the fair market value per share of common stock at such time minus the exercise price per share of common stock at such time, and the denominator of which is the fair market value per share of common stock at such time. For purposes of the cashless exercise feature in the Milestone Warrants, the fair market value of one share of our common stock shall mean the closing price reported on the NASDAQ National Market or the principal exchange on which our common stock is listed, or the average of the closing bid and asked prices of our common stock quoted in the over-the-counter market, whichever is applicable, in each such case averaged over a period of fifteen (15) consecutive trading days immediately preceding the date that the exercise form is delivered to us. If our common stock is not traded on such market or exchange, or over-the-counter, the fair market value of our common stock will be the price per share which we could obtain from a willing buyer for shares sold by us from authorized but unissued shares, as agreed upon by us and the selling security holder in good faith or, absent such agreement, as shall be determined by arbitration instituted by either party under the rules of the American Arbitration Association.

     Each Warrant may be exercised in whole or in part at the applicable exercise price until its applicable expiration date, as described above. No fractional shares of our common stock will be issued upon the exercise of the Warrants. We will pay a cash adjustment instead of fractional shares equal to the excess of the fair market value of such fractional share (determined in such reasonable manner as may be prescribed by our Board of Directors in its discretion) over the proportional part of the per share purchase price represented by such fractional share.

     Upon exercise of each Warrant, we will deliver a stock certificate representing the number of shares that were exercised under the Warrant, such certificate to be issued and delivered promptly after the Warrant is exercised. If the Warrant is not fully exercised, we will execute a new warrant exercisable for the remaining shares and deliver the new warrant at the same time as the stock certificate for the exercised shares.

Adjustments

     The exercise price of each Warrant and the number of shares of common stock purchasable upon the exercise of each Warrant may, with certain exceptions, be subject to adjustment in certain situations. We will compute such adjustment and provide the respective Warrant holder with a certificate setting forth the adjustment and the facts on which it is based. The situations requiring adjustment are as follows:

l	Upon a (1) reorganization, consolidation or merger with or into another corporation (other than a merger or share exchange in which we are the surviving corporation and the common stock is not exchanged for or converted to securities, property or assets by virtue of such transaction) or (2) sale, lease, license or other transfer of all or substantially all of our property or assets, an adjustment will be made to enable the Warrant holder to receive, in lieu of the shares of common stock that might otherwise have been purchased upon exercise of the Warrant, the kind and number of shares and/or other securities and/or property and assets and/or cash receivable in such event that the holder would otherwise have been entitled to receive had the holder exercised the Warrant immediately prior to such reorganization, consolidation, merger, lease, sale, license or other transfer.
l	Upon a reclassification or otherwise that changes any of the securities as to which purchase rights under a Warrant exist into the same or a different number of securities of any other class or classes, an adjustment will be made to enable the Warrant holder to receive, in lieu of the shares of common stock that might otherwise have been purchased upon exercise of the Warrant, the kind and number of shares and/or other securities in such event that the holder would otherwise have been entitled to receive had the holder exercised the Warrant immediately prior to such reclassification or other change or immediately prior to the record date with respect thereto, together with an appropriate adjustment to the exercise price of the Warrant.
l	Upon a split, subdivision or combination of the securities as to which purchase rights under a Warrant exist into a different number of securities of the same class, an adjustment to the exercise price of the Warrant will be made to enable the Warrant holder to receive the same proportion of shares that the

29

holder would otherwise have been entitled to receive had the holder exercised the Warrant immediately prior to such split, subdivision or combination.

Warrant Holder Not A Stockholder

     The Warrants do not entitle the holders to any voting or other rights as are accorded to our stockholders nor are the holders subject to any liability for the exercise price or as a stockholder whether asserted by us or our creditors.

Registration Rights

     We agreed to file a registration statement with respect to the shares of common stock issuable upon exercise of the Warrants, as well as other securities issued or to be issued from time to time to PharmaBio Development, Inc. The following summary of the registration rights provided in such registration rights agreement, a copy of which has been filed as an exhibit to the registration statement of which this prospectus is a part, is not complete. Unless otherwise indicated, the provisions set forth below summarize the provisions contained in the registration rights agreement. This summary is not complete and you should refer to the registration rights agreement for a full description of the registration rights that apply to the Warrants and the underlying shares of common stock. This summary is qualified in its entirety by the registration rights agreement. In the event of any conflict between this description and the registration rights agreement, the terms of the registration rights agreement will govern.

     The holders of the Warrants and the common stock issuable upon exercise of the Warrants are entitled to the benefits of a registration rights agreement. This prospectus is part of a registration statement that we filed to meet our obligations to, among other things, register for resale shares of common stock issuable upon exercise of the Warrants by the selling security holder.

     We will use our best efforts to have this registration statement declared effective as promptly as practicable following the filing thereof, and to keep it effective until the earlier of:

     (1) the sale under the registration statement of all of the shares of common stock covered by the registration rights agreement; and

     (2) such date as all remaining unsold shares of common stock covered by the registration rights agreement can be sold by the selling security holder without restriction pursuant to the requirements of Rule 144 promulgated under the Securities Act of 1933, as amended.

     We will be permitted to suspend the use of this prospectus for a period not to exceed 60 days (whether or not consecutive) during any twelve month period if our management determines in its good faith judgment that our obligation to ensure that the registration statement and prospectus are current and complete would require us to take actions that might reasonably be expected to have a materially adverse effect on us and our stockholders, or upon our determination of the existence of any fact or the happening of any event that makes any statement of a material fact made in the registration statement, the prospectus, any amendment or supplement thereto, or any document incorporated by reference therein untrue in any material respect, or that requires the making of any additions to or changes in the registration statement or the prospectus, in order to make the statements therein not misleading in any material respect. A holder of registrable securities that sells registrable securities pursuant to the registration statement generally will be required to provide information about itself and the specifics of the sale, be named as a selling security holder in the related prospectus, deliver a prospectus to purchasers, be subject to relevant civil liability provisions under the Securities Act in connection with such sales and be bound by the provisions of the registration rights agreements which are applicable to such holder.

     We will give notice of the effectiveness of the registration statement to all holders who have provided us with a selling security holder notice and questionnaire. Each holder must complete the notice and questionnaire in order to be named as a selling security holder in the prospectus and prior to any intended distribution of registrable securities pursuant to the registration statement.

30

     We will pay all registration expenses of the registration to be incurred by us in connection with the selling security holder’s exercise of its registration rights under the registration rights agreement.

DESCRIPTION OF CAPITAL STOCK

     Our restated certificate of incorporation provides that we have the authority to issue 100 million shares of $0.0005 par value common stock and 2 million shares of $0.0005 par value preferred stock.

     The following is a summary of the material provisions of our common stock and preferred stock. This summary does not purport to be exhaustive and is qualified in its entirety by reference to applicable Delaware law and our restated certificate of incorporation and bylaws.

Common Stock

     The holders of common stock are entitled to one vote per share on all matters to be voted upon by the stockholders. Stockholders are not entitled to cumulate their votes for the election of directors. Subject to preferences that may be applicable to any outstanding shares of preferred stock, the holders of common stock are entitled to receive ratably such dividends, if any, as may be declared from time to time by the board of directors out of funds legally available for that purpose. In the event of our liquidation, dissolution or winding up, the holders of common stock are entitled to share ratably in all assets remaining after payment of liabilities, subject to prior distribution rights of preferred stock, if any, then outstanding. The common stock has no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the common stock. All outstanding shares of common stock are fully paid and nonassessable, and the shares of common stock to be issued upon completion of this offering will be fully paid and nonassessable.

     The transfer agent for our common stock is Bank of New York.

Preferred Stock

     Under our restated certificate of incorporation, our board of directors has the authority, without further action by our stockholders, to issue up to 2 million shares of preferred stock in one or more series and to fix the variations in the powers, preferences, rights, qualifications, limitations or restrictions of the preferred stock, including dividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences, any or all of which may be greater than the rights of our common stock. Our board of directors, without stockholder approval, can issue preferred stock with voting, conversion or other rights that could adversely affect the voting power and other rights of the holders of our common stock. As a result, preferred stock could be issued quickly with terms that will delay or prevent a change of control or make removal of management more difficult. In addition, the issuance of preferred stock may have the effect of decreasing the market price of our common stock and may adversely affect the voting and other rights of our common stock. At present, there are no shares of preferred stock outstanding and we have no current plans to issue any shares of preferred stock.

Preferred Stock Purchase Rights

     We have entered into a Rights Agreement, dated as of March 4, 1997, as amended, with Bank of New York, pursuant to which each outstanding share of our common stock has attached one preferred stock purchase right. Each share of our common stock subsequently issued prior to the expiration of the Rights Agreement will likewise have attached one right. Under specified circumstances involving a merger, an acquisition of 15% or more of our outstanding common stock, a tender offer or exchange offer resulting in ownership of 20% or more of our common stock by an acquiring person or a sale of 50% or more of our assets or earning power, the rights will entitle the holder thereof to purchase 1/100 of a share of our Series A preferred stock for a purchase price of $25.00 (subject to adjustment), and to receive, upon exercise, common shares having a value equal to two times the exercise price of the right. In this prospectus, unless the context requires otherwise, all references to our common stock include the accompanying rights.

     Currently, the rights are not exercisable and trade with our common stock.

31

Delaware Law

     We are subject to the provisions of Section 203 of the Delaware General Corporation Law. In general, this statute prohibits a publicly held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date that the person became an interested stockholder unless (with certain exceptions) the business combination or the transaction in which the person became an interested stockholder is approved in a prescribed manner. Generally, a “business combination” includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the stockholder. Generally, an “interested stockholder” is a person who, together with affiliates and associates, owns (or within three years prior, did own) 15% or more of the corporation’s voting stock.

Certain Anti-Takeover Provisions

     Stockholders’ rights and related matters are governed by Delaware corporate law, our restated certificate of incorporation (the “Restated Certificate”) and our bylaws. Certain provisions of the Restated Certificate and bylaws which are summarized below may discourage or have the effect of delaying or deferring potential changes in control of OrthoLogic Corp. Our board of directors believes that these provisions are in the best interests of stockholders because they will encourage a potential acquirer to negotiate with the board of directors, which will be able to consider the interests of all stockholders in a change-in-control situation. However, the cumulative effect of these terms may be to make it more difficult to acquire and exercise control of OrthoLogic Corp. and to make changes in our management.

     The Restated Certificate provides for the approval of the holders of two-thirds of our outstanding voting stock for a merger or a consolidation with, or a sale by us of all or substantially all of our assets to, any person, firm or corporation, or any group thereof, which owns, directly or indirectly, 5% or more of any class of our voting securities (an “Interested Person”). In addition, two-thirds approval is required with respect to other transactions involving any such Interested Person, including among other things, purchase by us or any of our subsidiaries of all or substantially all of the assets or stock of an Interested Person and any other transaction with an Interested Person which requires stockholder approval under Delaware law. The two-thirds voting requirement is not applicable to any transaction approved by our board of directors if a majority of the members of the board of directors voting to approve such transaction were elected prior to the date on which the other party became an Interested Person or certain other conditions are met (the “Continuing Directors”).

     The Restated Certificate provides that each director will serve for a three-year term and that approximately one-third of the directors are to be elected annually. Candidates for directors shall be nominated only by the board of directors or by a stockholder who gives us written notice no later than 20 days before the annual meeting or, in the case of a special meeting, the close of business on the 15^th day following the date on which notice of such special meeting is first given to the stockholders. We may have three to nine directors as determined from time to time by our Board, which currently consists of six members. Between stockholder meetings, our Board may appoint new directors to fill vacancies or newly created directorships. The Restated Certificate does not provide for cumulative voting at stockholder meetings for the election of directors. Stockholders controlling at least 50% of the outstanding common stock can elect the entire board of directors, while stockholders controlling 49% of the outstanding common stock may not be able to elect any directors. A director may be removed from office only for cause and only by the affirmative vote of a majority of the combined voting power of the then outstanding shares of capital stock entitled to vote generally in the election of directors.

     The Restated Certificate further provides that stockholder action must be taken at a meeting of stockholders and may not be effected by any consent in writing. Special meetings of stockholders may be called only by the President, a majority of the board of directors or the holders of at least 35% of the outstanding shares of capital stock entitled to vote.

     The Restated Certificate provides further that the foregoing provisions of the Restated Certificate and bylaws may be amended or repealed only with the affirmative vote of at least two-thirds of the shares entitled to vote, unless the amendment is recommended for stockholder approval by a majority of the Continuing Directors. These provisions exceed the usual majority vote requirement of Delaware law and are intended to prevent the holders of less than two-thirds of the voting power from circumventing the foregoing terms by amending the

32

Restated Certificate or bylaws. These provisions, however, enable the holders of more than one-third of the voting power to prevent amendments to the foregoing anti-takeover provisions of the Restated Certificate or bylaws even if they were favored by the holders of a majority of the voting power.

     The effect of such provisions of our Restated Certificate and bylaws may be to make more difficult the accomplishment of a merger or other takeover or change in control of OrthoLogic Corp. To the extent that these provisions have this effect, removal of our incumbent board of directors and management may be rendered more difficult. Furthermore, these provisions may make it more difficult for stockholders to participate in a tender or exchange offer for common stock and in so doing may diminish the market value of the common stock.

Limitations on Personal Liability of Directors

     Delaware law authorizes a Delaware corporation to eliminate or limit the personal liability of a director to the corporation and its stockholders for monetary damages for breach of certain fiduciary duties as a director. We believe that such a provision is beneficial in attracting and retaining qualified directors, and accordingly the Restated Certificate includes a provision eliminating liability for monetary damages for any breach of fiduciary duty as a director, except: (1) for any breach of the duty of loyalty to OrthoLogic Corp. or our stockholders; (2) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (3) for any transaction from which the director derived an improper personal benefit; or (4) for unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law. Thus, pursuant to Delaware law, our directors are not insulated from liability for breach of their duty of loyalty (requiring that, in making a business decision, directors act in good faith and in the honest belief that the action was taken in the best interest of the corporation). The foregoing provisions of the Restated Certificate may reduce the likelihood of derivative litigation against directors and may discourage or deter stockholders or management from bringing a lawsuit against directors for breaches of the fiduciary duties, even though an action, if successful, might otherwise have benefited us and our stockholders. Further, we have entered into indemnity agreements with all of our directors and officers for the indemnification of and advancing of expenses to such persons to the fullest extent permitted by law. We have also obtained insurance for the benefit of our officers and directors insuring such persons against certain liabilities, including liabilities under the securities laws.

LEGAL MATTERS

     The validity of the securities to be sold pursuant to this prospectus is being passed upon for us by our counsel, Quarles & Brady Streich Lang LLP, Phoenix, Arizona.

EXPERTS

     The financial statements, the related financial statement schedule, and management’s report on the effectiveness of internal control over financial reporting incorporated in this prospectus by reference from the OrthoLogic Corp. Annual Report on Form 10-K for the year ended December 31, 2005 have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their reports, (which reports (1) express an unqualified opinion on the financial statements and financial statement schedule and include an explanatory paragraph referring to the fact that OrthoLogic Corp. is in the development stage at December 31, 2005 (2) express an unqualified opinion on management’s assessment regarding the effectiveness of internal control over financial reporting, and (3) express an unqualified opinion on the effectiveness of internal control over financial reporting), which are incorporated herein by reference, and have been so incorporated in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

REGISTRATION STATEMENT AND OTHER GOVERNMENT FILINGS

Securities and Exchange Commission

     We have filed with the Securities and Exchange Commission (the “SEC”) a registration statement on Form S-3 under the Securities Act with respect to our common stock offered in this prospectus. This prospectus does not contain all of the information set forth in the registration statement and the exhibits and schedules to the registration statement. For further information with respect to us and our common stock, we refer you to the registration

33

statement and its exhibits and schedules. Statements contained in this prospectus as to the contents of any contract or other document are not necessarily complete and, in each instance, reference is made to the copy of that contract or document filed as an exhibit to the registration statement, each of these statements being qualified in all respects by that reference.

     We are subject to the information reporting requirements of the Securities Exchange Act of 1934, as amended. As such, we file annual, quarterly and special reports, proxy statements and other documents with the SEC. These reports, proxy statements and other documents, as well as the registration statement of which this prospectus is a part and the exhibits to such registration statement, may be inspected and copied at the public reference facilities maintained by the SEC at its Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may also obtain copies of such material by mail from the public reference facilities of the SEC’s Washington, D.C. offices, at prescribed rates. Please call the SEC at 1-800-SEC-0330 for further information on its public reference facilities. The SEC also maintains a website that contains reports, proxy and information statements and other information regarding registrants, including us, that file electronically with the SEC at the address “http://www.sec.gov.” The registration statement of which this prospectus is a part, including all exhibits and amendments to such registration statement, is available on that website.

Nasdaq

     Our common stock is listed on The NASDAQ National Market. Material filed by us can also be inspected and copied at the offices of the National Association of Securities Dealers, Inc. at 1735 K Street, N.W., Washington, D.C. 20006.

OrthoLogic Corp.

     Most of our SEC filings also are available at our website at “http://www.orthologic.com.” Information contained on our website is not part of this prospectus. We will provide you without charge, upon your oral or written request, with a copy of any or all reports, proxy statements and other documents we file with the SEC, as well as any or all of the documents incorporated by reference in this prospectus or the registration statement of which it is a part (other than exhibits to such documents unless such exhibits are specifically incorporated by reference into such documents). Requests for such copies should be directed to:

OrthoLogic Corp.
Attention: Corporate Secretary
1275 West Washington Street
Tempe, Arizona 85281
Telephone number: (602) 286-5520

INFORMATION INCORPORATED BY REFERENCE

     The SEC allows us to “incorporate by reference” in this prospectus certain information we file with the SEC, which means that:

l	incorporated documents are considered a part of this prospectus;
l	we can disclose important information to you by referring you to those documents; and
l	certain information that we file after the date of this prospectus with the SEC will automatically update and supersede information contained in this prospectus and the registration statement.

     We incorporate by reference into this prospectus the following documents, and filings we make after the initial filing of the registration statement but before it becomes effective, and any future filings we make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after the date of this prospectus (other than current reports or portions thereof furnished under Item 2.02 or Item 7.01 of Form 8-K) until we sell all of the securities that we have registered under the registration statement of which this is a part:

34

l	Our Annual Report on Form 10-K, as amended, for the year ended December 31, 2005;
l	Our Current Reports on Form 8-K filed with the SEC on January 19, 2006, January 31, 2006, February 16, 2006, March 1, 2006, March 3, 2006, March 7, 2006, March 13, 2006, March 15, 2006 and April 11, 2006;
l	The description of our common stock contained in our Registration Statement on Form 8-A dated January 28, 1993, and any further amendment or report updating that description; and
l	The description of our Series A preferred stock purchase rights contained in our Registration Statement on Form 8-A filed with the SEC on March 6, 1997, as amended as described in Forms 8-K filed with the SEC on August 24, 1999 and October 20, 2003, and any further amendment or report updating that description.

35

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

Item 14. Other Expenses of Issuance and Distribution.

     The estimated expenses in connection with the issuance and distribution of the securities covered by this registration statement, all of which will be paid by the registrant, are as follows:

SEC registration fee (actual)	$	708.91	(1)
Printing and engraving expenses	$	1,000
Legal fees and expenses	$	15,000
Accounting fees and expenses	$	10,000
Miscellaneous	$	1,000
Total	$	27,708.91

(1) The filing fee of $708.91 has been previously paid.

Item 15. Indemnification of Directors and Officers.

     Section 145 of the General Corporation Law of the State of Delaware, or DGCL, empowers a Delaware corporation to indemnify any person who was or is a party, or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of such corporation) by reason of the fact that such person is or was an officer or director of such corporation, or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise. The indemnity may include expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, provided that such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person’s conduct was unlawful.

     A Delaware corporation may indemnify past or present officers and directors of such corporation or of another corporation or other enterprise at the former corporation’s request, in an action by or in the right of the corporation to procure a judgment in its favor under the same conditions, except that no indemnification is permitted without judicial approval if the officer or director is adjudged to be liable to the corporation. Where an officer or director is successful on the merits or otherwise in defense of any action referred to above, or in defense of any claim, issue or matter therein, the corporation must indemnify such person against the expenses (including attorneys’ fees) which such person actually and reasonably incurred in connection therewith. Section 145 further provides that any indemnification shall be made by the corporation only as authorized in each specific case upon a determination that indemnification of such person is proper because he has met the applicable standard of conduct (i) by the stockholders, (ii) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, (iii) by a committee of such directors designated by majority vote of such directors, even though less than a quorum, or (iv) by independent legal counsel in a written opinion, if there are no such disinterested directors, or if such disinterested directors so direct. Section 145 further provides that indemnification pursuant to its provisions is not exclusive of other rights of indemnification to which a person may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise.

     We have directors’ and officers’ insurance which provides for indemnification of our officers and directors and certain other persons against liabilities and expenses incurred by any of them in certain stated proceedings and

II-1

under certain stated conditions. We have also entered into separate indemnification agreements with each of our directors and certain officers that may require us, among other things, to indemnify such directors and officers against certain liabilities that may arise by reason of their status or service as directors or officers to the maximum extent permitted under Delaware law.

     Our restated certificate of incorporation provides that indemnification shall be available to the fullest extent permitted by the DGCL for all current or former directors or officers. Reference is made to Item 17 for OrthoLogic’s undertakings with respect to indemnification for liabilities arising under the Securities Act.

Item 16. Exhibits.

     See the Exhibit Index following the “Signatures” page in this registration statement, which Exhibit Index is incorporated herein by reference.

Item 17. Undertakings.

     (a) The undersigned registrant hereby undertakes:

          (1) to file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) to include any prospectus required by Section 10(a)(3) of the Securities Act; (ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and (iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;

provided, however, that clauses (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) above do not apply if the registration statement is on Form S-3 and the information required to be included in a post-effective amendment by those clauses is contained in reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the registration statement;

          (2) that, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof;

          (3) to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering;

          (4) that, for the purpose of determining liability under the Securities Act of 1933 to any purchaser:

(i)	each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and
(ii)	each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5) or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii) or (x) for the purpose of providing the information required by Section 10(a) of the Securities Act of

II-2

1933 shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which the prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date; and

(iii)

each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use;

          (5) that, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

(i)	Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
(ii)	Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iii)	The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of an undersigned registrant; and
(iv)	Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

     (b) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in this registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

II-3

     (c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions described under Item 15 above, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

II-4

SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Tempe, State of Arizona, on April 13, 2006.

ORTHOLOGIC CORP.
By:	/s/ John M. Holliman, III
	John M. Holliman, III Executive Chairman

POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints John M. Holliman, III, Les M. Taeger, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement and to sign any registration statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and any other regulatory authority, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their substitutes, may lawfully do or cause to be done by virtue hereof.

     Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the date indicated.*

Signature	Title
/s/ John M. Holliman, III	Executive Chairman (Principal Executive Officer),
John M. Holliman, III	Chairman of the Board and Director
/s/ Les M. Taeger	Senior Vice President and Chief Financial Officer
Les M. Taeger	(Principal Financial and Accounting Officer)
/s/ Augustus A. White III	Director
Augustus A. White III, MD, Ph.D.
/s/ Frederic J. Feldman	Director
Frederic J. Feldman, Ph.D.
/s/ Michael D. Casey	Director
Michael D. Casey
/s/ William M. Wardell	Director
William M. Wardell, MD, Ph.D.
/s/ Elwood D. Howse, Jr.	Director
Elwood D. Howse, Jr.

* Each of the above signatures is affixed as of April 13, 2006.

S-1

ORTHOLOGIC CORP.
(the “Company”)

EXHIBIT INDEX
TO
FORM S-3 REGISTRATION STATEMENT

     The following exhibits are filed with or incorporated by reference in this registration statement:

		Incorporated Herein	Filed
Exhibit	Description	By Reference To	Herewith
4.1	Rights Agreement dated as of March 4, 1997, between the Company and Bank of New York, and Exhibits A, B and C thereto	Exhibit 4.1 to the Company’s Registration Statement on Form 8-A filed with the SEC on March 6, 1997
4.2	First Amendatory Agreement to March 4, 1997 Rights Agreement	Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on August 24, 1999
4.3	Amendment No. 2 to March 4, 1997 Rights Agreement	Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on October 20, 2003
4.4	Class A Warrant Agreement dated February 24, 2006, between OrthoLogic Corp. and PharmaBio Development Inc.	Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed with the SEC on March 3, 2006 (the “March 3rd 8-K”)
4.5	Class B Warrant Agreement dated February 24, 2006, between OrthoLogic Corp. and PharmaBio Development Inc. (asterisks located within exhibit denote information that has been deleted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission)	Exhibit 4.2 to the March 3rd 8-K
4.6	Class C Warrant Agreement dated February 24, 2006, between OrthoLogic Corp. and PharmaBio Development Inc. (asterisks located within exhibit denote information that has been deleted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission)	Exhibit 4.3 to the March 3rd 8-K
4.7	Class D Warrant Agreement dated February 24, 2006, between OrthoLogic Corp. and PharmaBio Development Inc. (asterisks located within exhibit denote information that has been deleted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission)	Exhibit 4.4 to the March 3rd 8-K
4.8	Form of Class A Warrant Agreement for Additional Class A Warrants		X
5.1	Opinion of Quarles & Brady LLP		X
10.1	Common Stock and Warrant Purchase Agreement dated February 24, 2006, by and between the Company and PharmaBio		X

		Incorporated Herein	Filed
Exhibit	Description	By Reference To	Herewith
	Development Inc.
10.2	Registration Rights Agreement dated February 24, 2006, between PharmaBio Development Inc. and the Company,		X
10.3	Registration Rights Agreement dated February 27, 2006, by and among the Company, AzERx, Inc. and the other shareholders listed thereon		X
23.1	Consent of Deloitte & Touche LLP		X
23.2	Consent of Quarles & Brady LLP		(Included in Exhibit 5.1)
24.1	Powers of Attorney		(Included in the Signature Page)

EX-4.8

Exhibit 4.8

Confidential
FINAL

[Form of Warrant for Additional Closings]

CLASS A-___WARRANT AGREEMENT

     This CLASS A-___ WARRANT AGREEMENT (this “Warrant Agreement”) is dated and entered into as of [                    ], 2006, by and between ORTHOLOGIC CORP., a Delaware corporation (the “Company”), and PHARMABIO DEVELOPMENT INC., a North Carolina corporation (“PharmaBio”).

     WHEREAS, the Company and PharmaBio have entered into the Common Stock and Warrant Purchase Agreement, dated as of the date hereof (the “Purchase Agreement”);

     WHEREAS, the Company and Quintiles, Inc., an affiliate of PharmaBio, have entered into a Master Services Agreement also dated as of the date hereof;

     WHEREAS, pursuant to the Purchase Agreement, the Company desires to grant to PharmaBio the rights set forth in this Warrant Agreement;

     NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties, the parties agree as follows:

     1. The Warrant.

          (a) The Company hereby agrees to issue and sell to PharmaBio, its designee or assigns (the “Holder”)                      shares (the “Warrant Shares”) of the Company’s Common Stock, $.0005 par value per share (“Common Stock”), at an exercise price of                      Dollars ($                    ) per share (the “Exercise Price”), upon the terms and conditions herein set forth. (Such number of shares was calculated as follows: $1,500,000, divided by the average of the closing prices of the shares of Common Stock for the fifteen (15) trading days prior to the date of the applicable additional closing referred to in the Purchase Agreement (the “Average Price”), multiplied by 13%. Such exercise price was calculated as follows: the Average Price multiplied by 115%.) The Exercise Price and the number of Warrant Shares purchasable upon exercise of this Warrant Agreement are subject to adjustment from time to time as provided in Section 4 of this Warrant Agreement.

     2. Expiration Date. This Warrant Agreement, and the Holder’s right to purchase any of the Warrant Shares, will expire at 5:00 p.m. Eastern Time on the tenth anniversary of the date of this Warrant Agreement (the “Expiration Date”).

     3. Exercise of this Warrant Agreement. The Holder may exercise this Warrant Agreement, on any Business Day, at any time from and after the date hereof and prior to the Expiration Date, in whole or in part, as adjusted from time to time as provided in Section 4 of

this Warrant Agreement, by: (a) the surrender of this Warrant Agreement, with the Exercise Form substantially in the form attached hereto as Annex A properly completed and executed, at the principal office of the Company, and (b) upon payment by the delivery of a certified check, official bank check or wire transfer of immediately available funds, payable to the order of the Company, in an amount equal to the aggregate purchase price for the Warrant Shares being purchased upon such exercise. Upon receipt thereof by the Company, the Holder will be deemed to be the holder of record of the Warrant Shares issuable upon such exercise as of the close of business on the date of such receipt by the Company, and the Company will promptly execute or cause to be executed and delivered to the Holder, a certificate or certificates representing the aggregate number of Warrant Shares specified in the Exercise Form. If this Warrant Agreement is exercised only in part, the Company will, at the time of delivery of said stock certificate or certificates, deliver to the Holder a new Warrant Agreement of like tenor evidencing the right of the Holder to purchase the remaining Warrant Shares then covered by this Warrant Agreement. “Business Day” shall mean any day, other than a Saturday, Sunday or legal holiday during which banks in North Carolina, United States are open for the conduct of their banking business.

     4. Certain Adjustments. The Exercise Price at which Warrant Shares may be purchased and the number of Warrant Shares to be purchased upon exercise of this Warrant Agreement are subject to change or adjustment from time to time as follows:

          (a) Merger, Sale of Assets, etc. If at any time while this Warrant Agreement, or any portion hereof, is outstanding and unexpired there shall be (i) a reorganization (other than a combination, reclassification, exchange or subdivision of shares otherwise provided for herein), (ii) a merger or consolidation of the Company with or into another corporation or entity in which the Company is not the surviving entity, or a reverse triangular merger or share exchange in which the Company is the surviving entity but the shares of the Company’s capital stock outstanding immediately prior to the merger or share exchange are exchanged or converted by virtue of the merger or share exchange into other property, whether in the form of securities, cash, or otherwise, or (iii) a sale, lease, license or other transfer of all or substantially all of the Company’s properties or assets to any other person or entity, then, as a part of such reorganization, merger, consolidation, exchange or other transfer, lawful provision shall be made so that the Holder shall thereafter be entitled to receive upon exercise of this Warrant Agreement, during the period specified herein and upon payment of the Exercise Price then in effect, the number of shares of stock or other securities or property resulting from such reorganization, merger, consolidation, exchange or other transfer that a holder of the shares deliverable upon exercise of this Warrant Agreement would have been entitled to receive in such reorganization, merger, consolidation, exchange or other transfer if this Warrant Agreement had been exercised immediately before the record date of (or the date of, if no record date is fixed) such reorganization, merger, consolidation, exchange or other transfer, all subject to further adjustment as provided in this Section 4. The foregoing provisions of this Section 4(a) shall similarly apply to successive reorganizations, mergers, consolidations, exchanges or other transfers and to the stock or securities of any other corporation that are at the time receivable upon the exercise of this Warrant Agreement. If the per-share consideration payable to the Holder hereof for shares in connection with any such transaction is in a form other than cash or marketable securities, then the value of such consideration shall be reasonably determined in good faith by the Company’s Board of Directors. In all events, appropriate adjustment (as

2

reasonably determined in good faith by the Company’s Board of Directors) shall be made in the application of the provisions of this Warrant Agreement with respect to the rights and interests of the Holder after any of the above-referenced transactions, to the end that the provisions of this Warrant Agreement shall be applicable after such event, as near as reasonably may be, in relation to any shares or other property deliverable after such event upon exercise of this Warrant Agreement.

          (b) Reclassification, etc. If the Company, at any time while this Warrant Agreement, or any portion hereof, remains outstanding and unexpired, by reclassification of securities or otherwise, shall change any of the securities as to which purchase rights under this Warrant Agreement exist into the same or a different number of securities of any other class or classes, this Warrant Agreement shall thereafter represent the right to acquire such number and kind of securities as the Holder would have received if this Warrant Agreement had been exercised in full immediately prior to such reclassification or other change or immediately prior to the record date with respect thereto and the Exercise Price therefor shall be appropriately adjusted, all subject to further adjustment as provided in this Section 4. The foregoing provisions of this Section 4(b) shall similarly apply to successive reclassifications or other changes.

          (c) Split, Subdivision or Combination of Shares. If the Company, at any time while this Warrant Agreement, or any portion hereof, remains outstanding and unexpired, shall split, subdivide or combine the securities as to which purchase rights under this Warrant Agreement exist, into a different number of securities of the same class, the Exercise Price for such securities shall be proportionately decreased in the case of a split or subdivision or proportionately increased in the case of a combination. Upon each adjustment in the Exercise Price pursuant to this subsection, the number of shares of such securities purchasable hereunder shall be adjusted, to the nearest whole share, to the product obtained by multiplying the number of shares purchasable immediately prior to such adjustment in the Exercise Price by a fraction, the numerator of which shall be the Exercise Price immediately prior to such adjustment and the denominator of which shall be the Exercise Price immediately thereafter.

          (d) Certificate as to Adjustments. Upon the occurrence of each adjustment pursuant to this Section 4, the Company at its expense shall promptly compute such adjustment in accordance with the terms hereof and furnish to any Holder of this Warrant Agreement a certificate signed by its Chief Financial Officer setting forth such adjustment and showing in detail the event requiring the adjustment, the amount of such adjustment, the method by which such adjustment was calculated, the Exercise Price at the time in effect, and the number of shares and the amount, if any, of the property that at the time would be received upon the exercise of this Warrant Agreement, together with the facts upon which such adjustment is based. The Company shall, upon the written request, at any time, of any Holder, promptly furnish or cause to be furnished to such Holder a like certificate setting forth: (i) all such previous adjustments; (ii) the Exercise Price at the time in effect; and (iii) the number of shares and the amount, if any, of other property that at the time would be received upon the exercise of this Warrant Agreement.

3

          (e) No Dilution or Impairment. The Company will not, by amendment of its certificate of incorporation or through any reorganization, recapitalization, reclassification, transfer of assets, consolidation, merger, business combination, or dissolution, avoid or seek to avoid the intent of this Section 4 or the observance or performance of any of the terms to be observed or performed by the Company under this Warrant Agreement, but will at all times in good faith assist in the carrying out of all the provisions of this Section 4 and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of this Warrant Agreement against impairment.

          (f) Conformity with Warrant Agreement. In the event that at any time, as a result of any adjustment made pursuant to this Section 4, the Holder thereafter shall become entitled to receive any shares of capital stock of the Company other than Common Stock, thereafter the number of such other shares so receivable upon exercise of the Warrant Agreement shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in this Section 4.

     5. Fractional Shares. Fractional shares will not be issued upon the exercise of this Warrant Agreement, but in any case where the Holder would, except for the provisions of this Section, be entitled under the terms of this Warrant Agreement to receive a fractional share upon the exercise of this Warrant Agreement, the Company will, upon the exercise of this Warrant Agreement for the largest number of whole shares then called for, pay a sum in cash equal to the excess of the fair market value of such fractional share (determined in such reasonable manner as may be prescribed by the Board of Directors of the Company in its discretion) over the proportional part of the per share purchase price represented by such fractional share.

     6. Notices of Certain Events. In case:

          (a) the Company shall take a record of the holders of its Common Stock (or other stock or securities at the time receivable upon the exercise of this Warrant Agreement) for the purpose of entitling them to receive any dividend or other distribution, or stock subdivision or combination, or any right to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any other right, or

          (b) of any reorganization or recapitalization of the Company, any reclassification of the capital stock of the Company, any consolidation, merger, share exchange or other business combination of the Company with or into another corporation or entity, or any sale, lease, license or other transfer of all or substantially all of the assets of the Company to another corporation or entity, or

          (c) of any voluntary dissolution, liquidation or winding-up of the Company, then, and in each such case, the Company will cause written notice thereof to be delivered to the Holder specifying, as the case may be, (i) the date on which a record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right or (ii) the date on which such reorganization, recapitalization, reclassification, consolidation, merger, share exchange, business combination, transfer, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such stock or securities at the time receivable

4

upon the exercise of this Warrant Agreement) shall be entitled to exchange their shares of Common Stock (or such other stock or securities) for securities or other property deliverable upon such reorganization, reclassification, recapitalization, consolidation, merger, share exchange, business combination, transfer, dissolution, liquidation or winding-up. Such notice shall be delivered at least ten (10) Business Days prior to the date required to be specified therein pursuant to this Section 6.

     7. No Rights as Stockholder; Limitation of Liability. This Warrant Agreement, as distinct from the shares for which this Warrant Agreement is exercisable, will not entitle the Holder to any of the rights of a stockholder of the Company. No provision of this Warrant Agreement, prior to the exercise of this Warrant Agreement, and no mere enumeration herein of the rights or privileges of the Holder, will give rise to any liability of the Holder for the purchase price or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

     8. Miscellaneous.

          (a) Successors and Assigns. This Warrant Agreement shall be binding on and inure to the benefit of the Holder and the Company and their respective successors and assigns.

          (b) Amendments and Waivers. This Warrant Agreement and any provision hereof may be amended, changed, waived, discharged or terminated only by an instrument in writing signed by both parties hereto.

          (c) Loss, Theft, Destruction or Mutilation. Upon receipt by the Company of evidence reasonably satisfactory to it that this Warrant Agreement has been lost, stolen, destroyed or mutilated, and in the case of any lost, stolen or destroyed Warrant Agreement, an indemnity reasonably satisfactory to the Company, or in the case of a mutilated Warrant Agreement, upon surrender and cancellation hereof, the Company will execute and deliver in the name of the registered holder of this Warrant Agreement, in exchange and substitution for the Warrant Agreement so lost, stolen, destroyed or mutilated, a new Warrant Agreement of like tenor and amount.

          (d) Warrant Exchangeable for Different Denominations. This Warrant Agreement is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company for new Warrant Agreements of like tenor representing in the aggregate the right to purchase the number of shares which may be purchased hereunder, each of such new Warrant Agreements to represent the right to purchase such number of Warrant Shares as shall be designated by said Holder hereof at the time of such surrender.

          (e) Law Governing. This Warrant Agreement will be governed by, and construed and enforced in accordance with, the laws of the State of North Carolina, without regard to conflicts-of-laws principles that would require the application of any other law.

          (f) Entire Agreement. This Warrant Agreement, together with the Purchase Agreement and the other transaction documents referred to therein or contemplated thereby,

5

constitutes the full and entire understanding and agreement among the parties with regard to the subject matter of this Warrant Agreement, and supersedes all prior agreements, understandings, inducements or conditions, express or implied, oral or written, with respect to the subject matter of this Warrant Agreement.

          (g) Notices. Unless otherwise provided herein, all notices, requests, demands and other communications required or permitted under this Warrant Agreement shall be in writing and will be deemed to have been duly made and received: (i) upon personal delivery; (ii) three (3) Business Days after deposit with the United States Post Office, by registered or certified mail or by first class mail, postage prepaid, addressed as set forth below; or (iii) one (1) Business Day after deposit with a nationally recognized, overnight courier (for next business day delivery), shipping prepaid, addressed as set forth below:

If to Company:	OrthoLogic Corp.
	1275 West Washington Street
	Tempe, Arizona 85281
	Attn: James M. Pusey, M.D.
	Facsimile: (602) 470-7080
With a copy to
(which shall not
constitute notice):	Quarles & Brady Streich Lang llp
	One Renaissance Square
	Two North Central Avenue
	Phoenix, Arizona 85004
	Attn: Steven P. Emerick
	Facsimile: (602) 417-2980
If to Purchaser:	PharmaBio Development Inc.
	4709 Creekstone Drive
	Suite 200 Riverbirch Building
	Durham, NC 27703
	Attn: President
	Facsimile: (919) 998-2090
With a copy to
(which shall not
constitute notice):	Smith, Anderson, Blount, Dorsett
	Mitchell & Jernigan, L.L.P.
	2500 Wachovia Capitol Center
	Raleigh, NC 27601
	Attn: Christopher B. Capel
	Facsimile: (919) 821-6800

6

Either party may change the address to which communications are to be sent by giving five (5) Business Days’ advance notice of such change of address to the other party in conformity with the provisions of this Section.

          (h) Execution; Counterparts. This Warrant Agreement and any amendment hereto may be executed in counterparts, each of which when executed and delivered shall be deemed to be an original and all of which counterparts taken together shall constitute but one and the same instrument. The exchange of copies of this Warrant Agreement or amendments thereto and of signature pages by facsimile transmission or by email transmission in portable digital format, or similar format, shall constitute effective execution and delivery of such instrument(s) as to the parties and may be used in lieu of the original Warrant Agreement or amendment for all purposes. Signatures of the parties transmitted by facsimile or by email transmission in portable digital format, or similar format, shall be deemed to be their original signatures for all purposes.

[signature page follows]

7

[Signature Page to Class A-__ Warrant Agreement]

     IN WITNESS WHEREOF, the parties have caused this Warrant Agreement to be duly executed and delivered as of the day and year first written above.

ORTHOLOGIC CORP.

By:

Name:

Title:

PHARMABIO DEVELOPMENT INC

By:

Name:

Title:

ANNEX A

EXERCISE FORM

TO BE EXECUTED BY THE REGISTERED HOLDER
TO EXERCISE THE ATTACHED CLASS ___ WARRANT AGREEMENT OF

ORTHOLOGIC CORP.

     The undersigned, [                                        ], pursuant to the provisions of the Class A-___ Warrant Agreement between OrthoLogic Corp. (the “Company”) and PharmaBio Development Inc. dated as of February [___], 2006 (the “Warrant Agreement”), hereby elects to exercise the Warrant Agreement by agreeing to subscribe for and purchase [                                        ] shares (the “Warrant Shares”) of Common Stock, $.0005 par value per share, of the Company, and hereby makes payment of $[                    ] by certified or official bank check or wire transfer of immediately available funds payable to the order of the Company in payment of the exercise price therefor.

     The undersigned acknowledges that the sale, transfer, assignment or hypothecation of the Warrant Shares to be issued upon exercise of this Warrant Agreement is subject to the terms and conditions of the Warrant Agreement.

PharmaBio Development Inc.
By:
Name:
Title:
Address: 4709 Creekstone Drive
	Suite 200 Riverbirch Building
	Durham, NC 27703

Dated:                                         ,                     

EX-5.1

Exhibit 5.1

Renaissance One
Two North Central Avenue
Phoenix, Arizona 85004-2391
602.229.5200
Fax 602.229.5690
www.quarles.com

April 13, 2006

OrthoLogic Corp.
1275 West Washington Street
Tempe, Arizona 85281

Ladies and Gentlemen:

     We are providing this opinion in connection with the Registration Statement of OrthoLogic Corp. (the “Company”) on Form S-3 (the “Registration Statement”) to be filed with the Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “Act”). This opinion is being furnished in accordance with the requirements of Item 601(b)(5) of Regulation S-K under the Act.

     The Registration Statement relates to the offer and resale by PharmaBio Development Inc. (“PharmaBio”) in accordance with the Common Stock and Warrant Purchase Agreement dated February 24, 2006 between PharmaBio and the Company (the “Purchase Agreement”) of up to an aggregate of 2,905,985 shares of the Company’s common stock, par value $.0005 per share (together with the preferred stock purchase rights attached thereto) (the “Common Stock”), covered by the Registration Statement which may be issued from time to time on a delayed basis pursuant to Rule 415 under the Act. Such shares consist of: (i) 2,359,279 shares of Common Stock, 359,279 of which have been issued to PharmaBio pursuant to the Purchase Agreement (the “Issued Shares”); and (ii) 546,706 shares of Common Stock underlying warrants (the “Warrant Shares”), 286,706 of which are available, subject to vesting provisions, upon exercise of warrants that have been issued pursuant to the Purchase Agreement. The Warrant Shares and the shares of Common Stock that are not Issued Shares are collectively referred to herein as the “Offered Shares.”

     We have examined (i) the Registration Statement; (ii) the Registration Rights Agreement between PharmaBio and the Company, dated February 24, 2006 (iii) the Company’s Restated Certificate of Incorporation and By-Laws, as amended to date; (iv) corporate proceedings of the Company relating to the Registration Statement and the transactions contemplated thereby; and (v) such other documents and such matters of law as we have deemed necessary in order to render this opinion.

OrthoLogic Corp.
April 13, 2006
Page 2

     In rendering the opinion set forth below, we have assumed that: (i) all information contained in all documents reviewed by us is true and correct; (ii) all signatures on all documents examined by us are genuine; (iii) all documents submitted to us as originals are authentic and all documents submitted to us as copies conform to the originals of those documents; (iv) each natural person signing any document reviewed by us had the legal capacity to do so; (v) each person signing in a representative capacity (other than on behalf of the Company) any document reviewed by us had authority to sign in such capacity; (vi) the Registration Statement, and any amendments thereto (including post-effective amendments) will have become effective and comply with all applicable laws; (vii) the Common Stock covered by the Registration Statement will be issued and sold in compliance with applicable federal and state securities laws and in the manner stated in the Registration Statement and in accordance with the Purchase Agreement; (viii) the Purchase Agreement is enforceable in accordance with its terms; (ix) the certificates representing the Issued Shares have been duly executed and delivered; (x) the certificates representing the Offered Shares to be issued from time to time in accordance with the Purchase Agreement will be duly executed and delivered and (xi) the Company’s Restated Certificate of Incorporation and By-Laws as amended to date and resolutions of the Company’s Board of Directors specifically authorizing the issuance and sale of the Common Stock in accordance with the Purchase Agreement remain in effect and unmodified, except as may be required as set forth in this opinion.

     On the basis and subject to the foregoing, we advise you that, in our opinion:

(1)	The Company is a corporation validly existing under the laws of the State of Delaware.
(2)	The Issued Shares issued to PharmaBio pursuant to the Purchase Agreement are validly issued, fully paid, and non-assessable.
(3)	The Offered Shares when (i) the terms of the offer, issue and sale have been duly established in conformity with the Purchase Agreement and do not violate any applicable law or result in a default under or breach of any agreement or instrument binding upon the Company and comply with any requirement or restriction imposed by any court or governmental body having jurisdiction over the Company, (ii) such shares have been duly executed and authenticated in accordance with the Purchase Agreement and offered, issued and sold as contemplated in the Registration Statement and the Purchase Agreement, and (iii) the Company has received consideration constituting lawful consideration under Delaware law in accordance with the Purchase Agreement, will be duly authorized, validly issued, fully paid, and non-assessable.

OrthoLogic Corp.
April 13, 2006
Page 3

     We consent to the filing of this opinion as Exhibit 5.1 to the Registration Statement and to the reference to our firm under the caption “Legal Matters” in the prospectus constituting a part thereof. In giving our consent, we do not admit that we are “experts” within the meaning of Section 11 of the Act, or that we come within the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Commission thereunder.

Very truly yours,

/s/ Quarles & Brady Streich Lang

QUARLES & BRADY STREICH LANG LLP

EX-10.1

Exhibit 10.1

Confidential
EXECUTION VERSION

COMMON STOCK AND WARRANT PURCHASE AGREEMENT

     THIS COMMON STOCK AND WARRANT PURCHASE AGREEMENT (this “Agreement”) is dated and entered into as of February 24, 2006, by and between OrthoLogic Corp., a Delaware corporation (the “Company”), and PharmaBio Development Inc., a North Carolina corporation (the “Purchaser”).

PREAMBLE

     WHEREAS, the Company and Quintiles, Inc., an Affiliate of Purchaser, have entered into a Master Services Agreement, dated as of the date hereof.

     WHEREAS, in connection with the foregoing, Purchaser desires to acquire and the Company is willing to issue and sell to Purchaser shares of common stock, $.0005 par value per share, of the Company (the “Common Stock”) and Warrants to purchase shares of Common Stock as described herein, subject to the terms and conditions specified herein;

     NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties, the parties agree as follows:

ARTICLE I

DEFINITIONS

     1.01 Definitions. For purposes of this Agreement, in addition to the terms defined elsewhere herein, the following terms shall have the meanings set forth below:

     “Additional Class A Warrants” shall have the meaning specified in Section 2.02.

     “Additional Shares” shall have the meaning specified in Section 2.02.

     “Affiliate” shall mean, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person. For the purposes of this definition, “control” when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

     “Business Day” shall mean any day other than a Saturday, Sunday or legal holiday on which banks in North Carolina and New York are open for the conduct of their banking business.

     “Class A-1 Warrant” shall have the meaning specified in Section 2.02.

     “Class A-2 Warrant” shall have the meaning specified in Section 2.02.

     “Class B Warrant” shall have the meaning specified in Section 2.01.

     “Class C Warrant” shall have the meaning specified in Section 2.01.

     “Class D Warrant” shall have the meaning specified in Section 2.01.

     “Common Stock” shall have the meaning specified in the Preamble to this Agreement.

     “Company SEC Reports” shall have the meaning specified in Section 4.05.

     “Disclosure Documents” shall have the meaning specified in Section 4.24.

     “Exchange Act” shall mean the Securities Exchange Act of 1934, as from time to time amended, and the rules and regulations of the SEC promulgated thereunder.

     “FDA” shall mean the U.S. Food and Drug Administration.

     “FFDCA” shall mean the United States Federal Food, Drug and Cosmetic Act, as amended from time to time, and all regulations promulgated thereunder.

     “Governmental Authority” shall mean any foreign, United States Federal, state, or local foreign court or governmental or regulatory agency or authority.

     “Initial Class A Warrant” shall have the meaning specified in Section 2.01.

     “Initial Closing” shall have the meaning specified in Section 2.01.

     “Initial Closing Date” shall have the meaning specified in Section 2.01.

     “Initial Closing Stock Price” shall have the meaning specified in Section 2.01.

     “Initial Shares” shall have the meaning specified in Section 2.01.

     “Intellectual Property” shall have the meaning specified in Section 4.12.

     “Law” shall mean any United States Federal, or state, local or foreign law, statute, rule, regulation, order, writ, injunction, judgment or decree of any Governmental Authority.

     “Master Services Agreement” shall mean the services agreement entered into by the Company and Quintiles, Inc., an Affiliate of Purchaser, dated as of the date of this Agreement.

     “Material Adverse Effect” shall mean a material adverse effect on or change in the business, operations, properties, assets, liabilities, results of operation or financial condition of the Company.

2

     “Material Agreements” shall have the meaning specified in Section 4.07.

     “Nasdaq” shall mean the Nasdaq National Market.

     “Person” shall mean any individual, partnership, corporation, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or agency or political subdivision thereof, or other entity.

     “Phase III Trial” shall have the meaning specified in Section 7.11.

     “Preferred Stock” shall have the meaning specified in Section 4.03.

     “Prospectus” shall mean the prospectus in the form included in the Registration Statement, as supplemented by any prospectus supplement to the Registration Statement filed with the SEC pursuant to Rule 424(b).

     “Registration Rights Agreement” shall have the meaning specified in Section 4.21.

     “Registration Statement” shall mean a registration statement on Form S-3 to be filed under the Securities Act by the Company after the Initial Closing Date as required by Section 4.21, as such Registration Statement may be amended from time to time.

     “Registrable Securities” shall have the meaning specified in Section 4.21.

     “SEC” shall mean the Securities and Exchange Commission.

     “Second Closing” shall have the meaning specified in Section 2.02.

     “Second Closing Date” shall have the meaning specified in Section 2.02.

     “Second Closing Stock Price” shall have the meaning specified in Section 2.02.

     “Securities” shall have the meaning specified in Section 4.04.

     “Securities Act” means the Securities Act of 1933, as from time to time amended, and the rules and regulations of the SEC promulgated thereunder.

     “Shares” shall mean collectively, the Initial Shares and the Additional Shares issued at any additional closings, if any.

     “Third Closing” shall have the meaning specified in Section 2.02.

     “Third Closing Date” shall have the meaning specified in Section 2.02.

     “Third Closing Stock Price” shall have the meaning specified in Section 2.02.

3

     “Transaction Agreements” shall mean this Agreement, the Warrants, the Registration Rights Agreement and the Master Services Agreement.

     “Transactions” shall mean the transactions contemplated by the Transaction Agreements.

     “Warrant Shares” shall mean the shares issuable by the Company upon the exercise of the Warrants.

     “Warrants” shall mean the Initial Class A Warrant, the Additional Class A Warrants, the Class B Warrant, the Class C Warrant and the Class D Warrant described in Sections 2.01 and 2.02.

ARTICLE II

PURCHASE AND SALE OF THE SHARES AND THE WARRANTS

     2.01 Initial Closing.

          (a) Subject to the terms and conditions of this Agreement, on the date hereof (the “Initial Closing Date”), the Company agrees to issue and sell to Purchaser, and Purchaser agrees to purchase from the Company for an aggregate purchase price of Two Million Dollars ($2,000,000):

               (i) a number of shares of Common Stock (the “Initial Shares”) equal to Two Million Dollars ($2,000,000) divided by $5.5667 (the “Initial Closing Stock Price”) (such price being the average of the closing prices on Nasdaq of the Common Stock for the 15 trading days prior to the Initial Closing Date), with any fractional share amount rounded to the nearest whole share and with 0.5 shares or more rounded up;

               (ii) a warrant, with an exercise price of 115% of the Initial Closing Stock Price, in the form attached hereto as Exhibit A to purchase a number of shares of Common Stock equal to Two Million Dollars ($2,000,000) divided by the Initial Closing Stock Price multiplied by thirteen percent (13%) (the “Initial Class A Warrant”), with any fractional share rounded to the nearest whole share and with 0.5 shares a more rounded up;

               (iii) a warrant, with an exercise price of 115% of the Initial Closing Stock Price, to purchase 80,000 shares of Common Stock, subject to certain vesting provisions, in the form attached hereto as Exhibit B (the “Class B Warrant”);

               (iv) a warrant, with an exercise price of 115% of the Initial Closing Stock Price, to purchase 80,000 shares of Common Stock, subject to certain vesting provisions, in the form attached hereto as Exhibit C (the “Class C Warrant”); and

               (v) a warrant, with an exercise price of 115% of the Initial Closing Stock Price, to purchase 80,000 shares of Common Stock, subject to certain vesting provisions, in the form attached hereto as Exhibit D (the “Class D Warrant”).

4

          (b) The purchase and sale of the Initial Shares, the Initial Class A Warrant, the Class B Warrant, the Class C Warrant and the Class D Warrant shall take place at a closing (the “Initial Closing”) to be held at the offices of Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P., 2500 Wachovia Capitol Center, Raleigh, NC 27601 at 10:00 a.m. Eastern Time on the Initial Closing Date, or at such other location, time and date as may be mutually agreed upon by the parties. The initial closing shall take place contemporaneously with the execution and delivery of this Agreement and the other Transaction Agreements by the parties thereto.

          (c) At the Initial Closing, subject to the terms and conditions contained in this Agreement, in payment of the full purchase price for the Initial Shares, the Initial Class A Warrant, the Class B Warrant, the Class C Warrant and the Class D Warrant, Purchaser shall provide a wire transfer of immediately available funds to the Company in an amount equal to Two Million Dollars ($2,000,000) using the wire transfer instructions separately provided to Purchaser by the Company.

          (d) Delivery of Shares and Warrants at the Initial Closing. At the Initial Closing, the Company shall deliver the Initial Class A Warrant, the Class B Warrant, the Class C Warrant and the Class D Warrant and, as soon as reasonably practicable after the Initial Closing Date, the Company shall deliver a stock certificate evidencing the Initial Shares, all issued in the name of Purchaser and dated as of the Initial Closing Date.

     2.02 Additional Closings.

          (a) Second Closing. Subject to the terms and conditions of this Agreement (including without limitation the Blocking Events set forth in Section 2.03 below) and upon the Company’s written notice to Purchaser of the Company’s intent to sell and issue additional shares of Common Stock pursuant to this Agreement on June 30, 2006 (the “Second Closing Date”) as described below, delivered not less than ten (10) Business Days prior to the Second Closing Date, the Company agrees to issue and sell to Purchaser, and Purchaser agrees to purchase from the Company, on the Second Closing Date, for an aggregate purchase price of One Million Five Hundred Thousand Dollars ($1,500,000):

               (i) a number of shares of Common Stock equal to One Million Five Hundred Thousand Dollars ($1,500,000) divided by the average of the closing prices on the Nasdaq of the Common Stock for the fifteen (15) trading days prior to the Second Closing Date (the “Second Closing Stock Price”), with any fractional share amount rounded to the nearest whole share and with 0.5 shares or more rounded up, and

               (ii) a warrant, with an exercise price of 115% of the Second Closing Stock Price, in the form attached hereto as Exhibit A-1 (the “Class A-1 Warrant”) to purchase a number of shares of Common Stock equal to One Million Five Hundred Thousand Dollars ($1,500,000) divided by the Second Closing Stock Price multiplied by thirteen percent (13%), with any fractional share amount rounded to the nearest whole share and with 0.5 shares or more rounded up.

5

          (b) Third Closing. Subject to the terms and conditions of this Agreement (including without limitation the Blocking Events set forth in Section 2.03 below) and upon the Company’s written notice to Purchaser of the Company’s intent to sell and issue additional shares of Common Stock pursuant to this Agreement on September 29, 2006 (the “Third Closing Date”) as described below, delivered not less than ten (10) Business Days prior to the Third Closing Date, the Company agrees to issue and sell to Purchaser, and Purchaser agrees to purchase from the Company, on the Third Closing Date, for an aggregate purchase price of One Million Five Hundred Thousand Dollars ($1,500,000):

               (i) a number of shares of Common Stock equal to One Million Five Hundred Thousand Dollars ($1,500,000) divided by the average of the closing prices on the Nasdaq of the Common Stock for the fifteen (15) trading days prior to the Third Closing Date (the “Third Closing Stock Price”), with any fractional share amount rounded to the nearest whole share and with 0.5 shares or more rounded up (such shares, together with the shares described in Section 2.02(a)(i), the “Additional Shares”), and

               (ii) a warrant, with an exercise price of 115% of the Third Closing Stock Price, in the form attached hereto as Exhibit A-1 (the “Class A-2 Warrant” and together with the Class A-1 Warrant, the “Additional Class A Warrants”) to purchase a number of shares of Common Stock equal to One Million Five Hundred Thousand Dollars ($1,500,000) divided by the Third Closing Stock Price multiplied by thirteen percent (13%), with any fractional share amount rounded to the nearest whole share and with 0.5 shares or more rounded up.

          (c) Each of the Second Closing and Third Closing described in this Section 2.02 shall take place at a closing to be held at the offices of Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P., 2500 Wachovia Capitol Center, Raleigh, NC 27601 at 10:00 a.m. Eastern Time on the Second Closing Date or Third Closing Date as applicable, or at such other location, time and date as may be mutually agreed upon by the parties. At the Second Closing or Third Closing as the case may be, (i) the Company shall deliver (A) the Additional Class A Warrant required to be delivered at such closing, issued in the name of Purchaser and dated as of such closing date, and (B) a copy of the Company’s instruction letter transmitted to its stock transfer agent directing such transfer agent to issue to Purchaser the stock certificate for the Additional Shares required to be delivered at such closing, issued in the name of Purchaser and dated as of such closing date; and (ii) Purchaser shall provide a wire transfer of immediately available funds, in an amount equal to the aggregate purchase price to be paid for the Additional Shares and Additional Class A Warrant being purchased at such closing, to the account designated by the Company under Section 2.01(c) or other account specified by the Company.

          (d) As soon as reasonably practicable after the Second Closing Date or Third Closing Date as applicable, the Company shall deliver a stock certificate evidencing the Additional Shares purchased at the Second Closing and Third Closing as the case may be, issued in the name of Purchaser and dated as of the applicable closing date.

          (e) Any Additional Shares sold pursuant to this Section 2.02 shall be deemed “Shares” for all purposes under this Agreement.

6

     2.03 Blocking Events. Purchaser shall not be obligated to purchase any Additional Shares from the Company pursuant to this Agreement unless and until the Registration Statement shall have been declared effective, and thereafter shall not be obligated to purchase any Additional Shares from the Company pursuant to this Agreement when there shall have occurred any one or more of the following events:

          (a) The withdrawal or suspension of the effectiveness of the Registration Statement;

          (b) The failure to have the number of shares of Common Stock proposed to be issued in the relevant additional closing covered by the Registration Statement;

          (c) The failure of the Common Stock issuable under this Agreement to be validly listed on Nasdaq;

          (d) The failure to continue to have the Common Stock registered under Sections 12(b) or 12(g) of the Exchange Act;

          (e) The receipt of a notification that the SEC or the National Association of Securities Dealers, Inc. is contemplating terminating the Company’s registration or listing, respectively;

          (f) The suspension of trading of the Common Stock by the SEC, Nasdaq or the National Association of Securities Dealers, Inc.

          (g) The failure to file with the SEC any form, report or document required to be filed by it under the Exchange Act since the date of this Agreement;

          (h) The commencement as a debtor of a voluntary bankruptcy case or proceeding; the consent to the entry of an order for relief against it in an involuntary bankruptcy case or proceeding; the commencement of any bankruptcy case against it; the consent to the appointment of a receiver of the Company or for all or substantially all of its property; the general assignment for the benefit of the Company’s creditors; the filing of a petition in bankruptcy or answer or consent seeking reorganization or relief; or the consent to the filing of such a petition or the appointment of or taking possession by a receiver;

          (i) The entry into a definitive agreement with respect to or the consummation of or the occurrence of any of the following: (a) any “person” or “group” (as such terms are defined in Section 13(d) and Section 14(d) of the Exchange Act) becomes the “beneficial owner” (as determined in accordance with Rule 13d-3 under the Exchange Act), directly or indirectly, of shares of voting securities of the Company representing 50% or more of the total voting power of all outstanding voting securities of the Company; (b) the sale, lease, license, exchange or other transfer (in one or a series of transactions) of all or substantially all of the assets of the Company, or all or substantially all of the assets relating to TP508; or (c) any merger, consolidation, share exchange, business combination or similar transaction in which the Company is not the surviving entity or in which the holders of the outstanding shares of stock of the Company immediately

7

prior to such transaction hold, immediately after such transaction, less that 51% of the total voting power of the outstanding securities of the surviving or resulting entity in such transaction;

          (j) The valid termination of the Master Services Agreement arising from a default by the Company under such Master Services Agreement;

          (k) The entry of a temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other legal or regulatory restraint or prohibition preventing the consummation of an additional closing;

          (l) The enactment, issuance, promulgation, enforcement or entry by a governmental entity of any statute, rule, regulation, executive order, decree, injunction or other order (whether temporary, preliminary or permanent) which has the effect of making an issuance of Additional Shares illegal or otherwise prohibiting consummation of the issuance of Additional Shares; or

          (m) The occurrence of an event that has a Material Adverse Effect on the Company.

The Company shall provide notice of the occurrence of any of the events described in this Section 2.03 to Purchaser promptly (and in any case within three (3) Business Days following the occurrence of said event).

ARTICLE III

CONDITIONS TO CLOSING

     3.01 Conditions to Purchaser’s Obligations at Closing. The obligation of Purchaser to purchase and pay for the Initial Shares, the Initial Class A Warrant, the Class B Warrant, the Class C Warrant and the Class D Warrant at the Initial Closing is subject to each of the following conditions precedent:

          (a) Opinion of Counsel. Quarles & Brady Streich Lang LLP, counsel to the Company, shall have delivered a legal opinion to Purchaser, in the form acceptable to the parties, regarding the Transaction Agreements and the Transactions;

          (b) Board Resolutions. Purchaser shall have received at the Initial Closing copies of the resolutions of the Board of Directors of the Company authorizing the execution, delivery and performance of the Transaction Agreements by the Company and the consummation of the Transactions, certified by an appropriate officer of the Company;

          (c) Officer’s Certificate. Purchaser shall have received at the Initial Closing a certificate, executed by the appropriate officer of the Company and dated as of the Initial Closing Date, together with and certifying (i) the names of the officers of the Company authorized to sign the Transaction Agreements together with the true signatures of such officers; (ii) a copy of the certificate of incorporation of the Company, as amended and in effect as of the Initial Closing Date; (iii) a copy of the bylaws of the Company, as amended and in effect as of

8

the Initial Closing Date; (iv) that the representations and warranties contained in Article IV hereof are true and correct as of the Initial Closing Date; and (v) the Company has complied with all the agreements and satisfied all the conditions herein on its part to be performed or satisfied on or prior to the Initial Closing Date;

          (d) Good Standing Certificate. Purchasers shall have received from the Company a Good Standing Certificate from the Delaware Secretary of State with respect to the Company.

          (e) Transaction Agreements. Purchaser shall have received the Transaction Agreements, duly executed by an authorized officer of the Company; and

          (f) Instruction Letter. The Company shall have transmitted an instruction letter to its stock transfer agent directing it to issue to Purchaser the stock certificate for the Initial Shares, and Purchaser shall have received a copy of such letter.

     3.02 Conditions to Company’s Obligations at Initial Closing. The obligation of the Company to issue and sell the Initial Shares and Warrants being purchased at the Initial Closing is subject to each of the following conditions precedent:

          (a) Transaction Agreements. The Company shall have received the Transaction Agreements, duly executed by an authorized officer of Purchaser or its Affiliates, as the case may be;

          (b) Payment. Purchaser shall have delivered Two Million Dollars ($2,000,000) in immediately available funds to Company’s specified account in accordance with Section 2.01(c); and

          (c) Officer’s Certificate. The Company shall have received at the Initial Closing a certificate, executed by the appropriate officer of Purchaser and dated as of the Initial Closing Date, certifying (i) the names of the officers of Purchaser authorized to sign the Transaction Agreements on behalf of Purchaser together with the true signatures of such officers; and (ii) that Purchaser has taken all actions necessary to authorize and approve Purchaser’s execution and delivery of the Transaction Agreements and the consummation by Purchaser of its obligations thereunder.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF COMPANY

     The Company represents and warrants to Purchaser and its Affiliates as follows:

     4.01 Corporate Status. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and the Company is qualified to do business as a foreign corporation in each jurisdiction in which qualification is required, except where failure to so qualify have not had and could not reasonably be expected to

9

have a Material Adverse Effect. The Company has all necessary corporate power and authority to carry on its business as now conducted.

     4.02 Authority and Consents. The Company has all necessary corporate power and authority to execute and deliver the Transaction Agreements and to consummate the Transactions. The execution and delivery of the Transaction Agreements and consummation of the Transactions have been duly authorized by all necessary corporate action on the part of the Company and no other corporate proceedings on the part of the Company are necessary to authorize the Transaction Agreements or to consummate the Transactions. No further approval or authority of the board of directors or stockholders of the Company will be required for the issuance and sale of the Securities to be sold by the Company as contemplated herein. Each of the Transaction Agreements has been duly and validly executed and delivered by the Company and constitutes a valid, legal and binding agreement of the Company, enforceable against the Company in accordance with its terms. Except for (a) applicable filings, if any, with the SEC pursuant to the Exchange Act and the Securities Act, (b) filings with Nasdaq in connection with the listing of the Shares and the Warrant Shares, and (c) filings, if any, under state securities or “blue sky” laws, no consent from, authorization or order of, notice to, or filing or registration with, any Governmental Authority or any other Person is required to be obtained or made by the Company for the execution, delivery and performance of the Transaction Agreements or the consummation of the Transactions. Neither the execution, delivery and performance of the Transaction Agreements by the Company nor the consummation by the Company of the Transactions will (i) conflict with or result in any breach of any provision of the certificate of incorporation or bylaws of the Company; (ii) violate any Law applicable to the Company or the Transactions; or (iii) result in the creation of any lien, charge, security interest or encumbrance upon any assets of the Company pursuant to the terms or provisions of, or will not conflict with, result in the breach or violation of, or constitute, either by itself or upon notice or the passage of time or both, a default under any agreement, mortgage, deed of trust, lease, franchise, license, indenture, permit or other instrument to which the Company is a party or by which the Company or its properties may be bound, except in the case of clauses (ii) and (iii) for such violation, lien, charge, security interest, default or encumbrance which, individually or in the aggregate, have not had and could not reasonably be expected to have a Material Adverse Effect.

     4.03 Authorized Capital Stock.

          (a) The authorized capital stock of the Company consists of 100,000,000 shares of Common Stock, of which 38,994,742 shares were issued and 38,744,742 outstanding as of the close of business on February 22, 2006 and 2,000,000 shares of preferred stock, of which no shares were issued and outstanding as of the close of business on the date hereof (the “Preferred Stock”). As of the date hereof, 2,555,000 shares of Common Stock were reserved for issuance and issuable or otherwise deliverable, including in connection with the exercise of outstanding stock options or warrants.

          (b) Except as set forth on Schedule 4.03(b), as of the Initial Closing Date, there are no outstanding subscriptions, options, warrants, rights, calls, contracts, demands, commitments, conversion rights or other agreements or arrangements of any character or nature whatever under which the Company is or may be obligated (x) to issue or sell shares of its

10

Common Stock or Preferred Stock, or (y) to register shares of its Common Stock or Preferred Stock. No holder of any security of the Company is entitled to any preemptive, subscription or similar rights to purchase any securities (including the Shares or Warrants) of the Company, except as set forth on Schedule 4.03(b).

          (c) The Company has reserved an adequate number of authorized but unissued shares of Common Stock for issuance upon exercise of the Warrants and such shares shall remain so reserved (subject to reduction from time to time for Common Stock issued upon the exercise of the Warrants), as long as the Warrants are exercisable.

     4.04 Issuance, Sale and Delivery of the Securities. The Shares, the Warrants and the Warrant Shares, when issued and paid for pursuant to the terms of this Agreement or the exercise provisions of the Warrants, as the case may be, will be duly and validly authorized, issued and outstanding, fully paid, nonassessable and free and clear of all pledges, liens, encumbrances and restrictions. The issuance of the Shares, the Warrants and the Warrant Shares by the Company pursuant to this Agreement or the Warrants (hereinafter such securities are sometimes collectively referred to as the “Securities”) are not subject to any preemptive or other similar rights.

     4.05 The Company SEC Reports; Financial Statements. The Company has made available to Purchaser (i) the Company’s Annual Reports on Form 10-K for each of the fiscal years ended December 31, 2003 and December 31, 2004; (ii) all definitive proxy statements relating to the Company’s meetings of stockholders (whether annual or special) held since January 1, 2004; and (iii) all other reports or registration statements filed by the Company with the SEC since January 1, 2004 (all such filings at (i) through (iii), collectively, the “Company SEC Reports”). As of their respective filing dates, the Company SEC Reports were prepared in all material respects in accordance with the requirements of the Securities Act or the Exchange Act, as the case may be, applicable to the Company SEC Reports. None of such forms, reports or registration statements contained, when filed, any untrue statement of a material fact or omitted to state a material fact required to be stated or incorporated by reference therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The consolidated financial statements of the Company included in the Company SEC Reports complied as to form in all material respects with applicable accounting requirements and the rules and regulations of the SEC with respect thereto when the same were filed and fairly presented, in conformity with United States generally accepted accounting principles applied on a consistent basis, the consolidated financial condition of the Company as of the dates thereof and its results of operations and changes in financial condition for the periods then ended (subject, in the case of the unaudited interim financial statements, to normal year-end adjustments). The Company has filed with the SEC all forms, reports and documents required to be filed by it under the Exchange Act since January 1, 2004.

     4.06 No Defaults. Except as to defaults, violations and breaches which individually or in the aggregate have not had and could not reasonably be expected to have a Material Adverse Effect on the Company, the Company is not in violation or default of any provision of its certificate of incorporation or bylaws, or other organizational documents, or in breach of or default with respect to any provision of any agreement, judgment, decree, order, mortgage, deed

11

of trust, lease, franchise, license, indenture, permit or other instrument to which it is a party or by which it or any of its properties are bound; and there does not exist any state of fact which, with notice or lapse of time or both, would constitute an event of default or default on the part of the Company as defined in such documents, except such defaults which individually or in the aggregate has not had and could not reasonably be expected to have a Material Adverse Effect.

     4.07 Material Agreements. Except as included or incorporated by reference in, or otherwise referred to in, the Company SEC Reports, the Company is not a party to or bound by any written or oral contract, instrument, agreement, commitment, obligation, plan or arrangement, a copy of which would be required to be filed with the SEC as an exhibit to a registration statement on Form S-1 (collectively, “Material Agreements”) if the Company was registering securities under the Securities Act. The Material Agreements are in full force and effect and the Company has in all material respects performed all the obligations required to be performed by it under such agreements, has received no notice of default and, to the best of the Company’s knowledge, neither the Company nor any party obligated to the Company is in default under any Material Agreement, the result of which has had and could reasonably be expected to have a Material Adverse Effect. All Material Agreements constitute valid and binding obligations of the Company, enforceable against the Company and, to the knowledge of the Company the other party thereto, in accordance with their respective terms.

     4.08 No Actions. There is no pending, or to the Company’s knowledge, threatened action, arbitration, investigation, litigation, proceedings, or suits before or involving any Governmental Authority or arbitrator by, against or involving the Company or its properties or business which has had or which could reasonably be expected to have a Material Adverse Effect, or which challenges or that may have the effect of preventing, delaying or otherwise interfering with the Transactions. The Company is not a party to or subject to the provisions of any material injunction, judgment, decree or order of any Governmental Authority or Arbitrator.

     4.09 Absence of Undisclosed Liabilities. Except as and to the extent specifically reflected or reserved against on the consolidated balance sheets of the Company as of September 30, 2005, included in the Company’s Quarterly Report on Form 10-Q for the nine-months ended September 30, 2005, the Company has no material debts, liabilities or obligations of any nature, whether accrued or unaccrued, absolute a contingent, disputed or undisputed, or otherwise, and whether due or to become due, arising out of transactions entered into, or any state of facts existing on or prior to the date of this Agreement, other than liabilities and obligations arising in the ordinary course of business after September 30, 2005, which have not had and could not reasonably be expected to have a Material Adverse Effect.

     4.10 Absence of Changes. Except as set forth on Schedule 4.10 and other than as set forth in Section 7.11, since September 30, 2005, (a) no Material Adverse Effect has occurred and no event has occurred or circumstance exists that could reasonably be expected to have a Material Adverse Effect; and (b) the Company has not paid or declared any dividends or other distributions with respect to the Common Stock and the Company is not in default in the payment of principal or interest on any outstanding debt or other obligations.

12

     4.11 No Defaults. Except as to defaults, violations and breaches which individually or in the aggregate have not had or could not reasonably be expected to have a Material Adverse Effect, the Company is not in violation or default of any provision of its certificate of incorporation or bylaws, or other organizational documents, or in breach of or default with respect to any provision of any agreement, judgment, decree, order, mortgage, deed of trust, lease, franchise, license, indenture, permit or other instrument to which it is a party or by which it or any of its properties are bound; and there does not exist any state of fact which, with notice or lapse of time or both, would constitute an event of default or default on the part of the Company as defined in such documents or instruments, except such defaults which individually or in the aggregate have not had or could not reasonably be expected to have a Material Adverse Effect on the Company.

     4.12 Intellectual Property. To the Company’s knowledge, (a) the Company owns or has obtained valid rights to use the inventions, patents, patent applications, trademarks (both registered and unregistered), tradenames, copyrights, know-how, and trade secrets necessary for the conduct of the Company’s business (as described in the Company SEC Reports) (collectively, the “Intellectual Property”); and (b) to the Company’s knowledge: (i) there are no third parties who have any ownership rights to any Intellectual Property that is owned by, or has been licensed to, the Company that would preclude the Company from conducting its business (as described in the Company SEC Reports), except for the ownership rights of the owners of the Intellectual Property licensed or optioned by the Company; (ii) there are currently no sales of any products that would constitute an infringement by third parties of any Intellectual Property owned, licensed or optioned by the Company; (iii) there is no pending or threatened action, suit, proceeding or claim by others challenging the rights of the Company in or to any Intellectual Property owned, licensed or optioned by the Company; (iv) there is no pending or threatened action, suit, proceeding or claim by others challenging the validity or scope of any Intellectual Property owned, licensed or optioned by the Company; (v) there is no pending or threatened action, suit, proceeding or claim by others that the Company infringes or otherwise violates any patent, trademark, copyright, know-how, trade secret or any other intellectual property proprietary right of others; (vi) none of the Intellectual Property or the use thereof by the Company infringes, misappropriated or makes any unauthorized use of any intellectual property or proprietary right of any third party, and no third party is infringing, misappropriating or making any unauthorized use of the Intellectual Property; and (vii) the Company is not subject to any judgment, order, writ, injunction or decree of any court or any Federal, state, local, foreign or other Governmental Authority, or any arbitrator, and the Company has not entered into or is a party to any contract which restricts or impairs the use of any such Intellectual Property.

     4.13 Compliance. Except as set forth on Schedule 4.13, the Company has been and is in compliance in all material respects with all applicable laws, rules, regulations and orders, in respect of the conduct of its business and the ownership of its properties, including without limitation with respect to the FFDCA, environmental matters, employment matters, and taxes and other governmental charges. The Company has all franchises, permits, licenses, consents and other governmental or regulatory authorizations and approvals necessary for the conduct of its business as now being conducted unless the failure to possess such franchises, permits, licenses, consents and other governmental or regulatory authorizations and approvals,

13

individually or in the aggregate, has not had and could not reasonably be expected to have a Material Adverse Effect.

     4.14 Insurance. The Company maintains insurance with sound and reputable insurance companies of the types and in the amounts that the Company reasonably believes is adequate for its business, including without limitation insurance covering all risks customarily insured against by similarly situated companies, all of which insurance is in full force and effect.

     4.15 Certain Regulatory and Other Matters.

          (a) The Company holds all applicable approvals and authorizations from any Governmental Authority necessary for the Company to conduct its business in the manner in which such business is being conducted with respect to TP508, including, without limitation, the development and testing of TP508, and all such approvals and authorizations are in good standing and in full force and effect. The Company has not received any written notice, or to the knowledge of the Company, any other communication, from any Governmental Authority, regarding any actual or possible revocation, withdrawal, suspension, cancellation, termination or material modification of any such approvals or authorizations.

          (b) The Company has not made any untrue statement of a material fact or fraudulent statement to the FDA or any other Governmental Authority, failed to disclose a material fact required to be disclosed to the FDA or other Governmental Authority, or committed an act, made a statement or failed to make a statement, that provides, or could reasonably be expected to provide, a basis for the FDA or other Governmental Authority to invoke, with respect to the Company, the FDA’s policy respecting “Fraud, Untrue Statements of Material Facts, Bribery, and Illegal Gratuities” set forth in 56 Fed. Reg. 46191 (September 10, 1991) or any similar policy.

          (c) Except as set forth on Schedule 4.15(c), the Company is not and has not been: (A) debarred by the FDA; (B) debarred, excluded, suspended, or otherwise ineligible to participate in federal health care programs such as Medicare or Medicaid or in federal procurement and non-procurement programs; or (C) a party to a settlement, consent or similar agreement with the FDA or other Governmental Authority.

          (d) TP508 is being, and all times has been (as applicable), developed, tested, manufactured, labeled, stored, distributed, promoted and marketed in compliance, in all material respects, with all applicable Laws, including, with respect to investigational use, good clinical practices, good laboratory practices, good manufacturing practices, record keeping, security, and filing of reports.

          (e) TP508 has not been the subject of, or subject to (as applicable), any recall, suspension, market withdrawal or seizure, any warning letter, other written communication asserting lack of compliance with any applicable Laws, or any serious adverse event; and no clinical trial of TP508 has been suspended, put on hold, or terminated prior to completion as a result of any action by the FDA or other Governmental Authority or voluntarily, based on adverse effects on human health. To the knowledge of the Company, no event has occurred or

14

circumstances exist that is reasonably likely to give rise to, or serve as a basis for, any of the foregoing events.

          (f) The Company has made available to Purchaser an accurate and complete copy of the Investigational New Drug Application for TP508, including all supplements, amendments and reports, and all material correspondence with the FDA with respect to TP508.

          (g) The Company has not received any adverse written notice from the FDA or any other Governmental Authority regarding the approvability or approval of TP508.

     4.16 Taxes. The Company has filed all federal, state, local and foreign income and other tax returns required to be filed by it and has paid or accrued all taxes shown as due thereon, and the Company has no knowledge of a tax deficiency which has been or might be asserted or threatened against it.

     4.17 Transfer Taxes. On the Initial Closing Date, all stock transfer or other similar taxes which are required to be paid in connection with the sale and transfer of the Securities to be sold to the Purchaser hereunder will be, or will have been, fully paid or provided for by the Company and all laws imposing such taxes will be or will have been fully complied with.

     4.18 Registration and Listing of Stock. The Common Stock is registered pursuant to Section 12(g) of the Exchange Act and is quoted on Nasdaq, and the Company has taken no action designed to, or likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act or de-listing the Common Stock from Nasdaq, nor has the Company received any notification that the SEC or the National Association of Securities Dealers, Inc. is contemplating terminating such registration or listing.

     4.19 No Manipulation of Stock. The Company has not taken any action designed to, or that might reasonably be expected to, cause or result in stabilization or manipulation of the price of the Common Stock to facilitate the transactions contemplated hereby or otherwise.

     4.20 Investment Company. The Company is not, and is not controlled by, an “investment company” or an “affiliated person” of, or “promoter” or “principal underwriter” for an investment company, within the meaning of the Investment Company Act of 1940, as amended.

     4.21 Securities Matters.

          (a) The Company has complied in all material respects with all applicable Laws, including securities laws, in connection with the offer, issuance and sale of the Securities hereunder.

          (b) Pursuant to the terms of a registration rights agreement in the form attached hereto as Exhibit E (the “Registration Rights Agreement”), the Company will file a Registration Statement with the SEC covering the resale of the Shares and the Warrant Shares, together with any securities issued or issuable upon any stock split, dividend or other

15

distribution, recapitalization or similar event with respect to the Warrant Shares (the “Registrable Securities”), and covenants that, prior to the sale of any Additional Shares and any Additional Class A Warrants, the Registration Statement will have been declared effective by the SEC and no stop order suspending the effectiveness of the Registration Statement will have been issued.

          (c) Indemnification and Contribution.

               (i) To the extent permitted by applicable law, the Company will indemnify and hold harmless each seller of Registrable Securities that were registered pursuant to the Registration Statement, each underwriter of such Registrable Securities thereunder, and each other person, if any, who controls such seller or underwriter within the meaning of Section 5 of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which such seller, underwriter or controlling person may become subject under the Securities Act or other applicable Federal or State securities or “blue sky” laws, to the extent that such losses, claims, damages or liabilities (or actions in respect thereof) arise out of, or are based upon, any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement under which such Registrable Securities were registered under the Securities Act, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of, or are based upon, the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each such seller, each such underwriter and each such controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable to any such indemnitee if, and to the extent that, any such loss, claim, damage or liability arises out of, or is based upon, an: (i) untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by or on behalf of such indemnitee in writing specifically for use in such registration statement or prospectus; or (ii) such untrue statement or alleged untrue statement or omission or alleged omission was contained in a preliminary or earlier effective prospectus and corrected in a final or amended prospectus, and such holder of Registrable Securities failed to deliver a copy of the final or amended prospectus at or prior to the confirmation of the sale of the Registrable Securities to the buyer of such Registrable Securities; provided, further, that the indemnity agreement contained in this Section 4.21 shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, provided, that such consent shall not be required if the settlement shall include, as an unconditional term thereof, the giving, by the claimant or plaintiff, to such indemnified party, of a release of the Company from all liability in respect of such claim or litigation.

               (ii) To the extent permitted by applicable law, each seller of Registrable Securities that were registered pursuant to the Registration Statement, severally and not jointly, will indemnify and hold harmless the Company, each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act, each officer of the Company who signs the Registration Statement, each director of the Company, each underwriter and each person who controls any underwriter within the meaning of the Securities Act, against all losses, claims, damages or liabilities, joint or several, to which the Company or such officer, director,

16

underwriter or controlling person may become subject under the Securities Act or other applicable Federal or State securities or “blue sky” laws, to the extent that such losses, claims, damages or liabilities (or actions in respect thereof) arise out of, or are based upon, any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement under which such Registrable Securities were registered under the Securities Act, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of, or are based upon, the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company and each such officer, director, underwriter and controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that such seller will be liable hereunder in any such case if, and only to the extent that, any such loss, claim, damage or liability arises out of, or is based upon, an untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with information pertaining to such seller, as such, furnished in writing to the Company by, or on behalf of, such seller specifically for use in such registration statement or prospectus, and provided, further, that the indemnity agreement contained in this Section 4.21 shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of such seller, which consent shall not be unreasonably withheld, provided, that such consent shall not be required if the settlement shall include, as an unconditional term thereof, the giving, by the claimant or plaintiff, to such indemnified party of a release of such seller from all liability in respect of such claim or litigation; provided, further, that the liability of each seller hereunder shall be limited to the net proceeds received for the account of such seller from the sale of Registrable Securities covered by such registration statement.

               (iii) Promptly after receipt by an indemnified party hereunder of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party hereunder, notify the indemnifying party in writing thereof, but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to such indemnified party other than under this Section 4.21 and shall only relieve it from any liability which it may have to such indemnified party under this Section 4.21 if, and to the extent that, the indemnifying party is prejudiced by such omission. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate in and, to the extent it shall wish, to assume and undertake the defense thereof, with counsel reasonably satisfactory to such indemnified party, and, after notice from the indemnifying party to such indemnified party of its election so to assume and undertake the defense thereof, the indemnifying party shall not be liable to such indemnified party under this Section 4.21 for any legal expenses subsequently incurred by such indemnified party in connection with the defense thereof, other than reasonable costs of investigation and of liaison with counsel so selected, provided, however, that, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be reasonable defenses available to it which are different from or additional to those available to the indemnifying party, or if the interests of the indemnified party reasonably may be deemed to conflict with the interests of the indemnifying party, the indemnified party shall have the right to select a separate counsel and to assume such legal defenses and otherwise to participate in the

17

defense of such action, with the reasonable expenses and fees of such separate counsel and other expenses related to such participation to be reimbursed by the indemnifying party as incurred; provided, further, that the Company shall not have any reimbursement obligation for the expenses and fees of more than one such separate counsel for all indemnitees.

               (iv) In order to provide for just and equitable contribution to joint liability under the Securities Act in any case in which either (1) any holder of Registrable Securities, or any controlling person of any such holder, makes a claim for indemnification pursuant to this Section 4.21 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section 4.21 provides for indemnification in such case, or (2) contribution under the Securities Act may be required on the part of any such selling holder or any such controlling person in circumstances for which indemnification is provided under this Section 4.21; then, and in each such case, the Company and such holder will contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (after contribution from others) in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other, as well as any other relevant equitable considerations. The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided, however, that, in any such case, (A) no such holder will be required to contribute any amount in excess of the public offering price of all such Registrable Securities offered by it pursuant to such registration statement; and (B) no person or entity guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation.

     4.22 Rule 144 Reporting. With a view to making available the benefits of certain rules and regulations of the SEC that may permit the sale of securities to the public without registration, the Company agrees to use its best efforts to make and keep public information regarding the Company available as contemplated by Rule 144 under the Securities Act and file with the SEC all reports and other documents required to be filed by the Company under the Securities Act and the Exchange Act, and furnish a written report to Purchaser, upon written request, as to the Company’s compliance with the reporting requirements of Rule 144 and of the Securities Act and the Exchange Act.

     4.23 Employees. As of the date hereof, the Company has no collective bargaining arrangements or agreements covering any of its employees. As of the date hereof, since September 30, 2005, no officer, consultant or key employee of the Company whose termination, either individually or in the aggregate, has had and could reasonably be expected to have a Material Adverse Effect, has terminated or, to the knowledge of the Company, has any present intention of terminating his or her employment or engagement with the Company.

18

     4.24 Disclosure. The information contained or incorporated in this Agreement and any disclosure schedule delivered by the Company to the Purchaser simultaneously with the execution of this Agreement (the “Disclosure Documents”) is true and correct in all material respects, as of the date hereof or thereof, as the case may be; and the Disclosure Documents do not contain an untrue statement of a material fact, or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they are made, not misleading.

     4.25 No Solicitation. The Company has not, in the past nor will it hereafter, take any action to sell, offer for sale or solicit offers to buy any securities of the Company which would bring the offer, issuance or sale of the Securities, as contemplated by this Agreement, within the provisions of Section 5 of the Securities Act, unless such offer, issuance or sale was or shall be within the exemptions of Section 4 (or other appropriate exemption) of the Securities Act.

     4.26 No Integration. Neither the Company, nor any of its Affiliates, nor any person acting on the Company’s behalf has, directly or indirectly, at any time within the past six (6) months, made any offer or sale of any security or solicitation of any offer to buy any security under circumstances that would eliminate the availability of the exemption from registration under Regulation D under the Securities Act in connection with the offer and sale of the Securities as contemplated hereby.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF PURCHASER

     Purchaser represents and warrants to the Company as follows:

     5.01 Corporate Status. Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of North Carolina.

     5.02 Authority and Consents. Purchaser has all necessary corporate power and authority to execute and deliver the Transaction Agreements and to consummate the Transactions. The execution and delivery of the Transaction Agreements and consummation of the Transactions have been duly authorized by all necessary corporate action on the part of Purchaser and no other corporate proceedings on the part of Purchaser are necessary to authorize the Transaction Agreements or to consummate the Transactions.

     5.03 Investment. Purchaser is acquiring the Securities for Purchaser’s own account, and not with a view to, or for resale in connection with, any distribution or public offering thereof within the meaning of the Securities Act. Purchaser acknowledges receiving and reviewing the Company SEC Reports. Purchaser is aware of the Company’s business affairs and financial condition and has been afforded: (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the business affairs and financial condition of the Company; and (ii) the opportunity to request such additional information which the Company possesses or can acquire without unreasonable effort or expense and has had access to and has acquired sufficient information about the

19

Company to reach an informed and knowledgeable decision to acquire the Securities to be purchased hereunder. Purchaser, either by reason of its own business or financial experience or the business or financial experience of its professional advisors (who are unaffiliated with and who are not compensated by the Company or any affiliate, finder or selling agent of the Company, directly or indirectly), has such business and financial experience as is required to give it the capacity to utilize the information received, to evaluate the risks involved in purchasing such securities, to make an informed decision about purchasing the Securities and to protect its own interests in connection with the purchase of the Securities and is able to bear the risks of an investment in the Securities. Purchaser is able to bear the economic risk of holding the Securities for an indefinite period of time and can afford a complete loss of its investment. Purchaser is not itself a “broker” or a “dealer” as defined in the Exchange Act and is not an “affiliate” of the Company as defined in Rule 405 promulgated under the Securities Act.

     5.04 Accredited Investor. Purchaser is an “accredited investor” within the meaning of Rule 501 of Regulation D promulgated under the Securities Act.

ARTICLE VI

COVENANTS; INDEMNIFICATION

     6.01 Notice of Issuance. The Company shall notify Purchaser and its Affiliates, concurrently with public disclosure of the same, of any plan approved by the Company’s Board of Directors to issue or sell any shares of Common Stock.

     6.02 Securities Compliance. The Company shall notify the SEC and Nasdaq in accordance with their rules and regulations, of the transactions contemplated by this Agreement, and shall take all other necessary action and proceedings as may be required by applicable Law for the legal and valid issuance of the Securities to Purchaser.

     6.03 Indemnification. The Company covenants and agrees to indemnify and hold harmless Purchaser and its respective officers, directors, employees, stockholders, assigns, successors and Affiliates for, and will pay to Purchaser the amount of, any loss, liability, claim, damage (but excluding special, incidental and consequential damages), expense (including costs of investigation and defense and reasonable attorney fees) whether or not involving a third-party claim, arising from any material breach of any representation or warranty made by the Company in this Agreement.

ARTICLE VII

MISCELLANEOUS

     7.01 Amendments, Etc. No amendment or waiver of any provision of this Agreement, nor consent to any departure by the Company therefrom, shall, in any event, be effective unless the same shall be in writing and signed by Purchaser, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

20

     7.02 Notices. All notices and other communications provided for hereunder shall be in writing, shall specifically refer to this Agreement, shall be addressed to the receiving party’s address set forth below or to such other address as a party may designate by notice hereunder, and shall be deemed to have been sufficiently given for all purposes if: (a) mailed by first class certified or registered mail, postage prepaid, (b) sent by nationally recognized overnight courier for next Business Day delivery, (c) personally delivered, or (d) made by telecopy or facsimile transmission with confirmed receipt.

     If to the Company: OrthoLogic Corp.
Attn: James M. Pusey, M.D.
1275 West Washington Street
Tempe, Arizona 85281

Phone: (602) 286-5520
Fax: (602) 470-7080
Email: jpusey@olgc.com

     With a copy to
     (which shall not
     constitute notice):

Quarles & Brady Streich Lang llp
Attn: Steven P. Emerick
Two North Central Avenue
Phoenix, Arizona 85004

Phone: (602) 230-5517
Fax: (602) 417-2980
Email: emerick@quarles.com

     If to Purchaser:      PharmaBio Development Inc.
4709 Creekstone Drive
Suite 200 Riverbirch Building
Durham, NC 27703
Attn: General Counsel

Phone: (919) 998-2418
Fax: (919) 998-2090
Email: john.russell@quintiles.com

With a copy to      (which shall not      constitute notice):	Smith, Anderson, Blount, Dorsett Mitchell & Jernigan, L.L.P. 2500 Wachovia Capitol Center Raleigh, NC 27601 Attn: Christopher B. Capel
	Phone: (919) 821-6759 Fax: (919) 821-6800 Email: ccapel@smithlaw.com

21

     7.03 No Waiver; Remedies. No failure on the part of Purchaser to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

     7.04 Attorneys’ Fees. In the event that any dispute among the parties to this Agreement relating to this Agreement, the Warrants or the Registration Rights Agreement should result in litigation, the prevailing party in such dispute shall be entitled to recover from the losing party all fees, costs and expenses enforcing any right of such prevailing party under or with respect to this Agreement, the Warrants or the Registration Rights Agreement as the case may be, including without limitation, such reasonable fees and expenses of attorneys and accountants, which shall include, without limitation, all fees, costs and expense of appeals.

     7.05 Binding Effect; Assignment. This Agreement shall be binding upon and inure to the benefit of the Company and Purchaser and their respective successors and assigns, provided, that neither the Company nor Purchaser may assign or transfer any or all of its rights or obligations under this Agreement without the prior written consent of the other party and any attempted assignment without such consent shall be null and void; provided, however, that Purchaser may at any time assign or transfer any of its rights or obligations under this Agreement to any Affiliate.

     7.06 Severability. To the extent any provision of this Agreement is prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

     7.07 Entire Agreement. This Agreement and the other Transaction Agreements embody the entire agreement and understanding between the parties hereto with respect to the subject matter thereof and supersede all prior oral or written agreements and understandings relating to the subject matter thereof. No statement, representation, warranty, covenant or agreement of any kind not expressly set forth in the Transaction Agreements shall affect, or be used to interpret, change or restrict, the express terms and provisions of the Transaction Agreements.

     7.08 Further Action. Each party shall, without further consideration, take such further action and execute and deliver such further documents as may be reasonably requested by the other party in order to carry out the provisions and purposes of this Agreement.

     7.09 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which, when taken together, shall constitute

22

one and the same instrument. This Agreement may be executed and delivered by telecopy or facsimile transmission and any execution by such means shall be deemed an original

     7.10 Survival. The representations, warranties, covenants and agreements made herein by the Company and Purchaser shall survive the Initial Closing and expire on the first anniversary of the Initial Closing Date.

     7.11 Phase III Trial Data. The parties hereby acknowledge that the Company has represented to the Purchaser that: (i) enrollment is complete in the Company’s Phase III trial in patients with unstable and/or displaced distal radius fractures (the “Phase III Trial”), (ii) the data relating to the Phase III Trial is currently being processed; and (iii) as of the date of this Agreement, the Company has no access to such data or any other non-public information relating to the results of such Phase III Trial. The parties further acknowledge that the Company has advised the Purchaser that, subsequent to the execution of this Agreement, the Company will, at a date in the future, have access to the data from the Phase III Trial for processing, analysis and evaluation and that, once disclosed to the public in due course, the results of such data processing, analysis and evaluation will have a material effect on the price of the Company’s Common Stock. The Purchaser, by approval and execution of this Agreement, hereby agrees: (i) to assume the risk of investment in the Company’s Common Stock in light of the future events described in this Section 7.11 and the effect such events will have on the price of the Shares received pursuant to this Agreement and/or the business prospects of the Company; and (ii) any such effect on the price of the Shares and/or the business prospects of the Company will not be deemed to be a Material Adverse Effect under this Agreement.

     7.12 Publicity. Except as otherwise required by applicable Law or by obligations pursuant to any listing agreement with or rules of any securities exchange or automated quotation system, each party shall, and shall cause its respective Affiliates to, not issue any press release or make any other public statement relating to the other party, connected with or arising out of this Agreement or the matters contained herein, without the other parties’ prior written approval of the contents and the manner of presentation and publication thereof (which approval shall not be unreasonably withheld or delayed).

     7.13 Governing Law. This Agreement, including, without limitation, the interpretation, performance, enforcement, breach or termination thereof and any remedies relating thereto, shall be governed by and construed in accordance with the laws of the State of North Carolina, United States of America, as applied to agreements executed and performed entirely in the State of North Carolina, without regard to conflicts of law rules.

[signature page follows]

23

     [Signature Page to Common Stock and Warrant Purchase Agreement]

     IN WITNESS WHEREOF, the Company and the Purchaser have caused this Common Stock and Warrant Purchase Agreement to be duly executed by their duly authorized representatives effective as of the date first above written.

OrthoLogic Corp.
By:	/s/ Les M. Taeger
	Name: Les M. Taeger
	Title: Sr. VP, CFO
PharmaBio Development Inc.
By:	/s/ Patrick B. Jordan
	Name: Patrick B. Jordan
	Title: Vice President, Corporate Development

EXHIBIT A

Form of Class A Warrant

EXHIBIT A-1

Form of Additional Class A Warrant

2

EXHIBIT B

Form of Class B Warrant

3

EXHIBIT C

Form of Class C Warrant

4

EXHIBIT D

Form of Class D Warrant

5

EXHIBIT E

Form of Registration Rights Agreement

6

EX-10.2

Exhibit 10.2

EXECUTION VERSION

OrthoLogic Corp.

Registration Rights Agreement

February 24, 2006

PharmaBio Development Inc.
as Investor

TABLE OF CONTENTS

		Pages
1.	Certain Definitions		1
2.	Registration Requirements		2
3.	Registration Procedures		3
4.	Suspensions of Effectiveness		4
5.	Indemnification		5
6.	Contribution		7
7.	Survival		8
8.	Transfer or Assignment of Rights		8
9.	Miscellaneous		8

-i-

REGISTRATION RIGHTS AGREEMENT

     THIS REGISTRATION RIGHTS AGREEMENT (this “Rights Agreement”), is dated and entered into as of February 24, 2006, between PharmaBio Development Inc., a North Carolina corporation (the “Investor”) and OrthoLogic Corp., a Delaware corporation (the “Company”).

W I T N E S S E T H:

     WHEREAS, pursuant to that certain Common Stock and Warrant Purchase Agreement by and between the Company and the Investor dated as of the date hereof (the “Agreement”), the parties desire that, upon the terms and subject to the conditions thereof, the Company shall issue to the Investor, and, subject to the terms and conditions thereof, the Investor shall purchase from the Company, from time to time as provided in the Agreement, shares of the Company’s common stock, par value $.0005 per share (“Common Shares”), and Warrants to purchase shares of such Common Shares as described therein (the “Warrant Shares” and, together with the Common Shares, the “Common Stock”);

     WHEREAS, pursuant to the terms of, and in partial consideration for, the Investor’s commitment to enter into the Agreement, the Company has agreed to provide the Investor with certain registration rights with respect to the Common Stock as set forth in this Rights Agreement;

     NOW, THEREFORE, in consideration of the mutual promises, representations, warranties, covenants and conditions set forth in the Agreement and this Rights Agreement and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, intended to be legally bound hereby, the Company and the Investor agree as follows:

     1. Certain Definitions. Capitalized terms used in this Rights Agreement and not otherwise defined herein shall have the same meaning ascribed to them in the Agreement. The following terms shall have the following respective meanings:

     “Agreement Date” shall mean the date as of which the Agreement was duly executed by the parties thereto.

     “Commission” shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act.

     “Exchange Act” shall mean the Securities Exchange Act of 1934, as from time to time amended, and the rules and regulations of the SEC promulgated thereunder.

     “Investor” shall include the Investor and any permitted assignee or transferee of the rights under the Agreement to whom the registration rights conferred by this Rights Agreement have been transferred in compliance with Section 8 of this Rights Agreement.

-1-

     “Principal Market” shall mean the Nasdaq National Market, or any similar organization or agency succeeding such market or exchange’s functions of reporting prices, whichever is at the time the principal U.S. trading exchange or market for the Common Stock.

     “Securities Act” means the Securities Act of 1933, as from time to time amended, and the rules and regulations of the SEC promulgated thereunder.

     The terms “register,” “registered” and “registration” shall refer to a registration effected by preparing and filing an appropriate registration statement in compliance with the Securities Act and applicable rules and regulations thereunder, and the declaration or ordering of the effectiveness of such registration statement.

     2. Registration Requirements. The Company shall use its reasonable best efforts to effect the registration of the Common Stock (including, without limitation, the execution of an undertaking to file post-effective amendments, appropriate qualification under applicable blue sky or other state securities laws and appropriate compliance with applicable regulations issued under the Securities Act) as would permit or facilitate the resale of all the Common Stock in the manner (including manner of sale) and in all states reasonably requested by the Investor for purposes of maximizing the proceeds realizable by the Investor from such sale. Such reasonable best efforts by the Company shall include without limitation the following:

          (a) Subject to the terms and conditions of this Rights Agreement, the Company shall, within forty-five (45) days after the date of this Rights Agreement, file with the Commission an appropriate registration statement on Form S-3 (or any successor or other appropriate form) under the Securities Act for the registration of the Common Stock (the “Registration Statement”). Furthermore, at the time of filing of the Registration Statement, the Company shall file (A) such blue sky filings as shall have been requested by the Investor; and (B) any required filings with the National Association of Securities Dealers, Inc. or exchange or market where the Common Stock is traded. The Company shall use its best efforts to have all filings declared effective as promptly as practicable.

          (b) The Company shall enter into such customary agreements and take all such other reasonable actions in connection therewith in order to expedite or facilitate the disposition of the Common Stock.

     3. Registration Procedures. The Company will keep the Investor advised in writing as to the initiation of each registration and as to the completion thereof. The Company also will provide to Investor’s counsel a copy of the Registration Statement prior to filing with the Commission, and promptly inform such counsel as to the substance of any comment letters or similar notices received by the Company from the Commission with respect thereto. At its expense, the Company will use its reasonable best efforts to:

          (a) Keep such registration continuously effective until the earlier of (i) the sale under the Registration Statement of all of the shares of Common Stock and (ii) and such date as all remaining unsold shares of Common Stock can be sold by the Investor without restriction pursuant to the requirements of Rule 144 of the Securities Act.

-2-

          (b) Furnish such number of prospectuses and amendments and supplements thereto, and other documents incident thereto as the Investor from time to time may reasonably request;

          (c) Prepare and file with the Commission such amendments and post- effective amendments to the Registration Statement as may be necessary to keep such Registration Statement effective for the applicable period; cause the related prospectus to be supplemented by any required prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Securities Act; and comply with the provisions of the Securities Act applicable to it with respect to the disposition of all securities covered by such Registration Statement during the applicable period in accordance with the intended methods of disposition by the sellers thereof set forth in such Registration Statement or supplement to such prospectus;

          (d) Notify the Investor and its counsel (as designated in writing by the Investor) promptly, and confirm such notice (a “Notice”) in writing, (i) when a prospectus or any prospectus supplement or post-effective amendment has been filed, and, with respect to the Registration Statement or any post-effective amendment, when the same has become effective, (ii) of any request by the Commission for amendments or supplements to the Registration Statement or related prospectus or for additional information, (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose, (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification of any of the Common Stock for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, (v) of the happening of any event as a result of which the prospectus included in the Registration Statement (as then in effect) contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein (in the case of the prospectus or any preliminary prospectus, in light of the circumstances under which they were made) not misleading, and (vi) of the Company’s reasonable determination that a post-effective amendment to the Registration Statement would be appropriate or that there exist circumstances not yet disclosed to the public which make further sales under such Registration Statement inadvisable pending such disclosure and post-effective amendment;

          (e) Upon the occurrence of any event contemplated by Section 3(d)(ii)-(vi) (unless a Blocking Notice shall be in effect) and immediately upon the expiration of any Blocking Notice (as defined in Section 4), prepare, if the occurrence of such event or period requires such preparation, a supplement or post-effective amendment to the Registration Statement or related prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Common Stock being sold thereunder, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements, in light of the circumstances under which they were made, not misleading;

          (f) Obtain the withdrawal of any order suspending the effectiveness of the Registration Statement, or the lifting of any suspension of the qualification of any of the Common Stock for sale in any jurisdiction, at the earliest possible moment;

-3-

          (g) Cause all Common Stock subject to the Registration Statement at all times to be registered or qualified for offer and sale under the securities or blue sky laws of such jurisdictions as any Investor reasonably requests in writing; use its best efforts to keep each such registration or qualification effective, including through new filings or amendments or renewals, during the period the Registration Statement is required to be kept effective and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Common Stock covered by the Registration Statement; provided, however, that the Company will not be required to qualify to do business or take any action that would subject it to taxation or general service of process in any jurisdiction where it is not then so qualified or subject; and

          (h) Cause all Common Stock included in such Registration Statement to be listed, by the date of first sale of Common Stock pursuant to such Registration Statement, on the Principal Market.

     4. Suspensions of Effectiveness. The Company may suspend dispositions under the Registration Statement and notify the Investor that it may not sell the Common Stock pursuant to any Registration Statement or prospectus (a “Blocking Notice”) if the Company’s management determines in its good faith judgment that the Company’s obligation to ensure that such Registration Statement and prospectus are current and complete would require the Company to take actions that might reasonably be expected to have a materially adverse effect on the Company and its shareholders; provided, that such suspension pursuant to a Blocking Notice or Prospectus Inadequacy Notice (as defined below) or as a result of the circumstances described in Section 3(d)(ii)-(vi) may not exceed sixty (60) days (whether or not consecutive) in any twelve (12) month period. The Investor agrees by acquisition of the Common Stock that, upon receipt of a Blocking Notice or “Prospectus Inadequacy Notice” from the Company of the existence of any fact of the kind described in the following sentence, the Investor shall not dispose of, sell or offer for sale the Common Stock pursuant to the Registration Statement until such Investor receives (i) copies of the supplemented or amended prospectus, or until counsel for the Company shall have determined that such disclosure is not required due to subsequent events, (ii) notice in writing (the “Advice”) from the Company that the use of the prospectus may be resumed and (iii) copies of any additional or supplemental filings that are incorporated by reference in the Prospectus. Pursuant to the immediately preceding sentence, the Company may provide such Prospectus Inadequacy Notice to the Investor upon the determination by the Company of the existence of any fact or the happening or any event that makes any statement of a material fact made in the Registration Statement, the prospectus, any amendment or supplement thereto, or any document incorporated by reference therein untrue in any material respect, or that requires the making of any additions to or changes in the Registration Statement or the prospectus, in order to make the statements therein not misleading in any material respect. If so directed by the Company in connection with any such notice, each Investor will deliver to the Company (at the Company’s expense) all copies, other than permanent file copies then in such Investor’s possession, of the prospectus covering such Common Stock that was current immediately prior to the time of receipt of such notice. Delivery of a Blocking Notice or Prospectus Inadequacy Notice and the related suspension of any Registration Statement shall not constitute a default under this Rights Agreement. During any suspension as contemplated by this section, the Company will not allow any of its officers or directors to buy or sell securities of the Company.

-4-

     5. Indemnification.

          (a) Company Indemnity. The Company will indemnify and hold harmless the Investor, each of its officers, directors and partners, and each person controlling the Investor, within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act and the rules and regulations thereunder with respect to which registration, qualification or compliance has been effected pursuant to this Rights Agreement, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any prospectus (including any related registration statement, notification or the like or any amendment thereto) incident to any such registration, qualification or compliance, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or any violation by the Company of the Securities Act or any state securities law or in either case, any rule or regulation thereunder applicable to the Company and relating to action or inaction required of the Company in connection with any such registration, qualification or compliance, and will reimburse the Investor, each of its officers, directors and partners, and each person controlling the Investor, each such underwriter and each person who controls any such underwriter, for any legal and any other expenses reasonably incurred in connection with investigating and defending any such claim, loss, damage, liability or action, provided, that the Company will not be liable in any such case to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission (or alleged untrue statement or omission) that is made in reliance upon and in conformity with written information furnished to the Company by the Investor and stated to be specifically for use therein; provided, however, that nothing contained herein shall limit the Company’s obligation to provide indemnification pursuant to the Agreement. In addition to any other information furnished in writing to the Company by the Investor, the information in the Registration Statement concerning the Investor or any of its Affiliates under the caption “Plan of Distribution” (or any similarly captioned Section containing information required pursuant to Item 508 of Regulation S-K) shall be deemed information furnished in writing to the Company by the Investor to the extent it conforms to information actually supplied in writing by the Investor. The indemnity agreement contained in this Section 5(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent will not be unreasonably withheld).

          (b) Investor Indemnity. The Investor will indemnify and hold harmless the Company, each of its directors, officers, partners, and each person who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act and the rules and regulations thereunder, and each of their officers, directors and partners, and each person controlling such other Investor (if any), and each of their officers, directors, and partners, and each person controlling such other Investor against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in the Registration Statement (or any amendment thereto) or prospectus or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statement therein not misleading, and will reimburse the Company and its directors, officers and partners, or control persons for any legal or any other expenses reasonably incurred in connection with investigating and defending any such claim, loss, damage, liability or action, in each case to the extent, but only to the extent, that such untrue

-5-

statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement or prospectus in reliance upon and in conformity with written information furnished to the Company by the Investor and stated to be specifically for use therein, and provided that the Investor shall not be liable under this indemnity for an amount in excess of the proceeds received by the Investor from the sale of the Common Stock pursuant to such Registration Statement; provided, however, that nothing contained herein shall limit the Investor’s obligation to provide indemnification pursuant to the Agreement. In addition to any other information furnished in writing to the Company by the Investor, the information in the Registration Statement concerning the Investor under the caption “Plan of Distribution” (or any similarly captioned Section containing information required pursuant to Item 508 of Regulation S-K) shall be deemed information furnished in writing to the Company by the Investor to the extent it conforms to information actually supplied in writing by the Investor. The indemnity agreement contained in this Section 5(b) shall not apply to amounts paid in settlement of any such claims, losses, damages or liabilities if such settlement is effected without the written consent of the Investor (which consent shall not be unreasonably withheld).

          (c) Procedure. Each party entitled to indemnification under this Section 5 (the “Indemnified Party”) shall give notice to the party required to provide indemnification (the “Indemnifying Party”) promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim in any litigation resulting therefrom, provided, that counsel for the Indemnifying Party, who shall conduct the defense of such claim or any litigation resulting therefrom, shall be approved by the Indemnified Party (whose approval shall not be unreasonably withheld), and the Indemnified Party may participate in such defense at such party’s expense, and, provided, further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Article except to the extent that the Indemnifying Party is materially and adversely affected by such failure to provide notice. The Indemnifying Party shall not, in connection with any one such action or proceeding or separate but substantially similar or related actions or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) at any time for such Indemnified Party, provided, however, that if separate firm(s) of attorneys are required due to a conflict of interest, then the indemnifying party shall be liable for the reasonable fees and expenses of one additional firm. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. Each Indemnified Party shall furnish such information regarding itself or the claim in question as an Indemnifying Party may reasonably request in writing and as shall be reasonably required in connection with the defense of such claim and litigation resulting therefrom.

     6. Contribution. If the indemnification provided for in Section 5 hereof is unavailable to the Indemnified Party in respect of any losses, claims, damages or liabilities referred to herein (other than by reason of the exceptions provided therein), then each such Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such losses, claims, damages or

-6-

liabilities (i) as between the Company on the one hand and the Investor on the other, in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand or Investor on the other from the offering of the Common Stock, or if such allocation is not permitted by applicable law, in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company on the one hand and of the Investor on the other, in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations and (ii) as between the Company on the one hand and the Investor on the other, in such proportion as is appropriate to reflect the relative fault of the Company and of the Investor in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations.

     The relative benefits received by the Company on the one hand and the Investor on the other shall be deemed to be in the same proportion as the proceeds from the offering of Common Stock by the Company to the Investor pursuant to the Agreement bear to the proceeds received by the Investor from the sale of Common Stock pursuant to the Registration Statement. The relative fault of the Company on the one hand and of the Investor on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or by the Investor.

     In no event shall the obligation of any Indemnifying Party to contribute under this Section 6 exceed the amount that such Indemnifying Party would have been obligated to pay by way of indemnification if the indemnification provided for under Section 5(a) or Section 5(b) hereof had been available under the circumstances.

     The Company and the Investor agree that it would not be just and equitable if contribution pursuant to this Section 6 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraphs. The amount paid or payable by an Indemnified Party as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraphs shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this section, the Investor shall not be required to contribute any amount in excess of the amount by which the total price at which the shares of Common Stock offered by the Investor and distributed to the public, or offered to the public, exceeds the amount of any damages that the Investor has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.

     7. Survival. The indemnity and contribution agreements contained in Section 5 and Section 6 shall remain operative and in full force and effect regardless of (i) any termination of the Agreement or any underwriting agreement, (ii) any investigation made by or on behalf of any Indemnified Party or by or on behalf of the Company and (iii) the consummation of the sale or successive resales of the Registrable Securities.

-7-

     8. Transfer or Assignment of Rights. Neither this Rights Agreement nor any rights of the Investor or the Company hereunder may be assigned by either party to any other person. Notwithstanding the foregoing, upon prior written notice to the Company, the Investor’s rights and obligations under this Rights Agreement may be assigned, in whole or in part, to (each a “Permitted Transferee”): (a) any Affiliate of the Investor, provided, however, that any such assignment shall not release the Investor from its obligations hereunder and (b) an assignee of each of (i) the Initial Class A Warrant and the Additional Class A Warrants, (ii) the Class B Warrant, (iii) the Class C Warrant, and (iv) the Class D Warrant.

     9. Miscellaneous.

          (a) Entire Agreement. This Rights Agreement, together with the Agreement, contains the entire understanding and agreement of the parties relating to the registration of Registrable Securities, and may not be modified or terminated except by a written agreement signed by both parties.

          (b) Notices. All notices, demands, requests, consents, approvals or other communications required or permitted to be given hereunder or which are given with respect to this Rights Agreement shall be in writing and shall be personally served or deposited in the mail, registered or certified, return receipt requested, postage prepaid, or delivered by reputable air courier service with charges prepaid, or transmitted by hand delivery, telegram or facsimile, addressed as set forth below, or to such other address as such party shall have specified most recently by written notice:

If to the Company:	OrthoLogic Corp.
	Attn: James M. Pusey, M.D.
	1275 West Washington Street
	Tempe, Arizona 85281
	Phone: (602) 286-5520
	Fax: (602) 470-7080
With a copy to:	Quarles & Brady Streich Lang llp
	Attn: Steven P. Emerick
	Two North Central Avenue
	Phoenix, Arizona 85004
	Phone: (602) 230-5517
	Fax: (602) 417-2980
If to the Investor:	PharmaBio Development Inc.
	4709 Creekstone Drive
	Suite 200 Riverbirch Building
	Durham, NC 27703
	Attn: President
	Phone: (919) 998-2080
	Fax: (919) 998-2090
With a copy to:	Smith, Anderson, Blount, Dorsett
	Mitchell & Jernigan, L.L.P.
	2500 Wachovia Capitol Center
	Raleigh, NC 27601
	Attn: Christopher B. Capel
	Phone: 919-821-6759
	Fax: (919) 821-6800

-8-

     Subject to Section 2.3(b) of the Agreement, notice shall be deemed given on the date of service or transmission if personally served or transmitted by telegram, telex or facsimile during normal business hours of the recipient. Notice otherwise sent as provided herein shall be deemed given on the third business day following the date mailed or on the second business day following delivery of such notice by a reputable air courier service.

          (c) Registration Expenses. The Company shall be responsible for the expenses to be incurred by the Company in connection with Investor’s exercise of its registration rights under this Rights Agreement, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel for the Company, blue sky fees and expenses, and the expense of any special audits that may be required in connection herewith.

          (d) Gender of Terms. All terms used herein shall be deemed to include the feminine and the neuter, and the singular and the plural, as the context requires.

          (e) Governing Law. This Rights Agreement, including, without limitation, the interpretation, performance, enforcement, breach or termination thereof and any remedies relating thereto, shall be governed by and construed in accordance with the laws of the State of North Carolina, as applied to agreements executed and performed entirely in the State of North Carolina, without regard to conflicts of law rules.

          (f) Titles. The titles used in this Rights Agreement are used for convenience only and are not to be considered in construing or interpreting this Rights Agreement.

          (g) Counterparts. This Rights Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

[Signature Page follows]

-9-

[Signature Page to Registration Rights Agreement]

     IN WITNESS WHEREOF, the parties hereto have caused this Rights Agreement to be duly executed as of the date first above written.

OrthoLogic Corp.
By:	/s/ Les M. Taeger
	Name: Les M. Taeger
	Title: Sr. VP and CFO
PharmaBio Development Inc.
By:	/s/ Patrick B. Jordan
	Name: Patrick B. Jordan
	Title: Vice President, Corporate Development

EX-10.3

Exhibit 10.3

REGISTRATION RIGHTS AGREEMENT

by and among

ORTHOLOGIC CORP.

and

AZERX, INC.

and

The shareholders listed
on the signature pages hereto

Dated as of February 27, 2006

TABLE OF CONTENTS

			Page
ARTICLE 1		DEFINITIONS		1
ARTICLE 2		REGISTRATION RIGHTS		3
	2.1	Resale Registration		3
	2.2	Obligations of the Company in Connection with a Registration		4
	2.3	Information		5
	2.4	Indemnification and Contribution		5
	2.5	Rule 144 Undertaking		8
	2.6	Assignment of Registration Rights		8
	2.7	“Market Stand-off” Agreement		8
ARTICLE 3		MISCELLANEOUS		8
	3.1	Successors and Assigns		8
	3.2	No Inconsistent Agreements		9
	3.3	Remedies		9
	3.4	Governing Law		9
	3.5	Counterparts		9
	3.6	Titles and Subtitles		9
	3.7	Notices		9
	3.8	Amendments and Waivers		9
	3.9	Severability		10
	3.10	Entire Agreement		10

EXHIBITS

Exhibit A — Notice of Registration Statement and Selling Securityholder Questionnaire
Exhibit B — Form of Joinder Agreement

i

Execution Copy

REGISTRATION RIGHTS AGREEMENT

     THIS REGISTRATION RIGHTS AGREEMENT (the “Agreement”) is made as of February 27, 2006, by and among ORTHOLOGIC CORP., a Delaware corporation (together with its successors, the “Company”), AZERX, INC., a Delaware corporation (the “Seller”), and each of the other shareholders of the Company listed on the signature pages hereof and such other shareholders of the Company as may, from time to time, become parties to this Agreement in accordance with the provisions hereof (collectively with the Seller, the “Shareholders”).

RECITALS

     WHEREAS, the Company and the Seller are parties to that certain Asset Purchase Agreement dated February 23, 2006 (the “Purchase Agreement”);

     WHEREAS, pursuant to the Purchase Agreement, the Company agreed to issue to the Seller 1,325,000 shares of the Company’s Common Stock, $.0005 par value (the “Shares”), as partial consideration for the Acquired Assets;

     WHEREAS, the Seller intends to distribute the Shares to its shareholders as soon as is practicable after Closing; and

     WHEREAS, pursuant to the terms of, and in partial consideration for, the Seller’s commitment to enter into the Purchase Agreement, and to induce Seller to do so, the Company has agreed to provide Seller and the Shareholders with certain registration rights with respect to the Company’s Common Stock (as defined below) as set forth in this Agreement.

     NOW, THEREFORE, in consideration of the mutual premises and covenants set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE 1

DEFINITIONS

     Terms not otherwise defined herein shall have the same meaning as set forth in the Purchase Agreement. As used in this Agreement, the following terms shall have the meanings specified:

     “1933 Act”: the Securities Act of 1933, as amended.

     “1934 Act”: the Securities Exchange Act of 1934, as amended.

     “Affiliate” has the meaning set forth in Rule 12b-2 of the regulations promulgated under the 1934 Act.

     “Business Day”: any day other than Saturdays, Sundays and days on which banking institutions located in Arizona are authorized by law or other governmental action to be closed, unless there shall have been an offering of the Common Stock registered under the 1933 Act, in which case “Business Day” means: (a) if the Common Stock is listed or admitted to trading on a national securities exchange, a day on which the principal national securities exchange on which the Common Stock is listed or admitted to trading is open for business; or (b) if the Common Stock is not so listed or admitted to trading, a day on which the New York Stock Exchange is open for business.

     “Common Stock”: the Common Stock of the Company, $.0005 par value, and any class of securities issued in exchange therefor or into which the Common Stock is converted.

     “Fully Diluted Basis”: calculation of the number of securities of the Company after giving effect to (x) all shares of Common Stock then outstanding, (y) all shares of Common Stock issuable upon the exercise of any then outstanding option, warrant or similar right and (z) all shares of Common Stock issuable upon the exercise of any conversion or exchange right contained in any then outstanding security convertible into or exchangeable for shares of Common Stock.

     “Holder”: any record owner of Registrable Securities or any assignee thereof pursuant to Section 2.6 hereof.

     “Holders’ Counsel”: one counsel for the selling Holders, which counsel shall be selected by a majority in interest of all participating Holders in the case of the preparation and filing of a Resale Registration Statement.

     “Issue Date”: the first date of the original issuance of the Shares to Seller.

     “Person”: an individual, a partnership, a limited liability partnership, a limited liability company, a joint venture, a corporation, a trust, an unincorporated organization or a government or any department or agency thereof.

     “Registrable Securities”: (i) the Shares of Common Stock issued to the Shareholders or any of their Affiliates as contemplated by the Purchase Agreement, and any additional shares of Common Stock issued to AzTE in connection with the assignment of the AzTE Agreement to the Company; and (ii) Common Stock issued as (or issued upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of the shares described in the foregoing clause (i), excluding in all cases, however, any shares of Common Stock which (x) are sold by a Person in a transaction in which the rights under this Agreement are not assigned pursuant to Section 2.6 hereof, (y) are then registered under an effective registration statement under the 1933 Act or (z) may be sold under paragraph (k) of Rule 144.

     “Registration Expenses”: all expenses incident to the Company’s performance of or compliance with Sections 2.1 through 2.7 hereof, which shall include, without limitation, the following costs and expenses, whether or not the Company is otherwise expressly required to pay such amounts in Sections 2.1 through 2.7 hereof: (i) all registration, filing, NASD and listing

2

fees; (ii) all fees and expenses of complying with securities or blue sky laws; (iii) all word processing, duplicating, printing and electronic filing expenses; (iv) all messenger and delivery expenses; (v) the fees and disbursements of Company’s counsel and the Company’s independent public accountants, including the expenses of any special audits required by or incident to such performance and compliance; (vi) premiums and other costs of policies of insurance (if any) against liabilities arising out of the public offering of the Registrable Securities being registered if the Company desires such insurance; (vii) any fees or disbursements of underwriters customarily paid by issuers or sellers of securities, but not including underwriting discounts and commissions and transfer taxes, if any; and (viii) the reasonable out-of-pocket expenses of the Holders of the Registrable Securities to be registered incurred in connection with such registration, including but not limited to the reasonable fees and disbursements of not more than one counsel chosen by the holders of a majority of the Registrable Securities to be included in any Resale Registration Statement; provided, that the fees and disbursements of such counsel chosen by a majority of the Holders shall only be paid by the Company to the extent that such fees and disbursements do not exceed $10,000; provided further, that in any case where Registration Expenses are not to be borne by the Company, such expenses shall not include (i) salaries of Company personnel or general overhead expenses of the Company, (ii) auditing fees not otherwise described herein, (iii) premiums or other expenses relating to liability insurance required by underwriters of the Company or (iv) other expenses for the preparation of financial statements or other data, to the extent such data is normally prepared by the Company in the ordinary course of its business or would have been incurred by the Company had no public offering taken place.

     “Resale Registration”: a registration of Registrable Securities pursuant to Section 2.1.

     “Rule 144”: Rule 144 promulgated under the 1933 Act, as amended.

     “SEC”: the U.S. Securities and Exchange Commission.

ARTICLE 2

REGISTRATION RIGHTS

     The Company covenants and agrees as follows:

     2.1 Resale Registration.

          (a) Resale Registration. The Company shall prepare and file or cause to be prepared and filed with the SEC, as soon as practicable but in any event by the date (the “Filing Deadline Date”) sixty (60) days after the Issue Date, a registration statement registering the resale, by Holders thereof, of all of the Registrable Securities (the “Resale Registration Statement”). The Resale Registration Statement shall be on Form S-3 or another appropriate form permitting registration of such Registrable Securities for resale by such Holders. The Company shall use its reasonable best efforts to cause the Resale Registration Statement to be declared effective under the Securities Act as promptly as is practicable but in any event by the date (the “Effectiveness Deadline Date”) that is one hundred twenty (120) days after the Issue

3

Date. Each Holder shall promptly, but not later than the forty-fifth (45^th) day after the Issue Date, give the Company written notice (“Notice”) in the form attached hereto as Exhibit A, specifying the number of Registrable Securities held by Holder to be registered for resale on the Resale Registration Statement, the full legal name of the Holder and such other information requested in the form of Notice. None of the Company’s securityholders (other than the Holders of Registrable Securities) shall have the right to include any of the Company’s securities in the Resale Registration Statement. If any Resale Registration Statement filed pursuant to this Article 2 ceases to be effective for any reason prior to the end of the period set forth in Section 2.2(a), the Company shall promptly prepare and file, as soon as practicable, another registration statement pursuant to this Article 2, which shall be deemed to be a “Resale Registration Statement” hereunder and for such purpose, the “Issue Date” shall mean the date the previously effective Resale Registration Statement ceased to be effective.

          (b) Underwriting; Limitation due to Marketing Factors. If a registered offering under this Section 2.1 involves an underwriting, the Company shall not be required to include any of a Holder’s Registrable Securities in such registration unless such Holder accepts the terms of the underwriting as agreed upon between the Company or the persons entitled to select the underwriters, as the case may be, and the underwriters thereof.

          (c) Expenses of Resale Registration. The Company shall bear and pay all Registration Expenses incurred in connection with the Resale Registration.

     2.2 Obligations of the Company in Connection with a Registration.

     Whenever required hereunder to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:

          (a) Prepare and file with the SEC a registration statement on the appropriate form with respect to such Registrable Securities and use its commercially reasonable efforts to cause such registration statement to become effective and remain effective for a period ending upon expiration of the Lock-Up Period (as defined in the Lockup Agreement) or until the distribution of all Registrable Securities contemplated in the registration statement has been completed, whichever first occurs.

          (b) Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as, in the opinion of counsel to the Company, may be necessary to comply with the provisions of the 1933 Act with respect to the disposition of all securities covered by such registration statement.

          (c) Furnish to the Holders, upon request, without charge, such reasonable number of conformed copies of such registration statement and of each amendment and supplement thereto (including all exhibits), financial statements, schedules and all documents incorporated therein, deemed to be incorporated therein by reference or filed therewith (except that the Company shall not be obligated to furnish more than two (2) copies of such exhibits and documents), and numbers of copies of a prospectus, including a preliminary prospectus and each

4

prospectus supplement or amendment, in conformity with the requirements of the 1933 Act, as they may reasonably request.

          (d) Use its commercially reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders and keep such registrations and qualifications effective during the period a registration statement is required to be effective; provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, unless the Company is already subject to service in such jurisdiction.

          (e) In the event of any underwritten public offering, enter into an underwriting agreement with such underwriters for such offering, such agreement to be reasonably satisfactory in substance and form to the Company and to contain such representations and warranties by the Company and such other terms as are generally prevailing in agreements of such type, including, without limitation, indemnities to the effect and to the extent provided in Section 2.4 hereof.

          (f) Cause all such Registrable Securities to be listed on each securities exchange or automated inter-dealer quotation system on which similar securities issued by the Company are then listed.

          (g) Provide a transfer agent, registrar and CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration.

          (h) Use its commercially reasonable efforts to comply with all applicable rules and regulations of the SEC.

          (i) Use its commercially reasonable efforts to cause such Registrable Securities to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the sellers thereof to consummate the disposition of such Registrable Securities.

     2.3 Information.

          (a) It shall be a condition precedent to the obligations of the Company to take any action hereunder with respect to the Registrable Securities of any Holder that such Holder furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as shall be required to effect the registration of such Holder’s Registrable Securities.

          (b) The Company shall make available for inspection by any seller of Registrable Securities, any underwriter participating in any disposition pursuant to such registration statement and any attorney, accountant or other agent retained by any such seller or underwriter, all financial and other records, pertinent corporate documents and properties of the Company, and cause the Company’s officers, directors, employees and independent accountants to supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with such registration statement, provided the foregoing

5

persons first shall execute such confidentiality agreements as reasonably may be required by the Company.

          (c) The Company shall furnish to counsel (if any) selected by the Holders of a majority of the Registrable Securities covered by a registration statement and to counsel for the underwriters in any underwritten offering copies of all documents proposed to be filed with the SEC in connection with such registration a reasonable time prior to the proposed filing thereof and give reasonable consideration in good faith to any comments of such Holders, counsel and underwriters.

     2.4 Indemnification and Contribution. In the event any Registrable Securities are included in a registration statement hereunder:

          (a) The Company will indemnify and hold harmless each Holder, the officers, directors, partners, members, employees and representatives of each Holder, any underwriter (as defined in the 1933 Act) for such Holder and each Person, if any, who controls such Holder or underwriter within the meaning of the 1933 Act or the 1934 Act (each, a “Company Indemnified Person”), against any losses, claims, damages, or liabilities (joint or several) to which they or any of them may become subject under the 1933 Act, the 1934 Act or any other federal or state laws, or otherwise, whether direct or indirect, including without limitation any obligation to indemnify any underwriter against any such losses, claims, damages, or liabilities, in each case insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a “Violation”): (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto; (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (iii) any violation or alleged violation by the Company of the 1933 Act, the 1934 Act, any state securities laws, or any rule or regulation promulgated under any of the foregoing; and the Company will pay, or promptly reimburse to such Company Indemnified Person, as incurred, any legal or other expenses reasonably incurred by any Company Indemnified Person, in connection with investigating or defending any such loss, claim, damages, liability or action; provided, however, that the indemnity agreement contained in this Section 2.4(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, nor shall the Company be liable in any such case for any such loss, claim, damage, liability, or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by any such Company Indemnified Person.

          (b) Each selling Holder, by requesting securities to be covered by any registration statement hereunder, agrees to indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the registration statement, each Person, if any, who controls the Company within the meaning of the 1933 Act, any underwriter, any other Holder selling securities in such registration statement and any of the directors, officers, partners or members and any controlling person of any such underwriter or other Holder (each, a “Holder

6

Indemnified Person”), against any losses, claims, damages, or liabilities (joint or several) to which any of the foregoing persons may become subject, under the 1933 Act, the 1934 Act, or any other federal or state laws or otherwise, insofar as such losses, claims, damages, or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder expressly for use in connection with such registration; and each such Holder will pay, as incurred, any legal or other expenses reasonably incurred by any Holder Indemnified Person, in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this Section 2.4(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the indemnifying Holder, which consent shall not be unreasonably withheld.

          (c) Promptly after receipt by an indemnified party under this Section 2.4 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.4, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties which may be represented without conflict by one counsel) shall have the right to retain one separate counsel if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, to the extent prejudicial to its ability to defend such action, shall relieve such indemnifying party of liability to the indemnified party under this Section 2.4 only to the extent of such prejudice, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 2.4.

          (d) If the indemnification provided for in this Section 2.4 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage, or expense referred to herein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage, or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage, or expense as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission.

7

     The Company and the Holders agree that it would not be just and equitable if contribution pursuant to this Section 2.4(d) were determined by pro rata allocation (even if the Holders and any underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph.

     Notwithstanding the provisions of this Section 2.4(d), no Holder shall be required to contribute any amount in excess of the amount by which the net proceeds received by such Holder from the sale of Registrable Securities exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of the Violation giving rise to such loss, liability, claim, damage, or expense. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

          (e) The obligations of the Company and Holders under this Section 2.4 shall survive the completion of any offering of Registrable Securities in a registration statement hereunder, and otherwise.

     2.5 Rule 144 Undertaking. The Company shall use its reasonable efforts to make publicly available and available to the Holders, pursuant to Rule 144, such information as is necessary to enable the Holders to make sales of Registrable Securities pursuant to Rule 144. The Company shall use its best efforts to file timely with the SEC all documents and reports required of the Company under the 1934 Act. The Company shall furnish to any Holder, upon request, a written statement executed by the Company as to compliance with the current public information requirements of Rule 144.

     2.6 Assignment of Registration Rights. The rights to cause the Company to register all or any portion of any Registrable Securities pursuant hereto may be assigned (but only with all related obligations) from time to time by a Holder to any transferee or assignee of such Holder’s Registrable Securities; provided such transferee or assignee agrees in writing to be bound by and subject to the terms and conditions of this Agreement.

     2.7 “Market Stand-off” Agreement. Each Holder hereby agrees that it shall not, to the extent requested by the Company or an underwriter of Common Stock (or other securities) of the Company, sell or otherwise transfer or dispose of any Registrable Securities in a market transaction during the seven days prior to and 180 days following the effective date of a registration statement of the Company filed under the 1933 Act, but only if:

          (a) the Holders are entitled under Section 2.1 to participate in such registration with respect to all of their Registrable Securities (provided that such agreement shall not apply to any shares which are included in any such registration); and

          (b) all officers and directors of the Company and shareholders who beneficially own more than 5% of the Company’s outstanding Common Stock (determined on a Fully Diluted Basis) and all other Persons with registration rights (whether or not pursuant to this agreement) enter into similar agreements.

8

     In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to the Registrable Securities of each Holder (and the shares or securities of every other person subject to the foregoing restriction) until the end of such 180-day period.

ARTICLE 3

MISCELLANEOUS

     3.1 Successors and Assigns. Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

     3.2 No Inconsistent Agreements. The Company will not hereafter enter into any agreement with respect to its securities which is inconsistent with the rights granted to the Holders in this Agreement.

     3.3 Remedies. Any Person having rights under any provision of this Agreement will be entitled to enforce such rights specifically to recover damages caused by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. The parties hereto agree and acknowledge that money damages may not be a complete and adequate remedy for any breach of the provisions of this Agreement and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction (without posting any bond or other security) for specific performance and for other injunctive relief in order to enforce or prevent violation of the provisions of this Agreement.

     3.4 Governing Law. This Agreement shall be governed by and construed under the laws of the State of Arizona, applicable to contracts made and performed in such state, disregarding such state’s principles of conflicts of laws which would otherwise provide for the application of the substantive laws of another jurisdiction.

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

     3.6 Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

     3.7 Notices. Unless otherwise provided, any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon the earliest of (i) the date of personal delivery to the party to be notified, (ii) the date of facsimile delivery with a confirmation copy sent simultaneously by registered or certified mail, postage prepaid, (iii) one Business Day after deposit for overnight delivery with a nationally recognized overnight courier, shipping charges prepaid, or (iv) four days after deposit with the United States Post Office by registered or certified mail, postage prepaid. Such notices shall be addressed to the appropriate

9

party to the attention of the person who executed this Agreement at the address and, as appropriate, the facsimile number, set forth under such party’s signature below (or to the attention of such other person or to such other address or facsimile number as such party shall have furnished to each other party in accordance with this Section 3.7).

     3.8 Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived, only with the written consent of the Company and the holders of sixty six and two-thirds percent (66 2/3%) of the Registrable Securities then outstanding, provided that no such amendment or waiver shall be effective with respect to the rights of any Holder in respect of any registration effected prior to such amendment or waiver without the written consent of such Holder. Except as provided in the preceding sentence, any amendment or waiver effected in accordance with this Section 3.8 shall be binding upon each holder of any Registrable Securities then outstanding, each future holder of all such Registrable Securities, and the Company. Notwithstanding the foregoing, a waiver or consent with respect to a matter which relates exclusively to the rights of Holders of Registrable Securities whose securities are being sold pursuant to a registration statement and which does not directly or indirectly affect the rights of other Holders may be given by the holders of a majority of the Registrable Securities being sold. Notwithstanding the foregoing, Holders receiving Registrable Securities pursuant to Section 2.6 hereof may become parties hereto automatically upon execution and delivery to the Company of a joinder agreement, in substantially the form attached hereto as Exhibit B, to assume the obligations of a Holder hereunder and to be bound hereby, and thereafter each such Holder shall be deemed to be a “Holder,” and such Registrable Securities held by such Holder shall be deemed “Registrable Securities” hereunder. The Company shall promptly provide written notice to the other Holders of any new Holder becoming party to the Agreement.

     3.9 Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms.

     3.10 Entire Agreement. This Agreement, together with the exhibits hereto, and the Purchase Agreement constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof.

[The remainder of this page is intentionally blank]

10

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

COMPANY: ORTHOLOGIC CORP., a Delaware corporation
By:	/s/ James M. Pusey
	Name:	James M. Pusey, M.D.
	Title:	President and Chief Executive Officer
	Address:	1275 West Washington Street
		Tempe, Arizona 85281
	Facsimile No.:	(602) 470-7080
SELLER: AzERx, Inc., a Delaware corporation
By:	/s/ Colleen M. Brophy
	Name:	Colleen M. Brophy, M.D.
	Title:	Chief Executive Officer
	Address:	3863 West Park Avenue
		Chandler, AZ 85226
	Facsimile No.:	(480) 965-0037

[Signature page to Registration Rights Agreement]

COUNTERPART SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT

/s/ Alyssa Panitch  

Alyssa Panitch 

Number of Registrable Securities 

/s/ Colleen M. Brophy  

Colleen M. Brophy 

Number of Registrable Securities 

/s/ Lokesh Joshi  

Lokesh Joshi 

Number of Registrable Securities 

/s/ Elizabeth Furnish  

Elizabeth Furnish 

Number of Registrable Securities 

/s/ Terry E. Winters  

Terry E. Winters 

Number of Registrable Securities 

COUNTERPART SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT

/s/ Dennis Goldberg  

Dennis Goldberg 

Number of Registrable Securities 

/s/ Randolph Steer  

Randolph Steer 

Number of Registrable Securities 

/s/ Padmini Komalavilas  

Padmini Komalavilas 

Number of Registrable Securities 

/s/ Charles Robb Flynn  

Charles Robb Flynn 

Number of Registrable Securities 

/s/ Brandon Seal  

Brandon Seal 

Number of Registrable Securities 

COUNTERPART SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT

/s/ Jeffery Thresher  

Jeffrey Thresher 

Number of Registrable Securities 

/s/ Catherine Parmiter  

Catherine Parmiter 

Number of Registrable Securities 

/s/ Elisabeth McLemore  

Elisabeth McLemore 

Number of Registrable Securities 

/s/ David Woodrum  

David Woodrum 

Number of Registrable Securities 

/s/ Adam Hansen  

Adam Hansen 

Number of Registrable Securities 

COUNTERPART SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT

/s/ Deron Tessier  

Deron Tessier 

Number of Registrable Securities 

VALLEY VENTURES III, L.P.,

By VV III Management, L.L.C., its General Partner
Its:      General Partner

By: /s/ Gregg E. Adkin
Name:	Gregg E. Adkin
Title:	Managing Member

ARIZONA SCIENCE & TECHNOLOGY ENTERPRISES, LLC

By: /s/ Peter Slate
Name:	Peter Slate
Title:	CEO

COUNTERPART SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT

EXHIBIT A

ORTHOLOGIC CORP.

NOTICE OF REGISTRATION STATEMENT
and
SELLING SECURITYHOLDER QUESTIONNAIRE

     Reference is hereby made to the Registration Rights Agreement (the “Registration Rights Agreement”) by and among OrthoLogic Corp. (the “Company”), AzERx, Inc. and the shareholders listed therein. Pursuant to the Registration Rights Agreement, the Company will file with the United States Securities and Exchange Commission (the “Commission”) a registration statement on Form S-3 (the “Resale Registration Statement”) for the registration and resale under the Securities Act of 1933, as amended (the “Securities Act”), the shares of common stock, par value $.0005 per share (the “Common Stock”), issuable pursuant to the Asset Purchase Agreement and Plan of Reorganization between the Company and AzERx, Inc. dated February ___, 2006. A copy of the Registration Rights Agreement is attached hereto. All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Registration Rights Agreement.

     Each beneficial owner of Registrable Securities (as defined below) is entitled to have the Registrable Securities beneficially owned by it included in the Resale Registration Statement. In order to have Registrable Securities included in the Resale Registration Statement, this Notice of Registration Statement and Selling Securityholder Questionnaire (“Notice and Questionnaire”) must be completed, executed and delivered to the Company’s counsel at the address set forth herein for receipt within 45 days from the Issue Date. Beneficial owners of Registrable Securities who do not complete, execute and return this Notice and Questionnaire by such date (i) will not be named as selling securityholders in the Resale Registration Statement, and (ii) may not use the Prospectus forming a part thereof for resales of Registrable Securities.

     Certain legal consequences arise from being named as a selling securityholder in the Resale Registration Statement and related Prospectus. Accordingly, holders and beneficial owners of Registrable Securities are advised to consult their own securities law counsel regarding the consequences of being named or not being named as a selling securityholder in the Resale Registration Statement and related Prospectus.

     The term “Registrable Securities” is defined in the Registration Rights Agreement to mean (i) the Shares of Common Stock issued to the Shareholders or any of their Affiliates as contemplated by the Purchase Agreement; and (ii) Common Stock issued as (or issued upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or

other distribution with respect to, or in exchange for or in replacement of the shares described in the foregoing clause (i), excluding in all cases, however, any shares of Common Stock which (x) are sold by a Person in a transaction in which the rights under this Agreement are not assigned pursuant to Section 2.6 hereof, (y) are then registered under an effective registration statement under the 1933 Act or (z) may be sold under paragraph (k) of Rule 144.

ELECTION

     The undersigned holder (the “Selling Securityholder”) of Registrable Securities hereby elects to include in the Resale Registration Statement the Registrable Securities beneficially owned by it and listed below in Item (3). The undersigned, by signing and returning this Notice and Questionnaire, agrees to be bound with respect to such Registrable Securities by the terms and conditions of this Notice and Questionnaire and the Registration Rights Agreement.

     Upon any sale of Registrable Securities pursuant to the Resale Registration Statement, the Selling Securityholder will be required to deliver to the Company the Notice of Transfer to be set forth in Appendix A to the Prospectus.

     The Selling Securityholder hereby provides the following information to the Company and represents and warrants that such information is accurate and complete:

2

QUESTIONNAIRE

(1) (a) Full legal name of Selling Securityholder:

(b) Full legal name of Registered Holder (if not the same as in (a) above) of Registrable Securities listed in Item (3) below:

(c) Full legal name of DTC participant (if applicable and if not the same as (b) above) through which registrable securities listed in Item (3) below are held:

(2) Address for notices to Selling Securityholder:

Telephone:

Fax:

Contact Person:

(3) Beneficial Ownership of Securities:

Except as set forth below in this Item (3) and Item (4), the undersigned does not beneficially own any shares of Common Stock or any other securities of the Company.

(a)	Number of Registrable Securities (as defined in the Registration Rights Agreement) beneficially owned:                                          shares
(b)	Number of Registrable Securities which the undersigned wishes to be included in the Resale Registration Statement:                                          shares

3

(4) Beneficial Ownership of Other Securities of the Company:                                                                                 

Except as set forth below in this Item (4), the undersigned Selling Securityholder is not the beneficial or registered owner of any shares of Common Stock or any other securities of the Company, other than the Registrable Securities listed above in Item (3).

State any exceptions here:

(5) Indicate below if the undersigned is (a) a broker-dealer or (b) an affiliate of a broker-dealer. Except as set forth below, if the undersigned is an affiliate of a broker-dealer, the undersigned represents and warrants that it bought the Registrable Securities in the ordinary course of business and at the time of the purchase had no agreements or understandings, directly or indirectly, with any person to distribute the Registrable Securities:

If you are (a) a broker-dealer or (b) an affiliate of a broker-dealer who did not buy Registrable Securities in the ordinary course of business and at the time of your purchase had an agreement or understanding, directly or indirectly, with any person to distribute the Registrable Securities, then you will be identified as an underwriter in the Resale Registration Statement.

(6) Relationships with the Company:

Except as set forth below, neither the Selling Securityholder nor any of its affiliates, officers, directors or principal equity holders (5% or more) has held any position or office or has had any other material relationship with the Company (or its predecessors or affiliates) during the past three years.

State any exceptions here:

(7) Plan of Distribution:

Except as set forth below, the undersigned Selling Securityholder intends to distribute the Registrable Securities listed above in Item (3) only as follows (if at all): Such Registrable Securities may be sold from time to time directly by the undersigned Selling Securityholder or, alternatively, through underwriters, broker-dealers or agents. Such Registrable Securities may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of sale, at varying prices determined at the time of sale, or at negotiated prices. Such sales may be effected in transactions (which may involve crosses or block transactions) (i) on any national securities exchange or quotation service on which the Registered Securities may be listed or quoted at the time of sale, (ii) in the over-the-counter market, (iii) in transactions otherwise than on such exchanges or services or in the over-the-counter market, or (iv) through the writing of

4

options. In connection with sales of the Registrable Securities or otherwise, the Selling Securityholder may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the Registrable Securities in the course of hedging the positions they assume. The Selling Securityholder may also sell Registrable Securities short and deliver Registrable Securities to close out such short positions, or loan or pledge Registrable Securities to broker-dealers that in turn may sell such securities.

State any exceptions here:

     Note: In no event may such method(s) of distribution take the form of an underwritten offering of the Registrable Securities without the prior agreement of the Company.

     By signing below, the Selling Securityholder acknowledges that it understands its obligation to comply, and agrees that it will comply, with the provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, particularly Regulation M.

     In the event that the Selling Securityholder transfers all or any portion of the Registrable Securities listed in Item (3) above after the date on which such information is provided to the Company, the Selling Securityholder agrees to notify the transferee(s) at the time of the transfer of its rights and obligations under this Notice and Questionnaire and under the Registration Rights Agreement.

     By signing below, the Selling Securityholder consents to the disclosure of the information contained herein in its answers to Items (1) through (7) above and the inclusion of such information in the Resale Registration Statement and related Prospectus. The Selling Securityholder understands that such information will be relied upon by the Company in connection with the preparation of the Resale Registration Statement and related Prospectus.

     The Selling Securityholder agrees to promptly notify the Company of any inaccuracies or changes in the information provided herein which may occur subsequent to the date hereof at any time while the Resale Registration Statement remains in effect. All notices hereunder and pursuant to the Registration Rights Agreement shall be made in writing, by hand-delivery, first-class mail, or air courier guaranteeing overnight delivery as follows:

     (i) To the Company:

OrthoLogic Corp.
1275 West Washington Street
Tempe, AZ 85281
Attn: James M. Pusey, M.D.
Tel: (602) 286-5520
Fax: (602) 470-7080

5

     (ii) With a copy to:

Quarles & Brady LLP
One Renaissance Square
Two North Central Avenue
Phoenix, Arizona 85004-2391
Attn: Steven P. Emerick, Esq.
Fax: (602) 417-2980
Tel: (602) 230-5517

     Once this Notice and Questionnaire is executed by the Selling Securityholder and received by the Company’s counsel, the terms of this Notice and Questionnaire, and the representations and warranties contained herein, shall be binding on, shall inure to the benefit of and shall be enforceable by the respective successors, heirs, personal representatives, and assigns of the Company and the Selling Securityholder with respect to the Registrable Securities beneficially owned by such Selling Securityholder and listed in Item (3) above. This Agreement shall be governed in all respects by the laws of the State of Arizona without giving effect to any of the conflict of law rules thereof.

6

     IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused this Notice and Questionnaire to be executed and delivered either in person or by its duly authorized agent.

Dated:

Selling Securityholder (Print/type full legal name of
beneficial owner of Registrable Securities)

By:

Name:

Title:

7

EXHIBIT B

FORM OF JOINDER AGREEMENT

     This Agreement (the “Agreement”) is made and entered into as of                     , 2006 by                      (the “Joining Holder”) with ORTHOLOGIC CORP., a Delaware corporation (together with its successors, the “Company”).

RECITALS

     WHEREAS, the Company, AzERx, Inc., a Delaware corporation, and certain of the shareholders of the Company are parties to that certain Registration Rights Agreement dated as of February      , 2006 (the “Rights Agreement”); and

     WHEREAS, the Rights Agreement contemplates that Holders (as such term is defined in the Rights Agreement) of Registrable Securities (as such term is defined in the Rights Agreement) may become parties to the Rights Agreement and be bound thereto; and

     WHEREAS, Joining Holder has acquired Registrable Securities and desires to become a party to the Rights Agreement, all on the terms and conditions set forth in this Agreement.

     NOW THEREFORE, in consideration of the foregoing recitals, the mutual promises hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

     1. By executing and delivering this Agreement to the Company, Joining Holder hereby agrees to become a party to, to be bound by, and to assume the obligations of a “Holder” under the Rights Agreement (as such term is defined in the Rights Agreement), in the same manner as if Joining Holder were an original signatory to the Rights Agreement. Joining Holder shall be considered to be a “Holder” and the stock held by Joining Holder shall be deemed to be “Registrable Securities” (as such terms are defined in the Rights Agreement).

     Accordingly, the undersigned has executed and delivered this Agreement as of the date first written above.

JOINING HOLDER:

[Print Name]

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in this Registration Statement on Form S-3 of our reports dated March 9, 2006, relating to the financial statements and financial statement schedule of OrthoLogic Corp., and management's report on the effectiveness of internal control over financial reporting (which report on the financial statements expresses an unqualified opinion and includes an explanatory paragraph regarding the fact that OrthoLogic Corp. is in the development stage at December 31, 2005), appearing in the Annual Report on Form 10-K of OrthoLogic Corp. for the year ended December 31, 2005 and to the reference to us under the heading “Experts” in the Prospectus, which is part of this Registration Statement.

/s/ DELOITTE & TOUCHE LLP

Phoenix, Arizona
April 12, 2006