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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549

FORM 10-Q

|                                                                |  |                                                                                      
|--------------------------------------------------------------- |  | -------------------------------------------------------------------------------------
|(Mark One)                                                      |  |                                                                                      
|x                                                               |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 OF THE SECURITIES EXCHANGE ACT OF 1934 
|                                                                |  |                                                                                      
|For the quarterly period ended June 30, 2002.                  
|                                                                |  |                                                                                      
|o                                                               |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 OF THE SECURITIES
EXCHANGE ACT OF 1934
|                                                                |  |                                                                                      
|FOR THE TRANSITION PERIOD FROM ______________ TO ______________

Commission file number 0-22170

Epoch Biosciences, Inc.(Exact name of Registrant as specified in its charter)

|                                                                       |  |                                               
|---------------------------------------------------------------------- |  | ----------------------------------------------
|Delaware(State or other jurisdiction of incorporation or organization) |  | 91-1311592(I.R.S. Employer Identification No.)

21720 23rd Drive SE, #150, Bothell, WA 98021(Address of principal executive office, including zip code)

(425) 482-5555(Issuers telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Check whether the issuer (1) filed all reports to be filed by Section 13 or
15(d) of the Exchange Act during the past 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  [   ]

State the number of shares outstanding of each of the issuers classes of
common equity as of the latest practicable date.

|                             |  |                               |            | 
|---------------------------- |  | ----------------------------- | ---------- | 
|Class                        |  | Outstanding at August 9, 2002
|                             |  |                              
|Common Stock, $.01 par value |  |                               | 25,659,776 | 

Page 1 of 22



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TABLE OF CONTENTS



|                               |                                                                                               |                               |  |  |  |  |  | 
|------------------------------ | --------------------------------------------------------------------------------------------- | ----------------------------- |  |  |  |  |  | 
|Part I.  Financial Information
|                               |                                                                                               | Balance Sheets               
|                               |                                                                                               | Statements of Operations     
|                               |                                                                                               | Statements of Cash Flows     
|                               |                                                                                               | Notes to Financial Statements
|                               | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|Part II.  Other Information   
|                               | Item 1.  Legal Proceedings                                                                   
|                               | Item 3.  Quantitative and Qualitative Disclosures About Market Risk                          
|                               | Item 4.  Submission of Matters to a Vote of Security Holders                                 
|                               | Item 6.  Exhibits and Reports on Form 8K                                                     
|Signatures                    
|EXHIBIT INDEX                 
|EXHIBIT 10.21.3               
|EXHIBIT 10.30                 
|EXHIBIT 10.31                 
|EXHIBIT 99.1                  
|EXHIBIT 99.2                  



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##### Table of Contents



Epoch Biosciences, Inc.
Index To Form 10-Q

|                               |  |  |    |         |  |                                                                                       |  |                                                                 |    |             |  | 
|------------------------------ |  |  | -- | ------- |  | ------------------------------------------------------------------------------------- |  | --------------------------------------------------------------- | -- | ----------- |  | 
|                               |  |  |    |         |  |                                                                                       |  |                                                                 |    | Page Number
|                               |  |  |    |         |  |                                                                                       |  |                                                                 |    |            
|Part I.  Financial Information |  |  |    |        
|                               |  |  |    | Item 1. |  | Financial Statements                                                                  |  |                                                                 | 3  |            
|                               |  |  |    | Item 2. |  | Managements Discussion and Analysis of Financial
Condition and Results of Operations |  |                                                                 | 9  |            
|Part II.  Other Information    |  |  |    |        
|                               |  |  |    | Item 1. |  | Legal Proceedings                                                                     |  |                                                                 | 19 |            
|                               |  |  |    | Item 3. |  | Quantitative and Qualitative Disclosures About Market Risk                            |  |                                                                 | 19 |            
|                               |  |  |    | Item 4. |  | Submission of Matters to a Vote of Security Holders                                   |  |                                                                 | 20 |            
|                               |  |  |    | Item 6. |  | Exhibits and Reports on Form 8-K                                                      |  |                                                                 | 21 |            
|                               |  |  |    |         |  |                                                                                       |  | Note: Items 2, 3, and 5 are omitted, as they are not
applicable |    |             |  | 
|Signature                      |  |  | 22 |        

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Part I.  Financial Information




Epoch Biosciences, Inc.
Balance Sheets
(unaudited)

Assets

|                                                        |                                                                                                                                                            |                                            |           |              |            |          |           |             |            | 
|------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | --------- | ------------ | ---------- | -------- | --------- | ----------- | ---------- | 
|                                                        |                                                                                                                                                            |                                            |           | December 31, |            | June 30,
|                                                        |                                                                                                                                                            |                                            |           | 2001         |            | 2002    
|                                                        |                                                                                                                                                            |                                            |           |              |            |         
|Current assets:                                         |                                                                                                                                                            |                                            |           |              |            |          |           |            
|                                                        | Cash and cash equivalents                                                                                                                                  |                                            | $         | 7,489,399    |            |          | $         | 4,954,878   |           
|                                                        | Restricted cash                                                                                                                                            |                                            |           | 98,891       |            |          |           |            |           
|                                                        | Accounts receivable                                                                                                                                        |                                            |           | 353,590      |            |          |           | 560,702     |           
|                                                        | Inventory                                                                                                                                                  |                                            |           | 157,700      |            |          |           | 302,102     |           
|                                                        | Prepaid expenses and other assets                                                                                                                          |                                            |           | 338,288      |            |          |           | 450,101     |           
|                                                        |                                                                                                                                                            |                                            |           |              |            |          |           |             |           
|                                                        |                                                                                                                                                            | Total current assets                       |           |              | 8,437,868  |          |           |             | 6,267,783  | 
|Property and equipment, net                             |                                                                                                                                                            |                                            | 3,852,359 |              |            |          | 3,711,971 |            
|Intangible assets, net                                  |                                                                                                                                                            |                                            | 4,414,976 |              |            |          | 4,267,227 |            
|Restricted cash                                         |                                                                                                                                                            |                                            | 575,755   |              |            |          | 595,087   |            
|Other assets                                            |                                                                                                                                                            |                                            | 25,265    |              |            |          | 29,265    |            
|                                                        |                                                                                                                                                            |                                            |           |              |            |          |           |             |           
|                                                        |                                                                                                                                                            | Total assets                               |           | $            | 17,306,223 |          |           | $           | 14,871,333 | 
|                                                        |                                                                                                                                                            |                                            |           |              |            |          |           |             |           
|Liabilities and Stockholders Equity                   
|Current liabilities:                                    |                                                                                                                                                            |                                            |           |              |            |          |           |            
|                                                        | Accounts payable                                                                                                                                           |                                            | $         | 226,686      |            |          | $         | 584,278     |           
|                                                        | Accrued liabilities                                                                                                                                        |                                            |           | 1,332,331    |            |          |           | 1,296,702   |           
|                                                        | Deferred revenue  current portion                                                                                                                         |                                            |           | 620,043      |            |          |           | 792,959     |           
|                                                        | Obligations under capital leases  current portion                                                                                                         |                                            |           | 12,732       |            |          |           | 9,929       |           
|                                                        |                                                                                                                                                            |                                            |           |              |            |          |           |             |           
|                                                        |                                                                                                                                                            | Total current liabilities                  |           |              | 2,191,792  |          |           |             | 2,683,868  | 
|Deferred revenue  less current portion                 |                                                                                                                                                            |                                            | 3,026,012 |              |            |          | 2,446,741 |            
|Deferred rent                                           |                                                                                                                                                            |                                            | 143,503   |              |            |          | 196,294   |            
|Obligations under capital leases  less current portion |                                                                                                                                                            |                                            | 4,613     |              |            |          | 2,074     |            
|Stockholders equity:                                   |                                                                                                                                                            |                                            |           |              |            |          |           |            
|                                                        | Preferred stock, par value $.01; 10,000,000 shares
authorized; no shares issued and outstanding                                                            |                                            |           |             |            |          |           |            |           
|                                                        | Common stock, par value $.01; 50,000,000 shares
authorized; shares issued and
outstanding: 25,651,677 at December 31, 2001
and 25,655,717
at June 30, 2002 |                                            |           | 256,517      |            |          |           | 256,557     |           
|                                                        | Additional paid-in capital                                                                                                                                 |                                            |           | 82,687,749   |            |          |           | 82,708,098  |           
|                                                        | Accumulated deficit                                                                                                                                        |                                            |           | (71,003,963  | )          |          |           | (73,422,299 | )         
|                                                        |                                                                                                                                                            |                                            |           |              |            |          |           |             |           
|                                                        |                                                                                                                                                            | Total stockholders equity                 |           |              | 11,940,303 |          |           |             | 9,542,356  | 
|                                                        |                                                                                                                                                            |                                            |           |              |            |          |           |             |           
|                                                        |                                                                                                                                                            | Total liabilities and stockholders equity |           | $            | 17,306,223 |          |           | $           | 14,871,333 | 
|                                                        |                                                                                                                                                            |                                            |           |              |            |          |           |             |           

See accompanying notes to financial statements.

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Epoch Biosciences, Inc.
Statements of Operations
(unaudited)

|                                                                         |                                 |                          |            |                    |            |                  |            |           |            |      |            |           |            |   |            |           |            |  
|------------------------------------------------------------------------ | ------------------------------- | ------------------------ | ---------- | ------------------ | ---------- | ---------------- | ---------- | --------- | ---------- | ---- | ---------- | --------- | ---------- | - | ---------- | --------- | ---------- | -
|                                                                         |                                 |                          |            | Three Months Ended |            | Six Months Ended
|                                                                         |                                 |                          |            | June 30,           |            | June 30,        
|                                                                         |                                 |                          |            |                    |            |                 
|                                                                         |                                 |                          |            | 2001               |            | 2002             |            | 2001      |            | 2002
|                                                                         |                                 |                          |            |                    |            |                  |            |           |            |     
|Revenue:                                                                 |                                 |                          |            |                    |            |                  |            |           |            |      |            |           |            |   |            |          
|                                                                         | Product sales                   |                          | $          | 1,135,441          |            |                  | $          | 1,700,397 |            |      | $          | 2,156,684 |            |   | $          | 3,224,591 |           
|                                                                         | License fees and royalty income |                          |            | 134,040            |            |                  |            | 255,909   |            |      |            | 162,192   |            |   |            | 432,998   |           
|                                                                         | Contract research revenue       |                          |            | 500,000            |            |                  |            | 531,757   |            |      |            | 1,000,000 |            |   |            | 1,112,430 |           
|                                                                         |                                 |                          |            |                    |            |                  |            |           |            |      |            |           |            |   |            |           |           
|                                                                         |                                 | Total revenue            |            |                    | 1,769,481  |                  |            |           | 2,488,063  |      |            |           | 3,318,876  |   |            |           | 4,770,019  |  
|Operating expenses:                                                      |                                 |                          |            |                    |            |                  |            |           |            |      |            |           |            |   |            |          
|                                                                         | Cost of product sales           |                          |            | 748,139            |            |                  |            | 1,194,831 |            |      |            | 1,626,867 |            |   |            | 2,294,196 |           
|                                                                         | Research and development        |                          |            | 1,193,929          |            |                  |            | 1,118,933 |            |      |            | 2,325,718 |            |   |            | 2,185,871 |           
|                                                                         | Sales and marketing             |                          |            | 105,712            |            |                  |            | 319,297   |            |      |            | 173,962   |            |   |            | 701,608   |           
|                                                                         | General and administrative      |                          |            | 1,029,649          |            |                  |            | 1,081,266 |            |      |            | 1,964,177 |            |   |            | 2,068,772 |           
|                                                                         |                                 |                          |            |                    |            |                  |            |           |            |      |            |           |            |   |            |          
|                                                                         |                                 | Total operating expenses |            |                    | 3,077,429  |                  |            |           | 3,714,327  |      |            |           | 6,090,724  |   |            |           | 7,250,447  |  
|                                                                         |                                 | Operating loss           |            |                    | (1,307,948 | )                |            |           | (1,226,264 | )    |            |           | (2,771,848 | ) |            |           | (2,480,428 | )
|                                                                         | Interest income, net            |                          |            | 117,689            |            |                  |            | 24,680    |            |      |            | 276,426   |            |   |            | 62,092    |           
|                                                                         |                                 |                          |            |                    |            |                  |            |           |            |      |            |           |            |   |            |           |           
|                                                                         |                                 | Net loss                 |            | $                  | (1,190,259 | )                |            | $         | (1,201,584 | )    |            | $         | (2,495,422 | ) |            | $         | (2,418,336 | )
|                                                                         |                                 |                          |            |                    |            |                  |            |           |            |      |            |           |            |   |            |          
|Net loss per share  basic and diluted                                   |                                 | $                        | (0.05      | )                  |            | $                | (0.05      | )         |            | $    | (0.10      | )         |            | $ | (0.09      | )        
|                                                                         |                                 |                          |            |                    |            |                  |            |           |            |      |            |           |            |   |            |          
|Weighted average number of common shares
outstanding  basic and diluted |                                 |                          | 25,632,619 |                    |            |                  | 25,655,649 |           |            |      | 25,534,198 |           |            |   | 25,654,590 |          

See accompanying notes to financial statements.

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Epoch Biosciences, Inc.
Statements of Cash Flows
(unaudited)

|                                      |                                                                             |                                                                  |                                   |                                                     |            |                           |            |            |          |          |            |  
|------------------------------------- | --------------------------------------------------------------------------- | ---------------------------------------------------------------- | --------------------------------- | --------------------------------------------------- | ---------- | ------------------------- | ---------- | ---------- | -------- | -------- | ---------- | -
|                                      |                                                                             |                                                                  |                                   |                                                     |            | Six Months Ended June 30,
|                                      |                                                                             |                                                                  |                                   |                                                     |            |                          
|                                      |                                                                             |                                                                  |                                   |                                                     |            | 2001                      |            | 2002      
|                                      |                                                                             |                                                                  |                                   |                                                     |            |                           |            |           
|Cash flows from operating activities: |                                                                             |                                                                  |                                   |                                                     |            |                           |            |           
|                                      | Net loss                                                                    |                                                                  | $                                 | (2,495,422                                          | )          |                           | $          | (2,418,336 | )       
|                                      | Adjustments to reconcile net loss to net
cash used in operating activities: |                                                                  |                                   |                                                     |            |                           |            |            |         
|                                      |                                                                             | Depreciation and amortization:                                   |                                   |                                                     |            |                           |            |            |          |         
|                                      |                                                                             |                                                                  | Property and equipment            |                                                     |            | 329,674                   |            |            |          | 410,022  |           
|                                      |                                                                             |                                                                  | Intangible assets                 |                                                     |            | 202,853                   |            |            |          | 147,749  |           
|                                      |                                                                             |                                                                  | Deferred stock compensation       |                                                     |            | 23,976                    |            |            |          |         |           
|                                      |                                                                             | Issuance of common stock warrants for services                   |                                   |                                                     | 5,727      |                           |            |            | 19,177   |         
|                                      |                                                                             | Interest accrued on restricted cash                              |                                   |                                                     | (22,327    | )                         |            |            | (20,441  | )       
|                                      |                                                                             | Deferred revenue                                                 |                                   |                                                     | (133,365   | )                         |            |            | (406,355 | )       
|                                      |                                                                             | Deferred rent                                                    |                                   |                                                     | 83,937     |                           |            |            | 52,791   |         
|                                      |                                                                             | Changes in operating assets and liabilities, net
of acquisition: |                                   |                                                     |            |                           |            |            |          |         
|                                      |                                                                             |                                                                  | Accounts receivable               |                                                     |            | (216,205                  | )          |            |          | (207,112 | )         
|                                      |                                                                             |                                                                  | Inventory                         |                                                     |            | (119,992                  | )          |            |          | (144,402 | )         
|                                      |                                                                             |                                                                  | Prepaid expenses and other assets |                                                     |            | (76,037                   | )          |            |          | (115,813 | )         
|                                      |                                                                             |                                                                  | Accounts payable                  |                                                     |            | (8,117                    | )          |            |          | 357,592  |           
|                                      |                                                                             |                                                                  | Accrued liabilities               |                                                     |            | 115,959                   |            |            |          | (35,629  | )         
|                                      |                                                                             |                                                                  |                                   |                                                     |            |                           |            |            |         
|                                      |                                                                             |                                                                  |                                   | Net cash used in operating activities               |            |                           | (2,309,339 | )          |          |          | (2,360,757 | )
|                                      |                                                                             |                                                                  |                                   |                                                     |            |                           |            |            |         
|                                      | Cash flows from investing activities:                                       |                                                                  |                                   |                                                     |            |                           |            |            |         
|                                      |                                                                             | Release of security deposit on facilities                        |                                   |                                                     |           |                           |            |            | 100,000  |         
|                                      |                                                                             | Acquisition of property and equipment                            |                                   |                                                     | (1,408,819 | )                         |            |            | (269,634 | )       
|                                      |                                                                             | Acquisition of Synthetic Genetics                                |                                   |                                                     | (357,692   | )                         |            |            |         |         
|                                      |                                                                             |                                                                  |                                   |                                                     |            |                           |            |            |         
|                                      |                                                                             |                                                                  |                                   | Net cash used in investing activities               |            |                           | (1,766,511 | )          |          |          | (169,634   | )
|                                      |                                                                             |                                                                  |                                   |                                                     |            |                           |            |            |         
|                                      | Cash flows from financing activities:                                       |                                                                  |                                   |                                                     |            |                           |            |            |         
|                                      |                                                                             | Payment of capital leases                                        |                                   |                                                     | (23,026    | )                         |            |            | (5,342   | )       
|                                      |                                                                             | Proceeds from exercise of warrants                               |                                   |                                                     | 332,376    |                           |            |            |         |         
|                                      |                                                                             | Proceeds from exercise of stock options                          |                                   |                                                     | 46,798     |                           |            |            | 1,212    |         
|                                      |                                                                             |                                                                  |                                   |                                                     |            |                           |            |            |         
|                                      |                                                                             |                                                                  |                                   | Net cash provided by (used in) financing activities |            |                           | 356,148    |            |          |          | (4,130     | )
|                                      |                                                                             |                                                                  |                                   |                                                     |            |                           |            |            |         
|                                      | Net decrease in cash and cash equivalents                                   |                                                                  |                                   | (3,719,702                                          | )          |                           |            | (2,534,521 | )       
|                                      | Cash and cash equivalents at beginning of period                            |                                                                  |                                   | 12,122,461                                          |            |                           |            | 7,489,399  |         
|                                      |                                                                             |                                                                  |                                   |                                                     |            |                           |            |            |         
|                                      | Cash and cash equivalents at end of period                                  |                                                                  | $                                 | 8,402,759                                           |            |                           | $          | 4,954,878  |         
|                                      |                                                                             |                                                                  |                                   |                                                     |            |                           |            |            |         
|                                      | Supplemental disclosure of cash flow information 
Interest payments        |                                                                  | $                                 | 2,732                                               |            |                           | $          | 1,025      |         
|                                      |                                                                             |                                                                  |                                   |                                                     |            |                           |            |            |         

See accompanying notes to financial statements

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Epoch Biosciences, Inc.
Notes to Financial Statements
June 30, 2002
(unaudited)

1.   Summary of Significant Accounting Policies



|(a) |  | Nature of Business
|--- |  | ------------------

Epoch Biosciences, Inc. is a biotechnology company developing technologies
and making products to help scientists around the world perform genetic
research to improve our lives and our environment. Genetic analysis has become
a pervasive activity in academic, biopharmaceutical, clinical, agricultural,
veterinary and forensic laboratories. Our technologies facilitate rapid,
accurate and cost-effective genetic analysis at the scale necessary to generate
the massive amounts of genetic information being studied today.

As the human genome and other animal and plant genomes are sequenced, the
task of understanding the structure and function of genes lies before us
(genomics). Researchers want to know when and why a gene switches on and
begins producing its protein (gene expression) and what the genes protein does
in the body (proteomics). Finally, researchers want to know what peoples
genetic similarities and differences mean for their health and susceptibility
to disease. For example, single nucleotide polymorphisms, or SNPs, are tiny
differences in our DNA that make humans different from one another. SNPs have
been linked to good and bad traits, including hereditary and acquired diseases,
and to peoples response to medications.

Because of the implications of understanding gene function on human health
and disease, institutions have moved quickly to design and manufacture
automated genetic analysis systems. We develop patented technologies that
improve the output of these systems. Our technologies are compatible with many
of the genetic analysis systems currently in use or in development. Just as
microprocessors are found in essentially all electronic appliances, our
chemistries and technologies have the potential to be incorporated in nearly
all genetic analysis systems.



|(b) |  | Basis of Presentation
|--- |  | ---------------------

The unaudited financial statements have been prepared in accordance with
accounting principles generally accepted in the United States for interim
financial information and with the instructions to Form 10-Q. Accordingly,
they do not include all of the information and footnotes required to be
presented for complete financial statements. The accompanying financial
statements include all adjustments (consisting only of normal recurring
accruals), which are, in the opinion of management, necessary for a fair
presentation of the results for the interim periods presented. Certain 2001
balances have been reclassified to conform with the 2002 presentation.

The financial statements and related disclosures have been prepared with
the presumption that users of the interim financial information have read or
have access to the audited financial statements for the preceding fiscal year.
Accordingly, these financial statements should be read in conjunction with the
audited financial statements and the related notes included in Epochs 2001
Annual Report on Form 10-K as filed with the Securities and Exchange
Commission.



|(c) |  | Loss Per Share
|--- |  | --------------

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Basic loss per share is computed based on weighted average shares
outstanding during the reporting period and excludes any potential dilution.
Diluted loss per share reflects potential dilution from the exercise or
conversion of securities into common stock or from other contracts to issue
common stock. Our capital structure includes common stock options and common
stock warrants, all of which have been excluded from net loss per share
calculations as they are antidilutive, as follows:

|                     |  |             |           |      |  |  |           | 
|-------------------- |  | ----------- | --------- | ---- |  |  | --------- | 
|                     |  | At June 30,
|                     |  |            
|                     |  | 2001        |           | 2002
|                     |  |             |           |     
|Outstanding options  |  |             | 2,285,634 |      |  |  | 2,760,229 | 
|Outstanding warrants |  |             | 383,333   |      |  |  | 398,333   | 



|(d) |  | Revenue Recognition
|--- |  | -------------------

We earn revenues from several sources. We license our technology for
incorporation into other companies products and earn license fees and
royalties from those companies and generate product revenue from sales of our
chemistries to them. We also sell our products to end-users; both through our
direct sales force and through distributors that provide worldwide reach. We
also earn revenues through contract research activities, whereby third party
companies pay for research and development activities carried out by our
scientists.

Revenues from product sales that require no ongoing obligations are
recognized when shipped to the customer and title has passed.

Up front license fees are recognized over the term of the agreement to
which the license fees correspond, which may extend to the expiration of the
underlying patents, and based on the terms and future performance obligations
in the underlying agreements. Deferred revenue represents advance payments for
license fees, product purchases and contract research.

Contract research revenues are recognized as the research and development
activities are performed under the terms of commercial collaboration and supply
agreements and government grants. Direct costs related to these contracts and
grants are reported as research and development expenses.

Royalty revenues are recognized when earned under the terms of the related
agreements, which is generally upon sale by our partners of products containing
our component products.



|(e) |  | Concentration of Credit Risk
|--- |  | ----------------------------

Credit is extended based on an evaluation of a customers financial
condition and collateral is generally not required. The majority of revenues
are derived from private and public companies and public enterprises in the
research market in the United States.

One customer accounted for approximately 56% of revenues in the current
quarter and 58% of revenues in the current year to date. Revenues from this
customer were 55% of total revenues in the comparable quarter of the prior year
and 54% of revenues in the first six months of 2001. Accounts receivable from
this customer amounted to $197,000 at June 30, 2002. There were no amounts due
from this customer December 31, 2001.

A second customer accounted for approximately 15% of revenues in the
current quarter and 9%
of revenues in the current year to date. Revenues from this customer were
3% of total revenues in the

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comparable quarter of the prior year and 5% of
revenues in the first six months of 2001. Accounts receivable from this
customer amounted to $97,000 at June 30, 2002, and $28,000 at December 31,
2001.

Another customer accounted for approximately 5% of revenues in the current
quarter and 8% of revenues in the current year to date. Revenues from this
customer were 16% of total revenues in the comparable quarter of the prior year
and 18% of revenues in the first six months of 2001. Accounts receivable from
this customer amounted to $85,000 at June 30, 2002, and $46,000 at December 31,
2001.



|(f) |  | Intangible Assets
|--- |  | -----------------

In July 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other
Intangible Assets. Under SFAS No. 142, goodwill and other indefinite-lived
intangible assets, including any such intangibles recorded in past business
combinations, are not amortized beginning January 1, 2002. SFAS No. 142 also
requires the assets to be written down with a goodwill impairment charge
against current earnings whenever the recorded values exceed their fair values.
We adopted SFAS No. 142 on January 1, 2002 and accordingly have not recorded
any amortization of our goodwill and other indefinite-lived intangible assets
during the six months ended June 30, 2002. If this standard had been
implemented as of January 1, 2001, amortization expense for the three months
ended June 30, 2001 would have been reduced by $39,000, and amortization
expense for the six month period ended June 30, 2001 would have been reduced by
$77,000.



|(g) |  | Bank Financing Commitment
|--- |  | -------------------------

In August 2002, we received a commitment from a commercial bank for a
secured term loan of up to $2,500,000 to finance manufacturing equipment and
other assets and a working capital line of credit of $750,000. Subject to the
execution of definitive loan documents, funds may be drawn on the equipment
facility at any time through June 30, 2003, and on the working capital line of
credit at any time for two years from the closing date, provided that we are in
compliance with the following covenants:



| |  |  | We maintain an Adjusted Quick Ratio of 1.3:1. Adjusted Quick
Ratio is defined as the sum of unrestricted cash and cash
equivalents and trade accounts receivable divided by the sum of
current liabilities, excluding current deferred revenues, and bank
debt.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | We maintain Minimum Tangible Net Worth of $1,500,000.
Minimum Tangible Net Worth is defined as total equity in accordance
with generally accepted accounting principles less intangible
assets.                                                                
|
| |  |  | We maintain with the bank our primary operating accounts and
a minimum of 50% of our investment funds.                                                                                                                                                         

We are currently in compliance with each of these covenants. On the term
loan, amounts advanced would be repayable in 36 monthly payments of principal
and interest at the banks prime rate (currently 4.75%) plus .5%. On the
working capital line of credit, interest would be payable monthly on any unpaid
balances at the banks prime rate (currently 4.75%) plus .5%, with principal
payable in full in two years from the date of the signing of the agreement. We
have not drawn funds on either of these facilities to date.

There can be no assurance that we will successfully complete loan
documents and other steps necessary to finalize these credit facilities, or
that we will be able to draw funds on either the term loan or
on the working capital line of credit.

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|        |  |                                                                                      
|------- |  | -------------------------------------------------------------------------------------
|Item 2. |  | Managements Discussion and Analysis of Financial Condition and
Results of Operations

This Quarterly Report on Form 10-Q includes forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
That Act provides a safe harbor for forward-looking statements to encourage
companies to provide prospective information about themselves so long as they
identify these statements as forward-looking and provide meaningful, cautionary
statements identifying important factors that could cause actual results to
differ from the projected results.

Other than statements of historical fact, all statements in this Quarterly
Report on Form 10-Q and, in particular, any projections of or statements as to
our expectations or beliefs concerning our future financial performance or
financial position or as to future trends in our business or in our markets,
are forward-looking statements. Forward-looking statements reflect our current
expectations and are inherently uncertain and our actual results in future
periods may differ materially from our expectations concerning our projections
of those results or of future business trends described in this Quarterly
Report on Form 10-Q. The sections below entitled Certain Factors that May
Affect Our Business and Future Results under Item 2, Managements Discussion
and Analysis of Financial Condition and Results of Operations, describe some,
but not all, of the factors, risks and uncertainties that could cause these
differences, including but not limited to the possibility that potential
products utilizing the Companys technology may be ineffective or, although
effective, may be uneconomical to market; that third parties hold proprietary
rights that preclude Epoch or its licensees from marketing its products; or
that third parties may market superior products. Readers of this Quarterly
Report on Form 10-Q are urged to read those sections in their entirety. In
light of the significant uncertainties inherent in the forward-looking
information included in this document, the inclusion of information should not
be regarded as a representation by us or any other person that our objectives
or plans will be achieved. The forward-looking statements contained in this
Quarterly Report on Form 10-Q are made only as of the date of this Quarterly
Report on Form 10-Q and Epoch undertakes no obligation to update or revise the
forward-looking statements, whether as a result of new information, future
events or otherwise.

The following discussion of Epochs financial condition and results of
operations should be read in conjunction with the financial statements and the
related notes thereto included elsewhere in this Quarterly Report on Form 10-Q
and other documents Epoch files from time to time with the Securities and
Exchange Commission, including subsequent Current Reports on Form 8-K,
Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K.

Results of Operations

Overview

We develop proprietary products with commercial applications in the fields
of genomics and molecular diagnostics, including specialty chemistries, probes
and other genomic detection systems. We sell our products to end users, and
also provide chemical intermediate products that are utilized by our
collaborative partners and other parties in the manufacture of products to be
sold to end-users by those parties. Sales of chemical intermediates began in
December 1999, and have continued to grow steadily as our technologies become
better known and validated, and as we executed collaborative agreements with
Applied Biosystems and Third Wave Technologies, among others. In November
2000, we acquired the assets of Synthetic Genetics, a provider of specialty
probes. The transaction was accounted for using the purchase method of
accounting.

Subsequent Event

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In July 2002, we entered an agreement with Amersham Biosciences Corp., the
life sciences business of Amersham plc, under which Amersham became the
exclusive worldwide sales and marketing partner of our MGB Eclipse Probe
Systems to the research field. Under the terms of the agreement, Amersham will
promote and market MGB Eclipse products as part of its genomics product
portfolio to researchers in the life sciences industry and to pharmaceutical
companies conducting internal research. Amersham will need to meet certain
milestones to retain its exclusive distributor status.

Amershams sales force will offer MGB Eclipse catalogue and custom probe
sets and will receive technical support and sales coordination from us in the
initial stages of the relationship. We will also make our MGB Eclipse Design
Software available from the Amersham Biosciences web site to enable customers
to rapidly design and order MGB Eclipse probes and primers specifically for a
sequence of interest. We will be the sole manufacturer of the MGB Eclipse
product line.

Critical Accounting Policies

Our accounting policies are more fully described in Note 1 to our annual
financial statements for the year ended December 31, 2001. However, certain of
our accounting policies are particularly important to the portrayal of our
financial position and results of operations and require the application of
significant judgment by our management. As a result they are subject to an
inherent degree of uncertainty. In applying those policies, our management
uses its judgment to determine the appropriate assumptions to be used in the
determination of the estimates. Those estimates are based on our historical
experience, terms of existing contracts, our observance of trends in the
industry, information provided by our customers and information available from
other outside sources, as appropriate. Our critical accounting policies, which
have not changed significantly from December 31, 2001, are as follows:



| |  |  | revenue recognition; and    
| | - |  | ----------------------------
|
| |  |  | accounting for income taxes.

Revenue recognition. We earn product revenues through sales of chemical
products and reagents to manufacturers for incorporation into their products,
from the sale of specialty oligonucleotides and value added reagents to end
users in the research fields of genomics and molecular diagnostics, from
license fees for the use of our proprietary technology and know-how, and by
providing services to third parties for performing research and development on
their behalf. We also have product royalty agreements that result in royalties
to us upon ultimate sales of products by our partners.

Revenues from product sales that require no ongoing obligations are
recognized when shipped to the customer and title has passed.

Up front license fees are recognized over the term of the agreement to
which the license fees correspond, which may extend to the expiration of the
underlying patents, and based on the terms and future performance obligations
in the underlying agreements. Deferred revenue principally represents license
fees received in advance and prepayments for product purchases.

Contract research revenues are recognized as the research and development
activities are performed under the terms of commercial collaboration and supply
agreements and government grants. Direct costs related to these contracts and
grants are reported as research and development expenses.

Royalty revenues are recognized when earned under the terms of the related
agreements, which is generally upon sale of products by our partner containing
our component products.

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Accounting for income taxes. Deferred income taxes are provided based on
the estimated future tax effects of carryforward and temporary differences
between the financial statement carrying amounts of existing assets and
liabilities ant their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those carryforwards and temporary differences are
expected to be recovered or settled. The effect on the deferred tax assets and
liabilities of a change in tax rates is recognized in the period that includes
the enactment date. A valuation allowance is recorded for deferred tax assets
when it is more likely than not that such deferred tax assets will not be
realized.

The gross deferred tax assets as of December 31, 2001 were approximately
$26 million, and have been fully reserved based on our history of operating
losses.

Revenues

Product Sales. Product sales increased 50% to $1,700,000 in the quarter
ended June 30, 2002 from $1,135,000 in the comparable quarter of the prior
year. Growth in the companys San Diego custom oligonucleotide operation and
in chemical intermediate shipments to our collaborative partners drove this
quarters increased product sales. Product sales similarly increased 50% to
$3,225,000 for the six month period ended June 30, 2002 from $2,157,000 in the
prior year period as a result of the same growth.

The growth in the custom oligonucleotide business this quarter was
primarily due to sales to one customer that increased to $371,000 in the
quarter ended June 30, 2002 from $55,000 in comparable quarter of the prior
year. Sales to this customer similarly increased to $408,000 for the six month
period ended June 30, 2002 from $150,000 in the prior year period. There can
be no assurance that revenue from this customer will continue at those levels.

License Fees and Royalties. License fees and royalties increased to
$256,000 in the quarter ended June 30, 2002 from $134,000 in the comparable
quarter of the prior year, indicative of the growth in the product revenues of
our corporate partners. License fees and royalties similarly increased to
$433,000 for the six month period ended June 30, 2002 from $162,000 in the
prior year period also reflecting the growth in the product revenues of our
corporate partners.

Contract Research. Contract research revenue increased to $532,000 in the
quarter ended June 30, 2002 from $500,000 in the comparable period of the prior
year, primarily as a result of a new SBIR grant which began in August 2001 and
additional research activity for a commercial collaborator which began in April
2002, offset by reductions in other activities as one of our collaborative
partners is not currently requiring contract research from us. We are
currently in discussion with this partner regarding future research funding
commitments. Similarly, contract research revenue increased to $1,112,000 for
the six month period ended June 30, 2002 from $1,000,000 in the prior year
period, as a result of the same changes.

Operating Expenses

Cost of Product Sales. Cost of product sales increased to $1,195,000 in
the quarter ended June 30, 2002 from $748,000 in the comparable quarter of the
prior year primarily as a result of the increase in product sales. Costs as a
percentage of product sales increased from 66% in second quarter 2001 to 70%
this quarter.

The cost of product sales increased to $2,294,000 in the six month period
ended June 30, 2002 compared to $1,627,000 in the comparable period of the
prior year. Costs as a percentage of product sales decreased from 75% for the
six month period ended June 30, 2001 to 71% for the current years

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period.

Increases in costs of product sales are generally tied to the increases in
revenues, while the changes in costs as a percentage of product sales are
generally impacted by the product mix. The selling prices of our chemical
intermediates, for example, are determined by contracts and are tied to fully
burdened manufacturing costs, which means our gross margin is fixed at levels
below those generally found in the commercial marketplace. The costs of our
specialty oligonucleotides are impacted by our San Diego manufacturing
operations where we continue to invest in capital equipment and staff as we
increase our capacity to support our expected revenue growth.

Research and Development. Research and development expenses decreased to
$1,119,000 in the quarter ended June 30, 2002 from $1,194,000 in the comparable
quarter of the prior year due primarily to a higher level of personnel and
other costs being involved in the manufacturing of chemical intermediates
versus working on research and development activities, partially offset by
higher personnel costs. A similar allocation of resources to the manufacture
of chemical intermediates versus research and development activities resulted
in a reduction of research and development expenses for the six months ended
June 30, 2002 to $2,186,000 from $2,326,000 in the comparable period of 2001.

Sales and Marketing. Sales and marketing expenses increased to $319,000
in the quarter ended June 30, 2002 from $106,000 in the comparable quarter of
the prior year. The primary reason for the increase is effort on our part to
market and sell our products, including an expanded direct sales group, the
establishment of an internal product and corporate marketing function, and
expanded print advertising activities. Similarly the sales and marketing
expenses for the six month period increased to $702,000 from $174,000 in the
prior year period.

General and Administrative. General and administrative expenses increased
to $1,081,000 in the quarter ended June 30, 2002 from $1,030,000 in the
comparable quarter of the prior year due primarily to increased personnel
costs, partially offset by decreased recruiting and relocation expenses and a
reduction in amortization expense on goodwill in accordance with SFAS 142, in
2002. Similarly, the general and administrative expenses for the six month
period increased to $2,069,000 from $1,964,000 in the prior year period, again
primarily due to increased personnel costs partially offset by decreased
recruiting and relocation expenses, and a reduction of amortization expense on
goodwill in 2002.

Interest Income, Net. Interest income, net, decreased to $25,000 in the
second quarter of 2002 compared to $118,000 in the second quarter of 2001, and
also decreased for the six month period ended June 30, 2002 to $62,000 from
$276,000 in the comparable period of the prior year, as a result of lower
average cash balances available for investment and lower realized interest
rates.

Liquidity and Capital Resources

Cash and cash equivalents amounted to $4,955,000 at June 30, 2002, a
$2,535,000 decrease from December 31, 2001 balances.

Cash used in operations during the six month period ended June 30, 2002
amounted to $2,361,000 as a result of our net loss of $2,418,000 adjusted for
certain non-cash reconciling items and
fluctuations in working capital accounts. The most significant working
capital account changes that impacted cash used by operations were increases in
accounts receivable of $207,000 and inventories of $144,000 to support our
increased sales volumes, offset by an increase in accounts payable of $358,000,
which is a normal fluctuation resulting from the increased activity. Also,
approximately $406,000 in product sales and royalties recognized during the six
months ended June 30, 2002, compared to $133,000

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in six month period of 2001,
had been received in advance and recorded as deferred revenue and therefore
didnt generate cash in the current period. The amounts and timing of these
offsets are based on contracts with our partners.

Cash used in investing activities amounted to $170,000 in the six months
ended June 30, 2002. Acquisition of property and equipment totaling $270,000
was offset by $100,000 in security deposits on our Bothell facility being
returned to us for general use. We continue to invest in manufacturing
equipment as we prepare for anticipated growth in demand for our products and
we expect that we will have a higher level of capital expenditures in the
second half of 2002 than we had in the first half of 2002. In addition to
increased manufacturing capacity, we will also continue to make other
investments to support our operational growth. We may also require a larger
inventory of raw materials and products to provide better service to our
customers. We may finance these purchases from our cash and cash equivalents
on hand, cash generated from our operations, borrowings, equity offerings, or a
combination thereof.

Cash used in financing activities was minimal in the period and consisted
of repayments on capital leases of $5,000 offset by $1,000 received from the
exercise of stock options.

We anticipate that existing cash balances and projected cash from
operations, will be sufficient to meet our anticipated working capital and
capital expenditure needs through at least the next 12 months. In addition to
our existing cash balances and projected cash from operations, we anticipate
borrowings under the bank financing commitment discussed in note (g) above may
be used to fund our capital equipment expenditures and growth in our working
capital requirements. However, it is possible that we may need to raise
additional capital to fund our activities, to maintain our listing on Nasdaq,
and/or to consummate acquisitions of other businesses, products or
technologies. We may be able to raise such funds by selling more stock to the
public or to selected investors, or by borrowing money. In addition, even
though we may not need additional funds, we may still elect to sell additional
equity securities or obtain credit facilities for other reasons. We may not be
able to obtain additional funds on terms that would be favorable to our
shareholders and us, or at all. If we raise additional funds by issuing
additional equity or convertible debt securities, the ownership percentages of
existing shareholders would be reduced. In addition, the equity or debt
securities that we issue may have rights, preferences or privileges senior to
those of the holders of our common stock.

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Certain Factors That May Affect Our Business And Future Results

Forward Looking Statements

Some of the information included herein contains forward-looking
statements. These statements can be identified by the use of forward-looking
terms such as may, will, expect, anticipates, estimate, continue,
or other similar words. These statements discuss future expectations,
projections or results of operations or of financial condition or state other
forward-looking information. When considering these forward-looking
statements, you should keep in mind the risk factors and other cautionary
statements we make. These risk factors could cause our actual results to
differ materially from those contained in any forward-looking statement. If
any of the following risks actually occur, our business could be harmed and the
trading price of our common stock could decline.

We have never been profitable and anticipate future losses, and we may require
additional capital

We have never been profitable. Since our formation in 1985, we have
generated limited revenues. As of June 30, 2002, we had an accumulated deficit
of approximately $73 million. While we are commercializing our products and
technologies, and prior to adequate revenues being generated from these
activities, we expect to incur additional losses as we expand our manufacturing
capacity, continue our research and development activities and fund our product
commercialization efforts. There is no assurance that we will ever become
profitable or that we will sustain profitability if we do become profitable.
Should we experience continued or unforeseen operating losses, our capital
requirements would increase and our stock price would likely decline.

Additionally, as of June 30, 2002 we had $4,955,000 in cash and cash
equivalents and have a commitment from a bank for a secured term loan of
$2,500,000 and also a working capital line of credit of $750,000. We currently
anticipate that our current cash balances, cash from operations, and borrowing
capacity will be sufficient to meet our cash needs through at least the next
twelve months. However, we may need to seek additional equity and/or debt
capital, and there can be no assurance that such capital will be available to
us on favorable terms, or at all. If additional funds are not available, we
would be required to delay, reduce, or eliminate expenditures for some of all
of our programs or products.

There is a risk that our technology may not be effective or might not work

The science and technology of synthetic DNA-based products is rapidly
evolving. While we are beginning to produce and supply products to customers
for commercial use, the majority of our products and proposed products are in
the discovery or early development stage. The proposed products will require
significant further research, development, and testing. We face the risk that
any or all of our products and proposed products could prove to be ineffective
or unsafe, or be an inferior product to products marketed by others because our
products are based on new and unproven innovative technologies. Some of our
current research and development activities may not result in any commercially
viable products. If we do not have commercially viable products, we will not
be able to sell our products, we will not be able to attract partners, and we
will not be able to generate funds internally to support operations.

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We may be unable to maintain our listing on Nasdaq, which could cause our stock
price to fall materially and decrease the liquidity of our common stock

Our common stock is currently is listed on The Nasdaq National Market. To
maintain the listing, we must continue to satisfy Nasdaqs ongoing compliance
requirements, including a current requirement that we have $4 million in net
tangible assets, which means our total assets, excluding goodwill, minus our
total liabilities. Effective November 1, 2002, that requirement will be
replaced by a requirement that we maintain a minimum of $10 million in
stockholders equity. At June 30, 2002, we had approximately $7.4 million in
net tangible assets and $9.5 million in stockholders equity. On August 1,
2002, we received an initial warning letter from Nasdaq stating that based on
our most recent public filings, we may not qualify under the minimum
stockholders equity standard when it takes effect on November 1, 2002.

Another Nasdaq continued listing requirement is that our common stock must
have a minimum bid price of $1.00 per share. In July and August 2002, our
stock traded below the $1 minimum, although it did not close below that level.

If our common stock were to trade below the $1.00 minimum bid requirement
for a period of 30 consecutive business days or more, or if we do not meet the
new stockholders equity requirement when it goes into effect in November,
Nasdaq could initiate delisting procedures, at which time we could apply for
listing of our common stock on The Nasdaq Small Cap Market, or initiate an
appeal with Nasdaq in order to remain qualified to be listed on The Nasdaq
National Market pending the final disposition of the appeal. If our common
stock is delisted for any reason, and any appeal we might file receives an
unfavorable determination by Nasdaq, our common stock would be removed from
listing on The Nasdaq National Market, and to be relisted we would need to meet
listing standards that are more difficult to satisfy than the continued listing
standards described above.

If our common stock is delisted from trading on The Nasdaq National Market
and is neither relisted thereon nor listed for trading on The Nasdaq SmallCap
Market, we would likely seek listing of our common stock in the
over-the-counter market, which is viewed by many investors as a less liquid
marketplace. Delisting of our common stock would result in limited release of
the market price of the common stock and limited news coverage of our
activities and could reduce investors interest in the common stock. Also, a
delisting could cause our stock price to decrease materially, as well as
materially and adversely affect the trading market for our common stock, our
ability to issue additional securities and our ability to secure additional
financing. In addition, if our common stock is not listed on The Nasdaq
National Market or Nasdaq SmallCap Market, and the trading price of our common
stock is less than $5 per share, our common stock could be deemed to be a
penny stock under the Securities Enforcement and Penny Stock Reform Act of
1990, which would require additional disclosure and procedures in connection
with trades in the common stock, including the delivery of a disclosure
schedule explaining the nature and risks of the penny stock market. Such
requirements could severely limit the liquidity of our common stock.

We have limited manufacturing experience

While we have experience in researching and developing unique, proprietary
technologies to enhance the study of genes, and in manufacturing
oligonucleotides, our experience in manufacturing other chemical reagent
products is relatively limited. While we are producing and supplying products
to customers for commercial use, we do not currently have the capacity for
high-volume production of our
reagents, nor do we currently have the capacity to meet our projected
sales of specialty oligonucleotides. We will need to expand our reagent and
oligonucleotide manufacturing capacity in connection with the

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continued development and commercialization of our products. Any delay or inability to
expand our manufacturing capacity could materially adversely affect our
manufacturing ability.

There is a risk that we do not own exclusive rights to our technology, or that
our competition may have access to our technology which may prevent us from
selling our products

We attempt to protect our proprietary technology by relying on several
methods, including United States patents. We also have international patent
applications that correspond to many of the U.S. patents and patent
applications. The issued patents and pending patent applications cover
inventions relating to the components of our core technologies. The expiration
dates of these patents range from January 2010 to November 2019. We make no
guarantee that any issued patents will provide us with significant proprietary
protection, that pending patents will be issued, or that products incorporating
the technology from our issued patents or pending applications will be free
from challenges by competitors. Further, third parties may hold proprietary
rights, which precede our claims and, therefore, could prohibit us from
marketing the proposed products.

Some of our technology might infringe on the rights of others, which may
prevent us from selling our products

There is a great deal of litigation regarding patents and other
intellectual property rights in the biomedical industry. We were defendants in
one action of this kind, which we settled prior to 1997. Although patent and
intellectual property disputes in the biomedical area are sometimes settled
through licensing or similar arrangements, this kind of solution can be
expensive, if a license can be obtained at all. An adverse determination in a
judicial or administrative proceeding or our failure to obtain necessary
licenses could prevent us from manufacturing and selling our products. This
would substantially hurt our business.

We face numerous competitors and changing technologies which could make our
products obsolete

Many companies do research and development and market products designed to
diagnose conditions based on a number of technologies and are developing
additional products using gene-based technologies. Many of these companies
have substantially greater capital resources, larger research and development
and marketing staffs and facilities and greater experience in developing
products than we have. Furthermore, the specific field in which we operate is
subject to significant and rapid technological change. Even if we successfully
introduce our products or proposed products, our technologies could be replaced
by new technologies or our products or proposed products might be obsolete or
non-competitive.

We will be dependent upon our Agreement with Applied Biosystems for a
significant portion of our revenues for 2002, and a reduction of sales under or
early termination of this Agreement would seriously harm our revenues and
operating results and would likely cause our stock price to decline

In January 1999, Epoch and Applied Biosystems entered into a License and
Supply Agreement pursuant to which we licensed some of our technology to
Applied Biosystems for use in its TaqMan® 5-nuclease real-time PCR assays, or
tests (TaqMan® is a registered trademark of Roche Molecular Systems, Inc.). In
July 1999, we licensed our proprietary software, which speeds the design of
chemical tools used in the study of genes, to Applied Biosystems. In August
2000, the agreement was amended to include
Epoch manufacturing product for Applied Biosystems. In October 2001, we
further amended our agreement with Applied Biosystems. Under the terms of this
amendment, Applied Biosystems will either purchase a specified minimum number
of probes from us each quarter at a specified price, or pay us a lesser amount
per probe for any probes not ordered below the minimum. This agreement is
effective from

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October 2001 through December 2002. In July 2002 this agreement
was further amended to remove the manufacturing minimums from the contract
effective October 2002, redefine product categories, increase the minimum
royalties and royalty rates, and establish that minimum royalties are measured
and paid quarterly. We will depend upon product sales and royalties from
Applied Biosystems sales of its TaqMan® assays under this agreement for a
significant portion of our revenues for 2002 and future periods. In addition,
we have incurred significant expenditures to date to equip our facilities for
the development of the assays we are developing under this agreement.

Either party may terminate the agreement upon 180 days written notice. In
the event that this agreement is terminated, our revenues, financial condition
and operating results would be adversely affected and our stock price would
likely decline.

Credit

Some of our customers may experience financial difficulties, which could
adversely impact our collection of accounts receivable. Although historically
we have experienced limited credit losses from our trade receivables, our
experience is limited. At June 30, 2002, our allowance for doubtful accounts
was approximately $31,000. We regularly review the collectibility and credit
worthiness of our customers and the receivables to determine an appropriate
allowance for doubtful accounts, however future uncollectable accounts could
exceed our current or future allowances.

The loss of key personnel could adversely affect operations by impairing our
research and our efforts to commercialize and license our products

Our performance is greatly dependent upon our key management including our
Chief Executive Officer, Dr. William Gerber, and technical personnel and
consultants. Our future success will depend in part upon our ability to retain
these people and to recruit additional qualified personnel. We must compete
with other companies, universities, research entities and other organizations
in order to attract and retain highly qualified personnel. Although we have
entered into agreements with our key executive officers, we make no guarantee
that we will retain these highly qualified personnel or hire additional
qualified personnel. We currently maintain no key man life insurance on any of
our management or technical personnel.

The value of our common stock could change significantly in a very short time

The market price of our common stock may fluctuate significantly. For
example, in the year 2001 our stock traded as high as $6.31, and recently
traded at $0.90. The rapid price changes Epoch has experienced recently, and
throughout our history, place your investment in our common stock at risk of
total loss over a short period of time. We are in the biotechnology industry
and the market price of securities of biotechnology companies have fluctuated
significantly and these fluctuations have often been unrelated to the
companies operating performance. Announcements by us or our competitors
concerning technological innovations, new products, proposed governmental
regulations or actions, developments or disputes relating to patents or
proprietary rights, and other factors that affect the market generally could
significantly impact our business and the market price of our securities.

Public opinion regarding ethical issues surrounding the use of genetic
information may adversely affect demand for our products

Public opinion regarding ethical issues related to the confidentiality and
appropriate use of genetic testing results may influence governmental
authorities to call for limits on, or regulation of the use

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of, genetic testing. In addition, these authorities could prohibit testing for genetic
predisposition to certain conditions, particularly for those that have no known
cure. Furthermore, adverse publicity of public opinion relating to genetic
research and testing, even in the absence of any governmental regulation, could
harm our business. Any of these scenarios could reduce the potential markets
for our products and technologies, which could materially and adversely affect
our revenues.

Government regulation of genetic research or testing may adversely affect the
demand for our products and impair our business and operations

Federal, state and local governments may adopt regulations relating to the
conduct of genetic research and genetic testing. These regulations could limit
or restrict genetic research activities as well as genetic testing for research
or clinical purposes. In addition, if state and local regulations are adopted,
these regulations may be inconsistent with, or in conflict with, regulations
adopted by other state or local governments. Regulations relating to genetic
research activities could adversely affect our ability to conduct our research
and development activities. Regulations restricting genetic testing could
adversely affect our ability to market and sell our products and our
technologies. Accordingly, any regulations of this nature could harm our
business.

Health care cost containment initiatives could limit the adoption of genetic
testing as a clinical tool, which would harm our revenues and prospects

In recent years, health care payers as well as federal and state
governments have focused on containing or reducing health care costs. We
cannot predict the effect that any of these initiatives may have on our
business, and it is possible that they will adversely affect our business. In
particular, gene-based therapeutics, if successfully developed and
commercialized, are likely to be costly compared to currently available drug
therapies. Health care cost containment initiatives focused either on
gene-based therapeutics or on genetic testing could cause the growth in the
clinical market for genetic testing to be curtailed or slowed. In addition,
health care cost containment initiatives could also cause pharmaceutical
companies to reduce research and development spending. In either case, our
business and our operating results would be harmed.

18



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Part II.  Other Information

Item 1.  Legal Proceedings

Mordecai Jofen, as Trustee of the Harbor Trust, f/k/a The Edward Blech
Trust v. Epoch Biosciences, Inc., United States District Court for the Southern
District of New York, Case No. 01 CV 4129

The Harbor Trust (formerly the Edward Blech Trust) filed a complaint
against us on May 16, 2001, alleging the breach of a March 29, 1996 letter
agreement between us and David Blech. Pursuant to the letter agreement, upon
payment of a pre-existing debt owed to us by Blech (the Ribonetics Debt), we
were to release to Blech from escrow warrants to purchase 500,000 shares of our
stock. Blech assigned all of his rights under the letter agreement to the
Harbor Trust. The Harbor Trusts claim is based on our alleged failure to
timely register the common stock underlying the warrants, allegedly resulting
in damages to Blech and/or the Trust of at least $10 million, based on the peak
trading value of our stock.

We filed a motions to dismiss the complaint based on, among other things,
the positions that: (1) Blech and the Harbor Trust have never had rights to
receive or exercise the warrants because Blech failed to perform a condition
precedent, i.e., payment of the Ribonetics Debt; and (2) we had no obligation
to register the stock unless and until Blech was entitled to the warrants.
Further, the warrants expired pursuant to the letter agreement in June 2000. In
July 2002, the Court decided in our favor and granted our motion to dismiss
without leave to file an amended complaint.

In August 2002 the Harbor Trust appealed the Courts dismissal of its case
to the United States Court of Appeal for the Second Circuit. While we believe
we have a strong position, it is not possible at this time to state the
likelihood of an unfavorable outcome because of the inherent uncertainties of
litigation.




Item 3.  Quantitative and Qualitative Disclosures About Market Risk

Our financial instruments include cash and short-term investment grade
debt securities. At June 30, 2002 the carrying values of our financial
instruments approximated their fair values based on current market prices and
rates. It is our policy not to enter into derivative financial instruments. We
do not currently have material foreign currency exposure as the majority of its
international transactions are denominated in U.S. currency. Accordingly, we
do not have a significant currency exposure at June 30, 2002.

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Item 4.  Submission of Matters to a Vote of Security Holders

|
|
|
|
|



| | Frederick B. Craves, Ph.D.
Richard L. Dunning
William G. Gerber, M.D.
Herbert L. Heyneker, Ph.D.
Michael Y. Lucero
Riccardo Pigliucci
Sanford S. Zweifach
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) |  | Purpose of the Annual Stockholders Meeting:
| | --- |  | -------------------------------------------



| | (1) |  | Election of Directors. To elect the
following seven nominees to serve as directors until the
next annual meeting of stockholders or until their
successors are elected and have qualified. The
following is a tabulation of votes for each of the
proposed seven nominees for election as directors of the
company.
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                           |  |     |            |         |  |         |        |  |  |  |   | 
|-------------------------- |  | --- | ---------- | ------- |  | ------- | ------ |  |  |  | - | 
|                           |  | For |            | Against |  | Abstain
|                           |  |     |            |         |  |        
|Frederick B. Craves, Ph.D. |  |     | 21,389,205 |         |  |         | 17,650 |  |  |  |  | 
|Richard L. Dunning         |  |     | 21,389,205 |         |  |         | 17,650 |  |  |  |  | 
|William G. Gerber, M.D.    |  |     | 21,389,205 |         |  |         | 17,650 |  |  |  |  | 
|Herbert L. Heyneker, Ph.D. |  |     | 21,368,183 |         |  |         | 38,672 |  |  |  |  | 
|Michael Y. Lucero          |  |     | 21,389,205 |         |  |         | 17,650 |  |  |  |  | 
|Riccardo Pigliucci         |  |     | 21,389,205 |         |  |         | 17,650 |  |  |  |  | 
|Sanford S. Zweifach        |  |     | 21,389,205 |         |  |         | 17,650 |  |  |  |  | 



| | (2) |  | To ratify the appointment of KPMG LLP
as independent auditors of the company for the fiscal
year ending December 31, 2002. The following is the
tabulation of the votes.
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|           |  |         |         |         |  |  |       | 
|---------- |  | ------- | ------- | ------- |  |  | ----- | 
|For        |  | Against |         | Abstain
|           |  |         |         |        
|21,293,700 |  |         | 111,860 |         |  |  | 1,295 | 

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PART II.  Other Information




Item 6.  Exhibits and Reports on Form 8K



| | (a) |  | Exhibits
| | --- |  | --------

|               |         |             |  |                                                                                                                                                                                                                                                                                                                                                                                                
|-------------- | ------- | ----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |         | Description
|               |         |            
|               | 10.21.3 |             |  | Amendment No. 1 to Second Amended and Restated
Collaboration, License and Supply Agreement between Epoch
and Applera Corporation (formerly PE Corporation) dated July 26,
2002. (Portions of this exhibit are omitted and were
filed separately with the Secretary of the SEC pursuant to
the Registrants application requesting confidential
treatment under Rule 406 of the Securities Act).
|               |         |            
|               | 10.30   |             |  | Employment Agreement dated May 13, 2002 by and between Epoch
and Cirilo Cabradilla.                                                                                                                                                                                                                                                                                                            
|               |         |            
|               | 10.31   |             |  | Letter Agreement dated June 10, 2002 between Epoch
Biosciences and Bay City Capital BD LLC. (Portions of this
Exhibit are omitted and were filed separately with the SEC
pursuant to Rule 406 of the Securities Act).                                                                                                                                                                          
|               |         |            
|               | 99.1    |             |  | Certification of Chief Executive Officer Pursuant to 18
U.S.C. Section 1350, As Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                             
|               |         |            
|               | 99.2    |             |  | Certification of Chief Financial Officer Pursuant to 18
U.S.C. Section 1350, As Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                             



| | (b) |  | Reports on Form 8K
| | --- |  | ------------------
|
| |     |  | None              

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Signatures

In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.

|                      |  |                         |  |                                                                              
|--------------------- |  | ----------------------- |  | -----------------------------------------------------------------------------
|                      |  | Epoch Biosciences, Inc.
|                      |  |                         |  |                                                                              
|Date: August 14, 2002 |  | By:                     |  | /s/   Bert W. Hogue

Bert W. Hogue
Vice President and Chief Financial Officer

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EXHIBIT INDEX

|               |         |             |  |                                                                                                                                                                                                                                                                                                                                                                                                
|-------------- | ------- | ----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |         | Description
|               |         |            
|               | 10.21.3 |             |  | Amendment No. 1 to Second Amended and Restated
Collaboration, License and Supply Agreement between Epoch
and Applera Corporation (formerly PE Corporation) dated July 26,
2002. (Portions of this exhibit are omitted and were
filed separately with the Secretary of the SEC pursuant to
the Registrants application requesting confidential
treatment under Rule 406 of the Securities Act).
|               |         |            
|               | 10.30   |             |  | Employment Agreement dated May 13, 2002 by and between Epoch
and Cirilo Cabradilla.                                                                                                                                                                                                                                                                                                            
|               |         |            
|               | 10.31   |             |  | Letter Agreement dated June 10, 2002 between Epoch
Biosciences and Bay City Capital BD LLC. (Portions of this
Exhibit are omitted and were filed separately with the SEC
pursuant to Rule 406 of the Securities Act).                                                                                                                                                                          
|               |         |            
|               | 99.1    |             |  | Certification of Chief Executive Officer Pursuant to 18
U.S.C. Section 1350, As Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                             
|               |         |            
|               | 99.2    |             |  | Certification of Chief Financial Officer Pursuant to 18
U.S.C. Section 1350, As Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.