SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                  ------------

                                    FORM 10-K

         (Mark one)

         [X] Annual  report  pursuant  to Section 13 or 15(d) of the  Securities
Exchange  Act of 1934  for the  fiscal  year  ended  September  30,  1999

                                       OR
         [ ]Transition  report pursuant to Section 13 or 15(d) of the Securities
Exchange  Act of 1934  for the  transition  period  from          to
                                                         --------    --------
                          Commission File No. 1-10492

                                  EPITOPE, INC.

             (Exact name of registrant as specified in its charter)

                     Oregon                              93-0779127
         (State or other jurisdiction of    (I.R.S. employer identification no.)
         incorporation or organization)

            8505 S.W. Creekside Place
               Beaverton, Oregon                            97008
    (Address of principal executive offices)             (Zip code)

                                 (503) 641-6115
              (Registrant's telephone number, including area code)

             Securities registered pursuant to Section 12(b) of the
                   Act: None Securities registered pursuant to
                           Section 12 (g) of the Act:

                           Common Stock, no par value
                                (Title of Class)

                         Preferred Stock Purchase Rights
                                (Title of Class)

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

         Indicate by check mark if disclosure of delinquent  filers  pursuant to
Item 405 of Regulation S-K is not contained  herein,  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-K or any
amendment to this Form 10-K. [X]

         State the aggregate  market value of the voting and  non-voting  common
equity held by  non-affiliates  of the  registrant,  as of  December 1, 1999:
$74,793,338

         Indicate the number of shares  outstanding of each of the  registrant's
classes of common stock,  as of December 1, 1999:  Common  Stock,  no par value,
14,246,350 shares.

                      Documents Incorporated by Reference:

Definitive Proxy Statement for 1999 Annual Shareholders' Meeting:  Part III
<PAGE>
                                TABLE OF CONTENTS
<TABLE>
<S>    <C>                                                                                  <C>

                                     PART I
                                                                                              Page

ITEM 1. Business                                                                                1

ITEM 2. Properties                                                                             15

ITEM 3. Legal Proceedings                                                                      15

ITEM 4. Submission of Matters to a Vote of Security Holders                                    15

                                   PART II

ITEM 5.  Market for Registrant's Common and Related Stockholder Matters                        16

ITEM 6.  Selected Financial Data                                                               17

ITEM 7.  Management's Discussion and Analysis of Financial Condition and Results of Operations 18

ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk                            20

ITEM 8.  Financial Statements and Supplementary Data                                           21

ITEM 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure  21

                                                PART III

ITEM 10. Directors and Executive Officers of the Registrant                                    22

ITEM 11. Executive Compensation                                                                22

ITEM 12. Security Ownership of Certain Beneficial Owners and Management                        22

ITEM 13. Certain Relationships and Related Transactions                                        22

                                                      PART IV

ITEM 14. Exhibits, Financial Statement Schedules, and Reports on
         Form 8-K                                                                              22

</TABLE>
<PAGE>

                                                       PART I

ITEM 1.  BUSINESS.

Epitope,  Inc. (Epitope or the Company) develops,  manufactures and markets oral
specimen  collection devices and diagnostic  products using its proprietary oral
fluid technologies. These products are sold to public and private-sector clients
in the United States and certain foreign countries.  The Company's primary focus
is on the detection of antibodies to the Human Immunodeficiency Virus (HIV), the
cause of Acquired Immune Deficiency Syndrome (AIDS). The Company's technology is
also  being  used to test for  drugs-of-abuse  and  other  analytes.  Commercial
distribution of the Company's oral specimen  collection device as part of a test
for five major drugs-of-abuse is scheduled to begin in calendar year 2000.

Epitope's lead product,  the patented  OraSure(R)  collection device, is used in
conjunction with screening and confirmatory  tests approved by the U.S. Food and
Drug Administration (FDA) to test for HIV-1 antibodies and other conditions. The
Company  markets the device for use in screening life  insurance  applicants and
for  public  health  use.  The  OraSure  device  consists  of a  small,  treated
cotton-fiber  pad on a nylon  handle that is placed in a person's  mouth for two
minutes.  The device  collects oral mucosal  transudate  (OMT), a  serum-derived
fluid that contains higher  concentrations of antibodies than saliva,  including
HIV antibodies in people infected with the virus. As a result,  OMT testing is a
highly  accurate  method for detecting  HIV  infection.  Because  OraSure uses a
noninvasive,  needle-free  collection method without need for privacy during the
collection process, the Company believes that oral fluid HIV testing has several
significant  advantages  over  blood or  urine-based  testing  systems  for both
healthcare professionals and individuals being tested.

Epitope also markets HIV-1 Western blot  confirmatory  test kits used to confirm
positive  results of initial  screening tests for HIV-1  infection.  Its OraSure
HIV-1  Western  blot   confirmatory   test  kit  is  used  in  conjunction  with
oral-specimen  based screening  tests,  while its EPIblot(R)  HIV-1 Western blot
confirmatory  test kit is used in conjunction with blood-based  screening tests.
The kits are  distributed  worldwide  under an exclusive  agreement with Organon
Teknika Corporation (Organon Teknika), a member of the Akzo Pharma group of Akzo
Nobel, NV., an international  chemical and pharmaceutical  manufacturer based in
Arnhem, The Netherlands.

The OraSure HIV-1 Oral Specimen  Collection device and the OraSure HIV-1 Western
blot and EPIblot confirmatory tests have all received clearance from the FDA for
sale to professional  markets in the United States. The FDA granted clearance in
1998  for  use  of  OraSure  with  enzyme   immunoassays   manufactured  by  STC
Technologies,  Inc.  (STC).  In  1998,  STC  agreed  to  act  as  the  exclusive
distributor of the OraSure device, using STC's trade name Intercept(TM) Drugs of
Abuse,  for use with STC's  substance abuse assays in the United States and much
of Europe. See "Products" and "Marketing and Customers."

BACKGROUND

HIV DISEASE. HIV attacks the immune system,  slowly weakening the body's ability
to ward off  infection  and certain  forms of cancer.  When these  complications
develop,  the HIV infection has progressed to clinically  diagnosed AIDS. HIV is
spread through sexual contact,  blood  transfusions,  the sharing of intravenous
needles,  accidental  needle sticks,  or contact  between a mother and her child
during gestation,  childbirth,  or  breast-feeding.  There is currently no known
cure for HIV/AIDS.  However,  the introduction of anti-HIV drugs called protease
inhibitors,  when used in combination with nucleoside  analogs (e.g.,  AZT), has
shown promising  results in slowing  progress of the disease.  Clinical  studies
have demonstrated that the early detection and treatment of HIV can help to curb
the effects of the disease and  significantly  prolong the life of the  patient.
Other studies have shown that  treatment  with AZT of an  HIV-infected  pregnant
woman may prevent the transmission of HIV from the mother to her child.

In 1998 UNAIDS, a program sponsored by the United Nations,  estimated that since
the beginning of the HIV/AIDS  epidemic,  more than 47 million  individuals  had
contracted HIV. The death toll for HIV/AIDS in that same time span includes over
11 million  adults and 3.2 million  children.  In 1998  alone,  nearly 6 million
people  became  infected  with HIV,  and  nearly 2 million  adults  and  510,000
children perished from it. HIV/AIDS continues to be one of the leading causes of
death in the world  today  with  underdeveloped  countries  having  the  highest
occurrence. In North America, an estimated 890,000 people are living with HIV as
of December 1998.

                                                                               1
<PAGE>

According to reports from the Centers for Disease  Control and Prevention  (CDC)
in August 1999, AIDS is now the leading cause of death in African Americans aged
25 to 44, affecting 1 in 50 African American males and 1 in 160 African American
females in that age group.  A growing  number of women in the United  States are
also living with  HIV/AIDS.  In just over a decade,  the  proportion of all AIDS
cases reported in women has tripled,  accounting for 23 percent of the total new
cases as of December 1998. The Global Strategic  Business Report titled "HIV and
AIDS Testing"  published in May 1999,  estimated  that in the United States $232
million would be spent on HIV/AIDS  screening and confirmatory tests in 1999. By
2003, this figure is estimated to increase to over $445 million.

Currently,  most HIV tests are performed by testing blood. There are a number of
blood tests for HIV, the most common of which is the enzyme  immunoassay  (EIA).
In order to  reduce  the  possibility  that an  individual  without  HIV will be
diagnosed as having the virus (a false positive),  most industrialized countries
require the re-testing of the blood sample using a second, more specific test to
confirm an initial  positive test result.  The most  commonly used  confirmatory
test is the Western blot.

The Company  believes that blood-based  testing,  in situations other than blood
donation,  has a number of  disadvantages  which increase  healthcare  costs and
patient inconvenience,  pose a risk of infection to healthcare professionals and
make testing uneconomic or unavailable in certain applications or settings,  and
that the OraSure product  overcomes these problems.  The  disadvantages of blood
testing include:

    RISK OF HIV INFECTION.  Blood tests involve the use of needles or lancets to
    obtain blood. Healthcare professionals collecting blood risk contracting HIV
    if  accidentally  stuck by the needle or lancet used to obtain blood from an
    infected individual.

    LIMITED  ACCESS.  Because blood must be collected by trained  professionals,
    collection can be difficult or prohibitively  expensive in certain settings.
    For example,  community-based  outreach programs,  homeless shelters,  rural
    communities,  and other remote settings often lack healthcare  professionals
    trained in blood collection.  As a result,  blood testing may not be readily
    available in some of these settings.

    HIGHER OVERALL COST.  The cost of collecting a blood  specimen  represents a
    significant component of the total cost of HIV testing.  Furthermore, when a
    healthcare  professional  must  travel  to the  subject's  office or home to
    collect a blood sample,  as is often the case with life insurance  applicant
    testing,  the  cost  of  collecting  the  blood  specimen  is  substantially
    increased.

    DISCOMFORT.  Blood  tests  require  the use of needles  or lancets  that are
    uncomfortable for the individual being tested. In addition, individuals with
    small or damaged  veins,  such as  intravenous  drug users,  the elderly and
    young  children,  may require  multiple  needle sticks in order to obtain an
    adequate blood sample.

SUBSTANCE  ABUSE.  Although HIV disease and drug abuse are  distinct  illnesses,
each profoundly  affects the other.  According to the CDC, drug abuse is now the
leading  factor in the spread of HIV infection in the United States with half of
all new infections in 1996 occurring  among  injecting drug users.  According to
the  National  Institute  on Drug Abuse  (NIDA),  many  public  health  agencies
concerned  about the spread of HIV are testing for both HIV and  drugs-of-abuse.
With the development of OraSure and  Intercept(TM)  Drugs of Abuse, both HIV and
substance  abuse  testing  may be done  with a  needleless,  noninvasive  orally
collected sample.

Currently, the most common means to test for substance abuse involves collecting
urine or blood  samples,  each of which may be  considered  either  invasive  or
inconvenient.  Urine testing is  susceptible to  adulteration  of samples unless
precautions are taken in the collection process.

The Company  believes that oral fluid  collection  will be popular for substance
abuse testing because of its non-invasive nature and ease of maintaining a chain
of custody without embarrassment to the person being tested, as well as the lack
of requirement for specially prepared collection facilities. The availability of
an oral fluid test is intended  to allow  workplace  administrators  to test for
impairment on demand,  eliminate  scheduling  costs,  and streamline the testing
process.

2
<PAGE>


EPITOPE ORAL SPECIMEN COLLECTION TECHNOLOGY

In order to address the significant drawbacks associated with blood-based tests,
Epitope  developed and patented a device to collect an oral specimen  instead of
blood.  The  OraSure  device,  shaped  like a small  toothbrush,  consists  of a
cotton-fiber  pad  treated  with a patented  salt  solution.  The pad,  which is
mounted on a nylon  handle,  is placed in the mouth  between the lower cheek and
gum for two minutes.  The pad collects oral mucosal transudate,  a serum-derived
fluid that contains higher  concentrations  of antibodies than does saliva.  The
OraSure sample contains  approximately four times the amount of antibodies found
in saliva expectorated into a cup.

Following  collection,  the  pad is  sealed  in a  specimen  vial  containing  a
proprietary  non-toxic  preservative  solution.  The  treated pad  enhances  the
collection,  and  the  preservative  solution  enhances  the  stabilization,  of
antibodies and other analytes originating from the oral mucosae. The specimen in
the vial is stable for three weeks at room  temperature,  although in most cases
laboratory testing takes place within one to three days.

PRODUCTS

ORASURE-HIV.  In December 1994, the Company  received  clearance from the FDA to
sell  OraSure  to  professional  markets  for use  with a  laboratory-based  EIA
screening  test for HIV-1  antibody  detection.  The device is  marketed  by the
Company for use by the life insurance industry and public health programs in the
United States and a number of other countries. See "Marketing and Customers."

HIV-1  antibody  detection  using the OraSure oral  specimen  collection  device
involves three steps:  (i)  collection of an oral specimen  using OraSure,  (ii)
screening  of the  specimen for HIV-1  antibodies  at a  laboratory  with an EIA
screening test, and (iii) laboratory confirmation of any positive screening test
results with the  FDA-approved  OraSure  Western blot kit. A trained  healthcare
professional  then conveys test results and provides  appropriate  counseling to
the individual who was tested.

The OraSure HIV-1 test represents a highly  accurate  alternative to traditional
blood-based  tests. In clinical  trials,  OraSure provided the correct result or
triggered  appropriate  follow-up  testing  in 3,569 out of 3,570  cases  (99.97
percent).  The Company believes OraSure has several  advantages over blood-based
tests, as outlined in the following table.
<TABLE>

     Feature            Blood Collection                        OraSure
     -------            ----------------                        -------
<S> <C>                <C>                                     <C>
     Safety             Poses risk of HIV infection             Eliminates risk of needle-stick
                        through accidental needle sticks        accidents

     Invasiveness       Requires use of a needle or lancet      Uses noninvasive collection technique

     Ease of use        Requires blood collection by a          Sample collection requires minimal
                        trained healthcare professional         training

     Portability        Generally performed in a physician's    Can be used rapidly and efficiently
                        office or other healthcare setting      in almost any setting

     Professional Cost  Requires a nurse or other healthcare    Eliminates the need for and costs
                        professional trained in phlebotomy      associated with a healthcare professional

</TABLE>

In July 1999, an article was published by the Florida Bureau of HIV/AIDS  titled
"OraSure Uncovers Higher Seroprevalence in Some Florida Counties." Florida began
providing  testing  programs  throughout  the state with the  OraSure  device in
February 1998. The testing programs were primarily for use in outreach settings,
to reach high-risk  persons (e.g.,  homeless persons,  drug abusers,  youth, and
rural  residents)  who are less likely to access  health  care  systems and less
accepting of conventional testing methods.

                                                                               3
<PAGE>

Between  February  1,  1998  and  May  31,  1999,   30,328  OraSure  tests  were
administered in Florida.  650 of which were returned positive (2.1 percent).  Of
the  twenty-nine  counties  conducting  tests during this period,  fifteen found
higher relative  positivity rates with OraSure as compared to blood-based tests.
Although  OraSure tests accounted for less than 10 percent of the HIV testing in
Florida at the time the article was  written,  the use of OraSure as an outreach
tool was demonstrated in several counties.  According to the article,  anecdotal
evidence from the field suggested that the  availability of OraSure has resulted
in increased test acceptance in a variety of outreach settings, including jails,
homeless  shelters,  and high risk  youth  programs.  For some of those  tested,
OraSure  represents  the  opportunity  to be  tested  safely  and  privately  in
situations where a needle mark could result in suspicion of drug use or domestic
violence.  Health care  workers in Florida  also  appreciated  the  convenience,
flexibility, and safety of using OraSure in outreach settings.

ORASURE  DRUGS-OF-ABUSE  TESTING.  The FDA granted clearances in 1998 for use of
OraSure with enzyme immunoassays manufactured by STC Technologies,  Inc. to test
for cannabanoids  (marijuana),  amphetamines and methamphetamines,  opiates, and
cocaine.  In  addition,  the FDA has  allowed  the use of  OraSure  to test  for
phencyclidine  (PCP) under a "For  Investigational  Use Only" status in order to
collect clinical samples and generate data required for FDA review.

In May 1999, STC  contracted  with LabOne,  Inc.  (LabOne) to market and provide
oral fluid analysis for the  Intercept(TM)  Drugs Of Abuse product line in North
America for work-site drug testing.  Product trials are expected to be completed
by December 1999 with product launch expected early in calendar year 2000.

The  OraSure  device has been  approved  in Japan for  cotinine  testing of life
insurance  applicants.  Cotinine  is a  derivative  of nicotine  that  indicates
whether the tested subject is a smoker.  The Finance Ministry of Japan announced
in February  1998 that life  insurance  companies  could reduce  premiums on new
nonsmoker policies by as much as thirty percent,  effectively  creating a larger
market for cotinine  testing of life insurance  applicants in Japan. The Company
also sells  OraSure for cotinine  testing of life  insurance  applicants  in the
United States. Cotinine is not currently regulated by the FDA for insurance risk
assessment.

ORAL-BASED AND SERUM-BASED  WESTERN BLOT CONFIRMATORY TESTS. The Company markets
an oral-based HIV-1 Western blot  confirmatory  test that received FDA clearance
in 1996.  This test uses the original  specimen  collected with the OraSure oral
specimen  collection device to confirm positive results of initial OraSure HIV-1
screening tests. The Company also markets  EPIblot,  a serum-based  Western blot
HIV-1  confirmatory test kit. The kit is used to confirm the positive results of
initial  blood-based  screening  tests for HIV-1  infection.  Both  Western blot
products are marketed under an exclusive arrangement with Organon Teknika.

PRODUCTS UNDER DEVELOPMENT

ORASURE.  Oral mucosal  transudate  contains  many  constituents  found in blood
serum, although in lower concentrations.  The Company therefore believes OraSure
is a platform  technology with a wide variety of potential  applications  beyond
HIV-1 and drugs-of-abuse  testing. For example, the OraSure device may be useful
for the diagnosis of a variety of infectious diseases in addition to HIV-1, such
as viral hepatitis,  syphilis,  prostate  specific antigen (PSA) and a number of
other diseases. In addition, the Company believes that the use of oral specimens
may allow  physicians  to diagnose  diseases  more  readily in children  without
subjecting them to the discomfort of drawing a blood sample,  thereby increasing
the frequency of testing for diseases.

Physicians  may also find the OraSure  device useful for monitoring the level of
certain  drugs and hormones that must be  maintained  within narrow  therapeutic
ranges.  Monitoring of these substances  currently requires frequent blood tests
to determine drug concentration. The Company believes that oral specimen testing
would eliminate the discomfort and  inconvenience  associated with this frequent
blood testing.

ORAQUICK.  Epitope is developing OraQuick(R),  a rapid-format oral specimen test
designed to provide results within fifteen  minutes.  The Company  believes that
OraQuick has  significant  potential as a rapid test for  professional  use, and
possibly as an over-the-counter  home-based test. Prototype OraQuick devices, to
be used for pre-clinical HIV testing, are in the final stages of development and
the Company is establishing  manufacturing  specifications  for the device.  One
patent is pending on this new technology and a second patent is in process.  The
Company is also  evaluating the regulatory  hurdles and clinical trials required
to bring this product to market.

4
<PAGE>

Like OraSure,  OraQuick provides a platform  technology that can be modified for
detection of a variety of infectious  diseases in addition to HIV, such as viral
hepatitis,  syphilis,  childhood infections and a number of other diseases.  The
application of this technology to  drugs-of-abuse  testing appears promising and
is currently  under  investigation  within the Epitope  development  group.  The
Company  will  carefully  analyze  each  application  to  determine  the cost of
development and regulatory  approval compared to the potential  benefits of each
market and will focus its efforts on those with the best business return.

DNA FORENSIC TESTING. During 1998, the Company entered into a research agreement
with Analytical  Genetic Testing Center (AGTC) to explore the use of OraSure for
DNA collection. Results of this research have been positive,  demonstrating that
OraSure  collects a high  quality DNA sample.  This sample is in addition to the
antibody  sample that is used to test for HIV-1,  making it possible to test for
antibodies and produce a DNA "fingerprint" with a single OraSure collection. The
Company is now developing a beta-site  testing program with AGTC to evaluate the
use of  OraSure in  several  key user  settings.  There are  limited  regulatory
requirements  in  this  market.  If  the  results  of  research  continue  to be
promising,   a  commercial  launch  of  OraSure  for  DNA  collection  could  be
accomplished soon after field testing and development are completed.

MARKETS

LIFE INSURANCE  INDUSTRY.  Epitope  believes there is a significant  need in the
life   insurance   industry   for   an   easy-to-administer,   noninvasive   and
cost-effective  HIV-1  testing  system  such as OraSure.  In the United  States,
approximately  7  million  HIV  tests  were  administered  in 1997  by the  life
insurance  industry  in  connection  with the  issuance  of about 11 million new
policies. In addition,  data from the American Council of Life Insurance and the
Health Insurance  Association of America indicate that  approximately $1 billion
in  AIDS-related  death  benefits  were  paid in 1997.  The  organizations  also
cautioned that, due to difficulty in identifying all  AIDS-related  claims,  the
data may significantly  understate the financial impact of AIDS on the insurance
industry.

Traditional  HIV  testing of life  insurance  applicants  involves  the use of a
paramedic or other trained healthcare professional to obtain a blood sample. The
cost to the insurance company for an HIV test includes the cost of the paramedic
as well as the cost of the collection kit and laboratory  testing services.  The
cost of collecting and processing a blood sample is  approximately  $70 per test
versus a cost of $15 for an  agent-collected  OraSure  test.  As a result of the
higher cost of collecting  blood  samples,  insurance  companies  have generally
limited HIV testing to policies with face amounts of $100,000 or more.  Based on
industry  statistics,  Epitope estimates that in 1997  approximately 8.9 million
policies  were issued for face amounts of less than  $100,000,  representing  80
percent of all policies issued. The Company believes that the use of OraSure can
significantly reduce the cost of HIV-1 testing to the insurance industry because
collection  of an oral fluid  specimen can be  performed by insurance  agents or
other persons without professional medical training, eliminating the cost of the
paramedic and making  testing at policy levels below  $100,000 a  cost-effective
practice.  Insurance  companies and testing  laboratories  expect the market for
oral fluid  testing of  applicants  to grow by at least 50 percent over the next
several years .

Epitope also believes that the use of OraSure will allow the insurance  industry
to address "anti-selection."  Anti-selection occurs when an individual who knows
that he or she is infected with HIV  intentionally  applies for one or more life
insurance policies that do not entail HIV testing. The Company believes that the
adoption  of  OraSure  by a  number  of  insurance  companies,  and the  current
availability of an  over-the-counter  HIV blood test, may increase the incidence
of anti-selection.  By allowing insurance companies to lower the policy level at
which HIV testing is cost-effective, using OraSure may allow insurance companies
to reduce their exposure to losses from anti-selection and thereby lower overall
claims costs.

Insurance companies have also been using the same OraSure specimen collected for
HIV-1 testing to identify smokers and users of cocaine.  Cotinine,  a metabolite
of nicotine, and cocaine can be detected using OraSure. In a presentation at the
105th annual  meeting of The American  Academy of Insurance  Medicine in 1997, a
major life insurance  company  reported results of the use of the OraSure device
for tests in  Canada  and the  Bahamas  from  1992 to 1995.  The life  insurance
company reported that OraSure sample collection by agents significantly  reduced
its testing  costs per policy.  During the four-year  study period,  the insurer
found it saved $1.7  million  using  OraSure for HIV-1 and cocaine  testing.  In
addition,  the life  insurance  company  determined  it realized $1.6 million in
increased

                                                                               5
<PAGE>

premiums as a result of  identifying  smokers who claimed on their  applications
that they were nonsmokers. In another study presented to the same Academy, Crown
Life of Canada  reported  five-year  savings from  OraSure  testing for cocaine,
cotinine and HIV-1 of approximately $1.4 million.

JAPANESE  INSURANCE  MARKET.  The Japanese life insurance market is served by 44
companies which sold  approximately  35 million policies in 1996, of which about
one-third were new ordinary life policies. Whole life policy applicants are most
likely  to be tested  for  smoking  and other  risk  factors.  While  non-smoker
policies have been available in the U.S.  insurance  market since the mid-1960s,
it was only in early 1998 that Japanese  regulators  allowed premium  reductions
for non-smokers. Some insurance companies have begun the process of applying for
new premium  schedules and are using OraSure to test for evidence of smoking for
these policies.  Although many of the insurance companies in Japan are currently
experiencing financial  difficulties,  the number of companies using OraSure has
increased in the past year from five to eight.  Epitope will continue to service
this market, but does not anticipate any significant  increases in sales for the
next year.

PHYSICIAN AND PUBLIC HEALTH  CLINICAL  MARKET.  The  physician  market  consists
primarily  of  individual  doctors'  offices,  which are  supplied  through  the
physicians' supply house network.  Selling to this market requires a substantial
sales force to call on the many offices throughout the country,  each making its
own purchasing decisions. Epitope has chosen not to focus on this market at this
time  because  of the high cost of selling to these  customers.  The  product is
currently  available to this customer base through  various  physicians'  office
supply  channels.  The  Company  has  begun a pilot  program  to  determine  the
feasibility of implementing a direct telemarketing program to further serve this
market.

The public health market is more concentrated  than the physician  market,  with
typically more purchasing power in each decision maker. The customers consist of
a broad  range of  clinics  and  laboratories  and  includes  states,  counties,
colleges and universities,  correctional facilities and the military.  There are
also a number of smaller  organizations in the public health market such as AIDS
Service Organizations and various  community-based  organizations set up for the
primary  purpose of encouraging  and enabling HIV-1 testing to combat the spread
of AIDS.  The OraSure  device has received a warm  welcome in the public  health
market  because  of its  accuracy,  ease of use,  reliability,  and  noninvasive
nature.

INTERNATIONAL.  In light of the  worldwide  scope of the HIV  epidemic,  Epitope
believes there are significant opportunities for sale of OraSure and OraQuick in
international  markets. The Company believes that the ease of use,  portability,
and increased safety of OraSure,  and aversion to blood draw in certain cultures
will provide  significant  advantages for oral fluid testing over blood tests in
international markets.

During the second quarter of fiscal 1999 the Company  received  approval for the
sale of the OraSure HIV-1 device in Europe.  Approval to use the CE mark,  which
is required to sell the OraSure device in all fifteen  countries of the European
Economic Community, was received following an inspection of Epitope's facilities
and processes by  representatives  of the European  Notified  Body.  The OraSure
collection device has been registered under European  regulations as a Class III
medical device, the classification  requiring the highest degree of scrutiny for
CE mark  approval.  Epitope  distributors  are actively  marketing the device in
England,  Ireland and Greece.  The Company expects to begin product shipments to
Europe under the new CE mark approval in fiscal 2000.

DRUGS-OF-ABUSE  MARKET.  The  analytical  testing  portion of the United  States
drugs-of-abuse  testing  market  is  estimated  to be over  $725  million,  with
approximately  42 million tests performed in 1998.  Testing is concentrated on a
set  of  commonly  abused  drugs  called  the  NIDA-5,  consisting  of  cocaine,
methamphetamines, opiates, marijuana and PCP.

According to an Office of National  Drug Control  Policy report on drug abuse in
America,  October  1999,  the social  cost of illicit  drug abuse is nearly $110
billion  each year.  There are more than one million  drug arrests each year and
half of all those arrested test positive for illicit drug use.

Results from the 1994 and 1997 National  Household Survey on Drug Abuse released
by the Substance Abuse and Mental Health Services Administration (SAMHSA) showed
that the percent of workers who reported that their  workplaces  had any type of
drug  testing  program  increased  significantly  between 1994 and 1997 (from 44
percent to 49  percent).  The study found that 70 percent of illicit drug users,
age 18-49,  are employed  full-time. Among full-

6
<PAGE>

time  workers,  there were 6.3 million  illicit drug users and 6.2 million heavy
alcohol users. The study further revealed that 1.6 million of these workers were
both heavy alcohol and illicit drug users.  The overall rate of current  illicit
drug use among full time  employees  had fallen from 17.5 percent in 1985 to 7.4
percent in 1992, but had risen to 7.7 percent by 1997.

Comprehensive workplace programs that combine drug testing, access to treatment,
and  employee   education   have  proven  to  increase   workplace   safety  and
productivity,  reduce  absenteeism and theft,  and reduce the human and economic
effects of substance abuse. See "Marketing and Customers."

OTC MARKET.  The  over-the-counter  (OTC)  market for HIV testing  currently  is
served by only one product,  distributed by Home Access Health Corp., which uses
a dried blood spot to provide the patient's sample.  This sample is then sent to
a laboratory for testing and test results are  communicated  to the customer via
an 800 number.  In July 1997,  citing lower sales than expected and lower market
estimates,  Johnson & Johnson  dropped its Confide HIV test from the OTC market.
Epitope is not currently pursuing this market, but has not ruled out doing so in
the future.

MARKETING AND CUSTOMERS

LIFE INSURANCE INDUSTRY. Epitope currently markets the OraSure device for use in
screening  life  insurance  applicants  to test for three of the most  important
underwriting  risk  factors:  HIV-1,  cocaine,  and  cotinine (a  derivative  of
nicotine). Epitope sells the devices to insurance testing laboratories, which in
turn provide the devices to insurance  companies,  usually in  combination  with
testing  services.  The Company maintains a direct sales force that promotes use
of OraSure directly to insurance companies.  Insurance companies then make their
own  decision  regarding  which  laboratory  to use to supply  their  collection
devices and testing services. The major laboratories currently using the OraSure
device include LabOne, Inc., Osborn Group, Inc., Clinical Reference  Laboratory,
and Heritage Labs International, LLC (Heritage Labs).

As of August 1999,  more than 150 U.S.  ordinary life  insurance  companies were
using  OraSure to varying  degrees for testing  applicants  for life  insurance.
These 150 companies included seven of the top ten U.S. life insurance companies;
the ten accounted for 21 percent of ordinary life insurance  policies  issued in
the U.S. in 1998.  According to Best's Review (July 1999), the top 100 companies
represented  79  percent of newly  issued  business  and 81 percent of  in-force
business.  In 1998,  ordinary life insurance issued climbed 8.5 percent to $1.48
trillion,   while  ordinary  life  insurance  in  force  grew  by  12.8  percent
industry-wide to $12.9 trillion.

Because insurance  companies are in various stages of their adoption of OraSure,
there exists a wide range of policy  limits where the product is being  applied.
Some  insurance  companies  have chosen to extend their  testing to lower policy
limits where they did not test at all before,  while others have used OraSure to
replace some of their  blood-based  testing.  Epitope's sales force continues to
encourage additional insurance companies to use OraSure and to extend the use of
the  product by existing  customers.  Several  companies  have  expanded  use of
OraSure in "Preferred"  products in addition to the $1 million and higher dollar
policy amounts.  This expansion is attributable  to several  factors,  including
increasing comfort with oral fluid testing following its successful use, the low
cost of oral  fluid  testing  relative  to blood  tests,  and the ease of use of
OraSure.

PHYSICIAN AND PUBLIC HEALTH CLINICAL MARKET. As explained above under "Markets,"
Epitope is not currently  focusing sales efforts on the physician market because
of the high cost of selling to the large number of independent entities involved
in making purchasing decisions.  OraSure is currently available to the physician
market through various physicians' office supply channels. The Company has begun
a  pilot  program  to  determine  the   feasibility  of  implementing  a  direct
telemarketing program to further serve this market.

Epitope sales  personnel  sell its products  directly to customers in the public
health market. To better serve this market, Epitope entered into agreements with
LabOne and Heritage Labs to provide  prepackaged OraSure test kits, with prepaid
laboratory testing and specimen shipping costs included. These OraSure test kits
represented nearly half of the Company's revenues from this market in 1999.

                                                                               7
<PAGE>

FEDERAL SUPPLY SCHEDULE CONTRACT.  Epitope received approval to be listed in the
General Services  Administration (GSA) Federal Supply Schedule during the second
quarter of fiscal 1999.  Government agencies are encouraged to purchase from the
Federal Supply  Schedule,  which offers the best pricing for approved  products.
This  schedule  applies to various  federal  agencies,  including  the Veteran's
Administration,  the  military,  the Federal  Bureau of Prisons,  Job Corp,  the
Federal Aviation  Administration,  the National  Institutes of Health,  and many
others. Market studies indicate that the number of HIV tests associated with GSA
contracts is currently  about 2 million per year.  The Company  reorganized  its
public  health  field  sales  force  during  fourth  quarter  1999 to place more
emphasis on selling to the large customers represented by this market.

INTERNATIONAL.  Epitope markets to  international  customers  primarily  through
distributors with knowledge of their local market.  The distributor's  expertise
is  supplemented  by  Epitope's  contacts  with  testing  companies to assist in
registering the necessary tests in each country,  and Epitope's  assistance with
training  and  support  materials.  Epitope's  international  marketing  program
features direct assistance to distributors in establishing OraSure programs that
include laboratory services, cooperation from screening test manufacturers,  and
provision of Western blot confirmatory kits when necessary. Epitope has marketed
OraSure in the United Kingdom (UK), Ireland, Thailand,  Argentina, Brazil, South
Africa, Greece, the Philippines, Taiwan, Mexico and Colombia. Canadian insurance
customers  are served  primarily  through their United  States-based  affiliated
insurance  testing  laboratories.  The  recent  addition  of a new  Director  of
International  Sales and Marketing will greatly improve the Company's ability to
expand its international sales of OraSure. See "Personnel."

The Company entered into a distribution  agreement in September 1998 with Altrix
Healthcare, plc, a UK-based health diagnostic service provider, for the sale and
distribution  of OraSure to the life  insurance,  public health,  and laboratory
markets in the UK and Ireland. The agreement  contemplates optional expansion of
the relationship to other European countries.

In September 1999,  Epitope signed an exclusive  distribution  arrangement  with
Medical Products,  Ltd., a Greece-based medical products distributor selected to
replace the Company's former  distributor in that country.  The Company's former
distributor  has  protested  the  termination  of its agreement and attempted to
disrupt the sales  process in Greece.  Epitope has responded and will take legal
action, if necessary,  to preserve its rights in establishing a new distributor.
OraSure  has been  recently  selected  by the  Greek  government  for a  planned
multi-year  program  for  widespread  HIV testing of the Greek  population.  The
Company will begin shipping product when the Greek government gives all required
approvals and issues a purchase order.

Epitope  participates in a joint venture in Japan which markets both the OraSure
device and STC's  cotinine test to the Japanese life insurance  market.  Epitope
holds exclusive distribution rights in Japan for STC's laboratory-based test for
cotinine,  sold for use in insurance risk assessment.  Epitope has the option to
expand its  exclusive  distribution  rights  for the  cotinine  test  worldwide,
excluding the U.S.

The  Argentinean  Society of AIDS organized an HIV virus and detection  campaign
called "Seven Days of Life" in Rosario,  Argentina  during late  November  1999.
This  campaign  was  presented to stimulate  and  facilitate  the testing of the
general  population using Epitope's OraSure device. In addition,  the Company is
actively pursuing a clinical trial supported by Argentina's  Ministry of Health;
however,  recent government  elections in that country have slowed that process.
In 1998,  OraSure was used to test  patients  for  Hepatitis in  Argentina.  The
Company is also exploring opportunities to distribute OraSure in Brazil.

DRUGS-OF-ABUSE  MARKET.  In  November  1998,  the  Company  entered a supply and
distribution  agreement  with STC,  its research  partner in the  drugs-of-abuse
market.  Under the terms of the  agreement,  Epitope  will act as the  exclusive
supplier of oral fluid collection  devices using STC's trade name  Intercept(TM)
Drugs of Abuse for use with STC's laboratory-based,  NIDA-5 drugs-of-abuse tests
in the U.S. and Europe,  excluding  the U.K.  and  Ireland.  STC will act as the
exclusive  distributor of the OraSure device for  drugs-of-abuse  testing in the
same territory. The agreement provides for Epitope to sell oral fluid collection
devices to STC for a per-unit  price plus a royalty based on STC's gross revenue
from the sale of the  devices  and STC's oral  fluid  drugs-of-abuse  test.  The
agreement also covers any additional laboratory-based  drugs-of-abuse tests that
STC may  market,  including  those  STC is now  developing  using  up-converting
phosphor  technology.  The agreement will remain in effect for a minimum term of
five years.  STC has  contracted  with LabOne to provide  oral fluid  laboratory
analysis for STC's  drugs-of-abuse  product line in the North American work-site
testing market.

8
<PAGE>

WESTERN  BLOT  DISTRIBUTION.  Epitope  has  exclusive  supply  and  distribution
agreements with Organon Teknika Corporation for Epitope's Western blot products.
The supply agreement provides that Organon Teknika will supply the HIV-1 antigen
used to  manufacture  Western  blot  confirmatory  test kits.  The  distribution
agreement  grants Organon Teknika the exclusive  right to purchase  Western blot
confirmatory test kits from Epitope and to market them worldwide. The supply and
distribution  agreements  between  Epitope and  Organon  Teknika  were  recently
extended to March 31, 2001.

CUSTOMER  CONCENTRATION.  In fiscal 1999, the Company's  sales to LabOne,  Inc.,
Osborn Group,  Inc.,  Clinical Reference  Laboratory,  Heritage Labs and Organon
Teknika accounted for over 70 percent of product revenues.  The Company believes
that its  relationship  with each of these customers is strong and believes that
they will purchase  comparable or increasing  volumes of the Company's  products
for the foreseeable future.  There can be no assurance,  however,  that sales to
these  customers  will not decrease or that these  customers  will not choose to
replace the  Company's  products with those of  competitors.  The loss of any of
these customers or a significant decrease in the volume of products purchased by
them would have a material adverse effect on the Company.

COMPETITION

Competition  in the  market  for HIV  testing  is  intense  and is  expected  to
increase.  The Company  believes that the principal  competition  will come from
existing  laboratory-based  blood tests,  point-of-care whole blood rapid tests,
urine-based  assays,  or other oral  fluid-based  tests  that may be  developed.
Epitope's  competitors  include  specialized  biotechnology  firms  as  well  as
pharmaceutical  companies with  biotechnology  divisions and medical  diagnostic
companies,  many of which have considerably  greater financial,  technical,  and
marketing  resources than Epitope.  Competition  may intensify as  technological
advances are made and become more widely known and as products  reach the market
in greater numbers. Furthermore, new testing methodologies could be developed in
the future that render Epitope's oral-based HIV-1 test impractical, uneconomical
or  obsolete.  There can be no assurance  that  Epitope's  competitors  will not
succeed in  developing  or marketing  technologies  and  products  that are more
effective than those developed by Epitope or that would render its  technologies
or products obsolete or otherwise commercially unattractive.  In addition, there
can be no assurance that  competitors  will not succeed in obtaining  regulatory
approval for these products,  or in introducing or  commercializing  them before
Epitope. Such developments could have a material adverse effect on the Company's
business, financial condition and results of operations.

Three  companies  have  submitted  applications  to the FDA  for  OTC HIV  blood
testing:  Direct Access  Diagnostics,  Home Access  Health  Corp.,  and ChemTrak
Incorporated.  The FDA  approved  home  collection  kits for HIV  blood  testing
developed by Direct Access  Diagnostics (a division of Johnson & Johnson) and by
Home Access Health Corp. In July 1997,  Direct Access  Diagnostics  withdrew its
HIV home-test from the market, citing weak sales. Direct Access and ChemTrak are
no longer in business, leaving only Home Access active in this market.

Calypte,  Inc., BioRad Laboratories,  Inc. and Genetic Systems Corp. manufacture
HIV Western blot  confirmatory  tests, and Waldheim  Pharmazeutika  manufactures
immunofluorescent  HIV confirmatory  tests, which compete with Epitope's EPIblot
HIV-1 Western blot serum-based  confirmatory test kits.  Calypte,  Inc. acquired
the  Western  blot  manufacturing  facilities  and rights of  Cambridge  Biotech
Corporation in December 1998.

Several other  companies  market or have announced plans to market oral specimen
collection  devices and tests outside the United States and have announced plans
to seek FDA  approval of such tests in the United  States.  Epitope  expects the
number of devices  competing with its OraSure device to increase as the benefits
of oral specimen-based  testing become more widely accepted. The Company expects
that  FDA  approval  of  the  OraSure  device  will  also  encourage   potential
competitors to develop oral diagnostic  products.  No such devices have yet been
approved by the FDA for HIV-1 testing. See "Government Regulation."

The FDA has approved an HIV-1  screening  test for use with a urine  sample.  In
June 1998, the FDA notified Cambridge Biotech Corp.  (acquired by Calypte,  Inc.
in  December  1998)  that it had  approved  the use of its  HIV-1  Western  Blot
confirmatory  test for use with urine  samples.  Although  the  sensitivity  and
specificity  are less than  blood-based or oral fluid tests,  urine testing will
compete in the same markets as the Company's products. The

                                                                               9
<PAGE>

Company  believes that urine  collection  can be  logistically  more  difficult,
inconvenient and potentially  embarrassing for the individual being tested,  and
that privacy and chain-of-custody  issues are further impediments to routine use
of  urine-based  HIV  tests.  The  Company  cannot  predict  the  impact  of the
availability  of urine-based  tests on the HIV testing market or on sales of the
Company's products.

GOVERNMENT REGULATION

GENERAL.  Most of  Epitope's  existing  and  proposed  diagnostic  products  are
regulated by the FDA, other state and local agencies,  and comparable  bodies in
other  countries.  This  regulation  governs almost all aspects of  development,
production, and marketing, including product testing,  authorizations to market,
labeling,  promotion,   manufacturing,   and  recordkeeping.  All  of  Epitope's
FDA-regulated products require some form of action by the FDA before they can be
marketed in the United  States,  and, after  approval,  Epitope must continue to
comply with other FDA requirements  applicable to marketed products. Both before
and after approval,  failure to comply with the FDA's  requirements  can lead to
significant penalties.

PRODUCT  APPROVALS.  Most of  Epitope's  diagnostic  products  are  regulated as
medical devices.  The Western blot  confirmatory test is regulated as a biologic
product.

There are two  review  procedures  by which  medical  devices  can  receive  FDA
clearance or approval.  Some products may qualify for clearance  under a Section
510(k) procedure,  in which the manufacturer  provides a premarket  notification
that it intends to begin  marketing  the product,  and shows that the product is
substantially  equivalent to another legally marketed product (i.e., that is has
the same intended use and is as safe and effective as a legally  marketed device
and does not raise  different  questions of safety and  effectiveness).  In some
cases, the submission must include data from human clinical  studies.  Marketing
may commence  when the FDA issues a clearance  letter  finding such  substantial
equivalence.

If the medical device does not qualify for the 510(k) procedure  (either because
it is not substantially equivalent to a legally marketed device or because it is
a  Class  III  device  required  by  the  statute  and  the  FDA's  implementing
regulations to have an approved  application  for premarket  approval),  the FDA
must approve a premarket approval  application (PMA) before marketing can begin.
PMAs must demonstrate,  among other matters, that the medical device is safe and
effective.  A PMA is typically a complex  submission,  including  the results of
preclinical   and  clinical   studies.   Preparing  a  PMA  is  a  detailed  and
time-consuming  process. Once a PMA has been submitted,  the FDA's review may be
lengthy and may include requests for additional data.

Biologic  products  must  be  the  subject  of  an  approved  biologics  license
application  (BLA) before they can be marketed.  The FDA approval  process for a
biologic is similar to the PMA approval  process,  involving a demonstration  of
the product's  safety and  effectiveness  based in part on both  preclinical and
clinical studies.

Epitope has received  several FDA approvals and clearances.  The first approval,
in March 1991, was a BLA for the EPIblot HIV-1 serum-based  confirmatory Western
blot  confirmatory  test.  Since then,  Epitope's  approvals  have involved oral
specimen-based diagnostic tests. In 1994, the FDA approved Epitope's PMA for use
of the OraSure device in HIV-1 screening. The FDA also has issued several 510(k)
clearances  for  non-HIV  uses of the  OraSure  device.  In June  1996,  the FDA
approved  Epitope's PMA for use of the OraSure and  oral-specimen-based  Western
blot confirmatory test for HIV-1 diagnosis.

Obtaining FDA approval for either medical devices or biologic  products requires
substantial  time,  effort,  and expense.  Epitope cannot assure that it will be
able to obtain any additional  approvals or clearances on a timely basis,  or at
all.  Approvals and clearances  limit the indications for which a product may be
marketed;  accordingly,  Epitope  may market its  existing  and future  approved
products  only for the  indications  that the FDA has approved or cleared.  Even
after  approvals  are  obtained,  the FDA may  suspend  or revoke  approvals  if
problems are identified.

MANUFACTURING REQUIREMENTS.  Every company that manufactures biological products
or medical  devices  distributed in the United States must comply with the FDA's
Good Manufacturing  Practices ("GMP") Regulations.  These regulations govern the
manufacturing  process,   including  design,   manufacture,   testing,  release,
packaging, distribution,  documentation, and purchasing. Compliance with GMPs is
generally  required  before  the  FDA  will  approve  a PMA or  BLA,  and  these
requirements also apply to marketed products.

10
<PAGE>

POSTAPPROVAL  REQUIREMENTS.  Companies are also subject to other post-market and
general requirements, including compliance with restrictions imposed on marketed
products, compliance with promotional standards, recordkeeping, and reporting of
certain adverse  reactions.  The FDA regularly  inspects  companies to determine
compliance  with GMPs and other  post-approval  requirements.  Failure to comply
with statutory  requirements  and the FDA's  regulations can lead to substantial
penalties, including monetary penalties,  injunctions,  product recalls, seizure
of products, and criminal prosecution.

WARNING  LETTER.  Epitope  received a warning  letter from the FDA in June 1998,
asserting  that the  Company has not fully  adhered to FDA's Good  Manufacturing
Practice Regulations.  The FDA made similar observations during an inspection in
January  1999.  Epitope  has  cooperated  with  the FDA to  address  the  issues
identified,  has aggressively  implemented  enhanced quality control procedures,
and has retrained personnel.  The Company has also hired a new Vice President of
Quality  Assurance  and  Regulatory  Affairs to assist in bringing the Company's
systems into compliance. See "Personnel."

INTERNATIONAL.  Epitope is also  subject  to  regulations  in foreign  countries
governing products, human clinical trials and marketing. Approval processes vary
from  country to country,  and the length of time  required  for  approval or to
obtain other  clearances may in some cases be longer than that required for U.S.
governmental   approvals.   The  extent  of  potentially  adverse   governmental
regulation  affecting  Epitope  that might  arise  from  future  legislative  or
administrative action cannot be predicted.  Epitope will pursue approval only in
those countries that have a significant market opportunity.

In the second  quarter of fiscal 1999  Epitope  received  approval to use the CE
mark which is required to sell the OraSure  device in all fifteen  countries  of
the European Economic  Community.  The Company received approval to sell OraSure
as a Class III medical device, the  classification  requiring the highest degree
of scrutiny for the CE mark, following an inspection of Epitope's facilities and
processes by representatives of the European Notified Body. Epitope distributors
are actively  marketing the device in England,  Ireland and Greece.  The Company
has begun shipments to Europe under the new CE mark approval.

OTHER.  epitope is also subject to  regulation  by the  Occupational  Safety and
Health Administration and may be subject to regulation by the U.S. Environmental
Protection  Agency  (EPA) under the Toxic  Substances  Control  Act (TSCA),  the
Resource Conservation and Recovery Act, and other legislation.

SUPPLIES

The HIV-1 antigen needed to manufacture  Epitope's Western blot HIV confirmatory
test kits is available from only a limited number of sources.  Organon  Teknika,
the  exclusive  distributor  of the test kits,  is required to supply  Epitope's
requirements  for  antigen  for the  term  of its  distribution  agreement  with
Epitope,  which has recently  been extended to March 31, 2001. If for any reason
Organon Teknika should no longer be able to supply the Company's  antigen needs,
management believes Epitope would be able to obtain its own supply of antigen at
a competitive cost, although a change in the antigen would require FDA approval.
Epitope has obtained a license from the National Technical  Information  Service
which is required for the production of the HIV-1 antigen  currently used in the
Company's  Western blot test kits.  It is unlikely  that Epitope would choose to
manufacture its own antigen because of its  availability  from other  suppliers.
Other materials used by Epitope in manufacturing,  production,  and research and
development are widely available from a variety of sources.

GRANTS AND CONTRACTS

In  September  1999,  the National  Institutes  of Health (NIH) and the National
Institute of Allergy and Infectious Diseases (NIAID) approved a grant to Epitope
under the Small Business Innovation  Research Program Fast-Track  Initiative for
the  development  of syphilis  assays based on an oral fluid  sample.  Under the
Fast-Track  Initiative,  both Phase I and Phase II requests  were  reviewed  and
approved.  This approval means that if agreed-upon benchmarks are met at the end
of Phase I work,  the award of the  Phase II  funding  can be made  based on the
recommendation of the project's steering committee. Phase I funding amounting to
$117,674 has already been approved and an additional $992,373 has been requested
for Phase II.

                                                                              11
<PAGE>

Epitope has received  funding in the past from the NIAID, for work in developing
a rapid test to detect HIV  antibodies  in oral  fluid  specimens,  and from the
National Cancer Institute (NCI), to fund research for the treatment of cancer by
exploiting  a  deficiency  of certain  compounds  in cancer  cells.  The Company
regularly  makes  applications  for new grants,  but there is no assurance  that
additional grant support can be obtained.

PATENTS AND PROPRIETARY INFORMATION

Epitope has obtained patents in the United States and certain foreign  countries
for  the  OraSure  device  and  related  technology.  Epitope  has  applied  for
additional patents,  both in the United States and in certain foreign countries,
on the  OraSure  collection  device  and a  number  of  other  technologies  and
products.  The Company  anticipates filing patent applications for protection on
future products and technology.  United States patents  generally have a maximum
term of 20 years from the date an application is filed.

Much of the  technology  developed  by the  Company is  subject to trade  secret
protection.  To  reduce  the risk of loss of  trade  secret  protection  through
disclosure,  the Company  requires its employees and  consultants  to enter into
confidentiality agreements.

Although  important,  the  issuance  of a patent or  existence  of trade  secret
protection does not in itself ensure the Company's  success.  Competitors may be
able to produce  products  competing  with a patented  Company  product  without
infringing on the Company's  patent rights.  Issuance of a patent in one country
generally does not prevent  manufacture or sale of the patented product in other
countries.  The  issuance  of a patent to the  Company or to a  licensor  is not
conclusive  as to validity  or as to the  enforceable  scope of the patent.  The
validity or enforceability of a patent can be challenged by litigation after its
issuance,  and, if the outcome of such litigation is adverse to the owner of the
patent,  the owner's  rights  could be  diminished  or  withdrawn.  Trade secret
protection does not prevent independent discovery and exploitation of the secret
product or technique.

PERSONNEL

William D.  Block was named Vice  President  of Sales and  Marketing  on May 16,
1999.  Mr. Block was hired  following a nationwide  search to replace  Edward V.
Collom,  Jr., who resigned in March 1999 for health reasons.  Prior to accepting
the  position  at  Epitope,  Mr.  Block held a variety  of sales and  management
positions  with  companies in the medical field,  including  McKesson  Automated
Pharmacy  Solutions (a division of McKesson HBOC, Inc.),  Allegiance  Healthcare
Corp., Baxter Healthcare Corp., and Biotronics Enterprises, Inc.

Rob Ngungu was named to the newly created  position of Vice President of Quality
Assurance and  Regulatory  Affairs on October 25, 1999. Mr. Ngungu has more than
17 years of quality  assurance and regulatory  affairs  experience  with medical
companies  such as Baxter  Diagnostics (a former  division of Baxter  Healthcare
Corp.) and Johnson & Johnson Ultrasound (a former division of Johnson & Johnson,
Inc.).  He was most recently  employed by McGhan  Medical  Corporation,  a Santa
Barbara,  California- based medical device company, where he was Vice President,
Quality Systems and was responsible for overseeing five  departments  within the
regulatory and compliance sector.

Paul D.  Slowey,  Ph.D.  was  appointed  Director  of  International  Sales  and
Marketing on October 1, 1999. Dr. Slowey has over 16 years experience in medical
products  and  diagnostics  and was most  recently  Vice  President,  Sales  and
Marketing and Chief Operating  Officer of Saliva  Diagnostics  Systems,  Inc., a
Vancouver, Washington-based maker of rapid saliva and blood tests for HIV and H.
Pylori.  Before  joining  Saliva  Diagnostics,  he worked  six years at  Incstar
Corporation,  a Minneapolis-based  medical systems and diagnostics subsidiary of
American   Standard   Companies.   While  there,  Dr.  Slowey  became  Director,
International   Sales,   where  he  managed  a  $22  million  unit,   appointing
international distributors and establishing strategic partnerships.

On September 30, 1999, John W. Morgan notified the Company of his resignation as
President  and  Chief  Executive  Officer.  Mr.  Morgan  remains a member of the
Epitope board of directors.  Charles E. Bergeron,  Chief Financial  Officer,  is
serving as Interim  President until a new Chief Executive  Officer is hired. The
Company has retained an industry-focused  executive search firm to assist in the
search for a permanent  Chief  Executive  Officer.  A committee  of the board of
directors is overseeing the search.

12
<PAGE>

At September  30, 1999,  the Company had 83  full-time  employees,  including 16
persons in research and product development, 28 in administration and marketing,
30 in  manufacturing  and  production,  and 9 in regulatory  affairs and quality
assurance.  The  Company  considers  its  relations  with  its  employees  to be
excellent. None of its employees are represented by labor unions.

The Company  employs 6 persons  holding Ph.D.  degrees with  specialties  in the
following  disciplines:   virology/molecular  biology,  biochemistry,  microbial
physiology,  microbiology and organic chemistry.  From time to time, the Company
also engages the services of scientists as  consultants to augment the skills of
its scientific staff.

SCIENTIFIC ADVISORY BOARD

The Company utilizes the services of a Scientific Advisory Board. The Scientific
Advisory  Board  meets   periodically  to  review  the  Company's  research  and
development  efforts  and to  apprise  the  Company of  scientific  developments
pertinent to the Company's  business.  The Scientific  Advisory Board  comprises
chair Daniel Malamud,  Ph.D.,  Professor and Chair,  Department of Biochemistry,
University of Pennsylvania School of Dental Medicine;  J. Richard George, Ph.D.,
Chief  Scientific  Officer of Epitope;  James I.  Mullins,  Ph.D.,  Professor of
Microbiology and Medicine,  University of Washington;  Wayne R. Wecksler, Ph.D.,
General   Manager,   Esoteric  Testing  Center,   SmithKline   Beecham  Clinical
Laboratories, Van Nuys, CA; and John V. Parry, Ph.D., Deputy Director, Hepatitis
and Retrovirology Laboratory,  Central Public Health Laboratory, Virus Reference
Division, London, England.

FORWARD-LOOKING STATEMENTS; RISK FACTORS

Statements  in  this  report   regarding   future  events  or  performance   are
"forward-looking  statements"  within  the  meaning  of the  Private  Securities
Litigation  Reform Act of 1995.  The  Company's  actual  results  could be quite
different  from those  expressed or implied by the  forward-looking  statements.
Factors that could affect  results  include the risk  factors  discussed  below,
those discussed in Item 7, and those  described  elsewhere in this Annual Report
on Form 10-K.  Although  forward-looking  statements  help to  provide  complete
information about the Company,  readers should keep in mind that forward-looking
statements  are much less  reliable  than  historical  information.  Readers are
cautioned not to place undue reliance on the forward-looking statements.

LOSS OF KEY  PERSONNEL.  The Company  depends to a large extent on the abilities
and continued  participation of its executive officers and scientific personnel.
The loss of key personnel could have a material  adverse effect on the Company's
business,  financial  condition,  and  results of  operations.  Competition  for
management and  scientific  staff in the medical  products field is intense.  No
assurance  can be given that the Company will be able to continue to attract and
retain  personnel  with  sufficient  experience  and  expertise  to satisfy  the
Company's needs.

REGULATORY  COMPLIANCE.  The Company can manufacture and sell the OraSure device
and other regulated products, both in the U.S. and in some cases abroad, only if
it complies with regulations of government agencies such as the FDA. The Company
has implemented  quality assurance and other systems that are intended to comply
with applicable  regulations.  The FDA has issued warning letters,  to which the
Company has  responded,  stating that the Company is not in compliance  with the
FDA's  regulations.  Although the Company  believes  that it has  satisfactorily
addressed  the points raised by the FDA, the FDA could force the Company to stop
manufacturing  products  if  the  FDA  concludes  that  the  Company  is  out of
compliance with applicable regulations.  In addition,  until the FDA agrees that
the Company has resolved all points raised in the warning  letters,  the Company
may not be able to obtain regulatory  clearance  certificates  needed in certain
foreign countries.

INTERNATIONAL MARKETING OBSTACLES. The Company is devoting significant resources
to  international  sales of its products.  In addition to economic and political
issues,  a number of factors  can slow or prevent  international  sales.  In the
past, Epitope has had little direct experience with the governmental  regulatory
agencies in many  countries  that control sale of the  Company's  products.  The
Company's  new  Director of  International  Sales and  Marketing,  however,  has
substantial  experience  dealing  with  these  agencies.  See  "Personnel."  The
Company's recent experience with extended delays in obtaining  approvals to make
sales  in  Argentina   demonstrates  that  compliance  with  foreign  regulatory
requirements can be difficult and can impede  international  marketing  efforts.
Epitope must

                                                                              13
<PAGE>

rely on the  cooperation  of  distributors  to market  its  products  in foreign
countries and to register and provide technical support for the laboratory tests
which  may be used  with  OraSure.  Changes  in  distributor  relationships  can
interfere with the sales process because registrations may be in the name of the
former distributor.

LOSS OR  IMPAIRMENT  OF  SOURCES  OF  CAPITAL.  Although  the  Company  has made
significant  progress in the last two fiscal years toward  controlling  expenses
and  increasing  product  revenue,  the Company has  historically  depended to a
substantial  degree on capital raised  through the sale of equity  securities to
fund its operations.  The Company's  future  liquidity and capital  requirements
will depend on numerous factors,  including the costs and timing of expansion of
manufacturing  capacity,  the success of product development  efforts, the costs
and timing of expansion of sales and marketing  activities,  the extent to which
existing and new products gain market  acceptance,  competing  technological and
market  developments,  and the scope and timing of  strategic  acquisitions.  If
additional  financing is needed, the Company may seek to raise funds through the
sale of equity securities.  There can be no assurance that financing through the
sale of equity  securities,  or  otherwise,  will be available  on  satisfactory
terms, if at all.

ABILITY OF THE COMPANY TO DEVELOP PRODUCT DISTRIBUTION CHANNELS. The Company has
marketed  most  of  its  products  by  collaborating  with   pharmaceutical  and
diagnostic  companies and distributors.  For example,  the Company's EPIblot and
OraSure Western blot confirmatory tests are distributed through Organon Teknika,
the OraSure  collection device is distributed to the insurance  industry through
major insurance testing  laboratories,  and the Company has entered an agreement
with STC to distribute the OraSure device for drugs-of-abuse  testing. Except in
the public health market,  the Company does not maintain a substantial  sales or
marketing force. Accordingly, the Company's sales depend to a substantial degree
on its ability to develop  product  distribution  channels and on the  marketing
abilities of the companies with which it collaborates.

ABILITY OF THE COMPANY TO DEVELOP NEW PRODUCTS. The Company's OraSure collection
device is becoming recognized in the insurance and public health markets as part
of a reliable,  effective testing alternative.  The Company's long-term strategy
is based on continued  expansion of markets for OraSure and the  development  of
new  products.  OraQuick and other  planned  products  are in various  stages of
development.  In some cases,  the Company will be required to achieve  difficult
scientific  or  technical  objectives  before the  commercial  or  technological
feasibility of new products can be demonstrated.  There can be no assurance that
products under  development will perform in accordance with  expectations,  that
necessary  regulatory  approvals  will be obtained,  or that the products can be
successfully and profitably manufactured, distributed, and sold.

DEVELOPMENT OF COMPETING PRODUCTS.  Competition in the medical products business
is intense and will likely  increase.  The Company  believes  that the principal
competition for OraSure will come from blood-based and urine-based  assays,  and
could also come from other oral-fluid testing systems. New testing methods could
be developed in the future that render the Company's  products  uneconomical  or
obsolete.   Most  of  the  Company's   competitors  have  significantly  greater
financial,  manufacturing,  technical,  research, marketing, sales, distribution
and other  resources  than those of the Company.  There can be no assurance that
the Company will not experience competitive pressures, particularly with respect
to pricing, that could have a material adverse effect on the Company's business,
results of  operations  and financial  condition.  See  "Competition"  above for
additional information.

MARKET  ACCEPTANCE OF ORAL TESTING  PRODUCTS.  The Company has made  significant
progress in gaining  acceptance  of oral  testing for HIV in the  insurance  and
public  health  markets.   The  Company  also  expects  that  oral  testing  for
drugs-of-abuse   will  be  accepted  in  employment   testing.   Other  markets,
particularly the physician market,  may resist the adoption of oral testing as a
replacement  for other testing  methods in use today.  There can be no assurance
that the  Company  will be able to expand use of its oral  testing  products  in
these markets.

CHANGES IN FEDERAL OR STATE LAW OR  REGULATIONS.  As described  more fully above
under  "Government  Regulation,"  many of the  Company's  proposed  and existing
products are subject to regulation by the FDA and other  governmental  agencies.
The process of obtaining required approvals from these agencies varies according
to the nature of and uses for the product and can involve  lengthy and  detailed
laboratory  and  clinical  testing,  sampling  activities,  and other costly and
time-consuming  procedures.  Changes in government regulations could require the
Company to undergo additional trials or procedures, or could make it impractical
or  impossible  for the  Company to market its  products  for certain  uses,  in
certain markets, or at all. Other changes in government regulations, such as the
adoption of the FDA's Quality  System  Regulation,  may not affect the Company's
products directly but may

14
<PAGE>

nonetheless  adversely affect the Company's  financial  condition and results of
operations  by  requiring  that the  Company  incur the  expense of  changing or
implementing new manufacturing and control procedures.

The previous  discussion of the Company's business should be read in conjunction
with the Consolidated  Financial  Statements and accompanying  notes included in
Item 14 of this Annual Report on Form 10-K.


ITEM 2.  PROPERTIES.

The Company leases  approximately  35,600 square feet of office,  manufacturing,
and  laboratory  space in  Beaverton,  Oregon,  under two leases that  terminate
January 31, 2000. The lease for the Company's primary office,  manufacturing and
laboratory  space of 30,500  square feet has been  renewed  through  January 31,
2005. The remaining  lease for 5,100 square feet of excess office space will not
be renewed at expiration. The Company also leases 2,265 square feet of warehouse
space to store  inventory and  equipment  under a lease  expiring  September 30,
2002.  Each  lease  calls  for  fixed  monthly  payments  over its term  plus an
allocation  of common area charges and taxes.  The total amount of the Company's
base lease obligation through the term of these leases is $2,030,025.


ITEM 3.  LEGAL PROCEEDINGS.

Not applicable.


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

No  matters  were  submitted  to a vote of  security  holders  during the fourth
quarter of the fiscal year covered by this report.

                                                                              15
<PAGE>

                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

The Company's  Common Stock is listed for trading on the National Market tier of
The Nasdaq  Stock  Market  (NASDAQ)  under the symbol  EPTO.  High and low sales
prices reported by NASDAQ during the periods indicated are shown below.

SALES PRICES PER SHARE
<TABLE>
<S>                                                  <C>       <C>       <C>       <C>
YEAR ENDED SEPTEMBER 30                                      1999               1998
                                                        HIGH      LOW      HIGH      LOW
First Quarter..................................      $ 6.500   $ 2.500   $ 8.125   $ 4.250
Second Quarter.................................        8.375     4.500     7.188     4.750
Third Quarter..................................        6.125     3.688     6.875     4.563
Fourth Quarter.................................        7.500     4.875     7.000     2.875

</TABLE>

On December 1, 1999,  there were 873 holders of record of the Common Stock,  and
the closing price of the Common Stock was $5.25.  The Company has never paid any
cash  dividends,  and the Board of  Directors  does not  anticipate  paying cash
dividends in the  foreseeable  future.  The Company intends to retain any future
earnings to provide funds for the operation and expansion of its business.

16
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA.

The  following  table sets forth  selected  consolidated  operating  results and
balance sheet data of Epitope, Inc. and its subsidiaries. The balance sheet data
at  September  30, 1999 and 1998 and the  operating  results  data for the years
ended  September  30,  1999,  1998 and  1997  have  been  derived  from  audited
Consolidated  Financial  Statements  and notes  thereto  included in this Annual
Report on Form 10-K.  The balance  sheet data at September 30, 1997,  1996,  and
1995 and operating  results data for the years ended September 30, 1996 and 1995
have been derived  from  audited  Consolidated  Financial  Statements  and notes
thereto not included in this Annual Report on Form 10-K. This information should
be read in  conjunction  with the  Consolidated  Financial  Statements and notes
thereto included in Item 14 and Item 7 "Management's  Discussion and Analysis of
Financial Condition and Results of Operations."


                                             COMPARATIVE FINANCIAL DATA
                                        (In thousands, except per share data)
<TABLE>
<S>                  <C>                                  <C>         <C>          <C>          <C>          <C>
YEAR ENDED SEPTEMBER 30,                                  1999        1998         1997         1996         1995
OPERATING RESULTS

Revenues.........................................     $  10,073   $   9,792     $  9,360     $  5,594     $   2,856
Operating costs and expenses.....................        13,555      12,042       14,323       10,881        14,464
Other income, net................................           276         322          882        6,388(1)      1,157
(Loss) income from continuing operations.........        (3,206)     (1,928)      (4,081)       1,101       (10,451)
Discontinued operations..........................            -            -      (18,359)      (2,501)       (8,045)
Net loss.........................................        (3,206)     (1,928)     (22,440)      (1,400)      (18,496)
(Loss) income per share from continuing
  operations.....................................         (0.23)      (0.14)        (.30)         .08(2)      (.88)
Net loss per share...............................         (0.23)      (0.14)       (1.67)        (.11)       (1.56)
Shares used in per share
 calculations....................................        13,957      13,529       13,404       12,661(2)     11,886

BALANCE SHEET DATA
Working capital..................................    $    6,887   $   6,510     $  9,538     $ 24,793     $  20,686
Total assets.....................................        10,694      10,357       17,012       29,784        26,142
Accumulated deficit..............................      (106,251)   (103,046)     (95,426)     (72,985)      (71,585)
Shareholders' equity.............................         8,576       8,274       15,014       27,967        22,347
</TABLE>

(1)  Includes one-time licensing fee of $5.0 million.

(2)  13,440,000  shares used in calculation of income per share from  continuing
     operations due to common stock equivalents.


                                                                              17
<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.

Statements  below regarding  future events or performance  are  "forward-looking
statements" within the meaning of the Private  Securities  Litigation Reform Act
of 1995.  The  Company's  actual  results  could be quite  different  from those
expressed  or  implied by the  forward-looking  statements.  Factors  that could
affect  results  include:  loss  of  key  personnel;   failure  to  comply  with
regulations of the FDA or other regulatory agencies;  obstacles to international
marketing of the Company's  products;  loss or impairment of sources of capital;
ability of the Company to develop product distribution channels;  ability of the
Company to develop new  products;  development  of  competing  products;  market
acceptance  of oral  testing  products;  changes  in  federal  or  state  law or
regulations;  and uncertainties  related to customers' and suppliers' ability to
achieve  year 2000  compliance.  These  factors are  discussed  more fully under
"Forward-Looking   Statements;  Risk  Factors"  in  Item  1,  under  "Year  2000
Readiness"  in this Item 7, and  elsewhere  in this Annual  Report on Form 10-K.
Although  forward-looking  statements help to provide complete information about
the Company,  readers  should keep in mind that  forward-looking  statements are
much less reliable  than  historical  information.  Readers are cautioned not to
place undue reliance on the forward-looking statements.

RESULTS OF OPERATIONS

The table below shows the amount (in  thousands)  and  percentage  of  Epitope's
total revenue  contributed  by each of its principal  products and by grants and
contracts.
<TABLE>
FISCAL YEAR                                                  1999                  1998                  1997
Product Sales
<S>                                                     <C>      <C>         <C>      <C>          <C>       <C>
   Oral specimen collection devices..................   $7,762     77%        $7,195    74%         $6,279    67%
   Western blot HIV confirmatory tests...............    2,133     21          2,370    24           1,791    19
   Other product sales...............................      178      2            214     2              14     -
                                                        ------    ---         ------   ---          ------   ---
                                                        10,073    100%         9,779   100%          8,084    86%
Grants and contracts.................................        -      -             13     -           1,276    14
                                                        ------    ---         ------   ---          ------   ---
                                                       $10,073    100%        $9,792   100%         $9,360   100%
</TABLE>
REVENUES. Product sales increased by $294,000 or 3 percent from 1998 to 1999 and
by $1.7  million  or 21  percent  from  1997 to 1998  primarily  as a result  of
expanded  sales  volume of Epitope's  lead  product,  the OraSure oral  specimen
collection  device.  Approximately 30 percent of 1999 sales were attributable to
shipments  in the fourth  quarter.  The  increase in sales volume of the OraSure
device is primarily  due to increased  purchases of the device by the  Company's
distributors for the life insurance testing market.

Sales of the Company's  OraSure  device  increased by $567,000 or 8 percent from
1998 to 1999 and  increased  by  $916,000  or 14.6  percent  from  1997 to 1998.
OraSure  device sales into the  international  market  decreased  $314,000 or 68
percent  in 1999  reflecting  the  economic  problems  of many  countries  after
increasing  $438,000 or 246 percent in 1998.  The Company's  total product sales
into foreign markets,  including  cotinine test devices and product  components,
represented 3 percent,  6 percent and 2 percent of total sales in 1999, 1998 and
1997, respectively.

OraSure device sales into the public health markets in 1999 totaled $2.5 million
or 25  percent of total  product  sales  which  were the same as 1998.  The life
insurance testing market contributed $5.1 million or approximately 51 percent of
total 1999 product sales, an increase of $884,000 or 21 percent over 1998.

Although sales are  anticipated to continue  rising in fiscal 2000,  they may be
affected by  seasonality  and ordering  patterns of customers in certain  market
segments such as insurance. Expectations for future sales are based primarily on
forecasts  provided  to the  Company by  individual  customers  rather than firm
orders,  as many of the  customers  in the  public  health  market  do not  have
contractual arrangements with the Company.

Sales of the Company's  Western blot HIV confirmatory test decreased by $237,000
or 10 percent  from 1998 to 1999 and  increased  by $579,000 or 32 percent  from
1997 to 1998.  Sales in 1999 were  negatively  affected by a reduction in orders
from the Company's  exclusive  distributor  for this product as the  distributor
began to  experience  both an overall  decline in the  demand for  Western  blot
products and increased price competition.

18
<PAGE>

As  of  September  30,  1999,  the  Company  had  firm  orders  and  contractual
commitments  for delivery within 90 days of OraSure devices and Western blot HIV
confirmatory tests totaling approximately  $715,000 and $362,000,  respectively,
as compared to firm orders for delivery within 90 days of $940,000 and $570,000,
respectively, as of September 30, 1998.

Grant and  contract  revenues  decreased  by $13,000 or 100 percent from 1998 to
1999 and decreased $1.3 million or 99 percent from 1997 to 1998. The decrease in
1998 was due to the termination of the Company's development, license and supply
agreement with Smithkline  Beecham,  plc in July 1997. The Company  received two
grants for the  development of an oral fluid test for syphilis,  as described in
Part I, the  majority of which is  anticipated  to be  received in fiscal  2000.
Grant applications for additional funding are also being considered.

GROSS  MARGIN.  The gross  margin on product  sales was 62  percent in 1999,  62
percent in 1998,  and 57 percent in 1997.  Although  gross margin on the OraSure
device  improved  in 1999,  it was  offset by a decline  in the gross  margin of
Western blot products due to declining production volumes.

RESEARCH AND DEVELOPMENT  EXPENSES.  Research and development expenses increased
by $1.1 million or 36 percent from 1998 to 1999 and decreased by $1.2 million or
30 percent from 1997 to 1998.  The increase in 1999 was  primarily the result of
continued  work  on the  OraQuick  device,  process  improvements  for  OraSure,
Intercept(TM)  Drugs of Abuse  development,  obtaining the European CE mark, and
FDA regulatory compliance. R&D expenses for 2000 are expected to exceed the 1999
level as funding for the  syphilis  test and  clinical  trials for  OraQuick are
planned.

SELLING,   GENERAL   AND   ADMINISTRATIVE   EXPENSES.   Selling,   general   and
administrative expenses increased by $296,000 or 5 percent from 1998 to 1999 and
decreased by $1.2 million or 18 percent from 1997 to 1998.  The increase in 1999
was  primarily a result an accrual for costs related to the search for a new CEO
and increased costs in the development of international markets. The decrease in
1998  was  primarily  attributable  to  cost  containment  and  a  reduction  in
compensation expense. 2000 sales and marketing expenses are expected to increase
over  1999 as a result  of  additional  advertising  and  promotion  to  support
expansion  in all  markets  and an  increase  in  direct  sales  efforts  in the
international area. Selling, general and administrative expenses were reduced by
$1.4 million in 1997 for amounts  allocated to Agritope,  Inc. See Note 3 to the
Consolidated Financial Statements under Item 14.

OTHER INCOME (EXPENSE), NET.  Interest income  decreased in 1999,  primarily due
to lower levels of invested funds.

YEAR 2000 READINESS

The Company has completed its planned systems upgrades and replacements, as part
of  a  regular  ongoing  upgrade  program,   during  fiscal  1999.  Upgraded  or
replacement systems have all been certified Year 2000 (Y2K) compliant. Responses
to inquiries or other sources of information  regarding Y2K compliance have been
received  from  substantially  all  vendors,   suppliers,   and  customers,  the
interruption of whose businesses would have a material effect on the Company.  A
contingency  plan has been  completed and testing of the plan has been completed
to the extent possible.  The Company has incurred  $133,000 in costs to date for
Y2K  compliance  and does not  anticipate  incurring any other material costs to
resolve issues relating to the Y2K problem internally. Such costs were funded by
available cash and cash equivalents.

At the current  time,  the Company  believes  that all  essential  products  and
internal  systems and equipment are now Y2K  compliant.  This belief is based on
the  representations  made by  vendors  and,  where  possible,  by  testing.  In
addition,  Epitope has not investigated Y2K compliance of third parties that are
either not  critical  or  significant  to the  Company's  operations  or are not
currently vendors,  suppliers,  or customers of the Company.  Any failure of the
Company or its vendors, suppliers, customers, or any third party governmental or
business  entities to be Y2K  compliant  could  materially  affect the business,
results of operations, financial conditions and prospects of Epitope, the impact
of which cannot be quantified at this time.

This  section  captioned  "Year  2000  Readiness"  is  a  "Year  2000  Readiness
Disclosure" pursuant to the Year 2000 Information and Readiness Disclosure Act.

                                                                              19
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

(IN THOUSANDS)                                         9/30/99           9/30/98
Cash and cash equivalents.......................        $1,076            $1,164
Marketable securities...........................         4,533             4,455
Working capital.................................         6,887             6,510

Net cash flows used in operating  activities  increased by $867,000 from 1998 to
1999. Cash and cash  equivalents had a net decline of $88,000 from 1998 to 1999.
The decline  would have been much  greater  without  the  exercise of options to
purchase common stock which represented the primary sources of funds for meeting
the  Company's  requirements  for  operations,   working  capital  and  business
expansion in 1999. The Company received proceeds of $3.2 million,  $448,000, and
$1,668,000  from the exercise of options to purchase  common stock in 1999, 1998
and 1997, respectively.

Research grant funding from strategic partners was $0, $13,000, and $1.3 million
in 1999, 1998 and 1997,  respectively.  The acquisition of capital equipment for
manufacturing,  research and  development,  and computer  system  upgrades  used
$646,000,  $141,000, and $197,000 in 1999, 1998 and 1997, respectively.  In 1998
and 1997 the funding of the  Company's  discontinued  operations,  required $2.1
million and $7.7 million, respectively. See Note 3 to the Consolidated Financial
Statements under Item 14.

The Company  anticipates  that it will continue to need funds to support ongoing
research and development projects as well as to provide additional manufacturing
capacity and related increases in working capital to support growth. The Company
believes that its operating  liquidity  requirements for the foreseeable  future
can be met by  existing  resources,  including  marketable  securities  and cash
generated by operations. The Company may also receive funds through the exercise
of outstanding stock options and warrants as well as research grants.  There can
be no assurances however that such funds will be available.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The Company does not hold material amounts of derivative financial  instruments,
other  financial   instruments,   or  derivative  commodity   instruments,   and
accordingly has no material market risk to report under this item. See Note 2 to
the Consolidated Financial Statements included under Item 14.

20
<PAGE>

ITEM 8...FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Information  with respect to this item is (i) set forth below and (ii) contained
in the Company's  Consolidated  Financial Statements included in Item 14 of this
Annual Report on Form 10-K.

                   QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
                 (In thousands, except (loss) income per share)

The following table presents summarized quarterly results of operations for each
of the fiscal  quarters in the Company's  fiscal years ended  September 30, 1999
and 1998.  These  quarterly  results  are  unaudited,  but,  in the  opinion  of
management,  have  been  prepared  on the same  basis as the  Company's  audited
financial  information  and include all adjustments  (consisting  only of normal
recurring  adjustments) necessary for a fair presentation of the information set
forth  therein.  The data should be read in  conjunction  with the  Consolidated
Financial  Statements  and  related  notes  thereto  included in Item 14 of this
Annual Report on Form 10-K.
<TABLE>
<S>                                                  <C>          <C>           <C>          <C>          <C>
                                                         FIRST       SECOND        THIRD       FOURTH
                                                       QUARTER       QUARTER      QUARTER      QUARTER       TOTAL
YEAR ENDED SEPTEMBER 30, 1999
Revenues...........................................  $   2,244    $   2,073     $  2,688     $  3,068     $  10,073
Operating costs and expenses.......................      3,003        2,976        3,517        4,059        13,555
Other income, net..................................         59           70           65           82           276
Net loss...........................................       (700)        (833)        (764)        (909)       (3,206)
Basic and diluted net loss per share...............       (.05)        (.06)        (.05)        (.07)         (.23)


YEAR ENDED SEPTEMBER 30, 1998
Revenues...........................................      1,603        2,103        2,783        3,303         9,792
Operating costs and expenses.......................      2,653        2,921        3,109        3,360        12,043
Other income, net..................................         95           84           66           78           323
Net income (loss)..................................       (955)        (734)        (260)          21        (1,928)
Basic and diluted net loss per share...............       (.07)        (.05)        (.02)        0.00         (0.14)
</TABLE>

ITEM 9.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
         FINANCIAL DISCLOSURE.

None.

                                                                              21
<PAGE>
                                    PART III

The Company has omitted  from Part III the  information  that will appear in the
Company's definitive proxy statement for its 1999 annual meeting of shareholders
(the Proxy Statement),  which will be filed within 120 days after the end of the
Company's fiscal year pursuant to Regulation 14A.


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The  information  required  by this item is  incorporated  by  reference  to the
information under the captions  "Election of Directors,"  "Executive  Officers,"
"Compensation  Committee  Interlocks  and Insider  Participation,"  and "Section
16(a) Beneficial Ownership Reporting Compliance" in the Proxy Statement.


ITEM 11. EXECUTIVE COMPENSATION.

The  information  required  by this item is  incorporated  by  reference  to the
information under the caption "Executive Compensation" in the Proxy Statement.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The  information  required  by this item is  incorporated  by  reference  to the
information under the caption "Principal Shareholders" in the Proxy Statement.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

None.

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a)(1) and (a)(2)  Consolidated Financial Statements and Schedules.

22
<PAGE>

INDEX TO FINANCIAL STATEMENTS                                               Page

Report of Independent Accountants.............................................24

Consolidated Balance Sheets at September 30, 1999 and 1998....................25

Consolidated Statements of Operations for years ended
   September 30, 1999, 1998, and 1997.........................................26

Consolidated Statements of Changes in Shareholders' Equity for years ended
   September 30, 1999, 1998, and 1997.........................................27

Consolidated Statements of Cash Flows for years ended
   September 30, 1999, 1998, and 1997.........................................28

Notes to Consolidated Financial Statements....................................29

No  schedules  have been  presented  because they are either not required or the
information is in the consolidated financial statements.

                                                                              23
<PAGE>
PRICEWATERHOUSECOOPERS [logo]

                                                      PRICEWATERHOUSECOOPERS LLP
                                                      1300 SW Fifth Avenue
                                                      Suite 3100
                                                      Portland OR  97201-5638
                                                      Telephone (503) 478 6000
                                                      Facsimile (503) 478 6099


                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders
of Epitope, Inc.

In our opinion,  the  accompanying  consolidated  balance sheets and the related
consolidated statement of operations, of changes in shareholders' equity, and of
cash flows present fairly, in all material  respects,  the financial position of
Epitope,  Inc.  and its  subsidiaries  at September  30, 1999 and 1998,  and the
results of their  operations and their cash flows for each of the three years in
the period ended  September 30, 1999 in conformity  with  accounting  principles
generally  accepted in the United  States.  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 of these  statements in  accordance  with  auditing  standards  generally
accepted in the United States,  which 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,  assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for the opinion expressed above.

/s/ PriceWaterhouseCoopers LLP

November 12, 1999

24
<PAGE>

EPITOPE, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<S>                                                                        <C>                   <C>
SEPTEMBER 30                                                                   1999                  1998

ASSETS

Current assets
Cash and cash equivalents..............................................    $  1,075,898          $  1,164,275
Marketable securities..................................................       4,532,594             4,455,044
Trade accounts receivable, net (Note 2)................................       1,489,884             1,519,652
Other accounts receivable..............................................          73,356                47,818
Inventories (Note 2)...................................................       1,504,050             1,092,577
Prepaid expenses.......................................................         329,958               313,941
                                                                              ---------            ---------
Total current assets...................................................       9,005,740             8,593,307

Property and equipment, net (Note 4)...................................       1,030,595               819,095
Patents and proprietary technology, net (Note 2).......................         487,085               596,169
Other assets and deposits..............................................         170,895               348,733
                                                                             ----------            ----------
                                                                           $ 10,694,315          $ 10,357,304

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
Accounts payable.......................................................    $    474,713          $    566,894
Salaries, benefits and other accrued liabilities ......................       1,643,573             1,516,395
                                                                           ------------            ----------
Total current liabilities..............................................       2,118,286             2,083,289

Commitments and contingencies (Note 9).................................               -                     -

Shareholders' equity (Note 5)
Preferred stock, no par value - 1,000,000 shares authorized; no
  shares outstanding...................................................               -                     -
Common stock, no par value - 30,000,000 shares authorized; 14,245,097
  and 13,577,319 shares issued and outstanding, respectively...........     114,827,231           111,319,573
Accumulated deficit....................................................    (106,251,202)         (103,045,558)
                                                                           -------------         -------------
                                                                              8,576,029             8,274,015

                                                                           $ 10,694,315          $ 10,357,304
</TABLE>

The accompanying notes are an integral part of these statements.

                                                                              25
<PAGE>
<TABLE>

<S>                                                               <C>             <C>               <C>
EPITOPE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEAR ENDED SEPTEMBER 30                                       1999             1998              1997

Revenues
Product sales...............................................      $10,072,961     $  9,778,930      $ 8,083,606
Grants and contracts........................................               59           12,652        1,276,454
                                                                   --------------  ------------      -----------
                                                                   10,073,020        9,791,582        9,360,060

Costs and expenses
Product costs...............................................        3,847,444        3,684,702         3,512,054
Research and development costs..............................        3,972,096        2,917,742         4,156,996
Selling, general and administrative expenses................        5,735,408        5,439,743         6,654,553
                                                                   ----------      -----------       -----------
                                                                   13,554,948       12,042,187        14,323,603

Loss from operations........................................       (3,481,928)      (2,250,605)       (4,963,543)

Other income (expense), net
Interest income.............................................          278,889          362,694           885,583
Interest expense............................................             (989)          (8,868)           (8,165)
Other, net..................................................           (1,616)         (31,229)            4,861
                                                                   ------------    ------------      ------------
                                                                      276,284          322,597           882,279

Net loss from continuing operations.........................       (3,205,644)      (1,928,008)       (4,081,264)

Discontinued operations (Note 3)
Loss from discontinued operations; Agritope.................                -                -        (9,890,599)
Income from discontinued operations; A&W....................                -                -           170,646
Estimated loss on disposal of A&W...........................                -                -        (8,639,054)
                                                                   ------------    ------------      -----------
                                                                            -                -       (18,359,007)

Net loss....................................................      $(3,205,644)    $ (1,928,008)     $(22,440,271)

Basic and diluted loss per share from continuing operations.      $     (0.23)    $       (.14)     $       (.30)

Basic and diluted loss per share............................      $     (0.23)    $       (.14)     $      (1.67)

Weighted average number of shares
 outstanding................................................       13,956,512       13,528,596        13,404,402

The accompanying notes are an integral part of these statements.
</TABLE>

26
<PAGE>

EPITOPE, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<S>                                                 <C>           <C>               <C>                <C>
                                                          COMMON STOCK               ACCUMULATED
                                                    SHARES            DOLLARS           DEFICIT            TOTAL

BALANCES AT SEPTEMBER 30, 1996..............        12,937,383      $100,952,282     $(72,985,262)      $27,967,020
Common stock issued upon
  exercise of options.......................            16,124           168,211                -           168,211
Common stock issued as
  compensation..............................            41,088           323,938                -           323,938
Compensation expense for
  stock option grants.......................                 -           489,668                -           489,668
Common stock issued upon exchange
  of convertible notes (Note 3).............           250,367         4,529,009                -         4,529,009
Equity issuance costs.......................                 -           (86,134)               -           (86,134)
Capital contributed in rescission (Note 3)..                 -         1,820,000                -         1,820,000
Common stock issued for cash................           209,368         1,500,000                -         1,500,000
Minority interest investment in Vinifera....                 -           742,752                -           742,752
Net loss for the year.......................                 -                 -      (22,440,271)      (22,440,271)
                                                    ----------       -----------      ------------      ------------
BALANCES AT SEPTEMBER 30, 1997..............        13,454,330       110,439,726      (95,425,533)       15,014,193

Common stock issued upon
  exercise of options.......................            91,278           411,052                -           411,052
Common stock issued under the Employee
  Stock Purchase Plan.......................            14,451            54,814                -            54,814
Common stock issued as
  matching savings plan contributions.......            17,260            80,740                -            80,740
Compensation expense for
  stock option grants.......................                -            333,241                -           333,241
Spin-off of Agritope .......................                -                  -       (5,692,017)       (5,692,017)
Net loss for the year.......................                -                  -       (1,928,008)       (1,928,008)
                                                    ----------       -----------     -------------       -----------
BALANCES AT SEPTEMBER 30, 1998..............        13,577,319       111,319,573     (103,045,558)        8,274,015

Common stock issued upon
  exercise of options.......................           632,580         3,028,576                          3,028,576
Common stock issued as
  compensation..............................             6,233            29,996                             29,996
Common stock issued under the Employee
  Stock Purchase Plan.......................            16,002            59,697                             59,697
Common stock issued as
  matching savings plan contributions.......            12,963            75,475                             75,475
Compensation expense for
  stock option grants.......................                 -           313,914                            313,914
Net loss for the year.......................                 -                 -       (3,205,644)       (3,205,644)
                                                    ----------       -----------     -------------       -----------
BALANCES AT SEPTEMBER 30, 1999..............        14,245,097      $114,827,231    $(106,251,202)       $8,576,029
</TABLE>

The accompanying notes are an integral part of these statements.

                                                                              27
<PAGE>

EPITOPE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<S>                                                                  <C>              <C>               <C>
FOR THE YEAR ENDED SEPTEMBER 30                                        1999              1998             1997

Cash flows from operating activities
Net loss..................................................          $ (3,205,644)    $ (1,928,008)    $ (22,440,271)
Adjustments to reconcile net loss to net cash
  used in operating activities:
Loss from discontinued operations.........................                     -                -        18,359,007
Depreciation and amortization.............................               663,388          669,839           729,970
Loss on disposition of property...........................                 7,081           31,290            17,888
Decrease (increase) in receivables........................                 4,230         (510,474)          264,686
(Increase) decrease in inventories........................              (411,473)         232,070          (166,717)
(Decrease) increase in prepaid expenses...................               (16,017)        (235,701)           11,278
Increase (decrease) in other assets and deposits..........               195,273         (292,544)          (32,340)
Increase in accounts payable and accrued
  liabilities.............................................                34,997           85,179           180,773
Common stock issued as compensation for services..........                29,996                -           323,938
Compensation expense for stock option grants and
  deferred salary increases...............................               313,914          431,482           489,668
                                                                      ----------       ----------       -----------
Net cash used in operating activities.....................            (2,384,255)      (1,516,867)       (2,262,120)

Cash flows from investing activities
Investment in marketable securities.......................           (11,173,092)     (13,524,782)      (20,106,837)
Proceeds from sale of marketable securities...............            11,095,542       16,213,797        31,783,317
Additions to property and equipment.......................              (645,508)        (140,903)         (196,910)
Proceeds from sale of property............................                     -           37,629                 -
Expenditures for patents and proprietary technology.......              (127,377)        (157,063)         (265,435)
Investment in affiliated companies........................               (17,435)          (1,090)       (6,702,299)
                                                                     ------------      -----------       -----------
Net cash (used in) provided by investing activities.......              (867,870)       2,427,588         4,511,836

Cash flows from financing activities
Proceeds from issuance of common stock....................             3,163,748          448,365         1,668,211
Cash to Agritope (Note 3).................................                     -       (2,129,291)       (7,682,710)
                                                                     -----------       -----------       -----------
Net cash provided by (used in) financing activities.......             3,163,748       (1,680,926)       (6,014,499)

Net decrease in cash and cash equivalents.................               (88,377)        (770,205)       (3,764,783)
Cash and cash equivalents at beginning of year............             1,164,275        1,934,480         5,699,263
                                                                     -----------      -----------       -----------
Cash and cash equivalents at end of year..................          $  1,075,898     $  1,164,275      $  1,934,480
</TABLE>

The accompanying notes are an integral part of these statements.

28
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1   THE COMPANY

Epitope,  Inc. (Epitope or the Company) develops,  manufactures and markets oral
specimen  collection devices and diagnostic  products using its proprietary oral
fluid technologies. These products are sold to public and private-sector clients
in the United States and certain foreign countries.  The Company's primary focus
is on the detection of antibodies to the Human Immunodeficiency Virus (HIV), the
cause of Acquired Immune Deficiency Syndrome (AIDS). The Company's technology is
also  being  used to test for  drugs-of-abuse  and  other  analytes.  Commercial
distribution of the Company's oral specimen  collection device as part of a test
for five major drugs-of-abuse is scheduled to begin in calendar year 2000.

See Note 3, Discontinued Operations, below.

NOTE 2   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS  OF  PRESENTATION.  The  accompanying  consolidated  financial  statements
include  the  accounts  of  the  Company  and  its  wholly  and  majority  owned
subsidiaries.  All significant  intercompany balances and transactions have been
eliminated in consolidation.

CASH AND CASH  EQUIVALENTS;  MARKETABLE  SECURITIES.  The Company  considers all
highly liquid investments with maturities at time of purchase of three months or
less to be cash  equivalents.  At  September  30,  1999,  marketable  securities
consisted of  commercial  paper and U.S.  Treasury  securities  with an original
maturity  period  greater than three months,  but generally less than 12 months.
The Company's  policy is to invest its excess cash in  securities  that maximize
(a) safety of principal,  (b) liquidity for operating  needs,  and (c) after-tax
yields.

Pursuant to Statement of Financial Accounting Standards No. 115, "Accounting for
Certain  Investments in Debt and Equity Securities," the Company has categorized
all  of its  investments  as  available-for-sale  securities  and,  accordingly,
unrealized gains and losses on such investments,  if material,  are carried as a
separate  component of  comprehensive  income.  Such unrealized gains and losses
were immaterial as of September 30, 1999 and 1998.

TRADE ACCOUNTS  RECEIVABLE.  Accounts  receivable are stated net of an allowance
for doubtful  accounts of $50,000 and $49,513,  respectively,  at September  30,
1999 and 1998.

INVENTORIES.  Inventories  are  recorded  at the lower of  standard  cost (which
approximates  actual cost on a first-in,  first-out basis) or market.  Inventory
components are summarized as follows:

SEPTEMBER 30                                     1999                   1998
Raw materials......................          $   360,806           $   238,916
Work-in-process....................              441,952               627,503
Finished goods.....................              701,292               211,703
Supplies...........................                    -                14,455
                                               ---------             ---------
                                             $ 1,504,050           $ 1,092,577

DEPRECIATION AND CAPITALIZATION  POLICIES.  Property and equipment are stated at
cost less accumulated depreciation. Expenditures for repairs and maintenance are
charged  to  operating  expense  as  incurred.  Expenditures  for  renewals  and
betterments are capitalized.

Depreciation and amortization of property and equipment are calculated using the
straight-line  method over the estimated  lives of the related  assets (three to
seven years). Leasehold improvements are generally amortized over the shorter of
estimated useful lives or the terms of the related leases.  When assets are sold
or  otherwise  disposed  of, cost and the related  accumulated  depreciation  or
amortization  are removed from the accounts  and any  resulting  gain or loss is
included in operations.

                                                                              29
<PAGE>

PATENTS  AND  PROPRIETARY  TECHNOLOGY.   Direct  costs  associated  with  patent
submissions  and acquired  technology are  capitalized  and amortized over their
minimum estimated economic useful lives, generally five years.
<TABLE>
<S>                                                  <C>     <C>          <C>           <C>
Amortization and accumulated amortization are summarized as follows:
                                                                 1999           1998        1997
   Amortization expense for the year ended September 30....  $   236,463  $   218,381   $  209,180
   Accumulated amortization at September 30................    1,285,134    1,048,671      830,290
</TABLE>

FAIR VALUE OF FINANCIAL INSTRUMENTS.  The carrying amounts for cash equivalents,
accounts receivable,  and accounts payable approximate fair value because of the
immediate or short-term maturity of these financial instruments.

REVENUE  RECOGNITION.  Product  revenues are generally  derived from the sale of
products and are  recognized  as revenue when the related  products are shipped.
Grant  and  contract   revenues   include  funds  received  under  research  and
development  agreements with various  entities.  Such revenues are recognized in
accordance with the contract terms.

RESEARCH AND DEVELOPMENT. Research and development expenditures are comprised of
those costs  associated with the Company's own ongoing  research and development
activities  including  the costs to prepare  for,  obtain and  compile  clinical
studies  and  other   information  to  support  product  license   applications.
Expenditures  for research and  development  also include costs  incurred  under
contracts to develop certain  products,  including those contracts  resulting in
grant and contract revenues.  All research and development costs are expensed as
incurred.

SHARED  SERVICES.  For the year  ended  September  30,  1997  certain  corporate
overhead  services  were  provided  by  Epitope on a  centralized  basis for the
benefit  of  the  Company's   subsidiaries   (Shared   Services).   The  related
subsidiaries'  operating  results are included in discontinued  operations.  See
Note 3, Discontinued  Operations.  Selling,  general and administrative expenses
have been reduced by the cost of Shared Services  allocated to the  discontinued
operations of $1,402,895 for the year ended September 30, 1997.

INCOME  TAXES.  The  Company  accounts  for certain  revenue  and expense  items
differently for income tax purposes than for financial reporting  purposes.  The
Company  accounts  for income  taxes  under the asset and  liability  method for
accounting  for income taxes  whereby  deferred tax assets and  liabilities  are
recognized based on temporary  differences  between the financial  statement and
the tax bases of assets and  liabilities  using  enacted tax rates in effect for
the year in which the temporary differences are expected to reverse. See Note 8,
Income Taxes.

STOCK-BASED  COMPENSATION.  Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (SFAS 123) allows companies which have
stock-based compensation arrangements with employees to adopt a fair-value basis
of accounting  for stock options and other equity  instruments or to continue to
apply the accounting rules specified in Accounting  Principles Board Opinion No.
25,  "Accounting  for Stock Issued to Employees"  (APB 25), but with  additional
financial statement  disclosure.  The Company has elected to continue to account
for its stock-based compensation under APB 25. See Note 5, Shareholders' Equity.

INCOME (LOSS) PER SHARE.  Basic income (loss) per share has been computed  using
the weighted  average  number of shares of common stock  outstanding  during the
period.  Diluted income (loss) per share includes the effect of potential common
stock,  unless its effect is  anti-dilutive.  Potential common stock consists of
the number of shares issuable upon exercise of outstanding warrants, options and
convertible  notes less the number of shares  assumed to have been purchased for
the treasury with the proceeds from such exercise.  Basic and diluted net income
(loss) per share are the same for the years ended  September 30, 1999,  1998 and
1997.  On  September  30,  1999,  1998 and 1997,  the  weighted  average  shares
outstanding were 13,956,512, 13,528,596 and 13,404,402,  respectively. Shares of
potential  common stock on  September  30, 1999,  1998 and 1997,  of  6,075,376,
6,206,279 and 4,428,141,  respectively,  were not included in the calculation of
diluted loss per share as they were anti-dilutive.

30
<PAGE>

STATEMENT OF CASH FLOWS. Cash paid for interest approximated interest expense in
1999,  1998 and 1997. No cash was paid for income taxes in 1999,  1998, or 1997.
Compensation  expense amounted to $343,910,  $431,482 and $813,606 in 1999, 1998
and  1997,  respectively,   related  to  the  issuance  of  compensatory  equity
securities which also represent non-cash transactions.

MANAGEMENT ESTIMATES. The preparation of financial statements in conformity with
generally accepted  accounting  principles requires management to make estimates
relating  to  assumptions  that  affect  the  reported  amounts  of  assets  and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the  financial  statements  as well as the  reported  amounts  of  revenues  and
expenses  during the  reporting  period.  Actual  results  could vary from these
estimates.

COMPREHENSIVE  INCOME. On June 15, 1997 the Financial Accounting Standards Board
(FASB) issued Statement of Financial  Accounting  Standards No. 130,  "Reporting
Comprehensive  Income" (SFAS No. 130).  SFAS No. 130 is effective for all fiscal
quarters of all fiscal years  beginning after December 15, 1997 (October 1, 1998
for the Company).  Since the Company adopted this pronouncement  there have been
no items of other comprehensive income (loss) that are required to be reported.

NOTE 3   DISCONTINUED OPERATIONS

On December 30,  1997,  the Company  distributed  all of its shares of Agritope,
Inc. (Agritope) common stock through a stock dividend to Epitope shareholders of
record as of December 26, 1997. Epitope no longer owns or controls any shares of
Agritope  stock.  The costs of the  spin-off  and  Agritope's  operating  losses
through  December 30, 1997 were estimated and accounted for in fiscal year 1997.
Fiscal 1997 also included the loss from discontinued  operations of Agritope and
Andrew and Williamson Sales, Co. (A&W).

AGRITOPE.  Agritope's  results  of  operations  are  presented  as  discontinued
operations in the accompanying  consolidated financial statements for the period
ended September 30, 1997. All  intercompany  loans from Epitope to Agritope were
deemed to be terminated and reflected as capital contributions to Agritope as of
the spin-off date consistent with the separation  agreement  between Epitope and
Agritope dated December 1, 1997. The 1997 loss from  discontinued  operations of
Agritope  includes an accrual of $1.2 million for Agritope's  operating  losses,
from October 1, 1997 to December 1, 1997,  and costs of the spin-off of Agritope
which  occurred on December 30, 1997 in accordance  with  Accounting  Principles
Board Opinion No. 30, "Reporting the Effects of Disposal of a Portion or Segment
of a Business." This amount is not included in the table below. All net expenses
of Agritope subsequent to December 1, 1997, were borne by Agritope.

ANDREW AND  WILLIAMSON  SALES,  CO. On December 12,  1996,  a subsidiary  of the
Company  completed a merger with Andrew and Williamson Sales, Co. (A&W), a fruit
and vegetable  producer and wholesale  distributor.  The merger was rescinded on
May 27, 1997.  Epitope  received A&W  preferred  stock in the  rescission  which
carries no value on the  accompanying  balance  sheet  based  upon  management's
estimate of fair value on the date it was received.  A&W's results of operations
for the  period  from  December  13,  1996  through  May 27,  1997 and the total
estimated  loss  on  disposal  are  presented  in  the  accompanying   financial
statements as discontinued operations.

The  summarized  Statement of  Operations  for Agritope and  subsidiaries  is as
follows:

SEPTEMBER 30                                                       1997
Revenue...............................................        $ 1,551,190
Operating costs and expenses..........................          6,088,883(1)
Other income (expense), net...........................         (4,427,275)
Minority interest in subsidiary net loss..............            274,369
                                                               ----------
       Net loss from operations                               $(8,690,599)

(1) Does not include $1.2 million of accrued operating losses and spin-off costs
for the period of October 1, 1997 to December 1, 1997. Such operating losses and
spin-off costs have been reflected in the  consolidated  statement of operations
in 1997.

                                                                              31
<PAGE>

NOTE 4   PROPERTY AND EQUIPMENT
<TABLE>
<S>                                                             <C>              <C>
Property and equipment are summarized as follows:

SEPTEMBER 30                                                     1999               1998
Research and development laboratory equipment..............    $ 1,117,817      $ 1,014,015
Manufacturing equipment....................................      1,590,723        1,423,580
Office furniture and equipment.............................      1,785,422        1,753,455
Leasehold improvements.....................................      1,155,862        1,102,895
Construction in progress...................................        234,714           63,503
                                                                ----------       ----------
                                                                 5,884,538        5,357,448
Less accumulated depreciation and amortization.............     (4,853,943)      (4,538,353)
                                                                -----------      -----------
                                                               $ 1,030,595      $   819,095
</TABLE>

NOTE 5   SHAREHOLDERS' EQUITY

AUTHORIZED  CAPITAL  STOCK.  The  Company's  amended  articles of  incorporation
authorize  1,000,000  shares of preferred stock and 30,000,000  shares of common
stock. The Company's Board of Directors has authority to determine  preferences,
limitations and relative rights of the preferred stock.

On December 15, 1997, Epitope's Board of Directors approved a Shareholder Rights
Plan that would  allow the  Company to protect  shareholders'  interests  in the
event of an attempted  takeover of the Company.  A dividend  distribution of one
Right for each  outstanding  share of common stock was issued to shareholders of
record at the close of business on December  26, 1997.  Each Right  entitles the
registered  holder to purchase from Epitope 1/1000 of a share of Series A Junior
Participating  Cumulative Preferred Stock at a price of $60 per share subject to
adjustment.  The  Rights  become  exercisable  in the event a person or group of
affiliated or associated persons (other than the Company or its employee benefit
plans)  acquires  or  obtains  the right to  acquire  15  percent or more of the
outstanding  shares of common  stock.  With  certain  exceptions,  if any person
becomes  the  beneficial  owner of 15  percent or more of the  Company's  common
stock,  each of the Rights (other than Rights held by that person and certain of
its  transferees,  all of which will be voided)  entitles  the holder to acquire
shares of the  Company's  common stock having a value equal to twice the Right's
exercise price.  The Rights will expire on the earliest of the close of business
on December 26, 2007,  upon  exchange by the Company for common  stock,  or upon
redemption at the option of the Company for $0.01 per Right.

COMMON  STOCK  RESERVED FOR FUTURE  ISSUANCE.  As of  September  30,  1999,  the
following  shares  of the  Company's  common  stock  were  reserved  for  future
issuance, as more fully described below:

PURPOSE                                                       SHARES
Outstanding stock options.................................  3,448,094
Outstanding warrants......................................  2,537,307
Employee Stock Purchase Plan subscriptions................     82,712
                                                            ---------
                                                            6,068,113

STOCK  AWARD  PLANS.  The  Company's  1991 Stock  Award Plan (the 1991 Plan) was
approved by the  shareholders  during 1991,  replacing the  Company's  Incentive
Stock  Option Plan (ISOP).  The 1991 Plan  provides  for  stock-based  awards to
employees,  outside directors and members of scientific  advisory  committees or
other  consultants.  Awards  which may be  granted  under the 1991 Plan  include
qualified   incentive   stock  options,   nonqualified   stock  options,   stock
appreciation rights, restricted awards, performance awards and other stock-based
awards.

Options  issued to employees  under the ISOP were issued at prices not less than
the fair  market  value of a share of common  stock on the date of grant.  These
options generally expire ten years from the date of grant.

Under the terms of the 1991 Plan, qualified incentive stock options on shares of
common stock may be granted to eligible employees,  including  officers,  of the
Company at an exercise price not less than the fair market value of the stock on
the date of grant.  The maximum  term during which any  incentive  option may be
exercised is ten years from the date of grant.  To date,  options have generally
been  granted  with  four-year  vesting  schedules.  The options

32
<PAGE>

are generally  exercisable  after one year from the date of grant at the rate of
25 percent after one year and the balance at 1/36th monthly thereafter.

The 1991 Plan also provides that nonqualified  options may be granted at a price
not less than 75 percent of the fair market  value of a share of common stock on
the date of grant.  The option  term and  vesting  schedule  of such  awards may
either  be  unlimited  or have a  specified  period  in  which  to  vest  and be
exercised.   For  the  discounted   nonqualified  options  issued,  the  Company
amortizes,  on a straight-line basis over the vesting period of the options, the
difference  between the  exercise  price and the fair market value of a share of
stock on the date of grant.

SFAS 123 requires the following financial statement disclosure:

Options  granted and  outstanding  under the  Company's  stock  option plans are
summarized as follows:
<TABLE>

<S>                             <C>         <C>    <C>       <C>        <C>    <C>       <C>         <C>     <C>
                                        1999                         1998                        1997
                                   SHARES       PRICE          SHARES       PRICE           SHARES       PRICE
Outstanding at
    beginning of period ....    3,630,727  $1.29 - 18.17     3,499,865 $3.50 - 20.38     3,365,726   $3.50 - 24.00
Granted.....................      650,793   2.41 -  6.84     4,237,156  1.29 - 18.17     2,801,403    3.50 - 14.81
Exercised...................     (632,580)  3 54 -  6.31       (91,278) 2.79 -  5.04       (16,124)   7.25 - 14.81
Canceled....................     (200,846)  3.06 - 18.17    (4,015,016) 3.50 - 20.38    (2,651,140)   3.50 - 24.00
                                ----------  ------------    ----------- ------------    -----------   ------------
Outstanding at end of period    3,448,094   1.29 - 18.17     3,630,727  1.29 - 18.17     3,499,865   $3.50 - 20.38

Exercisable.................    2,386,856   1.29 - 18.17     2,621,613  1.29 - 18.17     2,474,623   $3.50 - 20.38
</TABLE>

<TABLE>
<S>       <C>            <C>               <C>                      <C>
                           Number of      Weighted            Average Remaining
Exercise Price Range         Shares      Average Price         Contractual Life
--------------------         ------      -------------         ----------------
$1.29  - $ 4.04             684,706         3.16                     8.40
 4.17  -   4.17             625,000         4.17                     6.27
 4.22  -   4.97             318,083         4.48                    20.59
 5.04  -   5.04           1,413,817         5.04                     9.16
 5.75  -  18.17             406,489         7.84                     9.30
</TABLE>

Options exercisable at September 30, 1999 totaled 2,386,856 shares at a weighted
average  exercise price of $4.97.  Options  available for grant at September 30,
1999 totaled 379,858.

Pursuant  to the 1991 Plan,  2478  shares of common  stock were also  awarded to
consultants and members of the Company's  scientific  advisory committees during
1998. No shares were awarded in 1999 or 1997.

COMMON STOCK  WARRANTS.  As of September  30, 1999,  the  following  warrants to
purchase  shares of common  stock were  outstanding:

                                     EXERCISE
                         SHARES        PRICE                   EXPIRATION DATE
September 26, 1991..... 159,150        5.91                  September 30, 2000
December 23,  1992..... 988,390        5.91                  September 30, 2000
July 20,  1993......... 375,000        5.91                  September 30, 2000
August 1, 1993......... 200,000        5.91                  September 30, 2000
October 17, 1994.......  50,000        5.91                  September 30, 2000
November 22, 1994...... 228,100        5.91                  September 30, 2000
May 15,  1998.........  416,667        5.91                  December  30, 2000
September 30, 1998..... 120,000        6.13                 September  30, 2008
                      ---------
                      2,537,307

EMPLOYEE STOCK PURCHASE PLAN. In 1993, the  shareholders  approved the Company's
adoption of the 1993  Employee  Stock  Purchase  Plan (1993 ESPP).  The plan, as
subsequently  approved  and  amended  by the  Company's  shareholders,  covers a
maximum of 500,000  shares of common  stock for  subscription  over  established
offering periods. The Executive Compensation Committee of the Board of Directors
determines the number of offering

                                                                              33
<PAGE>

periods, the number of shares offered,  and the length of each period,  provided
that  no  more  than  three  offering   periods  (other  than  Special  Offering
Subscriptions  as  described  below) may be set during  each  fiscal year of the
Company.  The purchase  price for stock  purchased  under the 1993 ESPP for each
subscription  period is the lesser of 85 percent of the fair  market  value of a
share of common stock at the commencement of the subscription period or the fair
market value at the close of the subscription period. An employee may also elect
to withdraw at any time during the  subscription  period and receive the amounts
paid plus interest at the rate of 6 percent.

As of September  30, 1999,  82,712  shares of common stock were  subscribed  for
through two offerings  under the 1993 ESPP.  Shares  subscribed  for under these
1993 ESPP offerings may be purchased over 24 months and had initial subscription
prices of $6.99 and $2.74 per share.  The  subscription  prices for the offering
prior to  December  30,  1997 were  adjusted  in fiscal  1998 as a result of the
spin-off  of  Agritope  from  $6.99 to $4.78 per  share.  During  the year ended
September 30, 1999,  16,002  shares were issued at prices  ranging from $2.74 to
$4.78 under the 1993 ESPP.

The 1993 ESPP was amended to allow the Company,  at its  discretion,  to provide
Special  Offering   Subscriptions  whereby  an  employee's  annual  increase  in
compensation could be deferred for a one-year period. At the end of the one-year
period,  the employee can elect to receive the deferred  compensation  amount in
the form of cash or shares of the Company's common stock. The purchase price for
stock issued under a Special  Offering  Subscription is the lesser of 85 percent
of the fair  market  value of a share of  common  stock on the  first day of the
calendar month the employee's increase was effective or the fair market value at
the close of the  one-year  subscription  period.  No shares were issued under a
Special Offering Subscription during 1999, 1998 or 1997.

The Company has elected to account for its  stock-based  compensation  under the
provisions  of APB 25.  However,  as required  by SFAS No. 123,  the Company has
computed for pro forma  disclosure  purposes the value of options granted during
1999, 1998 and 1997 using the  Black-Scholes  option pricing model. The weighted
average  assumptions used for stock option grants for 1999, 1998 and 1997 were a
risk-free interest rate of 5.1, 5.7 and 5.9 percent,  respectively,  no expected
dividend yield, an expected life of 3.8, 3.9 and 4.3 years, respectively, and an
expected volatility of 66, 60 and 53 percent, respectively. Options were assumed
to be exercised  upon vesting for purposes of this  valuation.  Adjustments  are
made for options  forfeited prior to vesting.  For the years ended September 30,
1999,  1998 and 1997, the total value of the options  granted was computed to be
$1,705,940, $6,861,799 and $9,096,600, respectively, which would be amortized on
the straight-line basis over the vesting period of the options.

The weighted  average  assumptions  used for 1993 ESPP rights for 1999, 1998 and
1997 were a risk-free  interest rate of 5.8, 5.6 and 6.1 percent,  respectively,
no  expected  dividend  yield,  an  expected  life of 1.0,  2.0,  and 2.0 years,
respectively, and an expected volatility of 69, 69 and 63 percent, respectively.
The  weighted-average  fair value of ESPP rights granted in 1999,  1998 and 1997
were $141,397, $55,066 and $248,700, respectively.

If the Company had accounted  for these plans in  accordance  with SFAS 123, the
Company's  net loss and pro forma net loss per share would have been reported as
follows:

YEAR ENDED SEPTEMBER 30                  1999                      1998
                                             BASIC AND                 BASIC AND
                                              DILUTED                   DILUTED
                               NET LOSS      NET LOSS     NET LOSS      NET LOSS
                                            PER SHARE                  PER SHARE
As reported................   $(3,205,664)  $(0.23)     $(1,928,008)    $(0.14)
Pro forma..................   $(5,467,219)  $(0.39)     $(4,957,178)    $(0.37)

The effects of applying SFAS 123 in providing pro forma  disclosure for 1999 and
1998 are not likely to be  representative  of the effects on reported net income
and earnings per share for future  years since  options vest over several  years
and additional awards are made each year.

34
<PAGE>

NOTE 6.  PROFIT SHARING AND SAVINGS PLAN

The Company  established a profit  sharing and deferred  salary  savings plan in
1986 and restated the plan in 1991. All employees are eligible to participate in
the plan. In addition, the plan permits certain voluntary employee contributions
to be excluded from the employees'  current  taxable income under the provisions
of  Internal  Revenue  Code  Section  401(k)  and  the  regulations  thereunder.
Effective  October 1, 1991, the Company replaced a discretionary  profit sharing
provision with a matching contribution (either in cash, shares of Epitope common
stock,  or partly in both  forms)  equal to 50  percent of an  employee's  basic
contribution, not to exceed 2.5 percent of an employee's compensation. The Board
of Directors  has the  authority to increase or decrease the 50 percent match at
any time.  During 1999,  1998 and 1997,  respectively,  the Company  contributed
$75,475 (12,963  shares),  $80,741(17,260  shares) and $101,737  (11,459 shares,
totaling  $101,721 and the remainder in cash). As of September 30, 1999,  38,325
shares of Epitope common stock are held by the plan.

NOTE 7   DISTRIBUTION AND SUPPLY CONTRACTS

The Company has entered into several contractual  arrangements,  including those
discussed  in the  following  paragraphs,  for  distribution  of  certain of its
products to customers.

The Company  maintains supply and  distribution  agreements with Organon Teknika
Corporation  (Organon  Teknika),  whereby Organon Teknika supplies the Company's
antigen requirements and exclusively  distributes the Company's Western blot HIV
confirmatory  tests on a worldwide  basis.  The agreements have been extended to
March 31, 2001 and continue to renew each year thereafter unless prior notice of
cancellation  is given by the  Company  or  Organon  Teknika.  The  distribution
agreement  includes  pricing  incentives  based on volumes  purchased by Organon
Teknika  and  penalties  for  failure to purchase  specified  minimum  quarterly
volumes.  For the years ended September 30, 1999,  1998 and 1997,  respectively,
revenues  generated  from sales of Western  blot tests to Organon  Teknika  were
$2,132,920,  $2,371,135 and $1,791,290, including export sales of $0, $1,250 and
$15,750.

LabOne,  Inc. (LabOne)  purchases oral specimen devices from the Company for use
in  insurance  testing in return for  non-exclusive  distribution  rights in the
United  States and Canada  under an agreement  which  expires on March 13, 2005,
with an automatic  five-year renewal,  unless either party notifies the other of
intent not to renew at least 180 days prior to the expiration date. In 1998, the
Company  entered  into  an  additional   agreement  with  LabOne  to  provide  a
prepackaged  OraSure test kit with prepaid testing and sample shipment to LabOne
via Airborne Express. This product package is sold directly to the public health
customers by the Epitope  sales force.  For the years ended  September 30, 1999,
1998 and 1997,  respectively,  revenues  generated  from product sales to LabOne
were  $2,768,971,  $2,773,351,  and  $3,194,698,  including  export sales of $0,
$402,150 and $597,000.

NOTE 8   INCOME TAXES

As of September 30, 1999,  the Company had net operating loss  carryforwards  to
offset federal and state taxable income of approximately $52.4 million and $49.5
million, respectively. Approximately $8.3 million of the Company's net operating
loss  carryforwards  were  generated  as a result of  deductions  related to the
exercise of stock options.  If utilized,  such  carryforwards,  as tax effected,
will be  reflected  in the  Company's  financial  statements  as an  increase in
shareholders'  equity rather than a reduction of the provision for income taxes.
Significant components of Epitope's deferred tax asset were as follows:

SEPTEMBER 30                                           1999
Net operating loss carryforwards..................  $20,123,000   $ 18,532,000
Stock compensation................................    1,945,000      1,829,000
Research and experimentation credit carryforwards.    1,121,000      1,026,000
Accrued expenses..................................      350,000        269,000
Other.............................................      687,000        779,000
                                                    -----------     ----------
Gross deferred tax assets.........................   24,226,000     22,435,000
Valuation allowance...............................  (24,226,000)   (22,435,000)
                                                    ------------   -----------
Net deferred tax asset............................  $         -   $          -

                                                                              35
<PAGE>

No benefit for these assets has been reflected in the accompanying  consolidated
financial  statements as they do not satisfy the recognition  criteria set forth
in SFAS 109. Accordingly, a valuation allowance of $24.2 million, representing a
$1.8 million increase since the prior fiscal year end, has been recorded.

The tax benefit of  approximately  $1.1 million for the year ended September 30,
1999,   calculated   using  the  statutory  tax  rate,  has  been  increased  by
approximately  $141,000  for the effect of state and local taxes (net of federal
impact) and $559,000  for other  permanent  and  temporary  differences,  and is
reduced by  approximately  $1.8  million  for the effect of the  increase in the
valuation allowance.

NOTE 9   COMMITMENTS AND CONTINGENCIES

The Company leases office,  manufacturing,  warehouse and laboratory  facilities
under  operating  lease  agreements  which require  minimum  annual  payments as
follows:

YEAR ENDING SEPTEMBER 30
2000.......................................          $   361,423
2001.......................................              375,867
2002.......................................              388,743
2003.......................................              380,628
2004 and after.............................              523,364
                                                       ---------
                                                     $ 2,030,025

Under the agreements for the lease of its office and laboratory facilities,  the
Company is obligated to the lessor for its share of certain  expenses related to
the use,  operation,  maintenance,  taxes and insurance of the  property.  These
expenses,  payable monthly in addition to the base rent, are not included in the
amounts shown above. Rent expense aggregated $435,569, $433,002 and $409,970 for
the years ended September 30, 1999, 1998 and 1997,  respectively.  There were no
items considered as contingencies at September 30, 1999.

NOTE 10  SEGMENT AND GEOGRAPHIC AREA INFORMATION

The following  disclosures are required by the Statement of Financial Accounting
Standards No. 131, "Segment Disclosures and Related Information" (SFAS 131):

The  Company's  products  are all  included  in the  medical  products  industry
segment.  See Note 1 for a description of the Company's business.  The Company's
products  are sold  principally  in the United  States,  Canada,  Asia and Latin
America.   Operating  loss  represents  revenues  less  operating  expenses.  No
operating income or loss is reflected for geographic areas other than the United
States and Asia as all revenues for other  geographic areas are exports from the
United States.  Most sales to Canada are for the life insurance  market and have
been made through U.S. laboratories since third quarter 1998.
<TABLE>
<S>             <C>        <C>        <C>          <C>        <C>        <C>          <C>        <C>        <C>
IN THOUSANDS
GEOGRAPHIC               REVENUES                         OPERATING LOSS                   IDENTIFIABLE ASSETS
AREAS            1999       1998       1997         1999       1998       1997         1999       1998      1997
United
   States....   $9,771     $8,774     $8,569       $(3,499)   $(2,264)   $(4,935)     $10,694    $10,357    $17,012
Canada.......       10        415        608             -          -          -            -          -          -
Asia.........      251        341        130            17         13        (29)           -          -          -
Latin
  America....        7        202          4             -          -          -            -          -          -
Europe.......       29         59         49             -          -          -            -          -          -
Other........        5          1          -             -          -          -            -          -          -
               -------     ------     ------       --------   --------   --------     -------    -------    -------
               $10,073     $9,792     $9,360       $(3,482)   $(2,251)   $(4,964)     $10,694    $10,357    $17,012
</TABLE>

In addition to those  customers  discussed  in Note 7, Osborn  Group,  Inc.  and
Clinical  Reference  Laboratory  accounted  for 11 percent  ($1,139,750)  and 10
percent ($1,042,375) of the Company's fiscal 1999 sales,  respectively.  In 1998
and 1997 no customers  accounted for more than 10% of the Company's sales except
as discussed in Note 7.

36
<PAGE>

No schedules are included with the foregoing  financial  statements  because the
required information is inapplicable or is presented in the financial statements
or related notes thereto.

(a)(3) Exhibits.

See Index to Exhibits following the signature page of this report.

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

                                                                              37
<PAGE>


                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized, on December 23, 1999.

                            EPITOPE, INC.

                            By *CHARLES E. BERGERON
                               --------------------------------
                               Charles E. Bergeron
                               Interim President and Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed on December 23, 1999, by the following  persons on behalf of the
Registrant and in the capacities indicated.

            SIGNATURE                          TITLE

   /S/ CHARLES E. BERGERON    Interim President and Chief Financial Officer
   Charles E. Bergeron        (Principal   Executive   Officer  and   Principal
                               Financial Officer)

   /S/ THEODORE R. GWIN       Controller
   Theodore R. Gwin           (Principal Accounting Officer)

   *W. CHARLES ARMSTRONG      Director
   W. Charles Armstrong

   *ANDREW S. GOLDSTEIN       Senior Vice President and Director
   Andrew S. Goldstein

   *MARGARET H. JORDAN        Director
   Margaret H. Jordan

   *JOHN W. MORGAN            Director
   John W. Morgan

   *MICHAEL J. PAXTON         Director
   Michael J. Paxton

   *ROGER L. PRINGLE          Director
   Roger L. Pringle

   *G. PATRICK SHEAFFER       Director
   G. Patrick Sheaffer

   *ROBERT J. ZOLLARS         Director
   Robert J. Zollars


   * /S/ CHARLES E. BERGERON
   Charles E. Bergeron
   (Attorney-in-Fact)

38
<PAGE>

                                INDEX TO EXHIBITS
Exhibit
Number            Exhibit

3.1               Restated Articles of Incorporation, as amended, of Registrant.
                  Incorporated  by  reference  to Exhibit 3 to the  Registrant's
                  Registration  Statement  on Form 8-A filed  December  26, 1997
                  (Registration Statement No. 000-15337).

3.2               Restated  Bylaws of Registrant.  Incorporated  by reference to
                  Exhibit 3.2 to the Registrant's Annual Report on Form 10-K for
                  the year ended September 30, 1997 (the 1997 10-K).

4.1               Stock  Purchase  Agreement  dated  November  9, 1990,  between
                  certain  investors and  Registrant.  Copies of the  agreements
                  with  individual  investors shall be filed with the Commission
                  upon  request  pursuant  to  Instruction  2  of  Item  601  of
                  Regulation  S-K (Item 601,  Instruction  2).  Incorporated  by
                  reference to Exhibit 4.2 to the Registrant's  Annual Report on
                  Form  10-K for the year  ended  September  30,  1994 (the 1994
                  10-K).

4.2               Unit Purchase  Agreement  dated September 1991 between certain
                  investors  and  Registrant.  Copies  of  the  agreements  with
                  individual  investors  shall be filed with the Commission upon
                  request pursuant to Item 601,  Instruction 2.  Incorporated by
                  reference to Exhibits 4.1 and 4.2 to the Registrant's  Current
                  Report on Form 8-K dated September 17, 1991.

4.3               Warrant  Purchase  Agreement  dated as of November  25,  1992,
                  between  certain  investors  and  Registrant.  Copies  of  the
                  agreements with  individual  investors shall be filed with the
                  Commission upon request  pursuant to Item 601,  Instruction 2.
                  Incorporated  by reference to Exhibit 4.5 to the  Registrant's
                  Annual  Report on Form 10-K for the year ended  September  30,
                  1992 (the 1992 10-K).

4.4               1993 Technology  Transfer Warrant Issuance  Agreement dated as
                  of June 15, 1993,  between  certain  investors and Registrant.
                  Copies of the agreements  with  individual  investors shall be
                  filed with the Commission  upon request  pursuant to Item 601,
                  Instruction 2. Incorporated by reference to Exhibit 4.3 to the
                  Registrant's Registration Statement on Form S-3 (No. 33-68510)
                  (Registration Statement No. 33-68510).

4.5               Form of Letter dated August 1, 1993, from Registrant regarding
                  modification  of the  terms  of the 1993  Technology  Transfer
                  Warrants.   Incorporated   by  reference  to  Exhibit  4.5  to
                  Registration Statement No. 33-68510.

4.6               1993  Warrant  Purchase  Agreement  dated as of July 6,  1993,
                  between  certain  investors  and  Registrant.  Copies  of  the
                  agreements with  individual  investors shall be filed with the
                  Commission upon request  pursuant to Item 601,  Instruction 2.
                  Incorporated  by  reference  to  Exhibit  4.6 to  Registration
                  Statement No. 33-68510.

4.7               Notice  to   warrantholders   and  current   form  of  warrant
                  certificate  for warrants  issued in September  1991 offering,
                  reflecting  extension  of  expiration  date.  Incorporated  by
                  reference to Exhibit 4.1 to the Registrant's Current Report on
                  Form 8-K dated September 12, 1997.

4.8               Notice  to   warrantholders   and  current   form  of  warrant
                  certificate  for warrants  issued in December  1992  offering,
                  reflecting  extension  of  expiration  date.  Incorporated  by
                  reference to Exhibit 4.2 to the Registrant's Current Report on
                  Form 8-K dated September 12, 1997.

4.9               Notice  to   warrantholders   and  current   form  of  warrant
                  certificate   for  warrants  issued  in  July  1993  offering,
                  reflecting  extension  of  expiration  date.  Incorporated  by
                  reference to Exhibit 4.3 to the Registrant's Current Report on
                  Form 8-K dated September 12, 1997.

                                                                              39
<PAGE>

4.10              Notice  to   warrantholders   and  current   form  of  warrant
                  certificate  for  warrants  issued  in August  1993  offering,
                  reflecting  extension  of  expiration  date.  Incorporated  by
                  reference to Exhibit 4.4 to the Registrant's Current Report on
                  Form 8-K dated September 12, 1997.

10.1              Incentive  Stock  Option  Plan  of  Registrant,   as  amended.
                  Incorporated by reference to Exhibit 10.1 to the 1994 10-K.*

10.2              Amended and  Restated  Epitope,  Inc.,  1991 Stock Award Plan.
                  Incorporated by reference to Exhibit 10.2 to the 1997 10-K.*

10.3              Lease dated July 17, 1990,  among  Registrant,  Koll  Woodside
                  Associates,  a  California  general  partnership,  and  Petula
                  Associates,   Ltd.,  an  Iowa  corporation.   Incorporated  by
                  reference to Exhibit 10.5 to the 1994 10-K.

10.4              Fourth  Amendment  dated May 20, 1994, to Lease dated July 17,
                  1990, among Registrant, Koll Woodside Associates, a California
                  general  partnership,  and Petula  Associates,  Ltd.,  an Iowa
                  corporation.  Incorporated by reference to Exhibit 10.1 to the
                  Registrant's  Quarterly  Report  on Form  10-Q for the  fiscal
                  quarterly period ended June 30, 1994 (June 1994 10-Q).

10.5              Business Park Lease dated May 5, 1994, among Registrant,  Koll
                  Woodside  Associates,  a California general  partnership,  and
                  Petula Associates, Ltd., an Iowa corporation.  Incorporated by
                  reference to Exhibit 10.2 to the June 1994 10-Q.

10.6              Lease dated October 25, 1999 between PS Business Parks,  L.P.,
                  a California Limited Partnership, and Registrant.

10.7              Distribution  Agreement  dated as of April  1,  1994,  between
                  Registrant and Organon  Teknika  Corporation.  Incorporated by
                  reference to Exhibit 10.3 to the June 1994 10-Q.

10.8              Supply Agreement dated as of April 1, 1994, between Registrant
                  and Organon Teknika Corporation.  Incorporated by reference to
                  Exhibit 10.4 to the June 1994 10-Q.

10.9              Form of Indemnification  Agreement for directors and officers.
                  Incorporated by reference to Exhibit 10.4 to the  Registrant's
                  Registration Statement on Form S-4 (No. 333-15705).*

10.10             Amended and Restated  Employment  Agreement  dated  January 8,
                  1991, between Andrew S. Goldstein and Registrant. Incorporated
                  by  reference  to  Exhibit  10.28 to the  Registrant's  Annual
                  Report on Form 10-K for the year ended September 30, 1991.*

10.11             Employment  Agreement dated January 19, 1998,  between Charles
                  E.  Bergeron  and  Registrant.  Incorporated  by  reference to
                  Exhibit  10.21 to  Amendment  No. 1 to the 1997 10-K (the 1997
                  10-K Amendment).*

10.12             Employment  Agreement  dated  January  13,  1998,  between  J.
                  Richard  George,   Ph.D.  and   Registrant.   Incorporated  by
                  reference to Exhibit 10.22 to the 1997 10-K Amendment.*

10.13             Business  Protection  Agreement dated April 28, 1988,  between
                  Mr. Goldstein and Registrant.

10.14             Business  Protection  Agreement dated April 17, 1995,  between
                  Dr. George and Registrant.

10.15             Employment  Agreement  dated May 16, 1999,  between William D.
                  Block and Registrant.

10.16             Form of Business Protection Agreement entered into between Mr.
                  Block dated April 20, 1999, and Rob Ngungu,  Vice President of
                  Quality  Assurance and Regulatory  Affairs,  dated October 25,
                  1999, and Registrant.

40
<PAGE>

10.17             Separation  Agreement  between  Registrant and Agritope,  Inc.
                  ("Agritope"),   dated  December  1,  1997.   Incorporated   by
                  reference to Exhibit 2.3 to the 1997 10-K.

10.18             Amended  and  Restated  Employee  Benefits  Agreement  between
                  Registrant and Agritope, dated December 19, 1997. Incorporated
                  by reference to Exhibit 10.24 to the 1997 10-K.*

10.19             Transition   Services   and   Facilities   Agreement   between
                  Registrant and Agritope,  dated December 1, 1997. Incorporated
                  by reference to Exhibit 10.25 to the 1997 10-K.

10.20             Tax  Allocation  Agreement  between  Registrant  and Agritope,
                  dated December 1, 1997.  Incorporated  by reference to Exhibit
                  10.26 to the 1997 10-K.

23.               Consent of PricewaterhouseCoopers LLP.

24.               Powers of Attorney.

27.               Financial Data Schedule.

*        Management contract or compensatory plan or arrangement