<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   FORM 10-QSB

                                   (Mark One)

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

                For the quarterly period ended September 30, 1999

                                       OR

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

                For the transition period from        to
                                               ------    -------

                         Commission file number 0-23145

                                  ZYMETX, INC.
             (Exact name of registrant as specified in its charter)

               Delaware                                73-1444040
      (State or other jurisdiction         (I.R.S. Employer Identification No.)
    of incorporation or organization)

        800 Research Parkway, Suite 100                  73104
             Oklahoma City, Oklahoma                   (Zip Code)
    (Address of principal executive offices)


          Issuer's telephone number, including area code: 405-271-1314
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.

                                  Yes  X  No
                                      ---    ---

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

  6,699,695 shares of common stock, $.001 par value, issued and outstanding at
                                November 3, 1999


Transitional Small Business Disclosure Format (check one): Yes     No  X
                                                               ---    ---


<PAGE>   2

                                  ZYMETX, INC.
                                   FORM 10-QSB
                                      INDEX
<TABLE>
<CAPTION>
                                                                                                  Page
<S>          <C>                                                                                <C>
PART I  -  FINANCIAL INFORMATION

Item 1.       Financial Statements (Unaudited)

              Balance Sheets - June 30, 1999 and September 30, 1999................................2

              Statements of Operations - Three Months Ended September 30, 1998 and 1999 and

                Cumulative from Inception to September 30,1999.....................................3

              Statements of Cash Flows - Three Months Ended September 30, 1998 and 1999

                and Cumulative from Inception to September 30, 1999................................4


              Notes to Financial Statements........................................................5

Item 2.       Management's Discussion and Analysis or Plan of Operations...........................7


PART II  - OTHER INFORMATION

Item 2.       Changes in Securities and Use of Proceeds...........................................15

Item 6.       Exhibits and Reports on Form 8-K....................................................15

SIGNATURES........................................................................................16
</TABLE>

                                       1

<PAGE>   3



                                  ZymeTx, Inc.
                          (A Development Stage Company)
                                 Balance Sheets
                (Information at September 30, 1999 is unaudited)

<TABLE>
<CAPTION>
                                                                                   JUNE 30,       SEPTEMBER 30,
                                                                                      1999            1999
                                                                                  ------------    ------------
<S>                                                                               <C>             <C>
Current assets:
   Cash and cash equivalents                                                      $     10,565    $  1,418,437
   Marketable securities, available-for-sale                                         8,735,430       5,708,360
   Accounts receivable, net                                                            192,038          21,852
   Inventory                                                                         1,500,000       1,553,752
   Prepaid insurance and other                                                          46,563          49,411
                                                                                  ------------    ------------
Total current assets                                                                10,484,596       8,751,812

Inventory not expected to be realized within one year                                1,789,931       1,934,792
Property, equipment and leasehold improvements, net                                    673,934         674,359
Proprietary technology and other intangibles, net                                       77,220          72,271
                                                                                  ------------    ------------
Total assets                                                                      $ 13,025,681    $ 11,433,234
                                                                                  ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
   Accounts payable                                                               $    435,178    $    340,838
   Accrued salaries, wages and benefits                                                225,065         312,052
   Accrued sales returns                                                                66,164          80,582
   Other                                                                                52,261         128,872
   Current portion of note payable to stockholder                                      100,000         100,000
                                                                                  ------------    ------------
Total current liabilities                                                              878,668         962,344

Long term obligations --
   Note payable to stockholder due after one year                                      227,390         235,523
   Deferred lease rentals                                                              241,173         284,330

Stockholders' equity:
   Preferred stock $.001 par value; 12,000,000 shares authorized (none issued
     or outstanding at June 30, 1999 or September 30, 1999)                               --              --
   Common stock $.001 par value; 30,000,000 shares authorized (6,692,572 shares
     and 6,696,355 issued and outstanding at June 30, 1999 and September 30,
     1999, respectively)                                                                 6,693           6,696
   Additional paid-in capital                                                       33,557,761      33,564,193
   Deficit accumulated during the development stage                                (21,893,966)    (23,629,856)
   Unrealized holding gains on marketable securities available for sale
                                                                                         7,962          10,004
                                                                                  ------------    ------------
Total stockholders' equity                                                          11,678,450       9,951,037
                                                                                  ------------    ------------
Total liabilities and stockholders' equity                                        $ 13,025,681    $ 11,433,234
                                                                                  ============    ============
</TABLE>

See accompanying notes.


                                       2

<PAGE>   4


                                  ZymeTx, Inc.
                          (A Development Stage Company)
                            Statements of Operations
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                               CUMULATIVE
                                                                                                  FROM
                                                                     THREE MONTHS ENDED        INCEPTION TO
                                                                       SEPTEMBER 30,           SEPTEMBER 30,
                                                                   1998            1999            1999
                                                               ------------    ------------    ------------
<S>                                                            <C>             <C>             <C>
Revenues:
   Sales, net                                                  $      4,750    $      9,773    $    631,196
   Other                                                               --              --             1,303
                                                               ------------    ------------    ------------
Total revenues                                                        4,750           9,773         632,499
   Cost of sales                                                        149           2,455         297,389
                                                               ------------    ------------    ------------
Gross Profit                                                          4,601           7,318         335,110

Operating expenses:
   Research and development                                         278,737         329,884       4,183,196
   Product development                                              163,555         296,843       3,481,308
   Inventory write-down                                                --              --         1,341,761
   Sales and marketing                                              739,556         308,740       4,660,201
   Acquired in-process technology and patent costs from OMRF           --              --         1,108,505
   General and administrative                                       471,568         913,931       5,033,871
                                                               ------------    ------------    ------------
Total operating expenses                                          1,653,416       1,849,398      19,808,842
                                                               ------------    ------------    ------------
Loss from operations                                             (1,648,815)     (1,842,080)    (19,473,732)

Other income (expense):
   Interest and dividend income                                     245,690         121,993       1,751,845
   Interest expense                                                 (16,120)        (15,803)       (211,705)
                                                               ------------    ------------    ------------
Total other income                                                  229,570         106,190       1,540,140
                                                               ------------    ------------    ------------
Net loss                                                         (1,419,245)     (1,735,890)    (17,933,592)

Preferred stock dividends-Series B                                     --              --            11,815
Preferred stock dividends-Series C                                     --              --         5,684,449
                                                               ------------    ------------    ------------
Net loss applicable to common stock                            $ (1,419,245)   $ (1,735,890)   $(23,629,856)
                                                               ============    ============    ============

Basic and diluted net loss per common share                    $       (.21)   $       (.26)   $      (8.22)
                                                               ============    ============    ============

Weighted average common shares outstanding                        6,636,880       6,695,774       2,873,224
                                                               ============    ============    ============
</TABLE>


See accompanying notes.

                                       3

<PAGE>   5



                                  ZymeTx, Inc.
                          (A Development Stage Company)
                            Statements of Cash Flows
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                                                   CUMULATIVE
                                                                                                     FROM
                                                                         THREE MONTHS ENDED       INCEPTION TO
                                                                            SEPTEMBER 30,         SEPTEMBER 30,
                                                                       1998            1999          1999
                                                                  ------------    ------------    ------------
<S>                                                               <C>             <C>             <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net loss                                                          $ (1,419,245)   $ (1,735,890)   $(17,933,592)
Adjustments to reconcile net loss to net cash used by operating
   activities:
     Depreciation and amortization                                      38,538          48,118         286,399
     Provision for doubtful accounts and sales returns                    --           100,000         100,000
     Inventory write-down                                                 --              --         1,341,761
     Acquired technology and patent costs from OMRF                       --              --           336,422
     Accretion of interest                                               7,620           8,133         155,866
     Deferred lease rentals                                             27,712          43,156         284,329
     Changes in operating assets and liabilities:
       Accounts receivable                                              (4,750)        120,186         (71,852)
       Interest receivable on marketable securities                    283,736          92,818         (49,550)
       Prepaid insurance and other                                    (173,059)         (2,848)        (50,593)
       Inventory                                                      (671,024)       (198,613)     (4,764,017)
       Accounts payable                                               (249,887)        (94,340)        340,838
       Accrued salaries, benefits and other                            (53,900)         86,987          86,987
       Other liabilities                                               (29,460)         41,028         372,703
                                                                  ------------    ------------    ------------
Total adjustments                                                     (824,474)        244,625      (1,530,707)
                                                                  ------------    ------------    ------------
Net cash used by operating activities                               (2,243,719)     (1,491,265)    (19,464,299)

CASH FLOW FROM INVESTING ACTIVITIES
Purchase of marketable securities                                  (11,200,084)     (5,648,805)    (47,430,970)
Proceeds from maturities of marketable securities                   11,965,940       8,585,100      41,782,165
Purchase of property, equipment and leasehold improvements
                                                                       (86,330)        (43,593)       (995,607)
Purchase of inventory, proprietary technology and other
   intangibles                                                            --              --          (202,917)
                                                                  ------------    ------------    ------------
Net cash provided (used) by investing activities                       679,526       2,892,702      (6,847,329)

CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from issuance of notes payable                                   --              --           392,510
Payments on notes payable                                                 --              --          (336,271)
Purchase of fractional shares of preferred stock                          --              --              (405)
Proceeds from issuance of common and preferred stock, net of
   offering costs                                                         --              --        27,591,572
Stock purchased through employee stock purchase plan                      --             6,435          15,409
Exercise of employee stock options                                        --              --            67,250
                                                                  ------------    ------------    ------------
Net cash provided by financing activities                                 --             6,435      27,730,065
                                                                  ------------    ------------    ------------
Net increase (decrease) in cash                                     (1,564,193)      1,407,872       1,418,437

Cash and cash equivalents at beginning of period                     2,112,552          10,565            --
                                                                  ------------    ------------    ------------
Cash and cash equivalents at end of period                        $    548,359    $  1,418,437    $  1,418,437
                                                                  ============    ============    ============
</TABLE>



See accompanying notes to financial statements.


                                       4

<PAGE>   6


                                  ZYMETX, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
                               SEPTEMBER 30, 1999



NOTE 1 - THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES

ZymeTx, Inc. (the "Company" or "ZymeTx") is a development stage biotechnology
company engaged in the discovery, development and commercialization of unique
products for the diagnosis and treatment of viruses. The scientific foundation
for our business is based upon the role of enzymes in the process of viral
infection. Our strategy is to:

o    develop diagnostic and therapeutic products for a range of viral diseases;
     and

o    earn revenues from marketing ZstatFlu, our first diagnostic product,
     continue our diagnostic research and development program and sustain a
     comprehensive viral therapeutic research and development program.

SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION OF FINANCIAL STATEMENTS

The accompanying unaudited financial statements have been prepared in accordance
with the instructions to Form 10-QSB as prescribed by the Securities and
Exchange Commission ("SEC"). Such financial statements, in the opinion of
management, include all adjustments (consisting only of normal, recurring items)
necessary for their fair presentation in conformity with generally accepted
accounting principles. These financial statements should be read in conjunction
with the financial statements and notes included in the Company's Annual Report
on Form 10-KSB for the year ended June 30, 1999, for an expanded discussion of
the Company's financial disclosures and accounting policies. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to the SEC rules and regulations. Interim results are not
necessarily indicative of results for the full year. As long as the U.S.
influenza market remains the principal market for the Company's products, the
Company's revenues may be concentrated in the second and third quarters of each
fiscal year.

NOTE 2 - NET LOSS PER SHARE

At September 30, 1999, there were warrants outstanding for the purchase of an
aggregate of 795,847 shares of the Company's common stock exercisable at prices
ranging from $3.20 to $12.40 (an average of $6.08 per share). The Company has
allocated 1,000,000 shares of common stock for issuance under the Employees' and
Directors' stock option plans, granted 686,125 stock options, with 618,875
shares outstanding at September 30, 1999. For additional disclosures regarding
the stock option plans, see Note 6 to the June 30, 1999 financial

                                       5

<PAGE>   7
statements filed on Form 10-KSB. At the October 1, 1999 Board of Directors
meeting, an additional 304,387 stock options were granted to various employees,
directors and officers. Stock warrants and stock options were not included in
the computation of diluted net loss per share for the three month period ended
September 30, 1998 or 1999, since the effect would be anti-dilutive.

NOTE 3 - COMPREHENSIVE INCOME

The Company presents comprehensive income in accordance with Financial
Accounting Standard No. 130 "Reporting Comprehensive Income" ("SFAS 130"). The
provisions of SFAS 130 require the Company to classify items of other
comprehensive income in the financial statements and display the accumulated
balance of other comprehensive income separately from retained earnings and
additional paid-in capital in the equity section of the balance sheet. Other
comprehensive income for the three month periods ended September 30, 1998 and
1999, are detailed below.

<TABLE>
<CAPTION>
                                           THREE MONTHS ENDED
                                              SEPTEMBER 30,
                                          1998             1999
                                     -------------    -------------
<S>                                  <C>              <C>
   Net loss                          $  (1,419,245)   $  (1,735,890)
   Unrealized gains on investments
     available for sale                     31,130            2,042
                                     -------------    -------------
   Comprehensive loss                $  (1,388,115)   $  (1,733,848)
                                     =============    =============
</TABLE>

NOTE 4- COMMITMENTS

In September 1999, the Company amended its lease agreement related to its office
space. As a result of the amendment, the Company was released from the rental
liability related to approximately 10,000 square feet over the remaining lease
term. In connection with this amendment, the Company is required to make a
payment of $95,000 which has been expensed in the three months ended September
30, 1999.


                                       6

<PAGE>   8

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

From time to time, we may publish forward-looking statements relating to certain
matters, including anticipated financial performance, business prospects, and
the progress and goals for our research and development program, marketing
strategies and other similar matters. The Private Securities Litigation Reform
Act of 1995 provides a safe harbor for forward-looking statements. To comply
with the terms of that safe harbor, a variety of factors could cause our actual
results and experience to differ materially from the anticipated results or
other expectations expressed in our forward-looking statements. In addition, we
disclaim any intent or obligation to update those forward-looking statements.

When used in this discussion, the words "believes," "anticipated" and similar
expressions are intended to identify forward-looking statements. Such statements
are subject to certain risks and uncertainties that could cause actual results
to differ materially from those projected. Readers are cautioned not to place
undue reliance on these forward-looking statements that speak only as of the
date hereof. We undertake no obligation to publicly release the result of any
revisions to these forward-looking statements that may be made to reflect events
or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.

OVERVIEW

ZymeTx, Inc. is a development stage biotechnology company engaged in the
discovery, development and commercialization of unique products for the
diagnosis and treatment of viruses. The scientific foundation for our business
is based upon the role of enzymes in the process of viral infection. Our
strategy is to:

o    develop diagnostic and therapeutic products for a range of viral diseases;
     and

o    earn revenues from marketing ZstatFlu, our first diagnostic product,
     continue our diagnostic research and development program and sustain a
     comprehensive viral therapeutic research and development program.

ViraZyme(R), our core technology, exploits the subtle structural differences and
characteristics of enzymes to create viral diagnostic and therapeutic products.
Our diagnostic technology is a platform for proprietary two-part compounds that
will split when the compound contacts a specific viral target site (an enzyme).
As a result of this split, one part of the compound reveals itself in formats
easily detected without instrumentation, permitting the user to determine
whether the virus is present. For therapeutic products, the technology platform
uses modified versions of the diagnostic compounds that bind to specific viral
enzymes to interrupt the replication cycle.

The initial viral targets of our diagnostic products are respiratory infections
including influenza A and influenza B, respiratory syncytial virus (commonly
called RSV), parainfluenza and adenovirus. There are three genera of influenza
virus, A, B, and C; A and B are most common to humans, while C rarely causes
significant infection. RSV infects humans, usually children, which is an
important cause of acute respiratory disease. Adenovirus can cause respiratory
disease, keratoconjunctivitis, diarrhea, cystitis and other diseases.

ZymeTx was incorporated under the laws of the State of Delaware in 1994.
ViraZyme(R), ViraSTAT(R) and ZstatFlu(TM) are trademarks owned or licensed by
ZymeTx.


                                       7

<PAGE>   9



CURRENT EVENTS

On June 30, 1999 Norman R. Proulx was elected to serve on the Company Board of
Directors, and in August Mr. Proulx was elected as the Company's President and
Chief Executive Officer.

In July, we announced the return of our license of the anti-HIV compound
internally designated ZX-0851 to the Oklahoma Medical Research Foundation
(OMRF). It was determined that the development of ZX-0851 would require a longer
development cycle than originally planned. OMRF agreed, in return for the
license and other consideration, to reimburse the Company for its license fee
and certain other expenses related to the compound (through reduction of
scheduled future payments on a license note payable to OMRF).

In October, we reported that earnings for fiscal year 1999 would be restated
(approximately $611,000) to reflect the costs of reworking existing inventory as
a result of a product improvement which reduced the amount of time required to
obtain an accurate influenza diagnosis using ZstatFlu from 30 minutes to 20
minutes.

PLAN OF OPERATIONS

Our plan of operations for the next 12 months is to market ZstatFlu through
direct marketing to the point of care, acute care and hospital markets. Product
development expenses will be focused toward further improvement to ZstatFlu.

We believe we have adequate cash and marketable securities available for sale to
fund the planned operations at least through December 31, 2000, due in part to
implemented cost reductions in the current fiscal year. We believe the
introduction of influenza therapeutics by other pharmaceutical companies will
enhance the sales of ZstatFlu for the fiscal 2000 influenza season, however, if
sales do not exceed prior year's sales we will likely require additional working
capital to sustain operations beyond calendar 2000.

RESULTS OF OPERATIONS

NET LOSS

For the three months ended September 30, 1998 and 1999, we recognized a net loss
of $1.4 million and $1.7 million, respectively. Net loss applicable to common
stock for the three months ended September 30, 1998 and 1999 was $.21 and $.26
per basic and diluted share, respectively. In fiscal 2000 revenues from the sale
of ZstatFlu are expected to be generated primarily during the second and third
fiscal year quarters, which coincide with the influenza season. The increase in
net loss compared to prior years net loss is due primarily to an increase in
general and administrative and product development expenses of $.6 million,
offset by a reduction in sales and marketing expenses of $.4 million, as
discussed below.

                                       8

<PAGE>   10

PRODUCT SALES

For the three months ended September 30, 1999, the Company recognized only
marginal revenues from sales of ZstatFlu. This is consistent with prior years
sales as most of our revenue is generated during the second and third fiscal
year quarters, which co-inside with influenza season. We expect increased sales
in the second and third quarters of fiscal year 2000 due to increased usage by
physicians and expansion of our national influenza surveillance program. In
addition, distributors have been added that increase the product distribution
channels to the hospital and laboratory markets.

RESEARCH AND DEVELOPMENT

Research and development spending for the three months ended September 30, 1999,
totaled $.3 million, which represents an increase of 18% from the three months
ended September 30, 1998. The increase was primarily due to an increase in
expenses attributable to the Company's programs to improve diagnostic products.

PRODUCT DEVELOPMENT

Product development costs expended in the manufacturing and production of our
diagnostic product totaled $.3 million for the three months ended September 30,
1999, compared to costs totaling $.2 million for the three months ended
September 30, 1998. This 81% increase is due primarily to increased contract
labor and rent expense.

SALES AND MARKETING

Sales and marketing expenses totaled $.3 million for the three months ended
September 30, 1999. This expenditure represents a 58% decrease from $.7 million
for the three months ended September 30, 1998. This decrease is due to decreased
personnel expense related to employee terminations effected in June 1999 and
elimination of costs related to a contract sales organization leased in fiscal
year 1999.

GENERAL AND ADMINISTRATIVE

General and administrative costs totaled $.9 million for the three months ended
September 30, 1999, representing a 94% increase from $.5 million for the three
months ended September 30, 1998. The increase was principally due to severance
and other compensation expense totaling $.3 million related to an executive
services agreement for the Company's prior chief executive officer. In addition,
a provision of $.1 million was recorded for uncollectible accounts receivable
and possible product returns of the ZstatFlu 30 minute version.

                                       9

<PAGE>   11



OTHER INCOME (EXPENSE)

Interest and dividend income totaled $.1 million for the three months ended
September 30, 1999, compared to $.2 million for the three months ended September
30, 1998. This 50% decrease resulted from earnings on cash and cash equivalents.

LIQUIDITY AND CAPITAL RESOURCES

We have relied principally on equity financing to fund our operations and
capital expenditures. Working capital at September 30, 1999, was $7.8 million,
as compared to $9.6 million at June 30, 1999. The decrease in working capital is
principally due to losses from operating activities during the three months
ended September 30, 1999.

We believe that additional financing may be required to meet the planned
operating needs beyond calendar year 2000 if significant positive cash flows are
not generated from sales of ZstatFlu during calendar 2000. Such needs would
include the expenditure of substantial funds to continue and expand research and
development activities, conduct existing and planned pre-clinical studies and
human clinical trials and to support the increasing working capital requirements
of a growing commercial infrastructure including manufacturing, sales and
marketing. As a result, we anticipate pursing various financing alternatives
such as collaborative arrangement and additional public offering or private
placements of our securities. If such alternatives are not available, we may be
required to defer or restrict certain commercial activities, delay or eliminate
expenditures for certain of our potential products under development or to
license third parties to commercialize products or technologies that we would
otherwise seek to develop or commercialize in-house.

The Company has a promissory note outstanding relating to a license of
intellectual property from OMRF. The note had an initial principal amount of $.4
million bearing interest at 8% per year. The initial obligation required
quarterly principal payments of $25,000 plus interest per quarter until the
license note was repaid. In July, 1999, we reached an agreement in principle
with OMRF to reduce the outstanding balance to reflect OMRF's reimbursement of
the license fee and other specific expenses related to the return of ZX-0851 and
re-amortize the remaining face amount of the note totaling $215,258 over the
same term and interest rate as the original note. The new terms will require
fully amortized quarterly principal and interest payments beginning November 15,
1999 of $16,753 and continuing thereafter until the note is repaid in full.

Future manufacturing expenses for the Company's diagnostic products will depend
on market acceptance. Currently, the Company has sufficient raw materials and
finished goods inventory to supply anticipated sales for the 1999/2000 North
American influenza season.

                                       10

<PAGE>   12



GENERAL DESCRIPTION OF THE YEAR 2000 ISSUE AND THE NATURE AND EFFECTS OF THE
YEAR 2000 ON INFORMATION TECHNOLOGY (IT) AND NON-IT SYSTEMS (NON-IT)

The Year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of our computer
programs or hardware that have date-sensitive software or embedded chips may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business activities.

We are continuing to assess our software and hardware systems to evaluate if
they will properly utilize dates beyond December 31, 1999. We believe that no
significant modifications or replacements of existing software or hardware will
be necessary to address the Year 2000 issue.

Our plan to resolve the Year 2000 issue has involved the following four phases:
assessment, remediation, testing, and implementation. To date we have completed
100% of its assessment of all systems (IT and non-IT) that could be
significantly affected by the Year 2000. We are currently implementing a new
integrated accounting and financial reporting system which is Year 2000
compliant. This implementation is expected to be completed by November 30, 1999.
We have determined that our primary product line will not require remediation to
be Year 2000 compliant. Accordingly, we believe that Year 2000 does not present
a material exposure as it relates to our products.

Nature and Level of Importance of Third Parties and Their Exposure to the Year
2000

We currently have no system interfaces directly with our significant third-party
vendors. We have queried our significant suppliers and subcontractors that do
not share information systems with us (external agents). To date, we have
gathered information from our external agents and are not aware of any external
agent with a Year 2000 issue that would materially impact our results of
operations, liquidity, or capital resources. Further, the responses received to
date from third parties have not identified a material non-compliance issue that
would require action by the Company. However, we have no means of ensuring that
external agent will be Year 2000 ready. The inability of external agents to
complete their Year 2000 resolution process in a timely fashion could materially
impact us. The effect of non-compliance by external agents is not determinable.

We have and will utilize both internal and external resources to reprogram, or
replace, test, and implement any software and operating equipment for Year 2000
modifications. Due to our growth, scale up of product manufacturing and
increased accounting transactions since inception, the accounting software was
replaced in fiscal year 1999. Accordingly, the costs of the accounting software
were capitalized. The total cost to replace the accounting software and
determine the Year 2000 projects effect on operating equipment was less than
$100,000. Management believes we have an effective program in place to resolve
the Year 2000 issue.

We anticipate maintaining a sufficient inventory of raw material and packaged,
salable product at the company and a number of distributors, adequate to
overcome in a reasonable period of time, any Year 2000 difficulty encountered by
our raw material manufacturer with respect to production for the 2000-2001
influenza season. We believe that we will have adequate time to address our
third-party suppliers' and distributors' Year 2000 issues in advance of the
2000-2001 influenza season.

                                       11

<PAGE>   13

FACTORS AFFECTING OPERATIONS

The following is a discussion of factors that we believe could have an impact on
future operations and financial performance:

HISTORY OF OPERATING LOSSES; WORKING CAPITAL NEEDS

For fiscal 1998 and fiscal 1999, we incurred net losses of $4.6 million and $8.6
million respectively. For the three months ended September 30, 1999, we incurred
a net loss of $1.7 million. As of September 30, 1999, our working capital was
$7.8 million. We believe that our existing working capital will meet our needs
for at least the next 15 months and we have implemented cost reductions in an
effort to preserve our working capital. In fiscal 2000, we expect a significant
reduction in research and development and product development costs due, in
part, to a reduction in employees in the fourth quarter of fiscal 1999 and the
first quarter of fiscal 2000. We anticipate that the remaining resources will be
dedicated to the enhancement of the ZstatFlu diagnostic product.

We will examine the feasibility of our therapeutic research program once sales
results of our fiscal 2000 influenza season have been determined. We believe the
introduction of influenza therapeutics by other pharmaceutical companies will
enhance the sales of ZstatFlu for the fiscal 2000 influenza season; however, if
sales do not significantly exceed the prior year sales of $.5 million we will
likely require additional working capital to sustain operations beyond December
31, 2000. If at that time additional working capital is required, we cannot
assure that financing will be available on terms satisfactory to us, or that
such financing will be available at all. Additionally, our ability to conduct
research and development beyond that planned for fiscal 2000 will be dependent
on our ability to generate cash flow from operations adequate to finance these
activities. The lack of adequate capital resources to conduct research and
development could limit our ability to introduce new products or make
improvements in our existing product line.

TECHNOLOGY AND COMPETITION

The viral diagnostic and therapeutic field is rapidly evolving, and the pace of
technological advancement is expected to continue. Rapid technological
development may result in our products becoming obsolete before we recoup a
significant portion of related research, development and commercialization
expenses. Quidel and Biostar each have introduced influenza diagnostic products
during 1999 that compete directly with ZstatFlu.

NO ASSURANCE OF MARKET ACCEPTANCE

We cannot assure that ZstatFlu or our other diagnostic products will achieve
market acceptance during the next influenza season, which is not expected to
commence until the second or third quarter of fiscal 2000. During the 1998-1999
influenza season we had limited success in realizing sales of that product, due
principally to the lack of therapeutic products to treat influenza. In addition,
there can be no assurance that any of our other potential products, if approved
or cleared by the FDA, will achieve market acceptance. The degree of market
acceptance of our products will depend upon a number of factors, including the
receipt and timing of regulatory approvals or clearances of companion
therapeutic products, the availability of third-party reimbursement and the
establishment and demonstration in the medical community of the clinical safety,
efficacy and cost-effectiveness of our products and their advantages over
existing technologies and products. We cannot assure we will be able to
successfully market our potential products even if such products perform
successfully in clinical trials. Furthermore, we cannot assure that physicians
or the medical community in general will

                                       12

<PAGE>   14

accept and utilize ZstatFlu or any other products currently cleared or under
development by ZymeTx.

NO ASSURANCE OF SUCCESSFUL OR TIMELY DEVELOPMENT OF THE COMPANY'S THERAPEUTIC OR
OTHER DIAGNOSTIC PRODUCTS

Our business strategy involves the discovery and development of products in
addition to our currently FDA cleared diagnostic products, particularly
therapeutic products. These products are in early stages of research and
development and further research, development and extensive testing will be
required to determine their technical feasibility and commercial viability.
Until the development process for these products is complete, we cannot assure
that such products will perform in the manner we anticipate, be commercially
viable or even if commercially viable, that such products will receive FDA
clearance. We may experience delays in the commercial introduction of these
products, and such delays could be significant. The proposed development
schedules for our other diagnostic and therapeutic products may be affected by a
variety of factors, many of which will not be within our control, including
technological difficulties, proprietary technology of others, possible changes
in government regulation and the availability of funding sources. Any delay in
the development, introduction and marketing of our products could result either
in such products being marketed at a time when their cost and performance
characteristics would not be competitive in the marketplace or in the shortening
of their commercial lives. For fiscal 2000, we will be concentrating our efforts
on completing developments of improvements to ZstatFlu. We plan to devote
greater efforts to the development of our therapeutic and other diagnostic
products in fiscal 2001 and beyond if capital resources are available to justify
expenditures for those products.

NO MANUFACTURING CAPABILITY; RELIANCE ON THIRD-PARTY MANUFACTURERS

We have limited experience in product manufacturing and currently have no
facility capable of manufacturing products on the scale necessary for adequate
market penetration. Because we do not currently have a manufacturing facility,
we have engaged third-party manufacturers to produce finished units of ZstatFlu.
Delays by third-party manufacturers in delivering finished products in time for
future influenza seasons could have a material adverse effect on ZymeTx.

LIMITATIONS ON PROTECTION OF INTELLECTUAL PROPERTY

Our success will depend, in part, on our ability to obtain patents and license
patent rights, to maintain trade secret protection and to operate without
infringing on the rights of other patent holders. The patent position of
biotechnology firms for such types of patents generally is highly uncertain and
involves complex legal and factual issues. Certain of our competitors may have
filed applications for or have been issued patents and may obtain additional
patents and other proprietary rights relating to virus substrates, chromogens,
inhibitors or processes competitive with our patents. The ultimate scope and
validity of such patents are presently unknown. If the courts uphold existing or
future patents obtained by competitors as valid, we may be required to obtain
licenses from such competitors. The extent to which such licenses will be
available to us and the costs thereof cannot currently be determined.

GOVERNMENT REGULATION

Regulation by Federal, state, local and foreign governmental authorities of our
research and development activities, as well as the use and sale of our products
at such time as they are commercially viable, is currently, and is expected to
remain, significant. The introduction of our products is governed by strict FDA
rules and regulations. Our diagnostic products are governed by FDA 510(k)
application requiring a clinical trial that compares our products to a certain
standard or to a prior cleared methodology. The testing, manufacturing,
labeling, distribution, marketing and advertising of therapeutic products are
subject to extensive regulation by

                                       13

<PAGE>   15
governmental regulatory authorities in the U.S. and other countries. The FDA and
comparable agencies in foreign countries impose substantial requirements on the
introduction of new pharmaceutical products through lengthy and detailed
clinical testing procedures and other costly and time-consuming compliance
procedures. Our therapeutic compounds will require substantial clinical trials
and FDA review as new drugs and such products are in the discovery stage of
development, requiring significant further research, development, clinical
testing and regulatory clearances. Due to the extended testing and regulatory
review process required for therapeutic products before marketing clearance can
be obtained, we do not expect to be able to commercialize any therapeutic drug
for at least several years, either directly or through any potential corporate
partners or licensees. A delay in obtaining or failure to obtain such approvals
could have a material adverse effect on our business and results of operations.
ZymeTx and its third-party manufacturers are subject to Good Manufacturing
Practices ("GMP") regulations promulgated by the FDA. The FDA will also inspect
our manufacturing facilities and the facilities of our third-party manufacturers
on a routine basis for regulatory compliance with GMP regulations. Although our
employees have experience with GMP protocols, there can be no assurance that we
or our third-party manufacturers can satisfy these requirements. We would not be
allowed to manufacture our approved or cleared products in the event such GMP
protocols could not be met.

MANAGEMENT OF GROWTH AND INCREASING PRODUCTION REQUIREMENTS

Our success will depend on our ability to expand and manage our operations and
facilities. There can be no assurance that we will be able to manage our growth,
meet the staffing requirements of manufacturing scale-up or for current or
additional collaborative relationships or successfully assimilate and train our
new employees. In addition, to manage our growth effectively, we will be
required to expand our management base and enhance our operating and financial
systems. If we continue to grow, there can be no assurance that the management
skills and systems currently in place will be adequate or that we will be able
to manage any additional growth effectively. Failure to achieve any of these
goals could have a material adverse effect on our business, financial condition
or results of operations.

PRODUCT LIABILITY AND INSURANCE

The testing, marketing and sale of therapeutic products and, to a lesser degree,
diagnostic products, entails an inherent risk of adverse effects and/or medical
complications to patients and, as a result, product liability claims may be
asserted against us. A product liability claim or product recall could have a
material adverse effect on our financial condition. We have secured limited
product liability insurance in the aggregate amount of $11.0 million for
products that we market. There can be no assurance that liability will not
exceed the insured amount. In the event of a successful suit against us,
insufficient insurance or lack of insurance would have a material adverse effect
on us.

UNCERTAINTIES RELATING TO CLINICAL TRIALS

We must demonstrate through preclinical studies and clinical trials that our
proposed therapeutic products are safe and effective for use in each target
indication before we can obtain regulatory approvals for the commercial sale of
those products. These studies and trials may be very costly and time-consuming.
The rate of completion of clinical trials for either diagnostic or therapeutic
products is dependent upon, among other factors, the rate of enrollment of
patients. Failure to enroll an adequate number of clinical patients during the
appropriate season could cause significant delays and increased costs. The cost
to conduct human clinical trials for any potential product can vary dramatically
based on a number of factors, including whether the product is a diagnostic or a
therapeutic product, the order and timing of clinical indications pursued and
the extent of development and financial support, if any, from corporate
partners.


                                       14


<PAGE>   16
PART II. OTHER INFORMATION

Item 2. Changes in Securities and Use of Proceeds:

        Use of Proceeds. On November 3, 1997, the Company closed an initial
public offering (the "Initial Public Offering") of 2,645,000 shares (the
"Shares") of Common Stock (inclusive of the sale of Shares pursuant to the
exercise of an underwriter overallotment option to purchase 345,000 Shares). The
Shares were offered for sale at a price of $8.00 per share pursuant to a
Registration Statement on Form SB-2 (No. 333-33563) (the "Registration
Statement") which was declared effective October 29, 1997. Capital West
Securities, Inc., Millennium Financial Group, Inc. and ComVest Partners, Inc.
(the "Underwriters") acted as the managing underwriters of the Offering.

         Since the filing of the Company's Form 10-KSB for fiscal year 1999,
proceeds were used by the Registrant for each of the purposes indicated below:

<TABLE>
<CAPTION>
                                              Direct or indirect payments to
                                              directors, officers, general
                                              partners of the Registrant or
                                              their associates; to persons
                                              owning ten percent or more of             Direct or
                                              any class of equity securities            indirect
                                              of the issuer; and to affiliates         payments to
                                              of the Registrant                          others
                                              --------------------------------        ------------
<S>                                           <C>                                   <C>
Temporary investments                                   $ --                          $ 5,708,000
Inventory                                                                               3,489,000
Equipment and Furniture                                                                   996,000
Operating expenses                                                                      8,144,000
</TABLE>

Item 6. Exhibits and Reports on Form 8-K:

        a.       Exhibits:

                 27.1      Financial Data Schedule. (Exhibit 27 is submitted as
                           an exhibit only in the electronic format of this
                           Quarterly Report on Form l0-QSB submitted to the
                           Securities and Exchange Commission).

        b.       Reports on Form 8-K: None.


                                       15

<PAGE>   17



                                   SIGNATURES



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


                                           ZYMETX, INC., a Delaware Corporation
                                           (Registrant)


                                            /s/ G. Carl Gibson
                                            -----------------------------------
                                            G. Carl Gibson
                                            Principal Financial and Accounting
                                            Officer


Date: November 15, 1999

                                       16

<PAGE>   18


                                 EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER      DESCRIPTION
-------     -----------
<S>       <C>
 27.1       Financial Data Schedule. (Exhibit 27 is submitted as
            an exhibit only in the electronic format of this
            Quarterly Report on Form l0-QSB submitted to the
            Securities and Exchange Commission).
</TABLE>