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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10-KSB

(Mark One)

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934
                                         For the fiscal year ended June 30, 2001

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934
                                 For the transition period from        to
                                                                ------    ------

                                               Commission File Number: 000-23145

                                  ZYMETX, INC.
                 (Name of small business issuer in its charter)

                    DELAWARE                                 75-731444040
         (State or other jurisdiction of                   (I.R.S. Employer
         incorporation or organization)                   Identification No.)

         800 RESEARCH PARKWAY, SUITE 100
             OKLAHOMA CITY, OKLAHOMA                             73104
    (Address of principal executive offices)                  (Zip Code)

                                 (405) 271-1314
                           (Issuer's telephone number)

    SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

    SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON STOCK,
$0.001 PAR VALUE

    Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for at least the past 90 days.

                                 YES [X] NO [ ]

    Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B is contained in this form, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB.

    Issuer's revenues for its most recent fiscal year were $948,703.

    As of October 14, 2001 the aggregate market value of voting stock held by
non-affiliates of the issuer was $3,520,066 (based on the closing price for the
common stock on the NASD Over-the-Counter (OTC) Bulletin Board on such date of
$0.51 per share). As of October 14, 2001 there were 6,902,091 shares of common
stock, $0.001 par value, outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

    Following is a list of documents incorporated by reference and the Part of
the Form 10-KSB into which the document is incorporated:

    The Company's Proxy Statement in connection with its Annual Meeting of
    Shareholders to be held on November 14, 2001 is incorporated by reference in
    Part III, Items 9, 10, 11 and 12.

    Transitional Small Business Disclosure Format (check one): YES      NO [X]
                                                                   ---     ---

================================================================================




<PAGE>


                                  ZYMETX, INC.

                                   FORM 10-KSB
                     For the fiscal year ended June 30, 2001


                                TABLE OF CONTENTS

<Table>
<Caption>
                                                                                                            Page
                                                                                                            ----
<S>                                                                                                         <C>
  PART I ............................................................................................          2

  Item 1.  Description of Business...................................................................          2

  Item 2.  Description of Property...................................................................          9

  Item 3.  Legal Proceedings.........................................................................          9

  Item 4.  Submission of Matters to a Vote of Security Holders.......................................          9

  PART II ...........................................................................................          9

  Item 5.  Market for Common Equity and Related Stockholder Matters..................................          9

  Item 6.  Management's Discussion and Analysis or Plan of Operation.................................         10

  Item 7.  Financial Statements......................................................................         16

  Item 8.  Changes In and Disagreements With Accountants on Accounting and Financial Disclosure......         16

  PART III ..........................................................................................         17

  Item 13. Exhibits and Reports on Form 8-K..........................................................         17

  Signatures.........................................................................................         18

  Index to Financial Statements......................................................................        F-1
</Table>


                                       1
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                                     PART I

ITEM 1.         DESCRIPTION OF BUSINESS.

GENERAL

    ZymeTx, Inc. is engaged in the discovery, development and commercialization
of unique products used to diagnose and treat 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 products that may be used to diagnose and treat a range of viral
        diseases;
    o   earn revenues from marketing ZstatFlu, our first diagnostic product;
    o   continue our diagnostic research and development program into other
        platform technologies; and
    o   sustain an anti-viral therapeutic research and development program.

    ViraZyme(R), our core technology, exploits the subtle structural differences
and characteristics of enzymes to create products to diagnose and treat viruses.
Our diagnostic technology is a platform for proprietary two-part compounds that
will split when the compound contacts a specific enzyme which is the viral
target site. As a result of this split, one part of the compound reveals itself
in formats easily detected by the naked eye, 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, and a proprietary Inverted Drug
Screening System (IDS).

    The initial viral targets of our diagnostic products are respiratory
infections including influenza A and influenza B, respiratory syncytial virus,
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. Respiratory syncital virus infects humans, usually children, which is
an important cause of acute respiratory disease. Adenovirus can cause
respiratory disease, keratoconjunctivitis, diarrhea, cystitis and other
diseases.

    For fiscal 2000 and fiscal 2001, we incurred net losses of $6.8 million and
$7.0 million respectively. As of June 30, 2001, our working capital was a
deficit of $1.7 million. Our plan for fiscal 2002 can only be achieved if we can
obtain new financing, aggregating $3.5 million during the second quarter of
fiscal 2002. 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 2002 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.

    As an alternative to financing, we are considering all other options,
including the sale of the company, the sale of significant assets of the company
or dissolution of the company. See Liquidity and Capital Resources.

    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.

ZYMETX TECHNOLOGY

    SCIENTIFIC BACKGROUND. Our ViraZyme(R) technology focuses on the development
of highly specific/selective molecules that will interact only with an enzyme of
specific origin such as viral, mammalian or bacterial origin. This permits
interaction with one enzyme while preventing activity with a similar enzyme of
different origin. We can identify the fingerprint of critical enzymes and then
build molecules having great preference for only the targeted form of the
enzyme. We build these molecules using proprietary assays supported by X-ray
crystallography. The enzyme structure is analyzed with 3-dimensional computer
aided designs, and by "rational design" which is a method of designing a
molecule based upon knowledge of the desired structural characteristics.


                                       2
<PAGE>


    The core of the ViraZyme(R) approach is to identify essential target sites
of viral enzymes and synthetically produce molecules that act selectively upon
an identified target site. This approach has now been shown to develop both
diagnostic and therapeutic programs.

    We select viral diseases other than influenza to be targeted for
commercialization of our products based on the following criteria:

    o   potential market size;

    o   the viral disease's incidence, morbidity/mortality;

    o   the availability of diagnostics and therapeutics for the viral disease;
        and

    o   the existence of possible corporate partners.

    During fiscal 2000 and fiscal 2001, we incurred research and development
expenses of approximately $1.6 million and $1.2 million, respectively.
Developing any additional products will require significant ongoing research and
development and capital resources not currently available to us.

ZSTATFLU(TM)

    BACKGROUND. Our flagship product, ZstatFlu(TM), permits physicians to detect
both influenza types A and B virus directly from a patient specimen while in the
physician's office. The unique patented technology of ZstatFlu(R) targets the
influenza neuraminidase enzyme. The ViraZyme(R) technology incorporates patented
substrate molecules which react with the influenza neuraminidase enzyme to
generate a visible color exposing the presence of the virus.

    PRODUCT STATUS. The FDA cleared the original ZstatFlu(TM) test in September
1997. In August 1998 and August 1999 we introduced FDA cleared improvements to
this product. These improvements have made the test easier to use and have
improved the test's performance.

    One such improvement made the test "portable." A specimen may be transported
from the collection point such as a patient's room in a nursing home to a remote
regional testing site such as a centralized reference laboratory or hospital
laboratory without the use of special packaging. In early fiscal 2000 we reduced
the test time from 30 minutes to 20 minutes, making it more convenient for
results to be obtained while patients wait in a doctor's office.

    In December 2000 the ZstatFlu(TM) test was granted waived status by the
United States Food and Drug Administration (FDA). The waived status under the
Clinical Laboratory Improvements Amendment (CLIA) means the test procedure can
be performed properly and safely without the usual regulatory requirements that
govern most other laboratory tests because of the test's simplicity of use and
performance features.

OTHER CURRENT PRODUCTS CLEARED BY THE FDA

    We have a history of successfully gaining FDA 510(k) clearances; however, we
have chosen not to expend resources to market the products described below, and
we cannot assure you we will ever market these products or that marketing such
products would generate significant income.

    VIRAZYME(R) CULTURE SCREEN. ViraZyme(R) Culture Screen, cleared by the FDA
in June 1996, detects influenza and parainfluenza viruses and is a product
available to clinical labs, in contrast to the use of ZstatFlu(R), which is used
both in physician office laboratories and clinical labs. We believe the Culture
Screen product reduces labor-intensive procedures in the clinical laboratory and
reduces costs.

    VIRASTAT(R) PARAINFLUENZA 1, 2 AND 3 FITC-LABELED MONOCLONAL ANTIBODIES.
ViraSTAT(R) Parainfluenza 1, 2 and 3, cleared by the FDA in 1995, is the first
of a series of clinical lab products we developed using monoclonal antibody
technology. Monoclonal antibodies are highly specific for a particular part of
an organism and are homogeneous in that they all arise from a single cell clone.
This directly labeled product has several distinct advantages over time and
labor-intensive tests of other clinical lab products currently available. We
intend to


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develop other monoclonal antibody-based products for the detection of adenovirus
and RSV, and the influenza type A and B products which comprise a panel test
detecting multiple viruses.

    VIRASTAT(R) INFLUENZA TYPES A AND B FITC-LABELED MONOCLONAL ANTIBODIES.
ViraSTAT(R) Influenza types A and B were produced and cleared by the FDA in
1999, and are the follow-on products developed toward completion of a
respiratory virus panel of monoclonal antibodies.

OTHER DIAGNOSTIC PRODUCTS IN DEVELOPMENT

    ADVANCED VIRAL TESTING PLATFORM TECHNOLOGY. In fiscal 2000, we were awarded
a $213,000, three-year grant from Oklahoma Center for the Advancement of Science
& Technology for the commercial development and clinical testing of a
chemiluminescence-based advanced viral testing platform technology. This
technology, which has completed laboratory testing, is being developed as a
highly sensitive and highly specific platform with broad application to detect
multiple viral disease organisms.

    In fiscal 2001, we signed a definitive agreement with Polaroid Corporation
to govern the continued development and commercial marketing of a new film and
chemiluminescence-based rapid disease detection platform using this
light-emitting technology. This new system will initially target the rapid
diagnosis of influenza and will be followed by applications to other viral
diseases.

    ADDITIONAL VIRASTAT(R) FITC-LABELED MONOCLONAL ANTIBODIES. We have developed
an improved proprietary method for directly labeling monoclonal antibodies with
a commonly used fluorescent dye. This method represents the currently accepted
method employed by clinical laboratories to culture and identify viruses. These
antibodies may be marketed separately or in a panel with other monoclonal
antibodies for detection of respiratory viruses. ViraSTAT(R) monoclonal
antibodies have been found superior to commercially available antibodies in our
tests.

THERAPEUTIC RESEARCH PROGRAM

    During fiscal 2000 and 2001 we reallocated our financial resources to focus
on the further development and enhancement of our ZstatFlu(TM) diagnostic
product. We expect to devote greater resources to therapeutic development in
fiscal 2003, provided that we have the financial ability to do so. Despite this
reallocation, we continue to conduct pre-clinical research in the following
areas through funding by National Institutes of Health (NIH) grants, and are
seeking additional grants from other agencies. For fiscal 2000 and 2001, funded
grants to the Company aggregated $120,000 and $135,000, respectively.

    INFLUENZA THERAPEUTIC DEVELOPMENT. We currently have an antiviral compound,
ZX-2401 and are completing in-vitro studies comparing its efficacy to reference
antiviral compounds. We are expanding the in-vitro testing for confirmation at
outside laboratories and to have this compound included in testing against other
viruses.

    RESPIRATORY SYNCYTIAL VIRUS THERAPEUTIC DEVELOPMENT. We have been awarded a
$100,000 Small Business Innovative Research Phase 1 grant by the National
Institutes of Health to continue studies toward the development of several
compounds that show potential antiviral activity against RSV. Currently these
compounds are in preclinical studies. RSV is a major, highly infectious
pediatric respiratory tract disease occurring worldwide. RSV infects children by
2 years of age and is the leading cause of bronchiolitis and pneumonia in
infants, and can be a significant cause of disease in immunocompromised adults
and the elderly.

    IMMUNE MODULATORY THERAPEUTIC DEVELOPMENT. In addition to its Respiratory
Syncytial Virus Therapeutic Development program, the Company has identified a
series of compounds through its Inverted Drug Screening Program (IDS) that has
the effect of stimulating T-cells, B-cells and macrophages. These preparations
are currently in pre-clinical studies and the Company has applied for federal
grants to continue development of this program. Immune modulators may be
important in the treatment of immunodeficiencies of the body caused by viral
infection or by chemotherapy for malignant diseases.


                                       4
<PAGE>


SALES AND MARKETING

    INFLUENZA MARKET. Our primary market is the seasonal disease influenza.
Influenza is caused by a virus spread from person to person generally through
physical contact or contact with respiratory fluids. According to the Center for
Disease Control in Atlanta, Georgia, each year the disease affects 30 million to
60 million people in the United States depending on the length and severity of
the season. In a typical year, the disease results in approximately 130,000
hospitalizations and 30,000 to 40,000 deaths.

    Historically, the use of diagnostic testing follows the availability of
therapeutic products. During the 1999-2000 influenza season a new family of
antiviral therapeutic products became available to treat influenza.
GlaxoWellcome's influenza therapeutic Relenza(TM) and Roche Laboratories
influenza therapeutic TamiFlu(TM) were introduced during the 1999/2000 influenza
season. We believe that the presence of these therapeutics has enhanced the
marketability of all influenza diagnostic products, including ZstatFlu(TM).

    MARKET STRATEGY. To maximize the market opportunity created by the
introduction of influenza therapeutics, we have implemented an influenza
comprehensive disease management program. This program includes informing
physicians and consumers about the importance of vaccination, disease
surveillance, rapid diagnosis and treatment. Our marketing program involves
several distinct components:

    o   National Flu Surveillance Network. The cornerstone of our total disease
        management program is the National Flu Surveillance Network, which is
        the first real time influenza reporting service. This service operates
        as an influenza surveillance and diagnosis network through the use of
        ZstatFlu and reporting of results by participating physicians. During
        the 2000-2001 influenza season our National Flu Surveillance Network at
        www.fluwatch.com included over 1,100 sites that had in excess of 6,000
        reporting physicians. We believe that our disease surveillance coverage
        is the most comprehensive in the United States and that real time
        reporting of influenza outbreaks through our National Flu Surveillance
        Network improves the use of diagnostics as a complement to the growing
        use of influenza therapeutics.

    o   Hospital Market. In the hospital market we are sponsoring direct
        comparisons of our product with our competitors' products and have
        contracted with distribution companies that target this market segment.

    o   Physician Office Laboratories. For physician office laboratories and
        commercial/reference laboratories we continue to enlist product users
        through our National Flu Surveillance Network in addition to traditional
        distribution channels. We believe that managed care has not adopted
        influenza testing due to the lack of definitive information on cost
        savings and outcome improvements. We have developed a proprietary
        economic model based on third party validation that depicts potential
        cost savings through the use of a comprehensive disease management
        protocol featuring our rapid diagnostic. This model is being presented
        to managed care companies in anticipation of adoption.

MANUFACTURING ARRANGEMENTS; SOURCES OF RAW MATERIAL

    We have sufficient finished goods in inventory currently undergoing rework
in house (at a cost of approximately $100,000) to generate sales and cash in
excess of $4.0 million in fiscal 2002. Should sales exceed this amount, we have
manufacturing arrangements with two producers of chemicals, a supplier of
heaters, and two assembly and packaging suppliers to support another $2.0
million in sales, at a cost of approximately $1.0 million.

JAPANESE AND OTHER FOREIGN MARKETS

    In March 2001, the Japan Ministry of Health, Labor and Welfare approved
ZstatFlu(TM) for sale in Japan. Nichirei Corporation (Tokyo, Japan) managed the
ZstatFlu(TM) approval process in Japan for ZymeTx and ordered an additional
100,000 units for delivery between July and November 2001.

    Requirements for marketing a diagnostic product in Europe are generally less
stringent than in the United States. Once an application for marketing clearance
is submitted to the FDA, the product covered by such application may be marketed
in some European countries. Without specific registration we can market our
diagnostic in the European Union, Hong Kong, Singapore, Mexico, Spain and Middle
Eastern countries. Although a large majority of


                                       5
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our product is allocated to the growing United States and Japanese market, we
are evaluating opportunities for foreign sales in European countries.

COMPETITION

    Competition in our markets is intense. We compete with a large number of
companies ranging from very small businesses to large diagnostic, healthcare,
pharmaceutical, biomedical and chemical companies, many of which have
substantially greater financial, manufacturing, marketing and product research
resources than we have. Academic institutions, governmental agencies and other
public and private research organizations are also conducting research
activities and may commercialize products on their own or through joint
ventures. We intend to compete primarily on the basis of preferred regulatory
categorization (CLIA waiver), the clinical utility, accuracy, speed, ease of use
and other performance characteristics of our products and, to a lesser degree,
on the price of our products.

    DIAGNOSTICS. Other companies have developed influenza diagnostics which may
compete with our products. The existence of these and other competing products
or procedures that may be developed in the future may adversely affect the
marketability of products which we develop.

    Although our existing licensed patent rights cover a broad field of enzyme
based viral diagnostics, others have developed traditional antibody based
diagnostics for viral disease. Two other companies, Quidel and Biostar, are
marketing influenza diagnostic tests for both types A and B viruses. Becton
Dickinson markets a test for influenza type A and recently has added a second
companion test for influenza type B. We believe the methods used by these
competitors are substantially different than our methods and do not offer the
anticipated market advantages of the ViraZyme(R) system. We cannot assure that
we will be successful in developing our products to realize the expected
marketing advantages or that the advantages of our competitors' products will
not exceed those of our products.

    THERAPEUTICS. During the 1999-2000 influenza season GlaxoWellcome and Roche
introduced their influenza therapeutics. These new drugs are neuraminidase
inhibitors, which inhibit viral replication (thus slowing the disease process).
They are considered more effective against the flu, exhibit fewer side effects,
and are less subject to resistance development, than previously available drugs.
Other major pharmaceutical companies have announced clinical trials for their
newly developed compounds as well. These competitors are further advanced in the
development of influenza therapeutics than we are, which could be a barrier to
market acceptance of our therapeutic products, if developed. In addition these
companies have substantially greater financial resources and marketing
capabilities than we do. In the event we develop a therapeutic product, we plan
to contract with large pharmaceutical companies. We cannot assure that such a
contract can be secured on terms satisfactory to us, or at all.

    Our competitive position will also depend on our ability to:

    o   obtain adequate capital resources,

    o   attract and retain qualified scientific and other personnel,

    o   develop effective proprietary products,

    o   implement production and marketing plans, and

    o   obtain patent protection.


INTELLECTUAL PROPERTY

    LICENSES FROM OMRF. In 1997, Oklahoma Medical Research Foundation granted us
an exclusive, perpetual, worldwide license covering all of the patents which
comprise the ViraZyme(R) technology and all foreign patents and patent
applications corresponding to those patent applications. The licensed United
States patents expire in the United States from 2010 to 2013 and relate to
methods for using naturally occurring viral enzymes to detect the presence of a
specific virus by a visible reaction, and patents on specific novel compounds,
synthesis pathways and


                                       6
<PAGE>


composition of matter. The license grants us the perpetual, exclusive worldwide
right to manufacture, use or sell products made under those patent rights. In
consideration for the OMRF license, we:

      o   paid OMRF a license fee of $825,000,

      o   executed a note in the principal amount of $425,000,

      o   granted OMRF a 2.0% royalty on net sales of products derived from
          patents held by OMRF and covered by the license,

      o   granted to OMRF a warrant to purchase 5,667 shares of our common stock
          initially at $3.20 per share (reduced to $0.70 per share on April 13,
          2001, and $0.38 per share on July 13, 2001) and

      o   issued OMRF 165,130 shares of common stock.

    OTHER PROPRIETARY RIGHTS. In addition to patent rights, we rely on trade
secrets, trademarks and nondisclosure agreements to establish and protect our
proprietary rights. Despite these precautions, it may be possible for
unauthorized third parties to utilize our technology or to obtain and use
information that we regard as proprietary. The laws of some foreign countries do
not protect our proprietary rights in our processes and products to the same
extent as United States laws.

    We rely substantially on technologies which are not patentable or
proprietary and therefore may be available to our competitors. In addition, many
of the processes and much of the know-how of importance to our technology are
dependent upon the skills, knowledge and experience of our scientific and
technical personnel, which are not patentable. To protect our rights in these
areas, we require all employees, significant consultants and advisors, and
collaborators to enter into confidentiality agreements. We cannot assure that
these agreements will provide meaningful protection for our trade secrets,
know-how or other proprietary information if there is unauthorized use or
disclosure. We may have competitors who independently develop substantially
equivalent technology or who gain access to our trade secrets, knowledge or
other proprietary information. ViraZyme(R) and ViraSTAT(R) are trademarks
registered to OMRF and licensed to us under the terms of the OMRF license.

GOVERNMENT REGULATION

    The following summarizes principal areas of governmental regulation which
affect our operations. Any change in governmental regulations or their
interpretation could have a material adverse effect on us.

    REGULATION OF DIAGNOSTIC PRODUCTS. The manufacture, distribution and sale of
our diagnostic products in the U.S require prior authorization by the FDA. The
FDA and similar agencies in foreign countries, especially Japan, have
promulgated substantial regulations which apply to the testing, marketing,
export and manufacturing of diagnostic products. We will usually be required to
submit proof of the safety and efficacy of a new diagnostic product to obtain
FDA clearance. This proof typically requires clinical and laboratory tests. The
testing, preparation of necessary applications and processing of those
applications by the FDA is expensive and time consuming.

    The clinical testing required by our diagnostic products is expected to be
significantly less extensive than that required for the development of a drug or
therapeutic product or for an invasive procedure. Clinical testing may take
several months or even years to complete, depending on the nature of the filing.
We cannot assure that the FDA will act favorably or quickly in making its
review, and we may encounter significant difficulties and costs in obtaining FDA
clearances. The FDA may request the development of additional data after the
original submission. The FDA may also limit the scope of the labeling or
permitted use of the product or deny the application altogether. Delays imposed
by the patent approval process may materially reduce the period during which we
will have the exclusive right to exploit those products or technologies.

    The marketability of our diagnostic products may also be affected by state
and Federal legislation covering the use of diagnostic tests in physician
offices. CLIA-88, the Clinical Laboratory Improvement Act of 1988, established
quality standards for all laboratory testing regardless of where the tests are
performed. This act also requires


                                       7
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physicians' offices conducting tests with sophisticated instruments or specially
trained personnel to be certified or licensed.

    Our currently contemplated diagnostic products are regulated as medical
devices. All medical devices must undergo FDA review under either a Section
510(k) pre-market notification or a pre-market approval application prior to
commercial distribution. A 510(k) is submitted to demonstrate that the product
in question is "substantially equivalent" to another legally marketed device. If
our diagnostic products do not qualify for clearance under the 510(k) procedure,
we may be required to file a pre-market approval application which shows:

      o   the product is safe and effective based on extensive clinical testing
          among several diverse testing sites and population groups; and

      o   the product has acceptable sensitivity and specificity.

    Sensitivity is the measure of actual positives versus the sum of false
positives and false negatives in a diagnostic test. A high value indicates that
the test detects even low levels of the desired target. A low value indicates
that detection occurs at higher levels of infection. Specificity is the measure
of actual negatives versus the sum of actual negatives and false positives in a
diagnostic test. A high value indicates that the test detects only the desired
target. A low value is indicative of detection of similar but not targeted
entities.

    A pre-market approval application requires much more extensive testing than
the 510(k) procedure and has a longer filing review period. In response to a
pre-market approval application, the FDA may:

      o   grant marketing clearance,

      o   request additional information,

      o   set restrictive limits on claims for use, or

      o   deny the application all together.

    Product clearance may be withdrawn after it is received if regulatory
standards are not maintained or if problems occur after the product reaches the
market. The FDA may require surveillance programs to monitor the effect of
products which have been commercialized. It can prevent or limit further
marketing of products based on the results of these post-marketing programs. The
FDA must also, under the pre-market approval application guidelines, approve the
manufacturing facilities and procedures for the product. The FDA inspects
diagnostic companies on a routine basis for regulatory compliance with quality
system requirements, which is a set of standards required by the FDA for an
organization to sell its products to consumers. We believe that the use of our
diagnostic products will not be restricted in physician office laboratories
located within our target markets.

    REGULATION BY FOREIGN GOVERNMENTS. Sales of our products outside the United
States are also subject to regulatory requirements imposed by foreign
governments. Regulatory requirements for diagnostic products vary significantly
from country to country. Regulations in Western Europe, Canada, Australia, Japan
and other developed countries are often less stringent than are the regulatory
requirements in the United States The time to meet such regulatory requirements
outside the United States may be longer or shorter than that required to achieve
United States clearance.

    OTHER GOVERNMENT REGULATION. In addition to regulations enforced by the FDA,
we also are or will be subject to regulation under the Clinical Laboratory
Improvement Act of 1988, the Occupational Safety and Health Act, the
Environmental Protection Act, the Resource Conservation and Recovery Act and
other present and future Federal, state or local regulations. Our research and
development activities involve the controlled use of hazardous materials,
chemicals and viruses. Although we believe that our safety procedures for
handling and disposing of such materials comply with the standard prescribed by
state and Federal regulations, the risk of accidental contamination or injury
from these materials cannot be completely eliminated. We could be held liable
for any damages that result from an accident, and the liability could exceed our
resources.


                                       8
<PAGE>


EMPLOYEES

    We had 20 full time employees as of October 14, 2001, comprising seven
laboratory/laboratory support personnel, three manufacturing employees, four
marketing employees and six employees in administration and finance. Six
employees have doctorate degrees, one with a M.D. We believe that our relations
with our personnel are excellent. Our future success will depend in large part
upon our continued ability to attract and retain highly skilled and qualified
personnel. Competition for such personnel is intense.

ITEM 2.         DESCRIPTION OF PROPERTIES.

    We lease approximately 17,000 square feet of laboratory and office space
located at 800 Research Parkway, Suite 100, Oklahoma City, Oklahoma, from
Presbyterian Health Foundation. This lease expires March 1, 2007, with annual
rent payable at the rate of $14.17 per square foot. As additional consideration
for the lease, in 1997 we issued to Presbyterian warrants to purchase 20,000
shares of our common stock initially at an exercise price of $3.20 per share
(reduced to $0.70 per share on April 13, 2001, and $0.38 per share on July 13,
2001). The Presbyterian lease warrant expires March 1, 2004. We believe that the
facilities available under the Presbyterian lease are in superior condition and
will be adequate to meet our foreseeable space requirements.

ITEM 3.         LEGAL PROCEEDINGS.

    From time to time, we may be involved in litigation relating to claims
arising out of our normal business operation. We do not have any material legal
proceedings pending against us, or any of our properties.

ITEM 4.         SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

    There were no matters submitted to a vote of stockholders during our fourth
quarter of fiscal 2001.

                                     PART II

ITEM 5.         MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

MARKET INFORMATION

    Our common stock traded on the Nasdaq National Market under the symbol
"ZMTX" until June 19, 2001. The minimum listing requirements of Nasdaq include,
among other things, that we maintain net tangible assets of at least $2 million,
market capitalization of $35 million or net income of $500,000 in the latest
fiscal year, and maintain a minimum stock-trading price of $1.00 per share. In
June 2001, the Nasdaq Listing Qualifications Panel delisted our common stock
because we failed to maintain the net tangible asset and minimum bid price
requirements for continued listing. Since June 20, 2001 our common stock has
traded on the NASD Over-the-Counter (OTC) Bulletin Board under the symbol
"ZMTX.OB".

     The following table shows the high and low closing sales prices per share
for the last two fiscal years.

<Table>
<Caption>
                                                     HIGH         LOW
                                                    -------     -------
<S>                                                 <C>         <C>
   FISCAL 2000

   First Quarter                                    $  2.69     $  1.75

   Second Quarter                                   $  2.69     $  1.75

   Third Quarter                                    $  6.38     $  1.94

   Fourth Quarter                                   $  3.19     $  1.81

   FISCAL 2001

   First Quarter                                    $  3.63     $  2.19

   Second Quarter                                   $  3.13     $  1.31

   Third Quarter                                    $  2.06     $  0.75

   Fourth Quarter                                   $  0.97     $  0.31(1)
</Table>

----------

   (1)Based on over-the-counter quotations that reflect inter-dealer prices,
   without retail mark-up, mark-down or commission and may not represent actual
   transactions.


                                       9
<PAGE>


STOCKHOLDERS

    As of October 14, 2001, there were 121 holders of record of common stock
according to the records maintained by our transfer agent. As of that date, we
had approximately 2,500 stockholders, including beneficial owners holding shares
in street or nominee names.


DIVIDENDS

    We have not paid dividends on our common stock and do not intend to pay any
dividends in the foreseeable future; in addition, so long as we have outstanding
certain 5% senior convertible debentures we are prohibited from declaring and
paying dividends.

USE OF PROCEEDS OF INITIAL PUBLIC OFFERING

    Our initial public offering became effective on October 29, 1997 pursuant to
a Registration Statement on Form SB-2 (File No. 333-33563). The net proceeds of
our initial public offering were approximately $18,337,000. From the effective
date of our registration statement to June 30, 2001, we have paid the net
proceeds to others for the purposes indicated below:

<Table>
<S>                                                       <C>
                  Cash and cash equivalents               $     238,000

                  Inventory                               $   2,433,000

                  Other expenses                          $      80,000

                  Operating expenses                      $  15,586,000
</Table>

ITEM 6.         MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

    From time to time, we may publish forward-looking statements relating to
matters, including anticipated financial performance, business prospects, 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,"
"expected," "assumes" and similar expressions are intended to identify
forward-looking statements. Such statements are subject to 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 of this report. We
undertake no obligation to publicly


                                       10
<PAGE>

release the result of any revisions to these forward-looking statements that may
be made to reflect events or circumstances after the date of this report or to
reflect the occurrence of unanticipated events.

RESULTS OF OPERATIONS

    PRODUCT SALES. We had revenues of $0.9 million and $1.2 million in fiscal
2001 and fiscal 2000, respectively. After the introduction of influenza
therapeutics by other pharmaceutical companies in fiscal 2000, we generated
significant revenues for the first time. We then expected further diagnostic
sales increases in fiscal 2001 given the expected growth of the influenza
therapeutics and the companion need for accurate and rapid diagnostics. However,
the 2000-2001 influenza season was unusually mild relative to typical seasons,
and influenza sales did not increase as anticipated. We believe that the low
incidence of influenza was a major factor in the $.3 million decrease in
revenues from 2000 to 2001.

    We intend to market ZstatFlu(TM) during fiscal 2002 through third party
marketing groups to the point of care, acute care and hospital markets.
Additional distributors have been added that increase the product distribution
channels to the hospital and laboratory markets which are expected to be primary
consumers of our ZstatFlu diagnostic product.

    INVENTORY WRITE-DOWN. Inventory write-downs totaled $0.3 million and $0.9
million for fiscal year 2001 and fiscal year 2000, respectively. The fiscal year
2001 inventory write-down recorded in the fourth quarter of 2001 related to
quantities of raw materials we do not presently expect to use and sell in fiscal
2002 or 2003. The fiscal 2000 write-downs were primarily due to improvements in
ZstatFlu(TM) incubation times from one hour to twenty minutes and other
qualitative test improvements. The improvements required write-downs of obsolete
materials, additional labor costs for reworking kit components, repackaging
costs, and additional quality assurance costs.

    RESEARCH AND DEVELOPMENT. Research and development spending for fiscal 2001
and fiscal 2000 totaled $1.3 and $1.6 million respectively. Decreases in
research spending consisted of reduced contract research and other laboratory
operating expenses which focused on the development of new diagnostic formats
and limited pre-clinical therapeutic research. In fiscal 2002 our available
resources will be allocated primarily to the continued development of a new
film-and-chemistry based rapid disease detection platform using a light-emitting
technology called chemiluminescence. Our antiviral therapeutic research
expenditures are not likely to be increased unless covered by additional
government grants.

    PRODUCT DEVELOPMENT. Product development costs were expended to improve the
sensitivity, portability and incubation time of ZstatFlu(TM) and totaled $0.7
and $0.9 million for fiscal 2001 and fiscal 2000, respectively. These costs
included ZstatFlu(TM) scale-up manufacturing processes, technology transfer and
the development of improved diagnostic delivery platforms. The decrease in
product development expenditures was primarily due to decreases in occupancy and
travel costs.

    SALES AND MARKETING. Sales and marketing expenses totaled $2.1 and $1.7
million for fiscal 2001 and fiscal 2000, respectively. The increase in sales and
marketing expense, a portion of which was non-cash, resulted from more costly
promotional sales programs and product fulfillment costs which were outsourced
during fiscal 2001.

    GENERAL AND ADMINISTRATIVE. General and administrative costs totaled $1.8
and $2.7 million for fiscal 2001 and 2000, respectively. The decrease was
principally due to reduced executive compensation and reduced rent resulting
from a reduction in leased space.

    RETURN OF IN-PROCESS TECHNOLOGY. In fiscal 2000, we returned certain
in-process technology to OMRF, a stockholder, because the technology did not
have the properties that we expected. OMRF refunded our purchase price of
$150,000 by offsetting our outstanding note payable by such amount.

    OTHER INCOME AND EXPENSES. Interest and dividend income for fiscal 2001
totaled $0.2 million compared with $0.3 million for fiscal 2000. The decrease is
due to decreases in short term cash investments resulting from our use of funds
for operating expenses. Interest expense for fiscal 2001 totaled $0.9 million
compared to less than $0.1 million for fiscal 2000 resulting from the sale of
$2.0 million of 5% Senior Secured Convertible Debentures in


                                       11
<PAGE>


October 2000. In the fourth quarter of fiscal 2001, we defaulted on the
debentures and expensed $.5 million, the remaining offering costs and discount.
The default and the resulting put option associated with the default resulted in
a 20% increase in the debenture redemption price, which as of June 30, 2001,
amounts to approximately $.6 million.

LIQUIDITY AND CAPITAL RESOURCES

    Net cash used by operating activities was $5.4 million in fiscal 2001
compared to $4.8 million in fiscal 2000. At June 30, 2001 we had cash available
for operations aggregating $.2 million compared to $3.8 million at June 30,
2000. Working capital at June 30, 2001 was a deficit of $1.7 million compared to
$4.6 million at June 30, 2000. In fiscal 2001 and fiscal 2000, the cash used by
operating activities was funded by the sale of marketable securities of $2.4
million and $6.1 million, respectively.

    On October 13, 2000, we sold $2.0 million of senior secured convertible
debentures to two private accredited investors, resulting in net proceeds of
approximately $1.9 million. The offering was completed in reliance on Rule 506
of Regulation D based on the accredited nature of the investors and the
satisfaction of other criteria of that Rule. As a result of our delisting from
the NASDAQ NMS and other events described below, we are in default under the
debentures. The debenture holders have not waived these defaults and, therefore,
have the right to declare the debentures immediately due and payable. If that
occurs, we would be unable to pay the debentures and the holders would have the
right to foreclose on all of our assets. We cannot predict what actions the
debenture holders may take; however, we are communicating with the debenture
holders in an effort to secure their cooperation with our attempts to obtain
financing or adopt alternative measures.

    The debentures bear interest at 5%, which is payable May 1 and November 1 of
each year, in cash or common stock or by adding the interest to the outstanding
principal due under the debenture at our option. Although the debentures are not
due by their terms until October 2002, inasmuch as we have defaulted on several
requirements of the debentures, we have fully amortized the debenture offering
costs and fully accreted the debenture discount as of June 30, 2001, and
classified the debentures as due within one year in the accompanying June 30,
2001 balance sheet.

    The debentures are convertible to common stock at the option of the holder
based on a conversion price based on the weighted average price of our common
stock for fifteen days prior to periodic anniversaries of the issuance of the
debentures. The debentures are secured by a first priority interest in
substantially all of our assets. The debentures prohibit us from declaring and
paying dividends on our common stock so long as these debentures remain
outstanding and limit our ability to incur new indebtedness senior to the
debentures.

    The debentures include certain anti-dilution and put features. The features
provide for keep-whole provisions in the event that we sell equity at less than
market prices and put options at the discretion of the holders, which allow the
holders to demand repayment of the debentures at their carrying value plus 20%.
These put options become available to the holders upon the occurrence of certain
events, including if the Investors do not have the ability to "freely trade" the
underlying common stock, or if a change of control occurs.

    In conjunction with the issuance of the debentures to the holders, we issued
warrants to the Investors for the purchase of 180,000 shares of common stock at
an exercise price of $3.17 per share, exercisable for a period of five years
following closing. The estimated fair value of these warrants of $374,400 was
recognized as debt discount at the date of issuance.

    The initial conversion price of $3.12 was reset to $0.70 per share on April
13, 2001 and to $0.38 per share on July 13, 2001. On May 1, 2001, we elected to
add interest payable on the debentures in the amount of $54,000 to outstanding
principal bringing the total outstanding face amount of the debentures as of May
1, 2001, to $2,214,000. The effect of the changes in the conversion price and
the addition of interest to principal resulted in an increase in the potential
number of shares of common stock from exercise of both the debentures and
associated warrants from 929,764 to 3,395,558 on April 13, 2001 and to 6,115,920
on July 13, 2001. We increased the shares reserved for future issuance to
provide for the increases but we did not file a registration statement covering
the increased


                                       12
<PAGE>
number of shares as required by the debentures. This is also an event of default
which has not been waived by the debenture holders.

    Beginning in the fourth quarter of fiscal 2001, we have taken a number of
actions to conserve and generate cash needed to remain in business. We have
reduced operating overhead, have put research and development on hold, and
delayed payments to vendors and suppliers. In fiscal 2002, in an effort to
provide cash, we reached agreement with our Japanese distributor of ZstatFlu(TM)
to purchase 100,000 units of product, 40,000 of which were on an accelerated
basis. The accelerated sales necessitated shipment of finished goods rather than
component parts resulting in reduced profit margins but provided cash needed to
remain in business. While there are no assurances that the holders of the
debentures, OMRF, as the holder of a note payable, or vendors will not force us
into involuntary bankruptcy, we believe these unit sales proceeds will allow us
to continue our operations at least through November 2001, at which time it will
be necessary to obtain additional debt or equity financing in order to proceed
with our plan, as described below, for fiscal 2002.

    Our financial plan for fiscal 2002 anticipates the sale of 450,000 units of
ZstatFlu(TM). Approximately 350,000 units are in inventory. In establishing our
operating plans for fiscal 2002 (including the amount of ZstatFlu(TM) products
required for the 2001-2002 influenza season) we have assumed, similar to fiscal
2001, that the availability of influenza therapeutics will significantly improve
the market opportunity for influenza diagnostic products. The cost of rework and
producing an additional 100,000 units is expected to require cash of
approximately $0.5 million.

    Assuming an average unit sales price of $12.46, revenues from 450,000 unit
sales would be approximately $5.6 million. If we are otherwise meeting budgeted
expenditures for fiscal 2002, we will expend cash in our operating activities of
$8.2 million in fiscal 2002. Assuming this planned level of sales and
expenditures, we will need to raise approximately $3.5 million during the second
quarter of fiscal 2002 to continue operations.

    We cannot be sure that the additional financing required to continue
operations beyond November 2001 will be available on terms satisfactory to us,
or that such financing will be available at all. We are currently exploring all
alternatives in the event financing is unavailable, including the sale or
dissolution of the company or the sale of the company's significant assets.

    As of June 30, 2001, we have federal and state income tax net operating loss
carryforwards of approximately $26.1 million, which expire between 2010 and
2021. We also have Federal and state research tax credit carryforwards of
approximately $577,000. The Federal credits expire between 2012 and 2015; the
state credits have no expiration date. Realization of these carryforwards and
credits are subject to us generating taxable income in future periods.


IMPACT OF INFLATION AND CHANGING PRICES

    Though not significant, inflation continues to cause increases in product,
occupancy and operating expenses, as well as the cost of acquiring capital
assets. The effect of higher costs is minimized by achieving operating
efficiencies and passing vendor price increases along to consumers.

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 AND WORKING CAPITAL NEEDS. For fiscal 2000 and
fiscal 2001, we incurred net losses of $6.8 million and $7.0 million
respectively. As of June 30, 2001, our working capital was a deficit of $1.7
million. Our plan for fiscal 2002 can only be achieved if we can obtain new
financing, aggregating $3.5 million during the second quarter of fiscal 2002. 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 2002 will be
dependent on our ability to generate cash flow from operations adequate


                                       13
<PAGE>


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.

    As an alternative to financing, we are considering all other options,
including the sale of the company, sale of significant assets of the company or
dissolution of the company.

    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 introduced influenza
diagnostic products during 1999 that compete directly with ZstatFlu(TM).

    NO ASSURANCE OF MARKET ACCEPTANCE. During the 1998-1999 influenza season we
had limited success in realizing sales of ZstatFlu(TM), due principally to the
lack of therapeutic products to treat influenza. With the introduction of
therapeutics during the 1999-2000 and 2000-2001 influenza season we saw
increased sales of ZstatFlu(TM). There can be no assurance that sales of
ZstatFlu(TM) will increase during the next influenza season, which is not
expected to commence until the second quarter of fiscal 2002. The degree of
market acceptance of ZStatFlu(TM) will depend upon a number of factors,
including the availability of third-party reimbursement on an economically
advantageous basis to care providers, the establishment of cost-effectiveness of
ZstatFlu(TM) and its advantages over existing technologies and products.

    NO ASSURANCE OF SUCCESSFUL OR TIMELY DEVELOPMENT OF OUR 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 2002, we will be concentrating our efforts on developing new
diagnostic products and completing developments of improvements to ZstatFlu(TM)
to the extent capital resources are available. We plan to devote greater efforts
to the development of our therapeutic and other diagnostic products in fiscal
2003 and beyond if capital resources are available to justify expenditures for
those products. Due to our present working capital constraints, we may be forced
to reduce research and development expenditures during fiscal 2002 which may
further delay or eliminate the development and acceptance of our therapeutic or
other diagnostic products.

    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 large scale manufacturing facility, we have engaged third-party
manufacturers to produce finished units of ZstatFlu(TM). Delays by third-party
manufacturers in delivering finished products in time could have a material
adverse effect on us.

    LIMITATIONS ON PROTECTION OF INTELLECTUAL PROPERTY. Our success will depend,
in part, on our ability to:

      o   obtain patents and license patent rights,

      o   to maintain trade secret protection, and

      o   to operate without infringing on the rights of other patent holders.

                                       14
<PAGE>


    The patent position of biotechnology firms for such types of patents
generally is highly uncertain and involves complex legal and factual issues. 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
these licenses will be available to us and their cost 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 when 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 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 United States 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. We and our
third-party manufacturers are subject to quality 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 quality regulations. Although our employees have experience with quality
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 quality 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, entail 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 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,


                                       15
<PAGE>


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.

ITEM 7.         FINANCIAL STATEMENTS.

    The financial statements required by this Item are set forth beginning on
page F-l.

ITEM 8.         CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
                FINANCIAL DISCLOSURE.

    None.


                                       16
<PAGE>


                                    PART III

    In accordance with General Instruction E(3), a presentation of information
required in response to Items 9, 10, 11 and 12 shall appear in our definitive
proxy statement to be filed pursuant to Regulation 14A within 120 days of the
year end covered hereby, and shall be incorporated herein when filed.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.

    (a) EXHIBITS. The exhibits listed below are included with this report. All
employment contracts and compensatory plans or arrangements are marked with an
asterisk (*).

Exhibit
Number   Name of Exhibit
-------  ---------------
3.1      Amended and Restated Certificate of Incorporation, incorporated herein
         by reference to Exhibit 3.1 to the Form SB-2 Registration Statement No.
         333-33563 (the "Registration Statement").

3.2      Amended and Restated Bylaws, incorporated herein by reference to
         Exhibit 3.2 to the Registration Statement.

4.1      5% Senior Secured Convertible Debenture Due October 13, 2002
         incorporated by reference to Exhibit 4.1 to our Annual Report on Form
         10-KSB for the fiscal year ended June 30, 2000.

4.2      Form of Warrant Agreement between ZymeTx and Capital West Securities,
         Inc. incorporated herein by reference to Exhibit 4.2 to the
         Registration Statement.

4.3*     ZymeTx, Inc. Stock Option Plan, incorporated herein by reference to
         Exhibit 4.3 to the Registration Statement.

4.4*     ZymeTx, Inc. Directors Stock Option Plan, incorporated herein by
         reference to Exhibit 4.4 to the Registration Statement.

4.5*     ZymeTx, Inc. Employee Stock Purchase Plan incorporated by reference to
         Exhibit 4.5 of the ZymeTx Annual Statement on Form 10-KSB for the
         fiscal year ended June 30, 1999.

4.6      Rights Agreement dated February 3, 1999, by and between ZymeTx, Inc.
         and American Stock Transfer and Trust Company incorporated herein by
         reference to Exhibit 99.1 of the ZymeTx Current Report on Form 8-K
         filed February 5, 1999.

10.1*    Executive Services Agreement, dated as of January 1, 2000, by and
         between ZymeTx and Norman R. Proulx, incorporated herein by reference
         to Exhibit 10.19 to our Annual Report on Form 10-KSB for the fiscal
         year ended June 30, 2000.

10.2     Purchase Agreement dated October 13, 2000, by and between ZymeTx and
         investors identified therein, incorporated herein by reference to
         Exhibit 10.20 to our Annual Report on Form 10-KSB for the fiscal year
         ended June 30, 2000.

10.3     Form of Common Stock Purchase Warrant dated October 13, 2000, issued in
         connection with the Purchase Agreement, incorporated herein by
         reference to Exhibit 10.21 to our Annual Report on Form 10-KSB for the
         fiscal year ended June 30, 2000.

10.4     Registration Rights Agreement dated October 13, 2000, issued in
         connection with the Purchase Agreement , incorporated herein by
         reference to Exhibit 10.22 to our Annual Report on Form 10-KSB for the
         fiscal year ended June 30, 2000.

10.5     Security Agreement dated October 13, 2000 issued in connection with the
         Purchase Agreement , incorporated herein by reference to Exhibit 10.23
         to our Annual Report on Form 10-KSB for the fiscal year ended June 30,
         2000.

23.1     Consent of Independent Auditors

    (b) REPORTS ON FORM 8-K. During the last quarter of fiscal 2001 ZymeTx filed
no Current Reports on Form 8-K.


                                       17
<PAGE>


                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

REGISTRANT:                               ZYMETX, INC.


Date:    October 15, 2001        By:  /s/ Norman R. Proulx
                                     -------------------------------------------
                                          Norman R. Proulx
                                          President and Chief Executive Officer

         In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.

<Table>
<Caption>
               SIGNATURE                                   TITLE                                 DATE
               ---------                                   -----                                 ----
<S>                                               <C>                                       <C>
/s/ Norman R. Proulx                              President; Chief Executive                October 15, 2001
--------------------------------------------      Officer; Director
Norman R. Proulx
Principal Executive Officer

/s/ Fred E. Hiller                                Acting Chief Financial Officer;           October 15, 2001
--------------------------------------------      Secretary; Treasurer
Fred E. Hiller
Principal Financial Officer

/s/ James R. Tolbert, III                         Chairman of the Board;                    October 15, 2001
--------------------------------------------      Director
James R. Tolbert, III

/s/ William I. Bergman                            Director                                  October 15, 2001
--------------------------------------------
William I. Bergman

/s/ Christopher M. Salyer                         Director                                  October 15, 2001
--------------------------------------------
Christopher M. Salyer

/s/ J. Vernon Knight, M.D.                        Director                                  October 15, 2001
--------------------------------------------
J. Vernon Knight, M.D.

/s/ David E. Rainbolt                             Director                                  October 15, 2001
--------------------------------------------
David E. Rainbolt

/s/ Gilbert M. Schiff, M.D.                       Director                                  October 15, 2001
--------------------------------------------
Gilbert M. Schiff, M.D.

/s/ William G. Thurman, M.D.                      Director                                  October 15, 2001
--------------------------------------------
William G. Thurman, M.D.

/s/ Rand Mulford                                  Director                                  October 15, 2001
--------------------------------------------
Rand Mulford
</Table>


                                       18
<PAGE>

                          Index to Financial Statements



<Table>
<S>                                                                                        <C>
Report of Independent Auditors........................................................     F-2
Balance Sheets at June 30, 2000 and 2001..............................................     F-3
Statements of Operations for the years ended June 30, 2000 and 2001...................     F-4
Statements of Stockholders' Equity for the years ended June 30, 2000 and 2001.........     F-5
Statements of Cash Flows for the years ended June 30, 2000 and 2001...................     F-6
Notes to Financial Statements.........................................................     F-7
</Table>


                                       F-1
<PAGE>



                         Report of Independent Auditors

The Board of Directors and Stockholders
ZymeTx, Inc.

We have audited the accompanying consolidated balance sheets of ZymeTx, Inc. as
of June 30, 2000 and 2001, and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of the two years in
the period ended June 30, 2001. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of ZymeTx, Inc. at
June 30, 2000 and 2001, and the consolidated results of its operations and its
cash flows for each of the two years in the period ended June 30, 2001, in
conformity with accounting principles generally accepted in the United States.

The accompanying financial statements have been prepared assuming that ZymeTx,
Inc. will continue as a going concern. As more fully described in Note 2, the
Company has not complied with certain covenants of debt agreements, has incurred
recurring operating losses, has a working capital deficiency and is dependent
upon its ability to secure additional capital resources to fund fiscal 2002
operations. These conditions raise substantial doubt about the Company's ability
to continue as a going concern. Management's plans in regard to these matters
are also described in Note 2. The financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amounts and classification of liabilities that
may result from the outcome of this uncertainty.


                                                         ERNST & YOUNG LLP

Oklahoma City, Oklahoma
October 9, 2001


                                       F-2
<PAGE>



                                  ZymeTx, Inc.

                                 Balance Sheets

<Table>
<Caption>
                                                                                                 JUNE 30,
                                                                                            2000            2001
                                                                                        ------------    ------------
<S>                                                                                     <C>             <C>
ASSETS
Current assets:
   Cash and cash equivalents                                                            $  1,357,509    $    237,673
   Marketable securities, available-for-sale                                               2,458,801              --
   Accounts receivable                                                                         8,801         113,897
   Inventory                                                                               1,900,642       1,941,161
   Prepaid insurance and other                                                               155,940          80,303
                                                                                        ------------    ------------
Total current assets                                                                       5,881,693       2,373,034

Inventory not expected to be realized within one year                                        628,022         492,226
Property, equipment and leasehold improvements, net                                          584,463         437,756
Proprietary technology and other intangibles, net                                             57,419          37,616
                                                                                        ------------    ------------
Total assets                                                                            $  7,151,597    $  3,340,632
                                                                                        ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                                                     $    603,211    $    739,961
   Accrued salaries, wages and benefits                                                      314,753         112,282
   Other accrued liabilities                                                                 290,940         301,196
   Senior secured convertible debentures in default (Note 4)                                      --       2,831,800
   Note payable to stockholders in default (Note 5)                                           56,880         126,394
                                                                                        ------------    ------------
Total current liabilities                                                                  1,265,784       4,111,633

Long term obligations:
   Note payable to stockholder                                                                94,270              --
   Deferred lease rentals                                                                    303,300          25,345
   Other                                                                                      16,348          13,664

Commitments (Note 5)

Stockholders' equity (deficit):
   Preferred stock $0.001 par value; 12,000,000 shares authorized  (none issued
     or outstanding at June 30, 2000 or 2001)                                                     --              --
   Common stock $0.001 par value; 30,000,000 shares authorized (6,837,175
     shares and 6,886,882 issued and outstanding at June 30, 2000 and June 30,
     2001, respectively)                                                                       6,837           6,887
   Additional paid-in capital                                                             34,141,203      34,890,066
   Accumulated deficit                                                                   (28,672,807)    (35,706,963)
   Unrealized holding gains (losses) on marketable securities
       available for sale                                                                     (3,338)             --
                                                                                        ------------    ------------
Total stockholders' equity (deficit)                                                       5,471,895        (810,010)
                                                                                        ------------    ------------
Total liabilities and stockholders' equity (deficit)                                    $  7,151,597    $  3,340,632
                                                                                        ============    ============
</Table>

See accompanying notes.


                                       F-3
<PAGE>



                                  ZymeTx, Inc.

                            Statements of Operations


<Table>
<Caption>
                                                                             YEAR ENDED JUNE 30,
                                                                             2000            2001
                                                                         ------------    ------------
<S>                                                                      <C>             <C>
Revenues                                                                 $  1,224,820    $    948,703
Cost of goods sold                                                            643,935         495,930
Inventory write-down                                                          913,861         260,000
                                                                         ------------    ------------
Gross profit (loss)                                                          (332,976)        192,773

Operating expenses:
   Research and development                                                 1,562,387       1,303,152
   Product development                                                        920,399         703,153
   Sales and marketing                                                      1,747,620       2,117,537
   General and administrative                                               2,676,547       1,792,733
   Return of in-process technology                                           (150,000)             --
                                                                         ------------    ------------
Total operating expenses                                                    6,756,953       5,916,575
                                                                         ------------    ------------
Loss from operations                                                       (7,089,929)      5,723,802

Other income (expense):
   Interest and dividend income                                               347,261         179,694
   Interest expense, including amortization of offering costs and
       accretion of discount on Debentures (Note 4)                           (36,173)       (872,248)
   Provision for premium on redemption of Debentures                               --        (617,800)
                                                                         ------------    ------------
 Total other income (expense)                                                 311,088      (1,310,354)
                                                                         ------------    ------------
Net loss                                                                 $ (6,778,841)   $ (7,034,156)
                                                                         ============    ============

Basic and diluted net loss per common share                              $      (1.00)   $      (1.02)
                                                                         ============    ============

Weighted average common shares outstanding                                  6,752,274       6,868,086
                                                                         ============    ============
</Table>

See accompanying notes.

                                       F-4
<PAGE>



                                  ZymeTx, Inc.

                       Statements of Stockholders' Equity

<Table>
<Caption>
                                                                                                 ACCUMULATED
                                           COMMON STOCK           ADDITIONAL                       OTHER            TOTAL
                                   ---------------------------     PAID-IN      ACCUMULATED     COMPREHENSIVE    STOCKHOLDERS'
                                      SHARES       PAR VALUE       CAPITAL        DEFICIT       INCOME (LOSS)   EQUITY (DEFICIT)
                                   ------------   ------------   ------------   ------------    -------------   ----------------
<S>                                <C>            <C>            <C>            <C>             <C>             <C>
Balance at June 30, 1999              6,692,572   $      6,693   $ 33,557,761   $(21,893,966)   $       7,962   $     11,678,450
Stock options exercised by
   employees and non-employee
   Directors                             75,333             75        117,290                              --            117,365
Stock purchased through
   Employee Stock Purchase Plan          15,652             15         26,144                              --             26,159
Warrants issued for services                 --             --        327,562                              --            327,562
Stock issued as compensation
   for services                          53,618             54        112,446                              --            112,500
Unrealized holding losses on
   marketable securities
   available for sale                        --             --             --                         (11,300)           (11,300)
Net loss                                     --             --             --     (6,778,841)              --         (6,778,841)
                                                                                                                 ---------------
Total comprehensive loss                     --             --             --                              --         (6,790,141)
                                   ------------   ------------   ------------   ------------    -------------    ---------------
Balance at June 30, 2000              6,837,175   $      6,837   $ 34,141,203   $(28,672,807)   $      (3,338)         5,471,895
Stock options exercised by
   employees and non-employee
   Directors                             28,125             28         30,440                              --             30,468
Stock purchased through
   Employee Stock Purchase Plan          21,582             22         26,329                              --             26,351
Warrants issued for services                 --             --        692,094                              --            692,094
Unrealized holding losses on
   marketable securities
   available for sale                        --             --             --                           3,338              3,338
Net loss                                     --             --             --     (7,034,156)              --         (7,034,156)
                                                                                                                 ---------------
Total comprehensive loss                     --             --             --                              --         (7,030,818)
                                   ------------   ------------   ------------   ------------    -------------    ---------------
Balance at June 30, 2001              6,886,882   $      6,887   $ 34,890,066    (35,706,963)   $          --           (810,010)
                                   ============   ============   ============   ============    =============    ===============
</Table>

See accompanying notes.


                                       F-5
<PAGE>


                                  ZymeTx, Inc.

                            Statements of Cash Flows

<Table>
<Caption>
                                                                                YEAR ENDED JUNE 30,
                                                                                2000            2001
                                                                            ------------    ------------
<S>                                                                         <C>               <C>
OPERATING ACTIVITIES
Net loss                                                                    $ (6,778,841)     (7,034,156)
Adjustments to reconcile net loss to net cash used by operating
   activities:
     Depreciation                                                                163,957         195,000
     Amortization                                                                 22,619         266,367
     Provision for (recovery of) doubtful accounts and sales returns              77,146         (13,095)
     Provision for premium on redemption of Debentures                                --         617,800
     Inventory write-down                                                        913,861         260,000
     Return of in-process technology to OMRF                                    (150,000)             --
     Accretion of interest                                                        19,526         527,602
     Stock-based compensation                                                    256,682         144,951
     Deferred lease rentals                                                       62,127        (277,955)
     Changes in operating assets and liabilities:
       Accounts receivable                                                       106,091         (92,001)
       Interest receivable on marketable securities                              122,190          20,179
       Prepaid insurance and other                                                74,005         199,288
       Inventory                                                                (152,594)       (164,723)
       Accounts payable                                                          168,033         136,750
       Accrued salaries, benefits and other                                        4,125        (202,471)
       Other liabilities                                                         258,074          10,256
                                                                            ------------    ------------
Total adjustments                                                              1,945,842       1,627,948
                                                                            ------------    ------------
Net cash used by operating activities                                         (4,832,999)     (5,406,208)

INVESTING ACTIVITIES
Purchase of marketable securities available for sale                         (11,554,525)     (1,452,475)
Proceeds from sale of marketable securities available for sale                17,697,665       3,894,435
Purchase of property, equipment and leasehold improvements                       (67,867)        (43,612)
                                                                            ------------    ------------
Net cash provided by investing activities                                      6,075,273       2,398,348

FINANCING ACTIVITIES
Proceeds from issuance of debentures, net                                             --       1,874,068
Payments on notes payable                                                        (38,854)        (42,863)
Proceeds from exercise of employee stock options                                 117,365          30,468
Proceeds from sale of common stock purchased through employee stock
  purchase plan                                                                   26,159          26,351
                                                                            ------------    ------------
Net cash provided by financing activities                                        104,670       1,888,024
                                                                            ------------    ------------
Net increase (decrease) in cash                                                1,346,944      (1,119,836)

Cash and cash equivalents at beginning of period                                  10,565       1,357,509
                                                                            ------------    ------------
Cash and cash equivalents at end of period                                  $  1,357,509    $    237,673
                                                                            ============    ============

SUPPLEMENTAL DISCLOSURE OF INTEREST PAID                                    $     32,452    $     20,951
</Table>

See accompanying notes.

                                       F-6
<PAGE>


                                  ZymeTx, Inc.

                          Notes to Financial Statements

                             June 30, 2000 and 2001



1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND BUSINESS

    ZymeTx, Inc. ("the Company"), a Delaware corporation, is a biotechnology
company engaged in the discovery, development and commercialization of unique
products for the diagnosis and treatment of viruses. The scientific foundation
of the Company is based upon the role of enzymes in the process of viral
infection. The year ended June 30, 2000 was the first year the Company had
significant revenues from its primary commercial diagnostic product, ZstatFlu.
The Company was presented as a Development Stage Company in all periods prior to
the year ended June 30, 2000.

    The Company has initiated early stages of research regarding therapeutics
utilizing its ViraZyme technology for enzymes associated with certain viral
diseases; however, the Company will concentrate its efforts during fiscal 2002
on completing developments of improvements to and marketing its influenza
diagnostic product, ZstatFlu. The Company expects to devote greater efforts to
therapeutic development in fiscal 2003 and beyond, depending upon capital
resource availability. These projects which will involve experimental and
unproven technology, may require many years and substantial expenditures to
complete, and may ultimately be unsuccessful.


CASH AND CASH EQUIVALENTS

    Cash and cash equivalents consist of cash and highly liquid debt investments
with maturities of 90 days or less when purchased. There were no cash
equivalents at June 30, 2001.

MARKETABLE SECURITIES

    Based on the nature of the assets held by the Company and management's
investment strategy, the Company's investments in marketable securities have
been classified as available-for-sale. Management determines the appropriate
classification of debt securities at the time of purchase and reevaluates such
designation as of each balance sheet date. The securities mature within one year
and the amortized cost basis, aggregate fair value, and unrealized holding gains
at June 30, 2000 are summarized below.

<Table>
<Caption>
                                                               AMORTIZED    AGGREGATE
                                                                 COST         FAIR      UNREALIZED
                                                                 BASIS        VALUE       LOSSES
                                                              -----------  -----------  ----------
<S>                                                           <C>          <C>          <C>
   Corporate debt securities                                  $ 1,970,404  $ 1,969,650  $     (754)
   Bankers Acceptance                                             491,735      489,151      (2,584)
                                                              -----------  -----------  ----------
                                                              $ 2,462,139  $ 2,458,801  $   (3,338)
                                                              ===========  ===========  ==========
</Table>

There were no marketable securities at June 30, 2001.


                                      F-7
<PAGE>


INVENTORY

    Inventories are carried at the lower of cost (first-in, first-out) or
market. The components of inventory consist of the following:

<Table>
<Caption>
                                                                     JUNE 30,
                                                                2000           2001
                                                            ------------   ------------
<S>                                                         <C>            <C>
Raw Materials                                               $  1,503,431   $    537,434
Work in process                                                  248,443        139,230
Finished goods                                                   776,790      1,756,723
                                                            ------------   ------------
                                                               2,528,664      2,433,387

Less amounts not expected to be realized in one year             628,022        492,226
                                                            ------------   ------------
                                                            $  1,900,642   $  1,941,161
                                                            ============   ============
</Table>

    The inventory in the accompanying balance sheet at June 30, 2001, consists
of costs related to ZstatFlu. The market for influenza diagnostics grew during
fiscal years 2000 and 2001, largely due to the introduction of influenza
therapeutics produced by other companies during the year. However, there are no
assurances that this market will continue to develop and accordingly, there are
no assurances that the Company's investment in its ZstatFlu inventory will be
recoverable. In addition, improvements in the delivery of the Company's
diagnostic as a result of its research and development program or new products
from competitors may render a portion of the inventory on hand at June 30, 2001,
obsolete in the near term. In fiscal 2001, raw material inventory used in
ZstatFlu of $260,000 not expected to be realized in fiscal 2002 or 2003 unit
sales was written off due to the Company's inability to predict with any
accuracy the technological advancement of competing products and/or the ability
of the Company to sell significantly more units in future periods than that
included in the Company's 2002 plan. In fiscal 2000 the carrying value of
inventory was written down $913,861 as a result of new packaging designs and
improvements to the Company's influenza diagnostic which rendered certain
existing inventory unsaleable.

DEPRECIATION AND AMORTIZATION

    Depreciation of property and equipment is computed using the straight-line
method over three to seven years. Amortization of leasehold improvements is
computed using the straight-line method over the shorter of the estimated useful
lives of the assets or the remaining lease term.

PROPRIETARY TECHNOLOGY AND OTHER INTANGIBLES

    Amortization of proprietary technology and other intangibles acquired is
computed using the straight-line method over periods of between five and ten
years. Accumulated amortization aggregated $79,212 and $99,015 as of June 30,
2000 and 2001, respectively.

STOCK COMPENSATION

    The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB No. 25") and related
interpretations in accounting for its stock options. Under APB No. 25, because
the exercise price of the Company's employee stock options is not generally less
than the estimated fair value of the underlying stock on the date of grant, no
compensation is generally recorded. Repriced options are accounted for as
variable, with compensation expense recognized for increases in intrinsic value
subsequent to the repricing date.

CONCENTRATION OF CREDIT RISK

    The Company invests its excess cash in debt instruments of the U.S.
Government and its agencies, institutions and other short-term investments with
strong credit ratings. The Company has established guidelines relative to
diversification and maturities that maintain safety and liquidity. These
guidelines are periodically reviewed and modified to take advantage of trends in
yields and interest rates.

USE OF ESTIMATES AND OTHER UNCERTAINTIES

    The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.


                                      F-8
<PAGE>


FAIR VALUES OF FINANCIAL INSTRUMENTS

    It is not practicable to estimate the fair value of the Senior secured
convertible debentures or the note payable to stockholder in default due to the
Company's current financial condition. Other financial instruments have a fair
value approximating their carrying amount due to the short maturity of those
instruments or due to the criteria used to determine carrying value in the
financial statements.

REVENUE RECOGNITION

    The Company utilizes independent distributors in the dissemination of
ZstatFlu. The independent distributors specify the quantities which they hold
for dissemination, assume the liability for damage or loss of merchandise and
may retain the right of return of such merchandise at the original purchase
price less a restocking charge. When a distributor has been given the right to
return merchandise, the merchandise shipped to and held by that distributor is
not reported as revenue until it is shipped from the distributor to the end
users.

NET LOSS PER SHARE

    Basic loss per common share is based upon the weighted average number of
common shares outstanding during each period. Diluted loss per share is based on
the weighted average number of common shares and dilutive common equivalent
shares outstanding and the assumed conversion of dilutive convertible securities
outstanding, if any. All potentially dilutive securities were antidilutive for
all periods presented and have thus, been excluded from diluted loss per share.
See Note 4 -- Senior Secured Convertible Debentures, Note 6 -- Related Party
Transactions, Note 7 -- Stockholders' Equity, and Note 8 -- Stock Option and
Purchase Plans for a full description of securities which may have a dilutive
effect in future periods.

2.  LIQUIDITY AND MANAGEMENT'S PLANS

    As of June 30, 2001, the Company has negative working capital of $1.7
million, including $2.8 million of debt in default. For the years ended June 30,
2000 and 2001, the Company also incurred operating losses of $6.8 million and
$7.0 million, respectively. As a result of the Company's delisting from the
NASDAQ National Market System and other events, the Company is in default under
the Senior Secured Convertible Debentures (Debentures). The Debenture holders
have not waived these defaults and, therefore, have the right to declare the
Debentures immediately due and payable. If that occurs, the Company would be
unable to pay the Debentures and the holders would have the right to foreclose
on all of the Company's assets. The Company cannot predict what actions the
debenture holders may take; however, the Company is communicating with the
Debenture holders in an effort to secure their cooperation with the attempts to
obtain financing or adopt alternative measures.

    Beginning in the fourth quarter of fiscal 2001, the Company has taken a
number of actions to conserve and generate cash needed to remain in business.
Operating overheads have been reduced, research and development has been put on
hold, and payments to vendors and suppliers have been delayed. In fiscal 2002,
in an effort to provide cash, the Company reached agreement with its Japanese
distributor of ZstatFlu to sell 100,000 units of product, 40,000 of which were
on an accelerated basis. The accelerated sales necessitated shipment of finished
goods rather than component parts resulting in reduced profit margins to the
Company but providing cash needed to remain in business. While there are no
assurances that the holders of the Debentures (Note 4), the holders of the Notes
Payable (Note 6) or other vendors of the Company will not force the Company into
involuntary bankruptcy, the Company believes these unit sales proceeds will
allow the Company to continue its operations at least through November 2001 at
which time the Company must obtain additional debt or equity financing in order
to proceed with its plan as described below for fiscal 2002.

    The Company's financial plan for fiscal 2002 anticipates the sale of 450,000
units of ZstatFlu. Approximately 350,000 units are in inventory. In establishing
the Company's operating plans for fiscal 2002 (including the amount of ZstatFlu
products required for the 2001-2002 influenza season) the Company has assumed
that the availability of influenza therapeutics will significantly improve the
market opportunity for influenza diagnostic products. The cost of rework and
producing an additional 100,000 units is expected to require cash of
approximately $0.5 million.


                                      F-9
<PAGE>


    Assuming an average unit sales price of $12.46, revenues from 450,000 unit
sales would be approximately $5.6 million. If the Company is otherwise meeting
budgeted expenditures for fiscal 2002, the Company will expend cash in its
operating and investing activities of $8.2 million in fiscal 2002. Assuming this
planned level of sales and expenditures, and the Company must successfully
negotiate the extension of the Debentures and Notes Payable and raise
approximately $3.5 million during the second quarter of fiscal 2002 in order to
continue operations.

    We cannot be sure that the additional financing required to continue
operations beyond November 2001 will be available on terms satisfactory to us,
or that such financing will be available at all. We are currently exploring all
alternatives in the event financing is unavailable, including the sale or
dissolution of the Company or the sale of the Company's significant assets.

    The accompanying financial statements do not include any adjustments to
reflect the possible future effects on the recoverability and classification of
assets or the amounts and classification of liabilities that may result from the
outcome of these matters.

3. PROPERTY, EQUIPMENT, AND LEASEHOLD IMPROVEMENTS

    Property, equipment, and leasehold improvements, stated at cost, are
summarized as follows:

<Table>
<Caption>
                                                                  YEAR ENDED JUNE 30,
                                                                  2000            2001
                                                              ------------    ------------
<S>                                                           <C>             <C>
Laboratory equipment                                          $    277,308    $    287,200
Manufacturing equipment                                            328,278         332,631
Computer equipment                                                 285,262         309,367
Office furniture, equipment and leasehold improvements             148,578         153,840
                                                              ------------    ------------
                                                                 1,039,426       1,083,038
Less accumulated depreciation                                     (454,963)       (645,282)
                                                              ------------    ------------
                                                              $    584,463    $    437,756
                                                              ============    ============
</Table>


                                      F-10
<PAGE>


4. SENIOR SECURED CONVERTIBLE DEBENTURES IN DEFAULT

    On October 13, 2000, the Company sold $2.0 million of senior secured
convertible debentures to two private investors, resulting in net proceeds of
approximately $1.9 million. The Debentures bear interest at 5%, which is payable
May 1 and November 1 of each year, in cash or common stock or by adding the
interest to the outstanding principal due under the debenture at the Company's
option. As a result of the Company's delisting from the NASDAQ National Market
System and the other events described below, the Company is in default under the
Debentures. The Debenture holders have not waived these defaults and, therefore,
have the right to declare the Debentures immediately due and payable.
Accordingly, the Company has fully accreted the discount and premium on
redemption, fully amortized the deferred offering costs, and classified the
Debentures as due within one year in the accompanying June 30, 2001 balance
sheet.

    The Debentures are convertible to common stock at the option of the investor
based on a conversion price based on the weighted average price of our common
stock for ten days prior to periodic anniversaries of the issuance of the
Debentures. The Debentures are secured by a first priority interest in
substantially all of the Company's assets. The Debentures prohibit us from
declaring and paying dividends on common stock so long as these Debentures
remain outstanding and limit the Company's ability to incur new indebtedness
senior to the Debentures. The initial conversion price at the date of closing
was $3.12 per share. The Company registered and reserved for future issuance
200% of the initial shares and initial warrants to be issued upon conversion and
exercise of the Debentures and associated warrants by the investors.

    The Debentures include certain anti-dilution and put features. The features
provide for keep-whole provisions in the event that the Company sells equity at
less than market prices and put options at the discretion of the investors,
which allow the Investors to demand repayment of the Debentures at their
carrying value plus 20%. These put options become available to the Investors
upon the occurrence of certain events, including if the investors do not have
the ability to "freely trade" the underlying common stock, or if a change of
control occurs. As of June 30, 2001, the Company has recognized this premium on
redemption of $617,800 associated with the put option triggered by the default
of the provisions of the agreement in the caption Senior Secured Convertible
Debentures in Default, in the accompanying balance sheet and in the related 2001
statement of operations.

    In conjunction with the issuance of the Debentures to the Investors, the
Company issued warrants to the investors for the purchase of 180,000 shares of
common stock at an exercise price of $3.17 per share, exercisable for a period
of five years following closing. The estimated fair value of these warrants of
$374,400 was recognized as debt discount at the date of issuance (which at June
30, 2001 was fully accreted to interest expense due to the events of default
discussed above).

    The Company also issued to a principal of Granite Financial Group, Inc.
Debentures in an aggregate principal amount of $112,000 and 54,244 warrants
(44,164 with an exercise price of $3.43 and 10,080 with an exercise price of
$3.17) as compensation for its services as our placement agent in connection
with the offering. The Company also issued to an affiliate of Rand P. Mulford,
one of the Company's directors, in his capacity as a representative of Granite,
$48,000 in Debentures and 4,320 warrants. All of the warrants issued to Mr.
Mulford had an exercise price of $3.17 per share, and all of the Debentures,
including Granite's, had a conversion price of $3.12 per share. The estimated
fair value of the warrants and debentures of $263,000 issued to these parties in
connection with the placement of the Debentures was recognized as deferred
Debenture offering cost at the date of issuance, which has been fully amortized
to interest expense as of June 30, 2001.

    The initial conversion price of $3.12 was reset to $0.70 per share on April
13, 2001 and to $0.38 per share on July 13, 2001. On May 1, 2001, the Company
elected to add interest payable on the Debentures in the amount of $54,000 to
outstanding principal bringing the total outstanding face amount of the
Debentures as of May 1, 2001, to $2,214,000. The effect of the changes in the
conversion price and the addition of interest to principal resulted in an
increase in the potential number of shares of common stock from exercise of both
the Debentures and associated warrants from 929,764 to 3,395,558 on April 13,
2001 and to 6,115,920 on July 13, 2001. The Company increased the shares
reserved for future issuance to provide for the increases, but the Company did
not file a registration statement covering the increased number of shares
required by the debentures. This was also an event of default which has not been
waived by the debenture holders.


                                      F-11
<PAGE>


5. COMMITMENTS

OPERATING LEASES

    In January 1997, the Company consolidated substantially all of its
operations, research, marketing and administrative functions into newly
constructed facilities leased from a stockholder of the Company. This lease
provided for no rent payable the first two years and a fixed rate thereafter for
the remaining eight years ("Base Rent"). The Company incurred certain leasehold
improvements that exceeded the defined tenant improvement allowance (the "Tenant
Allowance Overage") provided for under the lease. This Tenant Allowance Overage
bears interest at a rate of 10% over the repayment term of 60 months, with
interest only due for the first 24 months and principal and interest due monthly
over the final 36 months of the repayment term. The Tenant Allowance Overage
payments are due in addition to the Base Rent. The Company is recognizing the
total facility lease payments, including the Tenant Allowance Overage, on a
straight-line method over the entire term of the lease agreement. Accordingly,
as of June 30, 2000 and 2001, the Company has accrued a deferred lease rental
liability of $303,300 and $25,345, respectively. As additional consideration for
the lease, this stockholder initially received warrants to purchase 20,000
shares of Common Stock at an exercise price of $3.20 per share (20,000 shares
with an exercise price of $0.38 per share as of July 13, 2001).

    Several amendments to the lease have changed the amount of space rented by
the Company from approximately 46,000 square feet in December 1998, to 36,000
square feet in November 1999 and to 17,000 square feet in April 2001. As a
result of the amendments in fiscal 2001, certain rentals on unused space were
forgiven and accordingly, the Company recognized a non-cash gain on previously
accrued deferred lease rentals in the amount of $138,174.

    As of June 30, 2001 the Company had not paid $107,698 in lease payments for
the period from April 1 to June 30. The Company reached agreement with the
lessor to delay rent payments until the Company arranges the additional debt or
equity funding necessary to continue operations in fiscal 2002.

    Net rental expense related to the leased facilities during 2000 and 2001 was
$285,281 and $107,337, respectively.

    Future minimum lease commitments as of June 30, 2001 are as follows:


<Table>
<S>                                                                <C>
   2002 (Excluding the $107,698 from 2001 remaining unpaid)        $308,327
   2003                                                             231,453
   2004                                                             231,453
   2005                                                             231,453
   2006                                                             231,453
   2007                                                             154,302
                                                                 ----------
Total minimum lease payments                                     $1,388,441
                                                                 ==========
</Table>

LICENSE AGREEMENT COMMITMENTS

    In connection with license agreements with a related party, the Company has
committed to make royalty and other technology product development progress
payments. See Note 6 -- Related Party Transactions.

SEVERANCE AND EMPLOYMENT AGREEMENTS

    In April 1999, the Company entered into severance agreements with certain of
its executive officers that become effective after the occurrence of a change in
control, as defined, if the Company terminates the officer's employment or if
the officer terminates employment with the Company for good reason, as defined.
These agreements require the Company to make a severance payment to the
executive officers up to two times their Base Compensation, as defined, upon
termination. A provision for these benefits will not be made until a change in
control is probable. The Company incurred a charge of approximately $175,000 in
2000 related to the severance of its former President and Chief Executive
Officer.

    In 1999, the Company established a severance plan for certain other
employees. Employees are qualified for a severance payment based on their annual
salary exceeding the specified annual salary in the plan and involuntary
termination. Due to the uncertainty of future involuntary terminations, there is
no accrual at June 30, 2000 or 2001 for future payments by the Company under
this plan, if any. The Company incurred a charge of approximately $48,000
related to employees terminated in 2001.


                                      F-12
<PAGE>


    On October 1, 1999, the Company's 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 fiscal 2000. In February 2000, the
Board of Directors extended Mr. Proulx's employment agreement through June 2001
on which date the agreement automatically was extended through June 2002. Terms
of the employment agreement include, among other things, the payment of cash
bonuses based on obtaining certain goals including e-commerce sales, cash flow
objectives, diagnostic test unit sales and the average daily common stock price.
During fiscal 2000, the Company recognized a charge to operations related to the
bonus provisions of $50,000. No bonus was earned during fiscal 2001.

OTHER

    Between March and June, 2001, the Company entered into agreements with two
financial advisors to provide services related to raising capital and
facilitating acquisition, merger or joint venture partners for the Company. The
Company has paid $100,000 in fees to these advisors through June 30, 2001 and
has issued common stock warrants aggregating 300,000 shares, 100,000 of which
are contingent on a completed financing (See Note 7). Additional fees of
approximately $15,000 monthly will be paid until financing for the Company has
been concluded, at which time additional fees ranging from 3% to 10% of all
consideration or proceeds from any pending transaction will be payable and
additional 5 year warrants will be issued to purchase 10% of any securities sold
by the Company at an exercise price equal to the issuance price of the
securities sold.

    In 2001, the Company issued a large purchase order for heaters used with the
Company's ZstatFlu product. The heaters will be delivered and the Company will
be required to pay approximately $300,000 during the second quarter of fiscal
2002.

6. RELATED PARTY TRANSACTIONS

    In connection with a fiscal 1997 license agreement covering all of the
patents which comprise the ViraZyme technology, the Company executed a note (the
"Note") with OMRF, a stockholder. The Note had a face value of $425,000 and
provided for an interest free period of 24 months following execution and
interest at 8% thereafter. The Note was discounted to its estimated fair value
at the date of issuance. Imputed interest for the years ended June 30, 2000 and
2001 charged to operations aggregated $36,173 and $27,720, respectively.

    In fiscal 2000, the Company returned certain warranted in-process technology
acquired in fiscal 1998 from OMRF and reached an agreement with them for a
refund of approximately $186,000. After the refund was applied against the Note,
the Company recognized a gain of $150,000 which was equal to the change in the
fair value of the Note resulting from this transaction. This gain is reflected
in the accompanying fiscal 2000 statement of operations.

    Following the Note restructuring, quarterly principal and interest payments
have been reduced to $16,753 for the remaining term of the Note which runs
through May 2003. The Company failed to make the quarterly payments due on May
15, 2001, and August 15, 2001, and intends to resume quarterly payments
retroactively after the Company has arranged the additional debt or equity
funding necessary to continue operations. Since the Company has defaulted on the
quarterly note payments the Company has classified the note payable to
stockholder as due within one year in the accompanying June 30, 2001 balance
sheet.

    The Company leases certain facilities from a stockholder, as discussed in
Note 5 - Commitments. The Company recognized net rent expense totaling $285,281
and $107,337 in 2000 and 2001, respectively, related to its facilities that are
leased from this stockholder.

    In management's opinion, these license and lease transactions were conducted
on no less favorable terms than those which could have been obtained from
unrelated third parties.


                                      F-13
<PAGE>


7. STOCKHOLDERS' EQUITY

COMMON AND PREFERRED STOCK

    In July 1997, the stockholders approved an amendment to the Company's
Certificate of Incorporation increasing the number of authorized shares of
Common Stock from 16,500,000 shares to 30,000,000 shares and increasing the
number of authorized shares of Preferred Stock from 10,000,000 shares to
12,000,000 shares. The Preferred Stock may be issued in one or more series, with
such voting powers, designations, preferences, rights, qualifications,
limitations and restrictions as shall be set forth in a resolution of the
Company's Board of Directors providing for the issue thereof.

WARRANTS

    During fiscal 2000, the Company entered into several agreements for services
in exchange for common stock warrants aggregating 165,000 shares at the initial
exercise price of $2.31 per share which expire in October, 2005. During fiscal
2001 the Company entered into several agreements for such services as marketing,
information technology and public relations for which common stock warrants
aggregating 136,000 shares were granted at an initial exercise price of $2.00.
Under the terms of the grants, these awards generally have a contractual life of
five to ten years and vest over periods ranging from nine months to three years.
Additionally, in fiscal 2001, 230,000 common stock warrants with an initial
exercise price of $3.43 per share were issued to underwriters involved with the
Company's initial public offering. These warrants include a call feature (at
$3.43 per share) exercisable by the Company if the common stock exceeds $5.50
for five consecutive days. Additionally, in fiscal 2001, warrants aggregating
200,000 shares were issued to two financial advisors to provide services related
to raising capital and facilitating acquisitions, merger or joint venture
partners for the Company. The initial exercise price for 100,000 of these
warrants, which expire in May 2006, was $0.79. The initial exercise price of the
other 100,000 of these warrants, which expire in March 2011, was $1.14. Another
200,000 warrants, also expiring in March 2011 with an initial exercise price of
$1.14 have been issued but will not be exercisable until the closing of a
financing of the Company from a passive, non-strategic investor. Warrant expense
for years ended June 30, 2000 and 2001 charged to operations aggregated $129,032
and $359,051, respectively.

    At June 30, 2001, after adjustment for anti-dilution provisions, there were
warrants outstanding and shares of the Company common stock reserved for the
purchase of an aggregate of 2,126,372 shares of the Company's common stock
exercisable at prices ranging from $0.70 to $4.00 (a weighted average of $2.12
per share) which expire from November 2002 through March 2011.

RIGHTS PLAN

    In February 1999, the Company's Board of Directors adopted a rights plan
(the "Rights Plan") designed to protect the long-term interest of ZymeTx and its
stockholders in the event of an unsolicited takeover attempt. On February 3,
1999, the Company declared, under the Rights Plan, a tax-free dividend
distribution of one share purchase right ("Right") for each outstanding share of
Common Stock to stockholders of record as of the close of business. Each Right
entitles the holder to buy 1/1000 of a share of Series A Junior Preferred Stock
of the Company at an exercise price of $47.50 (a total of 20,000 shares of the
Company's Preferred Stock have been designated under the Rights Plan). The terms
of the Rights Plan provide that the Rights will be exercisable for Preferred
Shares only if a person or group acquires beneficial ownership of 20% or more of
the Company's common shares or commences an offer that would result in such
person or group owning 20% or more of the Common Shares without approval of the
Board of Directors. The holders of the Rights, other than the acquiring
person(s) would then have the right to receive upon exercise the Company's
common stock having a value equal to two times the exercise price. The Company
will be entitled to redeem the Rights at $0.001 per Right at any time prior to
the tenth day following a public announcement that a person or group has
acquired 20% or more of the Company's Common Shares. The Rights will expire on
February 3, 2009.


                                      F-14
<PAGE>


8. STOCK OPTIONS AND STOCK PURCHASE PLAN

STOCK OPTION PLANS

    The Company has elected to follow APB No. 25 and related interpretations in
accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under FASB Statement No. 123,
"Accounting for Stock-Based Compensation," ("FASB No. 123") requires use of
option valuation models that were not developed for use in valuing employee
stock options. Under APB No. 25, because the exercise price of the Company's
employee stock options generally equals the market price of the underlying stock
on the date of grant, no compensation expense is generally recognized.

    Pro forma information regarding net income and earnings per share is
required by FASB No. 123, which also requires that the information be determined
as if the Company has accounted for its employee stock options granted
subsequent to December 31, 1994 under the fair value method of that Statement.
The fair value for options granted prior to the initial public offering were
estimated at the date of grant using a minimum value option pricing model. The
fair value of options granted subsequent to the initial public offering was
estimated at the date of grant using a Black-Scholes option pricing model with
the following weighted average assumptions for 2000 and 2001, respectively: risk
free interest rate of 6.3% and 5.0%; no dividend yield; a volatility factor of
the expected market price of the Company's stock of 0.70 and 0.95; and a
weighted average expected life of the option of seven years and six years.

    Because option valuation models require the input of subjective assumptions
including the expected stock price volatility, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.

    For purposes of pro forma disclosures, the estimated fair value of the
qualified and non-qualified options is amortized to expense over the options'
vesting period. The Company's pro forma information follows:

<Table>
<Caption>
                                                           YEAR ENDED JUNE 30,
                                                          2000           2001
                                                      ------------   ------------
<S>                                                   <C>            <C>
Net loss applicable to common stock                   $ (7,243,258)  $ (7,100,212)
Net loss per common and common equivalent share              (1.07)         (1.03)
</Table>

    In 1997, the Company adopted stock option plans for employees, the ZymeTx,
Inc. Stock Option Plan (the "Employees' Plan") as well as for non-employees, the
ZymeTx, Inc. Director Stock Option Plan (the "Directors' Plan") (collectively,
the "Plans"). During fiscal 2000, the Company established the Consultant Stock
Option Plan, which provides for the issuance of up to 100,000 options to
non-employees. During fiscal 2001, the Company granted 55,000 options under the
Consultant Stock Option Plan, exercisable for 5 years at an initial weighted
average price of $2.35 per share. As of June 30, 2001, there are 293,773 shares
of common stock available for issuance under both the Employees' Plan and the
Directors' Plan. There are two forms of options: options intended to qualify as
incentive stock options ("ISO Options") under the Employees' Plan and the
Internal Revenue Code of 1986, as amended (the "Code"), and nonqualified options
under the Directors' Plan (the "Nonqualified Options"). Options granted under
the Employees' Plan prior to October 1, 1999, become exercisable 25% per year
and are fully vested after four years. For those options granted on or after
October 1, 1999, ISO Options become exercisable 50% on each of the first two
anniversary dates for executive officers and 25% on the date of grant and 25 %
and 50% on the first and second anniversary dates for non-executive employees of
the Company. Nonqualified options generally become exercisable 33% per year and
are fully vested after three years. All options under the Plans lapse 10 years
from the date of grant.


                                      F-15
<PAGE>


    Activity in the Company's Employees' Plan during 2000 and 2001 is as
follows:

<Table>
<Caption>
                                                               2000                               2001
                                                    ----------------------------      -----------------------------
                                                                   WEIGHTED                          WEIGHTED
                                                                    AVERAGE                           AVERAGE
                                                                   EXERCISE                          EXERCISE
                                                      SHARES         PRICE              SHARES         PRICE
                                                    ------------- --------------      ------------- ---------------
<S>                                                 <C>           <C>                 <C>           <C>
Outstanding options at beginning of period             393,974      $ 2.30               334,269      $ 2.28*
Granted                                                304,387        2.26                15,000        2.00
Exercised                                              (75,333)       1.56                (3,125)       1.75
Surrendered, forfeited or expired                     (288,759)       1.76               (20,625)       2.25
                                                    ----------                        ----------
Outstanding options at end of period                   334,269        2.89               325,519        2.28
                                                    ==========                        ==========

Exercisable at end of period                            49,376        3.31               165,154        2.26
                                                    ==========                        ==========

Weighted average fair value of options
  granted during period                                             $ 1.53                            $ 0.50
</Table>

    *Adjusted to reflect reduction in exercise price on 33,553 options from
    $4.94 and $6.00 to $2.00 during fiscal 2001.

    Options outstanding at June 30, 2001 have an average remaining life of
approximately 8 years. Following is an option analysis by exercise price as of
June 30, 2001.

<Table>
<Caption>
                                                     OUTSTANDING          EXERCISABLE
                             EXERCISE PRICE         OPTIONS/SHARES       OPTIONS/SHARES
                             --------------         --------------       --------------
<S>                                                 <C>                  <C>
                                  $1.00                   8,042               8,042
                                  $2.00                  66,240              35,619
                                  $2.25                 228,137             108,443
                                  $2.63                  10,000               5,000
                                  $4.21                   6,000               4,500
                                  $4.94                   7,100               3,550
                                                    --------------       --------------
                                                        325,519             165,154
                                                    ==============       ==============
</Table>


    Activity in the Company's Directors' Plan during 2000 and 2001 is as
follows:

<Table>
<Caption>
                                                               2000                         2001
                                                      ------------------------     ------------------------
                                                                   WEIGHTED                     WEIGHTED
                                                                    AVERAGE                      AVERAGE
                                                                   EXERCISE                     EXERCISE
                                                        SHARES       PRICE           SHARES       PRICE
                                                      ----------- ------------     ----------- ------------
<S>                                                   <C>         <C>              <C>         <C>
Outstanding options at beginning of period               200,000    $ 2.79            485,000     $ 2.20*
Granted                                                  285,000      2.53                 --        --
Exercised                                                     --       --             (25,000)      1.00
                                                      ----------                   ----------
Outstanding options at end of period                     485,000      2.63            460,000       2.27
                                                      ==========                   ==========

Exercisable at end of period                             134,165      2.07            272,080       2.15
                                                      ==========                   ==========

Weighted average fair value of options granted                       $1.69                          n/a
</Table>

    *Adjusted to reflect reduction in exercise price on 75,000 options from
    $4.38 and $4.94 to $2.00 during fiscal 2001.


                                      F-16
<PAGE>


    Options outstanding at June 30, 2001 have an average remaining life of
approximately 8 years. Following is an option analysis by exercise price as of
June 30, 2001.

<Table>
<Caption>
                                                     OUTSTANDING          EXERCISABLE
                             EXERCISE PRICE         OPTIONS/SHARES       OPTIONS/SHARES
                             --------------         --------------       --------------
<S>                                                 <C>                  <C>
                                  $1.00                  50,000               50,000
                                  $2.00                 125,000               74,998
                                  $2.06                  40,000               26,666
                                  $2.25                  10,000                3,333
                                  $2.63                 200,000              100,000
                                  $2.69                  25,000                8,333
                                  $4.22                  10,000                8,750
                                                    --------------       --------------
                                                        460,000              272,080
                                                    ==============       ==============
</Table>


STOCK PURCHASE PLAN

    Effective July 1, 1998, the Company reserved 50,000 shares of its Common
Stock for issuance to employees under an employee stock purchase plan (the
"ESPP"). During fiscal 2001 the Company increased the number of reserved shares
to 100,000 shares. Under the ESPP, eligible employees can purchase, through
payroll deductions, a specified number of shares of the Company's Common Stock
at the lesser of (a) 85% of the official closing price of the Common Stock on
the Offering Termination Date, as defined, or (b) 85% of the official closing
price of the Common Stock on the Offering Commencement Date, as defined. The
options will be continually granted and automatically exercised each quarter in
which the Plan is in effect. For the years ended June 30, 2000 and 2001, 15,652
and 21,582 shares of stock were purchased though the Employee Stock Purchase
Plan. Proceeds received by the Company for the years ended June 30, 2000 and
2001 totaled $26,159 and $26,351 or $1.67 and $1.22 per share, respectively.

9. INCOME TAXES

    The provision for income taxes differs from the expected income tax using
the federal statutory rate on loss before income taxes due to the following:

<Table>
<Caption>
                                               YEAR ENDED JUNE 30,
                                                2000          2001
                                            ------------  ------------
<S>                                         <C>           <C>
Benefit at federal statutory rate           $ (2,304,806) $ (2,391,613)
State tax benefit                               (243,354)     (262,785)
Operating loss not benefited                   2,548,160     2,654,398
                                            ------------  ------------
                                            $         --  $         --
                                            ============  ============
</Table>


                                      F-17
<PAGE>


    Deferred tax assets and liabilities, resulting from differences in the
timing of recognition of revenues and expenses, consist of the following:

<Table>
<Caption>
                                                               YEAR ENDED JUNE 30,
                                                               2000            2001
                                                           ------------    ------------
<S>                                                        <C>             <C>
Deferred tax liability:
   Tax depreciation in excess of financial                 $     70,034    $     73,199

Deferred tax assets:
   Net operating loss carryforward                            7,591,190       9,843,030
   Research and development credits                             496,693         576,699
   Capitalization of certain costs as inventory for
        tax Purposes                                            829,289       1,078,050
   Other                                                        109,269         113,380
                                                           ------------    ------------
                                                              9,026,441      11,611,159
   Valuation allowance                                       (8,956,407)    (11,537,960)
                                                           ------------    ------------
   Net deferred tax assets                                       70,034          73,199
                                                           ------------    ------------
         Net deferred tax liability                        $         --    $         --
                                                           ============    ============
</Table>

    As of June 30, 2001, the Company had a federal net operating loss
carryforward of approximately $26.1 million. The net operating loss carryforward
will expire from 2010 through 2020, if not utilized.

    Because of the Company's lack of earnings history, the net deferred tax
asset comprised of its net operating loss carryforward has been fully offset by
a valuation allowance. The valuation allowance increased by $2.6 million and
$2.7 million in 2000 and 2001, respectively.

10. EMPLOYEE BENEFIT PLAN

    The Company sponsors a retirement plan under Section 401(k) of the Internal
Revenue Code under which participation is available to substantially all
full-time employees. Company contributions are made at the discretion of the
compensation committee. The Company matched 2% of employee contributions
amounting to $15,459 and $16,026 in 2000 and 2001, respectively.


                                      F-18
<PAGE>


                               INDEX TO EXHIBITS

<Table>
<Caption>
EXHIBIT
NUMBER   DESCRIPTION
-------  -----------
<S>      <C>
3.1      Amended and Restated Certificate of Incorporation, incorporated herein
         by reference to Exhibit 3.1 to the Form SB-2 Registration Statement No.
         333-33563 (the "Registration Statement").

3.2      Amended and Restated Bylaws, incorporated herein by reference to
         Exhibit 3.2 to the Registration Statement.

4.1      5% Senior Secured Convertible Debenture Due October 13, 2002
         incorporated by reference to Exhibit 4.1 to our Annual Report on Form
         10-KSB for the fiscal year ended June 30, 2000.

4.2      Form of Warrant Agreement between ZymeTx and Capital West Securities,
         Inc. incorporated herein by reference to Exhibit 4.2 to the
         Registration Statement.

4.3*     ZymeTx, Inc. Stock Option Plan, incorporated herein by reference to
         Exhibit 4.3 to the Registration Statement.

4.4*     ZymeTx, Inc. Directors Stock Option Plan, incorporated herein by
         reference to Exhibit 4.4 to the Registration Statement.

4.5*     ZymeTx, Inc. Employee Stock Purchase Plan incorporated by reference to
         Exhibit 4.5 of the ZymeTx Annual Statement on Form 10-KSB for the
         fiscal year ended June 30, 1999.

4.6      Rights Agreement dated February 3, 1999, by and between ZymeTx, Inc.
         and American Stock Transfer and Trust Company incorporated herein by
         reference to Exhibit 99.1 of the ZymeTx Current Report on Form 8-K
         filed February 5, 1999.

10.1*    Executive Services Agreement, dated as of January 1, 2000, by and
         between ZymeTx and Norman R. Proulx, incorporated herein by reference
         to Exhibit 10.19 to our Annual Report on Form 10-KSB for the fiscal
         year ended June 30, 2000.

10.2     Purchase Agreement dated October 13, 2000, by and between ZymeTx and
         investors identified therein, incorporated herein by reference to
         Exhibit 10.20 to our Annual Report on Form 10-KSB for the fiscal year
         ended June 30, 2000.

10.3     Form of Common Stock Purchase Warrant dated October 13, 2000, issued in
         connection with the Purchase Agreement, incorporated herein by
         reference to Exhibit 10.21 to our Annual Report on Form 10-KSB for the
         fiscal year ended June 30, 2000.

10.4     Registration Rights Agreement dated October 13, 2000, issued in
         connection with the Purchase Agreement , incorporated herein by
         reference to Exhibit 10.22 to our Annual Report on Form 10-KSB for the
         fiscal year ended June 30, 2000.

10.5     Security Agreement dated October 13, 2000 issued in connection with the
         Purchase Agreement , incorporated herein by reference to Exhibit 10.23
         to our Annual Report on Form 10-KSB for the fiscal year ended June 30,
         2000.

23.1     Consent of Independent Auditors
</Table>