<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 December 31, 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.

  6,758,779 shares of common stock, $.001 par value, issued and outstanding at
                                February 3, 2000


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

<PAGE>   2


                                  ZYMETX, INC.
                                  FORM 10-QSB
                                     INDEX

<TABLE>

<S>                                                                                  <C>
PART I - FINANCIAL INFORMATION                                                     Page

Item 1.   Financial Statements (Unaudited)

          Balance Sheets - June 30, 1999 and December 31, 1999 ....................  2

          Statements of Operations - Three Months and Six Months Ended December 31,
          1998 and 1999 and Cumulative from Inception to December 31, 1999 ........  3

          Statements of Cash Flows -  Six Months Ended December 31,
          1998 and 1999 and Cumulative from Inception to December 31, 1999 ........  4

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

Item 2.   Management's Discussion and Analysis or Plan of Operations ..............  8

PART II - OTHER INFORMATION

Item 2.   Changes in Securities and Use of Proceeds ............................... 17

Item 6.   Exhibits and Reports on Form 8-K ........................................ 17

SIGNATURES ........................................................................ 18
</TABLE>


                                       1
<PAGE>   3


                                  ZymeTx, Inc.
                          (A Development Stage Company)
                                 Balance Sheets
                 (Information at December 31, 1999 is unaudited)

<TABLE>
<CAPTION>
                                                                                    JUNE 30,      DECEMBER 31,
                                                                                      1999            1999
                                                                                  ------------    ------------
<S>                                                                               <C>             <C>
Current assets:
   Cash and cash equivalents                                                      $     10,565    $  1,454,524
   Marketable securities, available-for-sale                                         8,735,430       4,248,170
   Accounts receivable, net                                                            192,038         571,886
   Inventory                                                                         1,500,000       1,831,334
   Prepaid expenses and other                                                           46,563         327,207
                                                                                  ------------    ------------
Total current assets                                                                10,484,596       8,433,121

Inventory not expected to be realized within one year                                1,789,931       1,512,721
Property, equipment and leasehold improvements, net                                    673,934         642,620
Proprietary technology and other intangibles, net                                       77,220          67,320
                                                                                  ------------    ------------
Total assets                                                                      $ 13,025,681    $ 10,655,782
                                                                                  ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                                               $    435,178    $    578,449
   Accrued salaries, wages and benefits                                                225,065         220,102
   Accrued sales returns                                                                66,164          23,199
   Taxes payable and other                                                              52,261         152,561
   Current portion of note payable to stockholder                                      100,000          52,330
                                                                                  ------------    ------------
Total current liabilities                                                              878,668       1,026,641

Long term obligations--
   Note payable to stockholder due after one year                                      227,390         112,389
   Deferred lease rentals                                                              241,173         310,904

Stockholders' equity:
   Preferred stock $.001 par value; 12,000,000 shares authorized (none issued
     or outstanding at June 30, 1999 or December 31, 1999)                                  --              --
   Common stock $.001 par value; 30,000,000 shares authorized (6,692,572 shares
     and 6,754,695 issued and outstanding at June 30, 1999 and December 31,
     1999, respectively)                                                                 6,693           6,754
   Additional paid-in capital                                                       33,557,761      33,931,813
   Deficit accumulated during the development stage                                (21,893,966)    (24,731,394)
   Unrealized holding gains (losses) on marketable securities available for
     sale                                                                                7,962          (1,325)
                                                                                  ------------    ------------
Total stockholders' equity                                                          11,678,450       9,205,848
                                                                                  ------------    ------------
Total liabilities and stockholders' equity                                        $ 13,025,681    $ 10,655,782
                                                                                  ============    ============
</TABLE>

See accompanying notes to financial statements.


                                       2
<PAGE>   4


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

<TABLE>
<CAPTION>
                                                                                                           CUMULATIVE
                                                                                                              FROM
                                               THREE MONTHS ENDED              SIX MONTHS ENDED           INCEPTION TO
                                                  DECEMBER 31,                    DECEMBER 31,            DECEMBER 31,
                                              1998            1999            1998            1999            1999
                                          ------------    ------------    ------------    ------------    ------------
<S>                                       <C>             <C>             <C>             <C>             <C>
Revenues:
   Sales, net                             $    143,623    $    794,055    $    148,373    $    803,828    $  1,425,251
   Other                                            --              --              --              --           1,303
                                          ------------    ------------    ------------    ------------    ------------
Total revenues                                 143,623         794,055         148,373         803,828       1,426,554
   Cost of sales                                94,398         419,195          94,547         421,651         716,585
                                          ------------    ------------    ------------    ------------    ------------
Gross Profit                                    49,225         374,860          53,826         382,177         709,969

Operating expenses:
   Research and development (net of
     research and development grants
     in 1999)                                  332,333         195,136         611,070         525,020       4,378,332
   Product development                         216,212         191,190         379,767         488,033       3,672,498
   Inventory write-down                             --              --              --              --       1,341,761
   Sales and marketing                       1,153,055         590,351       1,892,611         899,091       5,250,552
   Acquired (returned) technology  from
     (to) OMRF                                      --        (150,000)             --        (150,000)        958,505
   General and administrative                  506,770         735,698         978,338       1,649,628       5,769,568
                                          ------------    ------------    ------------    ------------    ------------
Total operating expenses                     2,208,370       1,562,375       3,861,786       3,411,772      21,371,216
                                          ------------    ------------    ------------    ------------    ------------
Loss from operations                        (2,159,145)     (1,187,515)     (3,807,960)     (3,029,595)    (20,661,247)

Other income (expense):
   Interest and dividend income                194,177          89,018         439,867         211,011       1,840,863
   Interest expense                            (16,507)         (3,041)        (32,627)        (18,844)       (214,746)
                                          ------------    ------------    ------------    ------------    ------------
Total other income                             177,670          85,977         407,240         192,167       1,626,117
                                          ------------    ------------    ------------    ------------    ------------
Net loss                                    (1,981,475)     (1,101,538)     (3,400,720)     (2,837,428)    (19,035,130)

Preferred stock dividend--Series B                  --              --              --              --          11,815
Preferred stock dividend--Series C                  --              --              --              --       5,684,449
                                          ------------    ------------    ------------    ------------    ------------

Net loss applicable to common stock       $ (1,981,475)   $ (1,101,538)   $ (3,400,720)   $ (2,837,428)   $(24,731,394)
                                          ============    ============    ============    ============    ============

Basic and diluted net loss per common
   share                                  $       (.30)   $       (.16)   $       (.51)   $       (.42)   $      (8.14)
                                          ============    ============    ============    ============    ============

Weighted average common shares
   outstanding                               6,655,380       6,702,785       6,646,130       6,699,279       3,038,168
                                          ============    ============    ============    ============    ============
</TABLE>

See accompanying notes to financial statements.

                                       3
<PAGE>   5


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

<TABLE>
<CAPTION>
                                                                                                   CUMULATIVE
                                                                                                      FROM
                                                                        SIX MONTHS ENDED          INCEPTION TO
                                                                           DECEMBER 31,           DECEMBER 31,
                                                                       1998           1999            1999
                                                                  ------------    ------------    ------------
<S>                                                               <C>             <C>             <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net loss                                                          $ (3,400,720)   $ (2,837,428)   $(19,035,130)
Adjustments to reconcile net loss to net cash used by operating
   activities:
     Depreciation and amortization                                      78,681          94,617         432,898
     Provision for doubtful accounts and sales returns                      --          87,365          87,365
     Inventory write-down                                                   --              --       1,341,761
     Acquired (returned) technology and patent costs from (to)
       OMRF                                                                 --        (160,110)        176,312
     Accretion of interest                                              15,627           9,885         157,618
     Awards of stock or stock warrants                                      --         171,100         171,100
     Deferred lease rentals                                             67,992          69,730         310,903
     Changes in operating assets and liabilities:
       Accounts receivable                                            (223,422)       (460,178)       (652,216)
       Interest receivable on marketable securities                    233,693          72,130         (70,238)
       Prepaid expenses and other                                      (92,392)        (94,744)       (142,489)
       Inventory                                                    (1,955,233)        (54,124)     (4,619,528)
       Accounts payable                                               (219,867)        143,271         578,449
       Accrued salaries, benefits and other                            (53,900)         (4,963)         (4,963)
       Other liabilities                                               108,870          50,301         381,976
                                                                  ------------    ------------    ------------
Total adjustments                                                   (2,039,951)        (75,720)     (1,851,052)
                                                                  ------------    ------------    ------------
Net cash used by operating activities                               (5,440,671)     (2,913,148)    (20,886,182)

CASH FLOW FROM INVESTING ACTIVITIES
Purchase of marketable securities                                  (12,633,911)     (7,634,315)    (49,416,480)
Proceeds from maturities of marketable securities                   17,910,123      12,040,159      45,237,224
Purchase of property, equipment and leasehold improvements            (110,372)        (53,403)     (1,005,417)
Purchase of inventory, proprietary technology and other
   intangibles                                                              --              --        (202,917)
                                                                  ------------    ------------    ------------
Net cash provided (used) by investing activities                     5,165,840       4,352,441      (5,387,590)
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from issuance of notes payable                                     --              --         392,510
Payments on notes payable                                                   --         (12,447)       (348,718)
Purchase of fractional shares of preferred stock                            --              --            (405)
Proceeds from issuance of common and preferred stock, net of
   offering costs                                                           --              --      27,591,572
Exercise of employee stock options                                      18,500           5,000          72,250
Stock purchased through employee stock purchase plan                        --          12,113          21,087
                                                                  ------------    ------------    ------------
Net cash provided by financing activities                               18,500           4,666      27,728,296
                                                                  ------------    ------------    ------------
Net increase (decrease) in cash                                       (256,331)      1,443,959       1,454,524

Cash and cash equivalents at beginning of period                     2,112,552          10,565              --
                                                                  ------------    ------------    ------------
Cash and cash equivalents at end of period                        $  1,856,221    $  1,454,524    $  1,454,524
                                                                  ============    ============    ============
</TABLE>


See accompanying notes to financial statements.


                                       4
<PAGE>   6


                                  ZYMETX, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
                                DECEMBER 31, 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 diagnostic products, 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

For the three and six month periods ended December 31, 1999 (and for the
cumulative from inception to December 31, 1999), all unexercised stock options
and warrants granted were antidilutive for purposes of calculating diluted net
loss per share. At December 31, 1999, there were warrants outstanding for the
purchase of an aggregate of 925,847 shares of the Company's common stock
exercisable at prices ranging from $2.31 to $12.40 (an average of $5.62 per
share) (Note 3). The Company has allocated 1,000,000 shares of common stock for
issuance under the


                                       5
<PAGE>   7


Employees' and Directors' stock option plans, 667,727 of which remain
unexercised at December 31, 1999 (an average of $2.25 per share). In the second
quarter of fiscal 2000, the Company's Board of Directors amended the employee's
stock option plan. The amended plan provides that future options granted will
vest 25% immediately, 25% after one year and the final 50% vest after two years.
On November 17, 1999, the Board of Directors approved the ZymeTx, Inc.
Consultants Stock Option Plan, and a total of 100,000 options are reserved for
issuance under the plan, pending approval at the next shareholders meeting.
30,000 of these options were outstanding at December 31, 1999 (Note 3).

For additional disclosures regarding the stock option plans, see Note 6 to the
June 30, 1999 financial statements filed on Form 10-KSB.

NOTE 3 - STOCK OPTIONS, WARRANTS AND AWARDS

During the fiscal quarter ended December 31, 1999, the Company issued 130,000
warrants and 30,000 Consultant Stock options (collectively, the "Service
Awards") to third parties in exchange for certain marketing and administrative
services. The Company expensed approximately $62,000 of the fair value related
to the Service Awards for services received by the Company and deferred
approximately $182,000 of the fair value of the service awards at December 31,
1999. The deferred value of the Service Awards will be amortized to marketing
expenses over the term that services are received by the Company. Under the
terms of the grants, the Service Awards have a contractual life of 5 years and
vest 50% on the date of grant and 50% after one year.

In conjunction with the issuance of the 130,000 warrants described above, the
Company entered into an agreement with the provider of marketing services. Under
the terms of the contract, the marketer may earn up to $260,000 cash and 160,000
additional warrants with an exercise price of $2.31 based on the number of
diagnostic product units sold by the marketer during the contract term. The
contract is cancelable by the Company after one year with 90 days notice. As of
December 31, 1999, no expense has been recognized associated with this
contingent marketing provision of the agreement.

On October 1, 1999, the Board of Directors approved the employment agreement of
Norman Proulx, the Company's Chief Executive Officer. A component of the
employment agreement included the award of 50,000 common shares of stock and
reimbursement of all Federal and state taxes associated with the stock award.
The value of the stock award and the related taxes ($198,000) was charged to
general and administrative expense in the fiscal quarter ended December 31,
1999. Other terms of the employment agreement include the payment of cash
bonuses based on obtaining certain goals established by the Board of Directors,
$25,000 of which was recognized in the three month period ended December 31,
1999.



NOTE 4 - NOTE PAYABLE TO STOCKHOLDER



In the three months ended December 31, 1999, the Company returned certain
technology to OMRF. In exchange for the returned technology, OMRF reduced the
outstanding principal balance of the note payable from the Company. The
reduction in the outstanding note payable


                                       6
<PAGE>   8


balance was based on the original costs of the in-process technology of $150,000
and certain patent costs incurred since the acquisition.


NOTE 5 - COMPREHENSIVE INCOME (LOSS)

The Company presents comprehensive income in accordance with Financial
Accounting Standards 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 loss for the three and six month periods ended December 31, 1998
and 1999, are detailed below.

<TABLE>
<CAPTION>
                                       THREE MONTHS ENDED           SIX MONTHS ENDED
                                          DECEMBER 31,                 DECEMBER 31,
                                      1998           1999           1998          1999
                                  -----------    -----------    -----------    -----------
<S>                               <C>            <C>            <C>            <C>
Net loss                          $(1,981,475)   $(1,101,538)   $(3,400,720)   $(2,837,429)
Unrealized gains on investments
  available for sale                  (33,701)       (11,329)        (2,571)        (9,287)
                                  -----------    -----------    -----------    -----------
Comprehensive loss                $(2,015,176)   $(1,112,867)   $(3,403,291)   $(2,846,716)
                                  ===========    ===========    ===========    ===========
</TABLE>



NOTE 6 - 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 expensed a total of $78,267
in the three months ended September 30, 1999.


                                       7
<PAGE>   9


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 diagnostic products, 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 (point of care diagnostic ZstatFlu)
respiratory syncytial virus (commonly called RSV), parainfluenza (laboratory
diagnostic ViraStat) 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.


                                       8
<PAGE>   10


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.

CURRENT EVENTS

In October 1999, we reported a product improvement which reduced the amount of
time required to obtain an accurate influenza diagnosis using ZstatFlu from 30
minutes to 20 minutes.

In November 1999 the following items were reported:

     o    The National Flu Surveillance Network enrolled more than 500
          surveillance sites, including more than 1,965 participating
          physicians.

     o    The Company had signed a strategic marketing agreement with The Alpha
          Group for a targeted sales initiative for ZstatFlu.

     o    The Company reported a new version of the National Flu Surveillance
          Network's www.fluwatch.com online flu reporting and information
          service, which now enables NFSN to identify flu by zip codes in major
          cities.

     o    The Company announced that product shipments of ZstatFlu are ahead of
          last year's pace, exceeding 40,000 units, the majority of which have
          been shipped directly to end users.

In January 2000, we reported that fiscal year-to-date revenues had exceeded $1
million due to the rapid growth in sales of ZstatFlu.

PLAN OF OPERATIONS

Our plan of operations for the current year is to market ZstatFlu 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 that the
introduction of influenza therapeutics by other pharmaceutical companies have
enhanced our prospect for increased sales of ZstatFlu for the fiscal 2000
influenza season. However, if sales for the third quarter of fiscal 2000 are not
significantly greater than second quarter sales, we will likely require
additional working capital to sustain operations beyond calendar 2000.

RESULTS OF OPERATIONS

NET LOSS

For the three and six months ended December 31, 1999, we recognized a net loss
of $1.1 million and $2.8 million, respectively. Net loss applicable to common
stock for the three and six months ended December 31, 1999 was $.16 and $.42 per
basic and diluted share, respectively. Sales of ZstatFlu have increased
substantially during the second quarter, which coincides with the onset of the
influenza season. The decrease in net loss compared to the prior year's net loss
is due primarily to increased sales and a reduction in expenses as discussed
below.


                                       9
<PAGE>   11


PRODUCT SALES

For the three and six months ended December 31, 1999, we recognized
significantly increased revenues from sales of our primary diagnostic product as
compared to the prior three months and six months ended December 31, 1998. This
increase is attributed to increased usage of ZstatFlu by physicians and
expansion of our national influenza surveillance program as well as the
complementary introduction of influenza therapeutics.

RESEARCH AND DEVELOPMENT

Research and development spending for the three and six months ended December
31, 1999, totaled $.2 million and $.5 million, respectively. This represents a
decrease of 42% and 14% respectively from the three and six months ended
December 31, 1998, due primarily to decreased contract research costs and the
reimbursement of research expenditures of $89,640 during the three months ended
December 31, 1999 from the Oklahoma Center for the Advancement of Science and
Technology.

PRODUCT DEVELOPMENT

Product development costs expended in the manufacturing and production of our
diagnostic product totaled $.2 million and $.5 million for the three and six
months ended December 31, 1999, respectively. This represents a 12% decrease and
a 29% increase respectively from the three and six months ended December 31,
1998. The six-month increase is due primarily to contract labor costs.

SALES AND MARKETING

Sales and marketing expenses totaled $.6 million and $.9 million for the three
and six months ended December 31, 1999. These expenditures represent a 49% and
53% decrease respectively from the three and six months ended December 31, 1998.
This decrease is due to the elimination of costs related to a contract sales
organization leased in fiscal year 1999 as well as reduced advertising costs,
partially offset by costs (cash and non-cash) of employing a contract marketing
company.

GENERAL AND ADMINISTRATIVE

General and administrative costs totaled $.7 million and $1.6 million for the
three and six months ended December 31, 1999, which represents a 46% and 69%
increase respectively from the three and six months ended December 31, 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 former Chief Executive Officer entered into in the first quarter of
fiscal 2000. In addition, salary expense increased in the second quarter of
fiscal 2000 due to a stock award totaling $.2 million granted to the Company's
current Chief Executive Officer.


                                       10
<PAGE>   12


OTHER INCOME (EXPENSE)

Interest and dividend income totaled $.1 million and $.2 million respectively
for the three and six months ended December 31, 1999, compared to $.2 million
and $.4 million for the three and six months ended December 31, 1998. This 50%
decrease resulted from reduced 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 December 31, 1999, was $7.4 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 six months ended
December 31, 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 diagnostic products 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 pursuing various financing
alternatives such as collaborative arrangements and a secondary 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. In July, 1999, we reached an agreement
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 a
technology license and re-amortize the remaining face amount of the note
totaling $215,258 over the same term and interest rate as the original note (see
Note 4 - Note Payable to Stockholder). The new terms require quarterly principal
and interest payments, which began 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 of such products. Currently, the Company has sufficient raw
materials and finished goods inventory to supply anticipated sales for the
1999/2000 North American influenza season.


                                       11
<PAGE>   13


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 data-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
operation, including among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business activities.

The Company has not experienced any significant problems related to the Year
2000 issue and we continue to assess our software and hardware systems to
evaluate if they are properly utilizing dates beyond December 31, 1999. In
addition, we believe that the Year 2000 does not present a material exposure as
it relates to our products.

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.


                                       12
<PAGE>   14


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 six months ended December 31, 1999, we incurred a
net loss of $2.8 million. As of December 31, 1999, our working capital was $7.4
million. We believe that our existing working capital will meet our needs for at
least the next 12 months and we have implemented cost reductions in an effort to
preserve our working capital. 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 have
enhanced and will continue to enhance the sales of ZstatFlu for the fiscal 2000
influenza season. However, if fiscal 2000 third quarter sales are not
significantly greater than second quarter sales 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
Although we have recognized substantial sales of ZstatFlu during this fiscal
year, we cannot assure that ZstatFlu or our other diagnostic products will
achieve market acceptance during this influenza season, which commenced during
the second 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


                                       13
<PAGE>   15


successfully in clinical trials. Furthermore, we cannot assure that physicians
or the medical community in general will 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
internal 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


                                       14
<PAGE>   16


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 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 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


                                       15
<PAGE>   17


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.


                                       16
<PAGE>   18


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, such
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
                           any class of equity securities        Direct or
                           of the issuer; and to affiliates       indirect
                           and to affiliates of the             payments to
                           Registrant                              others
                           -------------------------------------------------
<S>                        <C>                                  <C>
Temporary investments             $-                             $4,248,000
Inventory                                                         3,344,000
Equipment and Furniture                                           1,005,000
Operating expenses                                                9,740,000
</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.


                                       17
<PAGE>   19


                                   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: February 14, 2000


                                       18
<PAGE>   20


                               INDEX TO EXHIBITS


<TABLE>
<CAPTION>
EXHIBIT NO.    DESCRIPTION
-----------    -----------
<S>            <C>
27.1           Financial Data Schedule
</TABLE>