UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Amendment No. 1 to Form 10-Q
On Form 10-Q/A

        (Mark One)

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

For the Quarterly Period Ended March 31, 2001
or

[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     
Commission file number 0-28328
UROCOR, INC.
(Exact name of registrant as specified in its charter)

Delaware
(State of incorporation)
840 Research Parkway, Oklahoma City, OK
(Address of principal executive offices) 75-2117882
(IRS Employer Identification No.)
73104
(zip code)

(405) 290-4000
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last
report)

Indicate by check mark whether the registrant:   (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes X                      No

The number of shares of issuer’s Common Stock, $.01 par value, outstanding on September 28, 2001 was 10,029,218 shares.

TABLE OF CONTENTS

PART I—FINANCIAL INFORMATION
	Item 1. Financial Statements
		CONSOLIDATED BALANCE SHEETS
		CONSOLIDATED STATEMENTS OF OPERATIONS
		CONSOLIDATED STATEMENTS OF CASH FLOWS
		NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
SIGNATURES

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

UROCOR, INC.
CONSOLIDATED BALANCE SHEETS

					March 31,			December 31,
					2001			2000
					(Unaudited)
				ASSETS
CURRENT ASSETS:
	Cash and cash equivalents				$	16,531,251		$	11,006,568
	Short-term marketable investments					2,074,075			488,587
	Accounts receivable, net of allowance for doubtful accounts of $4,579,991 at March 31, 2001 and $4,130,275 at December 31, 2000					13,415,803			12,476,454
	Prepaid expenses					866,176			565,167
	Laboratory supplies, at average cost					451,502			473,205
	Inventory					316,219			309,308
	Deferred tax asset, net					1,082,092			2,286,619
	Other current assets					367,381			760,726
		Total current assets				35,104,499			28,366,634
LONG-TERM MARKETABLE INVESTMENTS						513,412			996,261
PROPERTY AND EQUIPMENT, net						9,935,456			10,037,696
NON-CURRENT DEFERRED TAX ASSET, net						3,001,097			4,371,456
GOODWILL, net of accumulated amortization of $204,802 at March 31, 2001 and $155,224 at December 31, 2000						3,804,521			3,859,336
INTANGIBLE AND OTHER ASSETS, net						2,011,252			3,697,979
		Total assets			$	54,370,237		$	51,329,362
			LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
	Accounts payable				$	2,045,520		$	3,257,018
	Accrued compensation					1,944,819			856,648
	Current installments of obligations under capital leases					398,079			249,679
	Accrued Special Charges					9,365,126			9,892,432
	Other accrued liabilities					217,814			728,516
		Total current liabilities				13,971,358			14,984,293
DEFERRED COMPENSATION						537,961			469,855
OBLIGATIONS UNDER CAPITAL LEASES, net of current installments						592,614			594,280
LONG-TERM DEBT						—			175,000
		Total liabilities				15,101,933			16,223,428
STOCKHOLDERS’ EQUITY:
	Preferred stock, $.01 par value, authorized 6,000,000 shares at March 31, 2001 and at December 31, 2000; no shares issued and outstanding at March 31, 2001 or at December 31, 2000					—			—
	Common stock, $.01 par value, authorized 20,000,000 shares at March 31, 2001 and at December 31, 2000; 11,058,967 shares issued at March 31, 2001 and 11,030,131 shares issued at December 31, 2000					110,590			110,301
	Additional paid-in capital					59,654,457			59,536,736
	Common stock held in treasury at cost, 1,194,604 shares at March 31, 2001 and at December 31, 2000					(5,397,308	)		(5,397,308	)
	Accumulated deficit					(15,099,435	)		(19,143,795	)
		Total stockholders’ equity				39,268,304			35,105,934
		Total liabilities and stockholders’ equity			$	54,370,237		$	51,329,362

The accompanying notes are an integral part of these consolidated financial statements.

2

UROCOR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

			Three Months Ended
			March 31,
			2001			2000
REVENUE			$	15,470,421		$	12,040,557
OPERATING EXPENSES:
	Direct cost of services and products			5,228,361			4,376,323
	Selling, general and administrative expenses			6,553,677			5,722,623
	Provision for bad debts			1,531,205			1,033,629
	Research and development			327,343			398,715
		Total operating expenses		13,640,586			11,531,290
OPERATING INCOME				1,829,835			509,267
OTHER INCOME (EXPENSE):
	Gain on termination of therapeutic agreement			4,597,011			—
	Interest, net			221,505			171,529
	Other			(29,105	)		(24,183	)
		Total other income, net		4,789,411			147,346
Income before income taxes				6,619,246			656,613
Income tax provision				2,574,886			249,520
NET INCOME			$	4,044,360		$	407,093
NET INCOME PER SHARE:
Basic:
	Net Income Per Common Share		$	.41		$	.04
	Weighted Average Common and Common Equivalent Shares Outstanding			9,834,204			9,367,268
Diluted:
	Net Income Per Common Share—Assuming Dilution		$	.38		$	.04
	Weighted Average Common and Common Equivalent Shares Outstanding— Assuming Dilution			10,524,025			9,662,141

The accompanying notes are an integral part of these consolidated financial statements.

3

UROCOR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

				Three Months Ended
				March 31,
				2001			2000
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income			$	4,044,360		$	407,093
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization			722,722			704,040
		Deferred income tax provision			2,574,886			249,520
		Deferred compensation expense			68,106			91,667
		Stock option compensation expense			—			2,063
		Loss on disposition of equipment			13,993			24,183
		Loss on asset write downs			24,999			—
		Gain on termination of therapeutic agreement			(4,597,011	)		—
		Equity in net income of subsidiary			(9,889	)		—
	Changes in assets and liabilities:
		(Increase) decrease in accounts receivable			(939,349	)		839,890
		Increase in prepaid expense			(301,009	)		(125,336	)
		Decrease in laboratory supplies			21,703			137,595
		Increase in inventory			(6,911	)		(3,612	)
		Decrease (increase) in other current assets			393,345			(722,737	)
		Decrease in accounts payable			(1,211,498	)		(604,890	)
		Increase in accrued compensation			1,088,171			304,503
		(Decrease) increase in accrued liabilities			(1,038,008	)		50,630
			Net cash provided by operating activities		848,610			1,354,609
CASH FLOWS FROM INVESTING ACTIVITIES:
	Purchases of short-term marketable investments				(1,585,488	)		(2,264,489	)
	Maturities of long-term marketable investments				482,849			2,687,292
	Capital expenditures				(556,320	)		(794,340	)
	Proceeds from termination of therapeutic agreement				7,000,000			—
	Intangibles and other assets				(754,712	)		253,359
			Net cash provided by (used in) investing activities		4,586,329			(118,178	)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Proceeds from exercise of stock options				118,010			266,688
	Proceeds from exercise of warrants				—			27,000
	Payment of long term debt				(175,000	)		—
	Proceeds from fixed asset sale/leaseback				236,253			—
	Principal payments under capital lease obligations				(89,519	)		(8,454	)
			Net cash provided by financing activities		89,744			285,234
Net increase in cash and cash equivalents					5,524,683			1,521,665
CASH AND CASH EQUIVALENTS, beginning of year					11,006,568			5,259,218
CASH AND CASH EQUIVALENTS, end of period				$	16,531,251		$	6,780,883
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
	Cash paid for interest			$	20,491		$	—
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
	Obligations under therapeutic product distribution agreement			$	—		$	1,750,000

The accompanying notes are an integral part of these consolidated financial statements.

4

UROCOR, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2001

NOTE 1—BASIS OF PRESENTATION:

        The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary for a fair presentation have been included. These interim financial statements should be read in conjunction with the financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2000 filed with the Securities and Exchange Commission on April 2, 2001.

        The consolidated financial statements include the accounts of all majority-owned subsidiaries. All significant intercompany transactions have been eliminated. Operating results for the three-month period ended March 31, 2001 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2001.

NOTE 2—INVESTMENTS:

        Pursuant to the Company’s investment policy, idle and excess funds are invested in high grade, fixed income securities generally for no more than two years. These securities are considered available-for-sale as of March 31, 2001 and December 31, 2000. The Company considers any net unrealized gain or loss on these investments to be temporary, and reflects such gains or losses as a component of stockholders’ equity. As of March 31, 2001 and December 31, 2000, there was not a material net unrealized gain or loss on these investments.

NOTE 3—COMMITMENTS AND CONTINGENCIES:

        In February 2001, the Company reached a tentative settlement with the United States Department of Justice (the “DOJ”) to settle matters covered by the DOJ investigation pursuant to which UroCor would refund the various programs a total of $8.5 million by paying $6.0 million at the consummation of the settlement and the remaining balance of $2.5 million pursuant to a promissory note payable in equal annual installments over three years bearing interest at a rate of 7% per annum. In March 2001, the Company and the DOJ amended this term of the tentative settlement to provide that the Company would refund the various programs a total of $9.0 million, all payable at the closing of the final settlement agreement. Pursuant to the current other principal terms of the tentative agreement, the proposed settlement would cover Company liabilities to the federal government and state insurance programs with respect to the matters under investigation through December 31, 2000, would settle matters covered by the investigation without any admission by the Company of any wrongdoing in connection with such matters and would require UroCor to operate under a corporate integrity agreement for a period of time to be determined as part of the final settlement agreement. Determination of the final terms and consummation of the tentative settlement are subject to certain judicial and governmental approvals and the negotiation and approval of the specific provisions of the final settlement agreement and the contemplated corporate integrity agreement.

        In the event the Company and the DOJ were unable to consummate the proposed settlement, no assurances may be given regarding the resolution of the DOJ investigation, and the Company is unable to predict its impact, if any, on the Company. If the DOJ or, if applicable, any other plaintiff were to pursue and prevail on matters that may arise from this investigation, any judgment resulting from such litigation or any administrative penalties, including, without limitation, significant recoupment of funds or civil or criminal penalty or exclusion from federal and state health care programs potentially resulting from such proceedings could have a material adverse effect on the financial condition and results of operations of the Company.

5

NOTE 4—STOCK REPURCHASE PROGRAM:

        On April 20, 1999, the Company’s Board of Directors authorized the repurchase by the Company of up to $10 million of UroCor common stock. Management expects that the repurchase program will be conducted from time to time on the open market or in privately negotiated transactions, depending upon market conditions, securities regulations and other factors. As of March 31, 2001, the Company had repurchased approximately $7.6 million (or approximately 1.7 million shares) of common stock and reissued 477,700 treasury shares for the acquisition of Mills Biopharmaceuticals, Inc. There were no stock repurchases during the first quarter of 2001.

NOTE 5—SEGMENT REPORTING:

        Statement of Financial Accounting Standards (“SFAS”) No. 131, “Disclosures about Segments of an Enterprise and Related Information,” requires selected information about reportable segments in interim financial reports that is consistent with that made available to management to assess financial performance. The Company operates in two reportable segments—1) diagnostic services and 2) therapeutic products. The diagnostic services segment provides testing services to urologists for diagnosing, selecting appropriate therapies and managing patients with urologic diseases. The therapeutic products segment currently offers ProstaSeed® for early stage prostate cancer and offered PACIS BCG® for bladder cancer until February 2001, when an agreement was reached with the manufacturer of PACIS BCG to terminate the related distribution agreement. The Company’s management evaluates performance based on several factors. However, the primary measurement focus is “Gross Profit” (revenue less direct costs) and “Operating Income,” excluding special charges and any other unusual items. The accounting policies of the segments are the same as those described in the summary of significant accounting policies contained in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2000. Corporate expenses include overhead expenses not allocated to specific business segments, including administrative expenses and information services expenses. The expenses that are allocated to business segments after the gross profit calculation to result in the operating income figures include sales and marketing expenses, certain administrative expenses directly attributable to the segments and bad debt expense. Asset information by segment is not reported, because the Company does not yet produce such information internally. The following table presents information about the Company’s segments for the three months ended March 31, 2001 and 2000:

	Diagnostic		Therapeutic
Three months ended March 31:	Services		Products			Total
2001:
Revenue	$	14,910,895	$	559,526		$	15,470,421
Gross Profit	$	10,404,191	$	(162,131	)	$	10,242,060
Operating Income (Loss)	$	5,281,875	$	(742,526	)	$	4,539,349
2000:
Revenue	$	11,985,320	$	55,237		$	12,040,557
Gross Profit	$	7,648,035	$	16,215		$	7,664,250
Operating Income (Loss)	$	3,250,093	$	(615,146	)	$	2,634,947

        Reconciliation of operating income above to corresponding totals in the accompanying financial statements:

	2001		2000
Total for reportable segments	$	4,539,349	$	2,634,947
Less: Corporate expenses		2,709,514		2,125,680
Operating income	$	1,829,835	$	509,267

NOTE 6—GAIN ON TERMINATION OF THERAPEUTIC AGREEMENT:

        In February 2001, ongoing manufacturing supply issues led UroCor and BioChem Pharma, Inc. (“BioChem”) to agree on a settlement to end their distribution agreement for PACIS BCG that had been executed in 1994. Under the terms of the settlement, UroCor received $7 million from BioChem, which resulted in a pretax gain of $4,597,011.

6

NOTE 7—BASIC EARNINGS PER SHARE AND DILUTED EARNINGS PER SHARE:

        Basic earnings per share of common stock has been computed on the basis of the weighted average number of shares outstanding during each period. The diluted net income per share of common stock includes the dilutive effect of the outstanding stock options and warrants.

        The following table summarizes the calculation of basic earnings per share (“EPS”) and the diluted EPS components:

		Three months ended March 31, 2001						Three months ended March 31, 2000
		Income		Shares				Income		Shares
		(Numerator)		(Denominator)		EPS		(Numerator)		(Denominator)		EPS
Net income/shares		$	4,044,360		9,834,204			$	407,093		9,367,268
Basic EPS						$	.41					$	.04
Effect of Dilutive Securities:
	(Stock options/warrants)				689,821						294,873
Adjusted net income/shares		$	4,044,360		10,524,025			$	407,093		9,662,141
Diluted EPS						$	.38					$	.04

7

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

        The following discussion of financial condition and results of operations of UroCor, Inc. (“UroCor” or the “Company”) should be read in conjunction with the Consolidated Financial Statements and Notes thereto included elsewhere in this Quarterly Report on Form 10-Q. Special Note: Certain statements set forth below constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. See “Special Note Regarding Forward-Looking Statements” and “Cautionary Statements” included elsewhere in this Report.

Overview

        UroCor markets a comprehensive range of integrated products and services directly to urologists and managed care organizations to assist in detecting, diagnosing, treating and managing prostate cancer, bladder cancer, kidney stones and other complex urologic disorders. The Company’s primary focus is helping urologists improve patient care and outcomes while reducing the total cost of managing these diseases.

        During the three months ended March 31, 2001, the Company derived approximately 96% of its revenue from diagnostic products and services that UroCor Labs™ provides to the urology market to assist in the diagnosis, prognosis and management of prostate cancer, bladder cancer and kidney stones disease. The Company recognizes revenue when products are sold or services are rendered. The Company typically bills various third-party payors for its products and services, such as private insurance, managed care plans and governmental programs (e.g., Medicare), as well as individual patients and physicians. During the three months ended March 31, 2001, approximately 46%, 42%, 8% and 4% of the Company’s diagnostic revenue was attributable to Medicare, private insurance and managed care, individual patients, and physicians and hospitals, respectively.

        During the three months ended March 31, 2001, the Company derived approximately 4% of its revenue from the sales of its therapeutic product, ProstaSeed. ProstaSeed is a UroCor-branded line of radiation implants (also referred to as “seeds”) used in brachytherapy for early stage prostate cancer that received regulatory approval for marketing in January 2000.

Results of Operations

        Revenue.    Revenue for the three months ended March 31, 2001 increased 28.5% to approximately $15.5 million compared to $12.0 million for the three months ended March 31, 2000.

        Diagnostic services revenue increased 24.5% for the three-month period resulting primarily from the Company’s price increase effective August 14, 2000, slightly offset by an overall decline in reimbursement rates from Medicare effective January 1, 2001. The Company’s price increase and the overall decrease in Medicare reimbursement resulted in an increase of approximately $1.6 million in revenue for the three months ended March 31, 2001 compared to the same period in 2000. Case volume for the three months ended March 31, 2001 compared to the three months ended March 31, 2000 decreased 9.2%, however, the majority of the decrease was in the Company’s lower priced products, therefore, the shift in product mix more than offset the decrease in volume. Diagnostic volumes have declined primarily as the result of the revision of pricing on contractual programs during the first quarter of 2000 that resulted in the loss of some clients and decreased product usage from other clients. The Company’s client base for the first quarter of 2001 was approximately 2,500 urologists of which approximately 45% used two or more products compared to approximately 2,575 urologists and approximately 46% using more than one product for the first quarter of 2000.

        Therapeutic products revenue increased from approximately $55,000 during the three months ended March 31, 2000 to approximately $560,000 during the three months ended March 31, 2001. The Company’s marketing of ProstaSeed accounted for substantially all of the therapeutic products revenue in both periods. Therapeutic products revenue in subsequent periods is contingent upon the successful manufacturing and marketing of ProstaSeed and the future acquisition of rights for, and the obtaining of appropriate United States Food and Drug Administration (the “FDA”) or other regulatory approvals for, any other therapeutic products that could be marketed by the Company.

        Direct Cost of Services and Products.    As a percentage of revenue, direct expenses decreased to 33.8% for the three months ended March 31, 2001 from 36.3% for the three months ended March 31, 2000. In the aggregate, direct cost of services and products increased 19.4%, from approximately $4.4 million for the three months ended March 31, 2000 to approximately $5.2 million for the three months ended March 31, 2001.

        Direct costs for diagnostic services, as a percentage of revenue, decreased to 29.1% for the three months ended March 31, 2001 from 36.0% for the three months ended March 31, 2000. The Company’s price increases discussed above in “Revenue” contributed to these decreased percentages, along with shifts in volume mix towards the Company’s higher margin tests. In the aggregate, direct costs

8

for diagnostic services increased 3.8%, from approximately $4.3 million for the three months ended March 31, 2000 to approximately $4.5 million for the three months ended March 31, 2001. These increases are primarily related to personnel costs for initial data-entry and specimen processing.

        Direct costs for therapeutic products for the three months ended March 31, 2001 are principally comprised of the manufacturing and overhead costs related to ProstaSeed. For the three months ended March 31, 2000, these direct costs were also related to ProstaSeed, however, before the Company acquired the manufacturer in April 2000, direct costs were for acquisition of the product. These direct costs exceeded revenue by 29.0% for the three-month period ended March 31, 2001 and were 29.6% of revenue for the three-month period ended March 31, 2000. In aggregate, the direct costs for therapeutic products increased to approximately $722,000 for the three-month period ended March 31, 2001 from approximately $39,000 for the three-month period ended March 31, 2000. Attainment of positive gross profit margins for the Company’s ongoing ProstaSeed marketing efforts is contingent upon increasing sales volumes, which is dependent on the efforts and results of the Company’s product distributors.

        Selling, General and Administrative Expenses.    As a percentage of revenue, selling, general and administrative expenses decreased to 42.4% for the three months ended March 31, 2001 from 47.5% for the three months ended March 31, 2000. In the aggregate, selling, general and administrative expenses increased 14.5%, from approximately $5.7 million in the three months ended March 31, 2000 to approximately $6.6 million in the three months ended March 31, 2001. The increase in selling, general and administrative expenses for the three-month period was due principally to increased sales and administrative personnel costs of approximately $760,000 and increased conventions and meetings costs of approximately $161,000.

        Provision for Bad Debts.    As a percentage of revenue, provision for bad debts increased to 9.9% for the three months ended March 31, 2001 from 8.6% for the three months ended March 31, 2000. In the aggregate, provision for bad debts increased 48.1%, from approximately $1.0 million in the three months ended March 31, 2000 to approximately $1.5 million in the three months ended March 31, 2001. The Company monitors the collection quality of its accounts receivable through analytical review of aging categories by payor group and collections performance. The Company provides an amount on a monthly basis for estimated future bad debts on current period revenues. In addition, from time to time, there are specific events for which management makes an additional provision. There have been no such additional provisions made in the three month periods ended March 31, 2000 or March 31, 2001.

        Research and Development Expenses.    As a percentage of revenue, research and development expenses decreased to 2.1% for the three months ended March 31, 2001 from 3.3% for the three months ended March 31, 2000. In the aggregate, research and development costs decreased 17.9%, from approximately $399,000 in the three months ended March 31, 2000 to approximately $327,000 in the three months ended March 31, 2001. The decrease in expenses was due primarily to the Company’s focus on strategic projects that it has determined have the highest potential of being commercialized, which has resulted in overall lower base research and development program costs.

        Other Income (Expense).    Other income, net of interest expense increased from approximately $147,000 in the three months ended March 31, 2000 to approximately $4.8 million in the three months ended March 31, 2001. The increase was due principally to the realized gain of approximately $4.6 million attributable to the termination in February 2001 of the Company’s distribution agreement with the manufacturer of PACIS BCG, a therapeutic product previously distributed by the Company.

        Income Taxes.    Income tax expense recorded in the three months ended March 31, 2001 was approximately $2.6 million resulting in an effective 38.9% federal and state income tax rate. Income tax expense recorded in the three months ended March 31, 2000 was approximately $250,000 based upon an effective 38.0% federal and state income tax rate.

Liquidity and Capital Resources

        As of March 31, 2001, cash, cash equivalents and marketable investments totaled approximately $19.1 million, and the Company’s working capital was approximately $21.1 million. As of March 31, 2001, the components of cash, cash equivalents and marketable investments were approximately $16.5 million of cash and cash equivalents and approximately $2.6 million in short-term marketable investments, consisting principally of high-grade fixed income securities with maturities of less than one year.

        Accounts receivable, net of allowance for doubtful accounts, totaled approximately $13.4 million at March 31, 2001, an increase of approximately $940,000 from December 31, 2000, or 7.5%, principally attributable to increased revenue, offset by the collection of $500,000 from a therapeutic product manufacturer relating to the termination at December 31, 1999 of a co-promotion agreement between the Company and the manufacturer.

        At March 31, 2001 and December 31, 2000, the Company’s average number of days sales in net diagnostics receivables was approximately 78 and 77, respectively.

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        Virtually all of the Company’s diagnostic services are rendered on a fee-for-service basis. Accordingly, the Company assumes the financial risk related to collection, including potential inability to collect accounts, long collection cycles for accounts receivable, difficulties in gathering complete and accurate billing information and delays attendant to reimbursement by third-party payors, such as governmental programs such as Medicare, private insurance plans and managed care organizations.

        The Company monitors the collection quality of its accounts receivable through analytical review of aging categories by payor group and collections performance. While the Company maintains what it believes to be an adequate allowance for doubtful accounts, there can be no assurance that the Company’s ongoing assessment of accounts receivable will not result in the need for additional provision for doubtful accounts. Such additional provision could have an adverse effect on the Company’s financial position and results of operations.

        Operating activities provided net cash of approximately $849,000 for the three months ended March 31, 2001 compared to net cash provided of approximately $1.4 million for the three months ended March 31, 2000.

        Net cash provided by investing activities was approximately $4.6 million for the three months ended March 31, 2001 and consisted primarily of capital expenditures purchases of approximately $556,000, milestone payments to obtain rights to a therapeutic product of approximately $750,000 and net purchases of marketable securities of $1.1 million, offset by the proceeds of approximately $7.0 million from the termination of the PACIS BCG distribution agreement.

        Net cash provided by financing activities was approximately $90,000 for the three months ended March 31, 2001, consisting primarily of approximately $118,000 from the exercise of stock options by employees and $236,000 of additional proceeds for financing of fixed assets, offset by payment of debt of $175,000 and capital lease principal payments of approximately $90,000.

        The Company’s capital expenditures of approximately $556,000 for the three months ended March 31, 2001, were primarily for leasehold improvements, furniture and fixtures, and computer equipment and software. Of the total amount, approximately $317,000 related to internal software development costs related primarily to installation and customization of third-party software. While future capital expenditures will depend upon a number of factors, the Company expects such expenditures to be comparable to recent levels as the Company continues to expand to deliver therapeutics and information services and to enhance current diagnostic services and operational capabilities. The Company intends to finance the majority of these capital expenditures with existing cash and investment balances and possibly debt.

        In February 2001, the Company and the United States Department of Justice (the “DOJ”) reached a tentative settlement that subsequently was amended in March 2001 of the DOJ investigation into certain matters. Pursuant to the terms of the current tentative settlement agreement between the Company and the DOJ, upon the consummation of the final settlement agreement and related matters, the Company will refund Medicare and various state programs $9.0 million. In addition to any refund or similar amount, the Company has incurred and expects to continue to incur certain expenses relating to the investigation, including without limitation, expenses in connection with the indemnification of legal and other fees and costs for current and past directors, officers and employees of the Company. The Company intends to make these payments from existing cash and investment balances.

        In March 2001, the Company entered into a collaborative agreement with a manufacturer of therapeutic products giving UroCor the exclusive rights to distribute one of the manufacturer’s products in the United States. Under the terms of the agreement, UroCor paid $750,000 during the first quarter of 2001 and will pay up to an additional $2.3 million in milestone payments in subsequent years during the development and potential product launch of the product. As milestones are achieved, the Company intends to make the additional payments from existing cash and investment balances or debt.

        The Company intends to pursue the acquisition, licensing or co-promotion of new therapeutic products and to acquire diagnostic products or possibly existing business. As such opportunities are identified, the Company intends to make any related acquisition payments from existing cash and investment balances or new debt.

        In April 1999, the Company’s Board of Directors authorized the repurchase of up to $10 million of the Company’s common stock. As of March 31, 2001, the Company had repurchased approximately $7.6 million (or approximately 1.7 million shares) of its common stock and reissued 477,700 treasury shares for the acquisition of Mills Biopharmaceuticals, Inc.

        The Company believes that its existing capital resources will be sufficient to provide the funds necessary to maintain its present level of operations and implement its currently planned growth strategy. There may be circumstances or new business opportunities, however, that would require additional resources. In such event, the Company may be required to seek additional financing, and there is no assurance that the Company would be able to obtain such financing on a timely basis or on acceptable terms.

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SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

By: /s/ Bruce C. Hayden
Bruce C. Hayden
Senior Vice-President, Chief
Financial Officer, Treasurer and Secretary

        October 9, 2001

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