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, 1997
                                       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,  1997:
$65,757,368

      Indicate the number of shares outstanding of each of the registrant's
classes of common stock,  as of December 1, 1997:  Common  Stock,  no par value,
13,454,330 shares.

                      Documents Incorporated by Reference:

Definitive Proxy Statement for 1998 Annual Shareholders' Meeting:  Part III


<PAGE>

                               Table of Contents

                                     PART I
                                                                            Page

ITEM 1.         Business                                                       3

ITEM 2.         Properties                                                    14

ITEM 3.         Legal Proceedings                                             14

ITEM 4.         Submission of Matters to a Vote of Security Holders           14


                                     PART II


ITEM 5.         Market  for   Registrant's   Common   Equity  and   Related
                Stockholder Matters                                           15

ITEM 6.         Selected Financial Data                                       16

ITEM 7.         Management's Discussion and Analysis of Financial Condition
                and Results of Operations                                     17

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


<PAGE>


                                     PART I

ITEM 1. BUSINESS

Epitope, Inc. (Epitope or the Company), is an Oregon corporation incorporated in
1981.  Epitope  develops and markets oral specimen  collection  kits and related
diagnostic  tests for the detection of the Human  Immunodeficiency  Virus (HIV),
the cause of Acquired Immune Deficiency  Syndrome (AIDS),  and for the detection
of other medical conditions and analytes.  Epitope's lead product,  the patented
OraSure(R)  collection  device,  is used as part of an oral specimen  diagnostic
system. The Company markets the device under the brand name EpiScreen(TM) in the
United States for use in screening  life  insurance  applicants,  and in certain
foreign  countries  for use in  professional  markets.  In the  balance  of this
document the product will be referred to only as OraSure.

The OraSure  device  consists of a small,  treated  cotton-fiber  pad on a nylon
handle  that is  placed  in the  patient's  mouth for two  minutes.  The  device
collects oral mucosal  transudate  (OMT),  a  serum-derived  fluid that,  unlike
saliva, contains higher concentrations of 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,  the Company  believes that oral fluid  testing has several  significant
advantages over  blood-based  testing systems for both healthcare  professionals
and patients.

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 U.S.
Food and Drug  Administration  (FDA)  for sale to  professional  markets  in the
United States.

In February  1995, the Company  entered into a  Development,  License and Supply
Agreement (the SB Agreement)  with SmithKline  Beecham plc (SB),  under which SB
would market the OraSure  device on an  exclusive  basis in the U.S. and certain
foreign countries as part of an integrated test system to physicians,  hospitals
and other healthcare professionals. The parties terminated the agreement in July
1997.  As a result,  the Company  may now sell the  OraSure  directly or through
other distributors to markets previously reserved to SB under the SB Agreement.

During fiscal 1997,  Agritope,  Inc. (Agritope) was a wholly owned subsidiary of
Epitope.  Agritope is a biotechnology company specializing in the development of
new fruit and vegetable plant varieties for sale to the fresh produce  industry.
Epitope  expects to make a  distribution  of all of its  ownership  interest  in
Agritope to Epitope's  shareholders  (the  Agritope  Spin-off) in late  December
1997. Following the Agritope spin-off, Epitope will no longer own or control any
shares of Agritope stock.

BACKGROUND

Acquired   Immune   Deficiency   Syndrome   (AIDS)   is   caused  by  the  Human
Immunodeficiency  Virus.  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 recent  introduction  of a new class 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.


                                      - 3 -
<PAGE>


According to the United Nations  Program on HIV/AIDS,  an estimated 30.6 million
people  worldwide are now living with HIV, the virus that causes AIDS. Data from
1997 show that the previous estimates of HIV transmission grossly underestimated
the spread of the AIDS virus.  The U.N. now  believes  that new  infections  are
occurring  almost twice as fast as they  estimated a year ago.  Instead of 8,200
new  infections a day, the U.N.  now  believes  that there are 16,000.  In North
America,  an estimated 860,000 people have been infected with HIV. For children,
the  report  estimates  that  1,600  under 15 years  old are  infected  each day
compared to 1,000 per day a year ago.

Based on industry estimates, the Company believes that approximately 100 million
HIV tests were  performed in the U.S. in 1996,  with blood banks  accounting for
about 25 million.  The Company  feels that a large  proportion  of the non-blood
bank HIV testing  market should be available to OraSure  because of the accuracy
of the test and the  benefits of not having to draw blood.  Currently,  most HIV
tests are  performed by testing a patient's  blood.  There are a number of blood
tests for HIV, the most common of which is the enzyme-linked immunosorbent assay
(ELISA or 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  retesting  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 a situation 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 from the patient.  Healthcare  professionals  collecting blood risk
contracting  HIV if  accidentally  stuck by the needle or lancet  used to obtain
blood from an infected patient.

Limited Access.  Because blood must be collected by trained  professionals,  its
collection is often 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 as 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.

Patient  Discomfort.  Blood tests require the use of needles or lancets that are
uncomfortable for patients.  In addition,  patients 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.

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 proprietary  salt  solution.  The pad, which is
mounted on a nylon handle,  is placed in the  patient's  mouth between the lower
cheek and gum for two minutes.  The pad  collects  oral  mucosal  transudate,  a
serum-derived  fluid that,  unlike saliva,  contains  higher  concentrations  of
antibodies. OMT contains approximately four times the amount of antibodies found
in ordinary whole saliva. Following collection,  the pad is sealed in a specimen
vial containing a proprietary  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.


                                      - 4 -
<PAGE>


PRODUCTS

OraSure.  In December 1994, the Company received  clearance from the FDA to sell
OraSure to professional markets for the ELISA screening of HIV-1 antibodies. The
device is marketed  directly by the Company  under the trade name  EpiScreen for
use by the U.S. life insurance  industry and in certain  international  markets,
and under the trade  name  OraSure  to  healthcare  professionals  in the United
States and a number of other countries. See "Marketing."

The  OraSure  oral  specimen  collection  and  HIV-1  testing  system  is easily
administered  and involves three steps: (i) collection of an oral specimen using
the OraSure  collection  device,  (ii) ELISA  screening  of the specimen for HIV
antibodies  at a  laboratory,  and (iii)  laboratory  confirmation  of  positive
screening test results with the FDA-cleared  OraSure Western blot kit. A trained
healthcare  professional  then conveys  test  results and  provides  appropriate
counseling to the patient.

The OraSure HIV-1 testing  system  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.

Feature        Blood Test                            EpiScreen/OraSure

Safety         Poses risk of HIV                     Eliminates risk of
               infection through                     needle-stick accidents
               accidental needle sticks

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

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

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

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

Oral-based and Serum-based  Western Blot  Confirmatory  Tests.  Epitope has also
developed,  and in June 1996  received FDA  clearance to market,  an  oral-based
HIV-1 Western blot confirmatory  test. This test uses the original oral specimen
to confirm  positive  results of initial  OraSure HIV-1 ELISA  screening  tests.
Epitope has also marketed EPIblot, a serum-based Western blot HIV-1 confirmatory
test kit, since 1987. The kit is used to confirm the positive results of initial
blood-based screening tests for HIV-1 infection.


                                      - 5 -
<PAGE>


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  testing  system  such as  OraSure.  In the  United  States,
approximately  4.5  million  HIV  tests  were  administered  in 1996 by the life
insurance industry in connection with the issuance of new policies. In addition,
data from the  American  Council  of Life  Insurance  and the  Health  Insurance
Association  of America  indicate that over $1.5 billion in  AIDS-related  death
benefits  were paid in 1995.  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. These
costs  range from  approximately  $55 to $70, of which $35 to $50 is the cost of
the paramedic.  As a result,  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 1994 approximately 9 million policies were
issued for face amounts of less than  $100,000,  representing  66 percent of all
policies issued.  The Company believes that the use of OraSure can significantly
reduce the cost of HIV 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.
Moreover,  the  Company has found that some  insurance  companies  are  adopting
OraSure for use in connection with applications for insurance policies with face
amounts at and above $100,000 because the tests for HIV-1,  cocaine and cotinine
give them sufficient information. John Hancock Mutual Life Insurance, one of the
nation's largest life insurers, is now using OraSure to test applicants 40 years
old and under for  policies  up to but not  including  $1  million,  citing  the
elimination  of the  unpleasant  blood and urine tests and other  medical  exams
required for underwriting purposes.

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 availability of
a recently  approved  over-the-counter  (OTC) 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,  the use of  OraSure  may allow
insurance  companies to reduce their exposure to losses from  anti-selection and
thereby to lower overall claims costs.

An additional  advantage of the OraSure testing system is that the oral specimen
used for HIV testing can also be used to identify  smokers and users of cocaine.
Cotinine,  a metabolite of nicotine,  can be detected using OraSure. The FDA has
advised  Epitope that OraSure may be used for cocaine testing for the purpose of
life insurance risk assessment while a 510(k) notice is undergoing final review,
and may be used for cotinine testing  generally.  In a presentation at the 105th
annual  meeting of The  American  Academy of  Insurance  Medicine,  a major life
insurance  company  reported results of the use of the OraSure testing system in
Canada and in the Bahamas from 1992 to 1995. The life insurance company reported
that agent collection  reduced its testing costs by $65 per application.  During
the  four-year  study  period,  the insurer  found that it saved $1.7 million by
using  OraSure for HIV and cocaine  testing.  In  addition,  the life  insurance
company  determined  that it realized  $1.6 million in  increased  premiums as a
result of identifying  smokers who claimed on their  applications that they were
nonsmokers.  In another  study  presented  to this same  Academy,  Crown Life of
Canada  reported  that the five year savings from testing for cocaine,  cotinine
and HIV were approximately $1.4 million.

Physician and Public Health  Clinical  Market.  The  physician  market  consists
primarily  of  individual  doctor's  offices  which  are  supplied  through  the
physician's 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   decision.   SB  was  marketing  to  these  customers   through
representatives  of the  physician  supply  network  and  advertising  in  trade
journals.  Since the termination of the SB Agreement,  Epitope has chosen not to
focus on this  highly  diverse  market at this time  because of the high cost of
selling to these customers.


                                      - 6 -
<PAGE>


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 such as states, counties, colleges and
universities,  prison  systems  and the  military.  There  are also a number  of
smaller  organizations  in this market such as AIDS  Service  Organizations  and
various  community  based  organizations  set  up for  the  primary  purpose  of
encouraging  and enabling HIV testing to combat the spread of AIDS.  The OraSure
device has received a warm welcome in much of this market because of its ease of
use and  reliability.  In some cases  there has been an issue of higher cost for
OraSure testing as compared to blood-based testing. This has been principally in
the smaller  organizations  or in customers  who are starting  with small volume
testing and therefore not achieving  volume price breaks for the OraSure  device
or the  related  tests.  In order to avoid  having  cost be a major  obstacle to
growth in volume and adoption of this new testing format,  Epitope is addressing
the issue on several fronts.  For example,  to assist in the cost of testing and
to provide fast turnaround with accurate test methods,  Epitope has entered into
an agreement with LabOne to provide a prepackaged  OraSure test kit with prepaid
testing  and sample  shipment  to LabOne via  overnight  express.  This  product
package  will be sold  directly to the public  health  customers  by the Epitope
sales force.

OTC Market. The over-the-counter (OTC) market for HIV testing currently consists
only of one test,  distributed  by Home Access  Health Care,  which uses a dried
blood  spot to  provide  the  patient's  sample.  This  sample is then sent to a
laboratory for testing and the test results are communicated to the customer via
an 800 number.  In July 1997,  citing  lower sales than  expected  and the lower
market  estimates,  Johnson & Johnson  dropped its Confide  product from the OTC
market.  Also in July 1997,  SB and Epitope  terminated  their  agreement.  As a
result,  Epitope has  significantly  reduced the  attention and resources it was
devoting  to  preparation  for the OTC market,  and has  shifted  instead to the
public health markets, including college health and corrections. The Company has
not  ruled  out an  eventual  move  into  the OTC  market,  but it is not a high
priority at this time.

International.  In light of the  worldwide  scope of the HIV  epidemic,  Epitope
believes   there  are   significant   opportunities   for  sale  of  OraSure  in
international  markets. The Company believes that the ease of use,  portability,
increased  safety and  aversion to blood draw in certain  cultures  will provide
significant  advantages over blood tests in international  markets.  Epitope has
initiated an international  marketing program that 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 in each  country.  Epitope  is  currently  marketing  OraSure
directly to customers in Canada and through  distributors in the United Kingdom,
Thailand,  Argentina,  Brazil,  South Africa,  Greece, the Philippines,  Taiwan,
Mexico and Colombia. Epitope also has a joint venture in Japan.

PRODUCTS UNDER DEVELOPMENT

OraSure. Oral mucosal transudate (OMT) contains many constituents found in blood
serum.  Because of this  feature,  the  Company  believes  OraSure is a platform
technology with a wide variety of potential applications beyond HIV testing. For
example,  the  OraSure  device may be useful for the  diagnosis  of a variety of
infectious  diseases in addition to HIV, such as viral hepatitis and a number of
childhood  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.

The  Company has  demonstrated  that the OraSure  device has  potential  for the
collection  of  samples  which can be tested  for  drugs of abuse  (NIDA-5)  and
cotinine,  a  derivative  of  nicotine.  Under an agreement  with  Epitope,  STC
Technologies,  Inc., has developed enzyme immunoassays (EIA's) for the detection
of cocaine,  methamphetamine,  cannabanoids (THC), opiates,  phencyclidine (PCP)
and cotinine present in oral specimens.  Four 510(k)  notifications for cocaine,
methamphetamines,  cannabanoids (THC) and cotinine are currently  undergoing FDA
review.  Additional 510(k)  notifications for opiates and PCP are expected to be
submitted within the next few months.  If approved,  these will allow Epitope to
market OraSure to professional markets for drug abuse detection,  in addition to
the life insurance industry. Although cotinine is not currently regulated by the
FDA for risk assessment,  the 510(k)  application for cotinine has been filed in
anticipation that cotinine testing for non-insurance  purposes will be performed
at some time in the  future.  Physicians  may also find the  device  useful  for
monitoring  level of drugs and hormones  that must be  maintained  within narrow
therapeutic ranges. Monitoring of these


                                      - 7 -
<PAGE>


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 currently developing OraQuick(R), a one-step,  rapid-format
oral  specimen  testing  system  designed  to provide  test  results  within ten
minutes. The Company believes that OraQuick has significant potential as a rapid
test  for  professional  use,  and  as  an  OTC  home-based  test.  Epitope  has
substantially  completed  a prototype  of  OraQuick to test for HIV,  with other
tests in various  stages of  development.  Like OraSure,  OraQuick is a platform
technology with a variety of potential  applications in addition to HIV testing.
Modifications  of the basic  OraQuick  technology may allow use of this approach
for detection of antibodies  against the  ulcer-causing  bacterium  helicobacter
pylori, as well as for a variety of infectious diseases such as syphilis,  viral
hepatitis,  and childhood  infections.  The  application of this  technology for
drugs of abuse  testing  appears  possible  and is a high  priority  within  the
Epitope development group.

DNA Forensic Testing.  Epitope has conducted successful preliminary trials which
have shown that it is  possible  to collect an  excellent  DNA sample  using the
OraSure  device.  This sample is in addition to the antibody sample that is used
to test for HIV,  making it  possible to test for  antibodies  and produce a DNA
"fingerprint" with a single OraSure collection.  The Company has contracted with
a  well-established  firm,  experienced in the field of DNA testing,  to conduct
further tests.


MARKETING

Life Insurance Industry. Epitope currently markets its OraSure device for use in
screening life insurance applicants for HIV, cocaine, and nicotine.  The Company
maintains a three-member direct sales force that markets OraSure directly to the
insurance  companies.  The  insurance  companies  then make  their own  decision
regarding  which insurance  reference  laboratory to use to supply their devices
and testing service.  The major laboratories  currently using the OraSure device
include LabOne, Inc., Osborn Laboratories and Clinical Reference Laboratory.  As
of  November  1997,  24 of the  top  100,  and 6 of the  top 10  life  insurance
companies were using OraSure to varying degrees for testing  applicants for life
insurance. Currently there are 62 insurance companies using OraSure. Because the
insurance  companies  are in various  stages of their launch plans with 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.  The  Company's  sales focus is on
converting  additional  insurance companies to the use of OraSure, and extending
its use within the companies already using OraSure.

Physician and Public Health Clinical Market. Through September 1997, SB marketed
Epitope's  oral  HIV  testing  system  to  the  physician,  hospital  and  other
professional  healthcare  provider  markets  under the brand name  OraSure.  The
Company resumed direct marketing of the device to these markets in October 1997.
Information  about the product is  accessible  to consumers  through a toll-free
number (1-800-OraSure) and on the Internet (www.OraSure.com).  Epitope is in the
process of  determining  whether to merge the  OraSure web site into the Epitope
web  site  (www.Epitope.com).  The SB  product  launch  in  1996  and  1997  was
accompanied  by an  advertising  campaign  featuring  two-page  spreads in major
medical professional publications. The OraSure brand was also a major sponsor of
the 1996 AIDS  Candlelight  March in Washington,  D.C.,  conducted in connection
with the display of the National AIDS Quilts. In addition, SB sponsored numerous
AIDS testing  programs  through  various  public health  organizations,  further
increasing the awareness of OraSure in these  markets.  During the period of the
agreement  (from Feb 1995 to July 1997),  SB marketed and publicized the OraSure
brand name, and the benefits of oral specimen testing,  nationwide.  SB set up a
testing service for OraSure samples through its SB Clinical  Laboratories (SBCL)
division,  which  continues  to  operate  following  the  termination  of the SB
Agreement.  In addition,  SB initiated  customer  contacts,  and began the sales
process  in  the  public  health  arena  with a  dedicated  sales  force  making
significant  inroads  in this  market.  Epitope  has hired some of the key sales
personnel  from SB that had been focused on the public  health  market,  and has
begun selling its products directly to these customers.


                                      - 8 -
<PAGE>


OTC  Market.  In addition to the sales  efforts in the  professional  and public
health  markets,  substantial  work was put into  preparation  for launching the
OraSure  product  into the OTC market.  This market  would have  required an FDA
approved  testing  laboratory  (such as the one set up by  SBCL),  a  counseling
service to provide test results, advice and referrals to customers, and a system
which would insure accurate and reliable handling of information  related to the
customer  sample,  test results and  counseling  data.  Epitope and SB conducted
clinical  trials  which  demonstrated  that  ordinary  untrained  customers  can
reliably  use the OraSure  device to collect an adequate  sample for HIV testing
using only printed  instructions  supplied with the OraSure device.  Although SB
and Epitope have chosen not to pursue the OTC markets at this time,  Epitope has
begun discussions with other potential marketing partners.  Epitope continues to
believe that the benefits of oral  specimen  testing  would offer a  significant
advantage in a consumer  setting  because it helps to overcome the aversion many
people have to taking their own blood for a sample.

International.  Epitope markets to  international  customers  primarily  through
carefully  chosen  distributors  with  knowledge  of  their  local  market.  The
distributor's  expertise is supplemented by Epitope's  contacts with the testing
companies to assist in  registering  the necessary  tests in each  country,  and
Epitope's assistance with training and support materials.

Western  Blot  Distribution.  Epitope has entered  into supply and  distribution
agreements  with Organon  Teknika.  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.  Epitope and Organon  Teknika  recently  extended the
expiration dates for the supply and distribution arrangements to March 31, 1998.

COMPETITION

Competition in the emerging market for HIV testing is intense and is expected to
increase.  The Company  believes that the principal  competition  will come from
existing  blood-based HIV assays and from urine-based testing assays.  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 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 has approved home  collection  kits for HIV blood testing
developed by Direct  Access  Diagnostics  (Johnson & Johnson) and by Home Access
Health Corp. In July 1997 Johnson & Johnson  withdrew its HIV home test from the
market, citing weak sales.

Cambridge  Biotech  Corporation and BioRad  Laboratories,  Inc.  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.

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 testing. See "Government Regulation".


                                      - 9 -
<PAGE>


The FDA has approved an HIV ELISA  screening  test for use with a urine  sample.
More recently the FDA notified  Cambridge Biotech Corp that it had completed the
review of its HIV-1 Western Blot  confirmatory  test for use with urine samples,
and that the  application  was  approvable,  pending the  completion  of product
labeling and restrictions on its use. Until a confirmatory  test for HIV testing
with urine is approved,  a patient who gives an initial positive urine screening
result  must  return  to give a  second,  blood-based  sample  for  confirmatory
testing.  The Company  believes that urine  collection can be logistically  more
difficult,  inconvenient and potentially  embarrassing for the patient, and that
privacy and  chain-of-custody  issues are further  impediments to routine use of
urine-based HIV tests.

GOVERNMENT REGULATION

General. Many of Epitope's proposed and existing diagnostic products are subject
to  regulation  by the FDA,  other  federal,  state,  and  local  agencies,  and
comparable  bodies in foreign  countries.  Such  regulation  governs  almost all
aspects of development and marketing,  including the introduction,  advertising,
promotion,  manufacturing practices, labeling,  distribution, and record keeping
for the products.  In the United States,  different types of diagnostic products
are regulated  differently  by the FDA, as discussed  below.  As part of the FDA
clearance  process,  Epitope often must  demonstrate  that its products are both
safe and effective for a particular indication or application.

Drugs and Biological Products.  Generally, drugs and biological products require
FDA approval  before  marketing.  The steps required before a drug or biological
product may be marketed in the United States include: (1) preclinical laboratory
and animal tests;  (2) submission of an application for an  investigational  new
drug or biological  product,  which must become  effective before human clinical
trials may commence;  (3) human  clinical  trials;  (4)  submission of a Product
License  Application (PLA) for the biological  product or a New Drug Application
(NDA) for most other new drug products; and (5) approval of the PLA or NDA.

Preclinical  safety  and  initial  efficacy  testing is  usually  undertaken  in
animals. Results of such preclinical and other laboratory tests are submitted to
the FDA before human clinical  trials can begin.  Clinical  trials are typically
conducted in three phases.  Phase I uses human subjects to determine  safety and
tolerance. Phase II uses a limited patient population to determine effectiveness
and dosage and to identify side effects.  Compounds  found effective and safe in
Phase II are further tested in Phase III with an expanded patient  population at
geographically  dispersed  clinical study sites. Each phase may last from one to
two years or more.

Most  products are not approved  because of the failure to  demonstrate  safety,
effectiveness, or both. The FDA may suspend clinical trials at any time if it is
felt that subjects or patients are being exposed to an unacceptable health risk.
Obtaining FDA approval  requires  substantial  time and effort.  There can be no
assurance that any approval will be granted to Epitope on a timely basis,  if at
all.  As part of the  approval  process,  the FDA may  require  the  Company  to
initiate post-approval marketing studies.

Medical Devices.  Medical devices are classified either in Class I, Class II, or
Class III. Class I devices are subject only to general control provisions of the
Federal Food, Drug, and Cosmetic Act, as amended (the FDC Act). These provisions
include  requirements  that a device not be adulterated or misbranded.  Class II
devices  are those for which  general  controls  are  insufficient  to provide a
reasonable   assurance  of  safety  and  efficacy  and  for  which  a  "generic"
performance standard or other special controls are appropriate.  Devices that do
not meet the criteria for Class I or II are placed in Class III.  Class I and II
devices,  those Class III  devices  initially  marketed  prior to passage of the
Medical  Device   Amendments  of  1976  (MDA)  for  which   premarket   approval
applications (PMAs) are not yet required,  and devices substantially  equivalent
to such devices, may be marketed upon FDA clearance of a Premarket  Notification
(a 510(k)).  Other Class III devices may be commercially marketed only after FDA
approval of a PMA. Generally,  the process of obtaining FDA approval of a PMA is
similar to that for obtaining approval of a biological or other drug product.

Based upon the  information  provided in a 510(k) Notice  regarding the device's
intended use and  technological  features,  the FDA will  determine  whether the
device is  "substantially  equivalent"  to a predicate  device,  i.e.,  a device
legally  marketed  which  did not  require  a PMA.  If a  device  is found to be
substantially equivalent to a predicate device, it may be freely marketed in the
United States so long as the device is otherwise in compliance with the FDC Act.
If it is not so found, it will be considered a Class III device requiring a PMA.
Substantial equivalence means


                                     - 10 -
<PAGE>


that  the FDA has  found  that  the  device  has the  same  intended  use as the
predicate device, and either has the same  technological  characteristics or has
different  characteristics,  but there is  information in the 510(k) Notice that
shows the device is as safe and  effective as the predicate and does not present
different questions of safety and effectiveness.

OraSure Collection Device. Use of the OraSure collection device for applications
involving the detection of antibodies to HIV is regulated by the FDA as use of a
Class III medical  device  requiring a PMA. In December  1994,  the FDA approved
Epitope's  PMA for use of the  OraSure  device in HIV  screening.  Post-approval
marketing studies are under way as required as part of the FDA's approval of the
OraSure  device.  In June 1996,  the FDA approved the PMA for use of the OraSure
oral  specimen-based  Western blot confirmatory test kit for HIV-1 diagnosis.  A
second generation HIV-1 antibody EIA test for OraSure samples is currently under
review by the FDA.

The Company has also applied for regulatory  clearance of the use of the OraSure
device for HIV testing  (device,  screening test, and Western Blot  confirmatory
test) in Canada.

Epitope has submitted  510(k)  Notices for use of OraSure in testing for several
drugs of abuse.  These  submissions  are currently  undergoing  FDA review.  See
"Business-- Products Under  Development--OraSure."  In the meantime, the FDA has
advised Epitope that OraSure may be used for cocaine testing for the purposes of
life insurance risk assessment.

Western Blot Test Kits.  Epitope's HIV-1 Western blot  serum-based  confirmatory
test kits are used to confirm whether  individuals are infected with HIV-1. They
are regulated by the FDA as biological  products,  unlike most other  diagnostic
tests which are regulated as medical devices. In March 1991, the FDA cleared the
EPIblot HIV-1 serum-based confirmatory test kit for commercial distribution.  As
noted above, a PMA seeking permission to market the OraSure oral  specimen-based
Western blot  confirmatory  test kit for HIV-1 diagnosis was approved by the FDA
in June 1996.

Manufacturing  Regulations.  Every company that manufactures  drugs,  biological
products,  or medical  devices  distributed  in the United  States is subject to
inspections  by  the  FDA  and  must  comply  with  the  FDA's  Quality  Systems
regulations.   These  regulations  govern,  among  other  matters,  manufacture,
testing, release, packaging, distribution,  documentation, purchasing and design
control.

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.  Epitope is also
subject to foreign regulations governing, for example, human clinical trials and
marketing  with  respect to  products  distributed  outside  the United  States.
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.

TARGETED STOCK AND AGRITOPE SPIN-OFF

In November 1996,  the Epitope board of directors  (the Epitope Board)  proposed
creating  two  separate  classes of Epitope  common  stock,  one to reflect  the
business and operations of the Epitope Medical  Products  business and the other
to  reflect  the  business  and  operations  of  Agritope,  then a wholly  owned
subsidiary  engaged in the  agricultural  biotechnology  business  (the Targeted
Stock Proposal).  In May 1997, prior to a shareholder vote on the Targeted Stock
Proposal,   the  Epitope  Board   withdrew  the  Targeted  Stock  Proposal  from
consideration.  In July 1997,  the Epitope Board approved a proposal to spin off
Agritope,  subject to obtaining  financing for Agritope and the  satisfaction of
certain  other  conditions,  in a  distribution  to  Epitope  shareholders  (the
Agritope Spin-off).  In late December 1997, Epitope expects to distribute all of
its  ownership  interest in Agritope to Epitope's  shareholders  through a stock
dividend.  Epitope  will then no longer  own or control  any shares of  Agritope
stock.


                                     - 11 -
<PAGE>


DISCONTINUED OPERATIONS

Agritope.  Agritope (then named Agricultural Genetic Systems, Inc.) was acquired
by Epitope  in 1987.  Agritope  consists  of two units:  Agritope  Research  and
Development  (Agritope  R&D) and Vinifera,  Inc.  (Vinifera).  Agritope R&D uses
biotechnology  in the development of new fruit and vegetable plant varieties for
sale to the  fresh  produce  industry.  To  date,  Agritope  has  not  completed
commercialization of this technology.  A portion of the research and development
efforts  conducted by Agritope has been performed under various  research grants
and contracts. Vinifera is engaged in the grapevine propagation and distribution
business.  During 1995,  Vinifera  was in the  development  stage and  generated
minimal product sales.  Vinifera commenced  commercial stage operations in 1996.
Agritope's results of operations are presented as discontinued operations in the
consolidated  financial  statements  included in this Annual Report on Form 10-K
for all periods presented.  Agritope's net assets are presented in the September
30,  1997  balance  sheet  as  net  assets  of  discontinued   operations.   All
intercompany  loans from  Epitope to  Agritope  have been  reflected  as capital
contributions to Agritope consistent with the separation agreement dated between
Agritope  and Epitope  dated  December  1, 1997,  which also  provides  that net
expenses of Agritope  after that date will be borne by Agritope,  subject to the
completion of the Agritope Spin-off.

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
producer and wholesale  distributor  of fresh and frozen  fruits and  vegetables
based in San  Diego,  California.  Under the terms of the  merger,  the  Company
issued  520,000  shares  of  Epitope  common  stock in  exchange  for all of the
outstanding common stock of A&W.

On May 27, 1997, in  accordance  with the terms of a rescission  agreement,  the
former  shareholders  of A&W returned the 520,000 shares of Epitope common stock
they received,  and Epitope returned all of the outstanding shares of A&W common
stock. Epitope also received A&W preferred stock in satisfaction of intercompany
loans  made to A&W  between  December  12,  1996 and  March 19,  1997.  This A&W
preferred  stock  carries  a  $5.7  million  liquidation  preference,   dividend
preferences,  and various  redemption  features.  In  addition,  the Company has
provided a guarantee to Wells Fargo Bank for a credit  facility  provided to A&W
which has a  borrowing  limit of $6.5  million.  This  credit line is secured by
A&W's  accounts  receivable,  inventory  and  equipment,  as well as by personal
guarantees from the owners of A&W, who have agreed to reimburse  Epitope for any
amounts the Company is required to pay under the guarantee.

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 ends March 31, 1998. 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.
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,  although 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 operations are widely available from a variety of sources.

GRANTS AND CONTRACTS
Epitope has received funding in the past from the National  Institute of Allergy
and Infectious  Diseases (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.  As a part of the SB Agreement,  various R&D
projects at Epitope were funded by SB, in exchange for certain  marketing rights
to products which would have resulted from the development. With the termination
of the SB Agreement, Epitope regained the rights to the results of the work that
had been  accomplished  under this funding.  The Company  intends to continue to
participate in grant programs and projects with strategic partners as it deems


                                     - 12 -
<PAGE>


appropriate.  The Company regularly makes applications for new grants, but there
is no assurance that grant support will be continued.

PATENTS AND PROPRIETARY INFORMATION

Epitope has obtained patents in the United States and certain foreign  countries
for the OraSure and OraQuick devices 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 or 17 years from
issuance, whichever is longer.

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.  The Company  believes that patent and trade secret
protection  is important to its business.  However,  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 licenser 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

At  September  30,  1997,  the Company and its  subsidiaries  had 130  full-time
employees,  including  85  persons  employed  by  Epitope,  and 45  employed  by
Agritope.  Epitope  employees  included  15  persons  in  research  and  product
development,  25  in  administration  and  marketing,  34 in  manufacturing  and
production,  and  11 in  regulatory  affairs  and  quality  assurance.  Agritope
employees  included 22 in research and  development and 23 at the Vinifera grape
plant  nursery  operation  which also employs  seasonal  part-time  employees as
needed.  The Company considers its relations with its employees to be excellent.
None of its employees are represented by labor unions.

The Company and its subsidiaries employ 12 persons holding Ph.D. or M.D. degrees
with   specialties   in  the  following   disciplines:   analytical   chemistry,
bacteriology  and  public  health,  biochemistry,   biophysics,  hematology  and
internal  medicine,  immunology,  molecular biology,  organic  chemistry,  plant
biology and plant  pathology.  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  also  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.,
Vice President of Scientific Affairs of Epitope;  Lesley M. Hallick, Ph.D., Vice
President for Academic Affairs, Oregon Health Sciences University;  and James I.
Mullins,   Ph.D.,   Professor  of  Microbiology  and  Medicine,   University  of
Washington;   and  John  V.  Parry,   Ph.D,   Deputy  Director,   Hepatitis  and
Retrovirology  Laboratory,  Central Public Health  Laboratory,  Virus  Reference
Division, London.


                                     - 13 -
<PAGE>


                    NOTE REGARDING FORWARD-LOOKING STATEMENTS

The previous  discussion of the Company's business should be read in conjunction
with the consolidated  financial statements and notes thereto included elsewhere
in this  Annual  Report on Form  10-K.  Statements  regarding  future  events or
performance  set forth in this report  constitute  "forward-looking  statements"
within the meaning of the Private Securities  Litigation Reform Act of 1995. The
forward-looking  statements  involve known and unknown risks,  uncertainties and
other factors that may cause the actual results,  performance or achievements of
the  Company or  industry  results to be  materially  different  from any future
results, performance or achievements expressed or implied by the forward-looking
statements. These factors with respect to the Company include loss or impairment
of sources of capital;  ability of the Company to develop  product  distribution
channels;  development of competing products;  market acceptance of oral testing
products;  changes  in  federal  or state  law or  regulations;  and loss of key
personnel.  Given these uncertainties,  readers are cautioned not to place undue
reliance on the forward-looking statements.











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. Each lease calls for fixed monthly payments over its term. The
Company also entered into a three-year  lease,  effective  October 1, 1996,  for
2,265 square feet of warehouse space used to store inventory and equipment.


ITEM 3.  LEGAL PROCEEDINGS.

None.


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.


                                     - 14 -
<PAGE>


                                     PART II

ITEM 5.  MARKET  FOR THE  REGISTRANT'S  COMMON  STOCK  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. Prior to Jan 2, 1997,
the Company's Common Stock was listed for trading on the American Stock Exchange
("AMEX") under the symbol EPT. High and low sales prices  reported by NASDAQ and
AMEX during the periods indicated are shown below.


                             SALES PRICES PER SHARE

YEAR ENDED SEPTEMBER 30                  1997                        1996

                                   HIGH          LOW         HIGH          LOW

First Quarter                    $ 16.375     $ 10.875     $ 18.00       $ 9.50

Second Quarter                     17.375        9.75        19.50        13.875

Third Quarter                      11.125        6.25        22.875       15.50

Fourth Quarter                      8.625        4.625       16.125       11.75


On December 1, 1997, there were 1,004 holders of record of the Common Stock, and
the closing price of the Common Stock was $5.75.  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.

On September  30, 1997,  the Company  issued  209,368  shares of Common Stock to
SmithKline  Beecham plc in a private  placement  in exchange for  $1,500,000  in
cash. The shares were issued in reliance on Rule 506 of Regulation D promulgated
under the Securities Act of 1933, as amended. SB is an accredited  investor,  as
defined  in  Regulation  D. The  Company  filed a Form D  regarding  sale of the
shares.


                                     - 15 -
<PAGE>


ITEM 6.  SELECTED FINANCIAL DATA.

                           COMPARATIVE FINANCIAL DATA
                      (In thousands, except per share data)

The  following  table sets forth  selected  historical  consolidated  income and
balance sheet data of Epitope, Inc. and its subsidiaries. The balance sheet data
at  September  30, 1997 and 1996 and the  operating  results  data for the years
ended  September  30,  1997,  1996,  and 1995 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, 1995, 1994 and 1993
and operating  results data for the years ended September 30, 1994 and 1993 have
been derived from audited  consolidated  financial  statements and notes thereto
not  included  in this  Annual  Report  on Form  10-K  and,  in the  opinion  of
management,  include  all  adjustments  necessary  for fair  presentation.  This
information  should  be read in  conjunction  with  the  consolidated  financial
statements and notes thereto  included in Item 8 herein 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>
YEAR ENDED SEPTEMBER 30                                   1997        1996         1995         1994         1993

OPERATING RESULTS
<S>                                                  <C>          <C>           <C>          <C>          <C>
Revenues.........................................    $   9,360    $   5,594     $  2,856     $  2,605     $   2,759
Operating costs and expenses.....................       14,324       10,881       14,463        8,890         9,376
Other income (expense), net......................          882        6,388(1)     1,157          456        (1,154)
Profit (loss) from continuing operations.........       (4,081)       1,101      (10,451)      (5,829)       (7,771)
Discontinued operations..........................      (18,359)      (2,501)      (8,045)      (9,804)       (6,958)
Net loss.........................................      (22,440)      (1,400)     (18,496)     (15,633)      (14,729)
Profit (loss) per share from continuing
  operations.....................................         (.30)         .08(2)      (.88)        (.58)        (.88)
Net loss per share...............................        (1.67)        (.11)       (1.56)       (1.56)       (1.67)
Shares used in per share
 calculations....................................       13,404       12,661(2)    11,886       10,050         8,828

BALANCE SHEET DATA
Working capital..................................    $   9,538    $  24,793     $ 20,686     $ 16,766     $   8,703
Total assets.....................................       17,012       29,784       26,142       19,993         9,071
Accumulated deficit..............................      (95,426)     (72,985)     (71,585)     (53,090)      (37,457)
Shareholders' equity.............................       15,014       27,967       22,347       18,470         7,970
</TABLE>

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

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


                                     - 16 -
<PAGE>


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

The following discussion of operations and financial condition should be read in
conjunction  with  the  consolidated  financial  statements  and  notes  thereto
included  elsewhere in this Annual Report on Form 10-K.  Certain  statements set
forth below constitute  "forward-looking  statements"  within the meaning of the
Private Securities Litigation Reform Act of 1995. The forward-looking statements
involve known and unknown risks,  uncertainties and other factors that may cause
the actual  results,  performance  or  achievements  of the  Company or industry
results to be  materially  different  from any future  results,  performance  or
achievements  expressed  or implied  by the  forward-looking  statements.  These
factors with respect to the Company  include  loss or  impairment  of sources of
capital;  ability  of the  Company  to develop  product  distribution  channels;
development of competing  products;  market acceptance of oral testing products;
changes in federal or state law or regulations; and loss of key personnel. Given
these  uncertainties,  readers are cautioned not to place undue  reliance on the
forward-looking statements.

                      TARGETED STOCK AND AGRITOPE SPIN-OFF

In November 1996, the Epitope Board  proposed  creating two separate  classes of
Epitope common stock,  one to reflect the business and operations of the Epitope
medical  products  business and the other to reflect the business and operations
of Agritope (the "Targeted Stock Proposal"). In May 1997, prior to a shareholder
vote on the Targeted  Stock  Proposal,  the Epitope Board  withdrew the Targeted
Stock Proposal from consideration.  In July 1997, the Epitope Board approved the
Agritope  Spin-off,   subject  to  obtaining  financing  for  Agritope  and  the
satisfaction  of certain  other  conditions.  In October 1997,  commitments  for
financing  for  Agritope  considered  to be adequate  by the Epitope  Board were
obtained.  In late  December  1997,  Epitope  expects to  distribute  all of its
ownership  interest  in  Agritope  to  Epitope's  shareholders  through  a stock
dividend.  Epitope  will then no longer  own or control  any shares of  Agritope
stock.

                             DISCONTINUED OPERATIONS

Agritope.  Agritope is a wholly owned  subsidiary  of Epitope  acquired in 1987.
Agritope  consists of two units:  Agritope R&D and  Vinifera.  Agritope R&D uses
biotechnology  in the development of new fruit and vegetable plant varieties for
sale to the  fresh  produce  industry.  To  date,  Agritope  has  not  completed
commercialization of this technology.  A portion of the research and development
efforts  conducted by Agritope has been performed under various  research grants
and contracts. Vinifera is engaged in the grapevine propagation and distribution
business.  During 1995,  Vinifera  was in the  development  stage and  generated
minimal product sales.  Vinifera commenced  commercial stage operations in 1996.
Agritope's  results of operations  and net assets are presented as  discontinued
operations  in the  consolidated  financial  statements  included in this Annual
Report on Form 10-K for all  periods  presented.  All  intercompany  loans  from
Epitope to Agritope  have been  reflected as capital  contributions  to Agritope
consistent  with the separation  agreement 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 through  December 1, 1997 and
for costs of the Agritope Spin-off.  The separation  agreement provides that net
expenses of Agritope after December 1, 1997 will be 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
producer and wholesale  distributor  of fresh and frozen  fruits and  vegetables
based in San  Diego,  California.  Under the terms of the  merger,  the  Company
issued  520,000  shares  of  Epitope  common  stock in  exchange  for all of the
outstanding common stock of A&W.

On May 27, 1997, in  accordance  with the terms of a rescission  agreement,  the
former  shareholders  of A&W returned the 520,000 shares of Epitope common stock
they received,  and Epitope returned all of the outstanding shares of A&W common
stock. Epitope also received A&W preferred stock in satisfaction of intercompany
loans  made to A&W  between  December  12,  1996 and  March 19,  1997.  This A&W
preferred  stock  carries  a  $5.7  million  liquidation  preference,   dividend
preferences, and various redemption features.


                                     - 17 -
<PAGE>


A&W's  results of  operations  for the period from December 13, 1996 through May
27, 1997 are presented in the consolidated financial statements included in this
Annual Report on Form 10-K as  discontinued  operations.  The estimated  loss on
disposal of $8.4 million results from several factors,  including a $1.8 million
reduction in market price of the  Company's  stock from the purchase date to the
rescission  date,  a $5.7  million  discount of the A&W  preferred  stock to its
estimated  net present  value as compared with the face amount of the loans made
to A&W, the write-off of $633,000 in A&W acquisition  costs,  and the accrual of
$262,000 in estimated costs associated with the rescission.

                              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                                                   1997                  1996                  1995
Product Sales
<S>                                                     <C>         <C>       <C>         <C>      <C>         <C>
Oral specimen collection devices.....................   $6,279       67%      $3,311       59%     $   981       34%
Western blot HIV confirmatory tests..................    1,791       19        1,540       28        1,811       64
Other product sales..................................       14        -           14        -           15        -
                                                        ------      ---       ------      ---       ------      ---
                                                         8,084       86        4,865       87        2,807       98

Grants and contracts.................................    1,276       14          729       13           49        2
                                                       -------      ---       ------      ---       ------      ---
                                                        $9,360      100%      $5,594      100%      $2,856      100%
</TABLE>

Revenues.  Product  sales  increased  by $3.2 million or 66 percent from 1996 to
1997 and by $2.1 million or 73 percent  from 1995 to 1996  primarily as a result
of expanded sales volume of Epitope's lead product, the  EpiScreen/OraSure  oral
specimen  collection  device.  Approximately  39  percent  of  1996  sales  were
attributable  to shipments in the fourth quarter.  The  significant  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
following  approval of the device by the FDA in June 1996 for use in conjunction
with an oral-based  confirmatory test. Sales of the device to the life insurance
testing market in the fourth  quarter of fiscal 1997 were adversely  affected by
reductions in orders as several of the Company's  distributors  reduced existing
inventory levels. Sales in the life insurance market are expected to continue to
be at reduced levels in the first quarter of fiscal 1998,  with growth  expected
in both the insurance and public health markets in the second quarter.

Sales in 1997 also reflect  increased  sales in the public  health market due to
the marketing  efforts of SB, the Company's  former marketing  partner.  In July
1997, as a result of SB's decision to  discontinue  pursuit of a plan to develop
and market  over-the-counter  products for disease detection,  SB terminated its
development,  license and supply  agreement with Epitope.  Because the agreement
was terminated,  Epitope regained  OraSure  marketing rights from SB. During the
transition  period in August and  September of 1997,  SB continued to market the
OraSure testing system to the medical community.  Beginning in October 1997, the
product is being marketed through Epitope's direct sales force.

As  of  September  30,  1997,  the  Company  had  firm  orders  and  contractual
commitments  for the OraSure  device and the  Western  Blot  confirmatory  tests
respectively totaling approximately $900,000 and $450,000 scheduled for shipment
within 90 days,  as compared to firm orders for delivery  within 90 days of $1.8
million and $450,000 respectively as of September 30, 1996.

Sales of the Company's  Western blot HIV confirmatory test increased by $251,000
or 16 percent  from 1996 to 1997 and  decreased  by $271,000 or 15 percent  from
1995 to 1996.  Sales in 1996 were  negatively  affected by a reduction in orders
from the Company's  exclusive  distributor  for this product as the  distributor
lowered inventory levels. In addition, 1997 sales of the oral-based Western blot
HIV confirmatory test have increased as a result of increased use of the related
oral specimen  collection  device and screening  test. As of September 30, 1997,
the Company had firm orders for the Western blot HIV confirmatory  test totaling
$450,000 scheduled for shipment before December 31, 1997.


                                     - 18 -
<PAGE>


Grant and  contract  revenues  increased  by $547,000 or 75 percent from 1996 to
1997 and by  $681,000  or 14 fold from 1995 to 1996 due to funding  of  research
projects by the Company's  former  development  partner,  SB. In July 1997,  the
Company's development,  license and supply agreement with SB was terminated, and
the R&D  funding  by SB was  curtailed.  Discussions  are  underway  with  other
potential partners who might replace some or all of this R&D funding.

Gross Margin on product  sales was 57 percent in 1997,  45 percent in 1996,  and
negative in 1995. The  improvement in gross margins is attributable to increased
sales and production  volumes for the OraSure device which resulted in lower per
unit costs and to the shift in product  mix towards  the  OraSure  device  which
carries a higher gross margin than does the Western blot HIV confirmatory  test.
The gross  margin in the fourth  quarter of 1997 was  adversely  affected by the
disposal  of  inventory  on hand which was  manufactured  with SB  labeling  and
packaging  when  the  development,  license  and  supply  agreement  with SB was
terminated. Excluding the inventory adjustment, the gross margin would have been
59 percent in 1997.

Research and Development  Expenses.  Research and development expenses increased
by $991,000 or 31 percent from 1996 to 1997 and  decreased by $1.5 million or 31
percent from 1995 to 1996.  The decrease in 1996 was primarily  attributable  to
cost  reductions  associated  with the Company's  September  1995  restructuring
program as well as lower  levels of clinical  trials  activity.  The increase in
1997 was  primarily  the  result  of  increased  levels  of  research  activity,
including several clinical studies, conducted under arrangements with SB and for
other  projects  performed by the Company.  Plans are in place to reduce the R&D
expense for 1998,  unless  additional  funding is forthcoming from potential new
partners.

Selling,   General   and   Administrative   Expenses.   Selling,   general   and
administrative  expenses  increased  by $1.6  million or 32 percent from 1996 to
1997 and decreased by $1.6 million or 25 percent from 1995 to 1996. The increase
in 1997 was primarily attributable to higher corporate and marketing expenses as
the  Company  expanded  its  direct  sales  efforts.  The  decrease  in 1996 was
primarily  due to the  results of the  Company's  September  1995  restructuring
program.   Selling,  general  and  administrative  expenses  for  1995  included
approximately  $607,000 for severance  payments and other costs  associated with
implementing the restructuring program. In addition,  marketing expenses in 1996
were $754,000 lower than in 1995 as a result of the restructuring  program. 1998
sales expenses are expected to increase as a result of direct marketing  efforts
by the Company in the public health market.

Selling,  general and administrative expenses have been reduced by $1.4 million,
$1.1 million and $1.9 million in 1997, 1996 and 1995, respectively,  for amounts
allocated  to  Agritope  (see  "Discontinued  Operations").   Certain  corporate
overhead  services  such as  accounting,  annual  meeting  costs,  annual report
preparation,   audit,  executive  management,   facilities,   finance,   general
management,  human resources,  information  systems,  investor relations,  legal
services,  payroll and SEC  filings  were  provided by Epitope on a  centralized
basis for the benefit of the medical products business and for Agritope ("Shared
Services").  Such  expenses  have been  allocated  between the medical  products
business  and  Agritope  using  activity  indicators  which,  in the  opinion of
management,  represent a reasonable  measure of each  business's  utilization of
such Shared  Services.  Epitope and Agritope  have  entered into a  transitional
services  agreement  whereby,  following  the  Agritope  Spin-off,  Epitope will
continue to provide  certain of these  services to Agritope  and  Agritope  will
reimburse  Epitope for the cost of such services  during a transitional  period.
The  allocation  of Shared  Services to  Agritope  is expected to  significantly
decrease in 1998 as Agritope eventually moves to separate  facilities.  However,
the Company has  implemented a cost  reduction plan for 1998 that is expected to
result in savings in selling,  general,  and administrative  expenses to off-set
the reduction in allocations to Agritope.

Other Income (Expense), Net. Other income for 1996 included $5.0 million related
to license fees  received from SB as a result of FDA approval of an extension of
dating for the  OraSure/EpiScreen  device.  Interest  income  decreased in 1997,
primarily due to lower levels of invested funds.


                                     - 19 -
<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

(IN THOUSANDS)                                     9/30/97               9/30/96
Cash and cash equivalents................         $  1,934             $   5,223
Marketable securities....................            7,142                18,818
Working capital..........................            9,532                24,793

Net cash flows from operating  activities  improved  significantly  from 1995 to
1996 as a result of improved operating results and the receipt of a $5.0 million
license fee from SB in 1996.  Cash flows from operations in 1997 did not include
such a payment.  Proceeds from the issuance of equity securities of the Company,
augmented by funding from  strategic  partners and other research  grants,  have
represented the primary sources of funds for meeting the Company's  requirements
for operations,  working capital and business  expansion.  Epitope received $1.5
million  for the  issuance  of common  stock in a 1997  private  placement.  The
Company also received proceeds of $168,000,  $5.9 million and $21.0 million from
the exercise of warrants and options to purchase  common stock in 1997, 1996 and
1995,  respectively.  Research  grant funding from  strategic  partners was $1.3
million,  $729,000 and $49,000 in 1997, 1996 and 1995, respectively.  Funding of
the Company's discontinued operations, Agritope and A&W, required $13.9 million,
$3.2 million and $7.8 million in 1997, 1996 and 1995, respectively.

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
intends to utilize  cash  reserves,  cash  generated  from sales of products and
research funding from strategic partners to provide some of the necessary funds.
The Company is also exploring  opportunities  to generate  additional funds from
the sale of equity  securities,  and may receive  funds  through the exercise of
outstanding stock options and warrants.


ITEM 7A.      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.


                                     - 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 income (loss) 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, 1997
and 1996.  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>
                                                         FIRST       SECOND        THIRD       FOURTH
                                                       QUARTER       QUARTER      QUARTER      QUARTER       TOTAL
YEAR ENDED SEPTEMBER 30, 1997
<S>                                                  <C>          <C>           <C>          <C>          <C>
Revenues.........................................    $   2,641    $   2,336     $  2,884     $  1,500     $   9,360
Operating costs and expenses.....................        3,251        3,574        4,005        3,494        14,324
Other income, net................................          319          274          173          116           882
Loss from continuing operations..................         (291)        (964)        (948)      (1,878)       (4,081)
Discontinued operations..........................       (4,093)      (9,202)      (1,366)      (3,698)      (18,359)
Net loss.........................................       (4,384)     (10,166)      (2,314)      (5,576)      (22,440)
Loss per share from continuing operations........         (.02)        (.07)        (.07)        (.14)         (.30)
Net loss per share...............................         (.34)        (.74)        (.17)        (.42)        (1.67)

YEAR ENDED SEPTEMBER 30, 1996
Revenues.........................................    $   1,225    $   1,207     $  1,107     $  2,055     $   5,594
Operating costs and expenses.....................        2,510        2,819        2,507        3,045        10,881
Other income, net................................          293          283        5,485(1)       327         6,388
Income (loss) from continuing operations.........         (992)      (1,329)       4,085         (663)        1,101
Discontinued operations..........................         (660)        (488)        (585)        (768)       (2,501)
Net income (loss)................................       (1,652)      (1,817)       3,500       (1,431)       (1,400)
Income (loss) per share from continuing
   operations....................................         (.08)        (.11)         .30         (.05)          .08
Net income (loss) per share......................         (.13)        (.14)         .25         (.11)         (.11)
</TABLE>

(1)   Includes license fee of $5.0 million from SmithKline Beecham, plc.






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 1998 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" and "Executive  Officers"
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.

The  information  required  by this Item is  incorporated  by  reference  to the
information under the caption "Certain Transactions" in the Proxy Statement.






                                     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, 1997 and 1996................... 25

Consolidated Statements of Operations for years ended
   September 30, 1997, 1996, and 1995........................................ 26

Consolidated Statements of Changes in Shareholders' Equity for years ended
   September 30, 1997, 1996, and 1995........................................ 27

Consolidated Statements of Cash Flows for years ended
   September 30, 1997, 1996, and 1995........................................ 28

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


                                     - 23 -
<PAGE>


REPORT OF INDEPENDENT ACCOUNTANTS

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

In our opinion,  the accompanying  balance sheets and the related  statements 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,  1997 and 1996,  and the  results of their
operations  and their cash flows for each of the three years in the period ended
September 30, 1997, in conformity with generally accepted accounting principles.
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
generally accepted auditing standards 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.

PRICE WATERHOUSE LLP

Portland, Oregon

October 31, 1997, except for Note 3, as to which the date is December 1, 1997


                                     - 24 -
<PAGE>


EPITOPE, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
SEPTEMBER 30                                                                         1997                  1996

ASSETS
Current assets
<S>                                                                             <C>                   <C>
Cash and cash equivalents..............................................         $   1,934,480         $   5,222,749
Marketable securities..................................................             7,141,640            18,818,120
Trade accounts receivable, net (Note 2)................................               928,047             1,147,599
Other accounts receivable..............................................               128,949               174,083
Inventories (Note 2)...................................................             1,324,647             1,157,930
Prepaid expenses.......................................................                78,240                89,518
                                                                                 ------------          ------------
Total current assets...................................................            11,536,003            26,609,999

Property and equipment, net (Note 4)...................................             1,200,988             1,542,757
Patents and proprietary technology, net (Note 2).......................               657,487               601,233
Other assets and deposits..............................................                55,099                22,759
Net assets of discontinued operations (Note 3).........................             3,562,726             1,007,607
                                                                                 ------------          ------------
                                                                                $  17,012,303         $  29,784,355

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable.......................................................         $     110,285         $     449,169
Salaries, benefits and other accrued liabilities ......................             1,887,825             1,368,166
                                                                                 ------------          ------------
Total current liabilities..............................................             1,998,110             1,817,335

Commitments and contingencies (Notes 3 and 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;  13,454,330
  and 12,937,383 shares issued and outstanding, respectively...........           110,439,726           100,952,282
Accumulated deficit....................................................           (95,425,533)          (72,985,262)
                                                                                 ------------          ------------
                                                                                   15,014,193            27,967,020

                                                                                $  17,012,303         $  29,784,355
</TABLE>

The accompanying notes are an integral part of these statements.


                                     - 25 -
<PAGE>


EPITOPE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
FOR THE YEAR ENDED SEPTEMBER 30                                         1997             1996              1995

Revenues
<S>                                                                <C>               <C>              <C>
Product sales.............................................         $   8,083,606     $  4,864,378     $   2,806,850
Grants and contracts......................................             1,276,454          729,271            48,672
                                                                    ------------      -----------      ------------
                                                                       9,360,060        5,593,649         2,855,522

Costs and expenses
Product costs.............................................             3,512,054        2,681,429         3,163,012
Research and development costs............................             4,156,996        3,165,838         4,617,246
Selling, general and administrative expenses..............             6,654,553        5,033,491         6,682,860
                                                                    ------------      -----------      ------------
                                                                      14,323,603       10,880,758        14,463,118

Loss from operations......................................            (4,963,543)      (5,287,109)      (11,607,596)

Other income (expense), net
Interest income...........................................               885,583        1,386,968         1,157,305
Interest expense..........................................                (8,165)               -                 -
License fee...............................................                     -        5,000,000                 -
Other, net................................................                 4,861            1,493              (319)
                                                                    ------------      -----------      -------------
                                                                         882,279        6,388,461         1,156,986

Net income (loss) from continuing operations..............            (4,081,264)       1,101,352       (10,450,610)

Discontinued operations (Note 3)
Loss from discontinued operations; Agritope...............            (9,890,599)      (2,501,268)       (8,045,218)
Income from discontinued operations; A&W..................               170,646                -                 -
Estimated loss on disposal of A&W.........................            (8,639,054)               -                 -
                                                                    ------------      -----------      ------------
                                                                     (18,359,007)      (2,501,268)       (8,045,218)

Net loss..................................................         $ (22,440,271)    $ (1,399,916)    $ (18,495,828)

Income (loss) per share from continuing operations........         $        (.30)    $        .08     $        (.88)

Net loss per share........................................         $       (1.67)    $       (.11)    $       (1.56)

Weighted average number of shares
 outstanding..............................................            13,404,402       12,661,420*       11,886,234
</TABLE>

* Income  per share  from  continuing  operations  calculated  using  13,440,396
weighted average shares outstanding due to common stock equivalents.

The accompanying notes are an integral part of these statements.


                                     - 26 -
<PAGE>


EPITOPE, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

<TABLE>
                                                          COMMON STOCK               ACCUMULATED

                                                    SHARES            DOLLARS           DEFICIT            TOTAL

<S>                                                 <C>             <C>             <C>                <C>
BALANCES AT SEPTEMBER 30, 1994..............        10,926,551      $ 71,559,900    $ (53,089,518)     $ 18,470,382
Common stock issued upon
  exercise of options.......................           183,525         2,145,673                -         2,145,673
Common stock issued as
  compensation..............................            16,013           266,800                -           266,800
Compensation expense for
  stock option grants.......................                 -         1,374,710                -         1,374,710
Common stock issued upon
  exercise of warrants......................         1,336,000        18,892,750                -        18,892,750
Common stock issued upon exchange of
   convertible notes........................            23,041           449,991                -           449,991
Equity issuance costs.......................                 -          (757,877)               -          (757,877)
Net loss for the year.......................                  -                -      (18,495,828)      (18,495,828)
                                                    -----------     ------------     ------------       -----------
BALANCES AT SEPTEMBER 30, 1995..............        12,485,130        93,931,947      (71,585,346)       22,346,601

Common stock issued upon
  exercise of options.......................           386,550         4,886,118                -         4,886,118
Common stock issued as compensation.........            19,353           263,586                -           263,586
Compensation expense for stock
  option grants.............................                 -         1,044,183                -         1,044,183
Common stock issued upon
  exercise of warrants......................            46,350           826,600                -           826,600
Equity issuance costs.......................                 -              (152)               -              (152)
Net loss for the year.......................                 -                 -       (1,399,916)       (1,399,916)
                                                    ----------      ------------     ------------       -----------
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
</TABLE>



The accompanying notes are an integral part of these statements.


                                     - 27 -
<PAGE>


EPITOPE, INC.
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30

<TABLE>
                                                                        1997             1996              1995
Cash flows from operating activities
<S>                                                                <C>               <C>              <C>
Net loss..................................................         $ (22,440,271)    $ (1,399,916)    $ (18,495,828)
Adjustments to reconcile Net loss to Net cash
  used in operating activities:
Loss from discontinued operations.........................            18,359,007                -                 -
Depreciation and amortization.............................               729,970        1,086,930         1,458,675
Loss (gain) on disposition of property....................                17,888           (1,098)              819
Decrease (increase) in receivables........................               264,686          125,025        (1,022,050)
Increase in inventories...................................              (166,717)        (233,929)         (286,903)
Decrease (increase) in prepaid expenses...................                11,278           69,133           (17,608)
(Increase) decrease in other assets and deposits..........               (32,340)          20,649           (33,521)
Increase (decrease) in accounts payable and accrued
  liabilities.............................................               180,773       (1,656,478)        2,168,684
Common stock issued as compensation for services..........               323,938          263,586           266,800
Compensation expense for stock option grants and
  deferred salary increases    ...........................               489,668        1,044,183         1,374,710
                                                                    ------------      -----------      ------------
Net cash used in operating activities.....................            (2,262,120)        (723,213)      (14,586,222)

Cash flows from investing activities
Investment in marketable securities.......................           (20,106,837)     (47,608,270)      (16,194,994)
Proceeds from sale of marketable securities...............            31,783,317       45,870,396         4,718,162
Additions to property and equipment.......................              (196,910)      (1,066,758)       (1,350,850)
Proceeds from sale of property............................                     -            7,432            14,343
Expenditures for patents and proprietary technology.......              (265,435)        (770,262)         (305,135)
Investment in affiliated companies........................            (6,702,299)        (331,280)          652,698
Minority interest in affiliated companies.................                     -          215,407                 -
                                                                    ------------      -----------      ------------
Net cash provided by (used in) investing activities.......             4,511,836       (3,683,335)      (12,465,776)

Cash flows from financing activities
Principal payments under installment purchase and
  capital lease obligations...............................                     -          (39,507)          (16,137)
Proceeds from issuance of common stock....................             1,668,211        5,885,573        21,060,912
Cost of common stock issuance.............................                     -             (152)         (757,877)
Cash to Agritope..........................................            (7,206,196)               -                 -
                                                                    ------------      -----------      ------------
Net cash (used in) provided by financing activities.......            (5,537,985)       5,845,914        20,286,898

Net (decrease) increase in cash and cash equivalents......            (3,288,269)       1,439,366        (6,765,100)
Cash and cash equivalents at beginning of year............             5,699,263        4,259,897        11,024,997
                                                                    ------------      -----------      ------------
Cash and cash equivalents at end of year (Note 3).........         $   1,934,480     $  5,699,263     $   4,259,897
</TABLE>

The accompanying notes are an integral part of these statements.


                                     - 28 -
<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1         THE COMPANY

Epitope,  Inc. (the "Company" or "Epitope") is an Oregon company incorporated in
1981.  Epitope  develops and markets oral specimen  collection  kits and related
diagnostic tests for the detection of the Human  Immunodeficiency Virus ("HIV"),
the cause of Acquired Immune Deficiency Syndrome ("AIDS"), and for the detection
of other medical  conditions and analytes.  The Company markets the device under
the brand name EpiScreen in the United States and in certain  foreign  countries
for use in screening life insurance  applicants and under the brand name OraSure
for use in the public health and medical professional  markets. The Company also
conducts joint research and development projects under contracts and grants.

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  owned  subsidiaries.  All
significant  intercompany  balances and  transactions  have been  eliminated  in
consolidation.   Assets  and  liabilities  of  majority-owned  subsidiaries  are
included in these statements.  Minority-owned investments and joint ventures are
accounted for using the equity method.

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,  1997,  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  shareholders'  equity.  Such unrealized gains and losses
were immaterial as of September 30, 1997 and 1996.

Trade Accounts  Receivable.  Accounts  receivable are stated net of an allowance
for doubtful accounts of $32,284 and $6,872, respectively, at September 30, 1997
and 1996.

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:

<TABLE>
SEPTEMBER 30                                                                         1997                   1996
<S>                                                                               <C>                  <C>
Raw materials..........................................................           $   296,432          $    522,824
Work-in-process........................................................               343,585               389,642
Finished goods.........................................................               670,175               192,882
Supplies...............................................................                14,455                52,582
                                                                                   ----------            ----------
                                                                                  $ 1,324,647           $ 1,157,930
</TABLE>

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 primarily
under the  straight-line  method over the estimated  lives of the related assets
(three to seven years). Leasehold improvements are 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>


Accounting  for  Long-Lived  Assets.  The  Company   periodically   reviews  its
long-lived assets for impairment or as events or circumstances indicate that the
carrying amount of long-lived  assets may not be  recoverable.  If the estimated
net cash flows are less than the carrying amount of the long-lived  assets,  the
Company  recognizes  an  impairment  loss in an amount  necessary  to write down
long-lived  assets to fair value as determined from expected  discounted  future
cash flows.  This  accounting  policy is consistent  with Statement of Financial
Accounting  Standards  No. 121,  "Accounting  for the  Impairment  of Long-Lived
Assets  and  for  Long-Lived  Assets  to be  Disposed  Of."  There  has  been no
significant impact to the Company's  financial position or results of operations
as the carrying amount of all long-lived assets is considered recoverable.

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.

Amortization and accumulated amortization are summarized as follows:

<TABLE>
                                                                     1997         1996         1995
<S>                                                               <C>          <C>          <C>
Amortization expense for the year ended September 30......        $ 209,180    $ 172,095    $ 130,313
Accumulated amortization at September 30..................          830,290      621,110      449,015
</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. Certain corporate overhead services such as accounting,  annual
meeting  costs,  annual  report  preparation,   audit,   executive   management,
facilities,  finance, general management, human resources,  information systems,
investor  relations,  legal  services,  payroll and SEC filings are  provided by
Epitope on a  centralized  basis for the benefit of the  Company's  subsidiaries
("Shared  Services").  Such expenses have been allocated to the  subsidiaries in
the accompanying  financial  statements using activity  indicators which, in the
opinion of  management,  represent  a  reasonable  measure of the  subsidiaries'
utilization  of such  Shared  Services.  These  activity  indicators,  which are
reviewed  periodically  and adjusted to reflect changes in utilization,  include
number of employees, number of computers, and level of expenditures. The related
subsidiaries'  operating  results are included in discontinued  operations.  See
Note 3, Discontinued  Operations.  Selling,  general and administrative expenses
have been reduced by Shared Services  allocated to the subsidiaries  included in
discontinued operations of: $1,402,895,  $1,069,249 and $1,892,371 for the years
ended September 30, 1997, 1996 and 1995, respectively.

Income  Taxes.  The  Company  accounts  for certain  revenue  and expense  items
differently for income tax purposes than for financial reporting purposes. These
differences  arise principally from methods used in accounting for stock options
and depreciation rates. The Company accounts for income taxes under Statement of
Financial  Accounting  Standards No. 109,  "Accounting for Income Taxes," ("SFAS
109") which  requires the use of the asset and liability  method for  accounting
for income  taxes.  Under SFAS 109,  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.


                                     - 30 -
<PAGE>


Stock-Based  Compensation.  In October 1995, the Financial  Accounting Standards
Board issued Statement of Financial  Accounting  Standards No. 123,  "Accounting
for Stock-Based Compensation" ("SFAS 123"). 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 existing  accounting rules under  Accounting  Principles Board Opinion
No.  25,  ("APB  25")  "Accounting  for  Stock  Issued to  Employees,"  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.  Income  (loss) per share has been  computed  using the
weighted  average number of shares of common stock and common stock  equivalents
outstanding during the period. Common stock equivalents consist 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. Common stock equivalents are excluded from
the computation if their effect is anti-dilutive.  Primary and fully diluted net
income (loss) per share are the same.

In February 1997, the Financial  Accounting  Standards Board issued Statement of
Financial  Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"). This
new standard is effective for interim and annual  periods  ending after December
15, 1997. SFAS 128 will require the reporting of "basic" and "diluted"  earnings
per share ("EPS") instead of "primary" and "fully diluted" EPS as required under
current accounting principles. Basic EPS eliminates the common stock equivalents
considered in calculating  primary EPS.  Diluted EPS is similar to fully diluted
EPS.

Supplemental  Profit  and  Loss  Information.   In  September  1995,  management
announced a  company-wide  reduction  in work force  whereby 48  employees  were
terminated.  The Company  charged  $607,000 to 1995  results of  operations  for
severance  payments and related  expenses of this  program.  As of September 30,
1996,  $55,000  of  these  charges  remained  accrued  and are  included  in the
accompanying balance sheets of the Company under the caption "Salaries, benefits
and other  accrued  liabilities."  There were no such  accruals  remaining as of
September 30, 1997.

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.  The Company has a contingent  liability with regard to the guarantee
of a loan to a former  subsidiary (A&W) through Wells Fargo Bank, NA. Because of
the various  collateral and corporate and personal  guarantees that also back up
this line of credit, the Company feels that the likelihood that the Company will
sustain  any loss  under  this  agreement  is remote  (see Note 3,  Discontinued
Operations).

Reclassifications. Certain reclassifications have been made to prior years' data
to conform with the current year's presentation.  These reclassifications had no
impact on previously reported results of operations or shareholders' equity.

NOTE 3         DISCONTINUED OPERATIONS

Agritope.  Throughout the period presented,  Agritope,  Inc.  ("Agritope") was a
wholly owned  subsidiary of Epitope acquired in 1987.  Agritope  consists of two
units:  Agritope  Research and Development  ("Agritope R&D") and Vinifera,  Inc.
("Vinifera").  Agritope R&D uses  biotechnology  in the development of new fruit
and vegetable plant varieties for sale to the fresh produce  industry.  To date,
Agritope has not completed  commercialization  of this technology.  A portion of
the research and  development  efforts  conducted by Agritope has been performed
under  various  research  grants  and  contracts.  Vinifera  is  engaged  in the
grapevine  propagation and distribution  business.  During 1995, Vinifera was in
the development  stage and generated minimal product sales.  Vinifera  commenced
commercial  stage operations in 1996.  Agritope's  results of operations and net
assets are presented as discontinued operations in the accompanying consolidated
financial  statements for all periods  presented.  All  intercompany  loans from
Epitope to Agritope  have been  reflected as capital  contributions  to Agritope
consistent  with the  separation  agreement  between  Epitope and Agritope dated
December 1, 1997. The 1997 loss from


                                     - 31 -
<PAGE>


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 is expected to occur in late  December  1997.
The separation  agreement  provides that, all net expenses of Agritope beginning
December 1, 1997, will be 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
producer and wholesale  distributor  of fresh and frozen  fruits and  vegetables
based in San  Diego,  California.  Under the terms of the  merger,  the  Company
issued  520,000  shares of common stock of Epitope,  Inc. in exchange for all of
the outstanding common stock of A&W.

On May 27, 1997, in  accordance  with the terms of a rescission  agreement,  the
former  shareholders  of A&W returned the 520,000 shares of Epitope common stock
they received,  and Epitope returned all of the outstanding shares of A&W common
stock. Epitope also received A&W preferred stock in satisfaction of intercompany
loans  made to A&W  between  December  12,  1996 and  March 19,  1997.  This A&W
preferred  stock  carries  a  $5.7  million  liquidation  preference,   dividend
preferences, and various redemption features.

A&W's  results of  operations  for the period from December 13, 1996 through May
27, 1997 are presented in the accompanying  financial statements as discontinued
operations.  The estimated loss on disposal of $8.4 million results from several
factors,  including a $1.8 million  reduction  in market price of the  Company's
stock from the purchase date to the rescission  date, a $5.7 million discount of
the A&W preferred  stock to its estimated net present value as compared with the
face  amount  of the  loans  made to  A&W,  the  write-off  of  $633,000  in A&W
acquisition  costs,  and the accrual of $262,000 in estimated  costs  associated
with the rescission.

THE COMPONENTS OF AGRITOPE'S NET ASSETS ARE SUMMARIZED AS FOLLOWS:
<TABLE>
SEPTEMBER 30                                                                         1997              1996
<S>                                                                               <C>              <C>
Cash.......................................................................       $     4,384      $   476,512
Trade accounts receivable, net.............................................           617,359          264,986
Inventories................................................................         2,081,295          509,745
Other current assets.......................................................           281,778           33,149
                                                                                   ----------       ----------
Total current assets.......................................................         2,984,816        1,284,392

Property and equipment, net................................................         2,749,788        1,286,197
Patents and proprietary technology, net....................................         1,276,692          510,244
Investment in affiliates...................................................           246,962        2,448,623
Other assets...............................................................            26,797          140,513
                                                                                   ----------       ----------
                                                                                    7,285,055        5,669,969

Convertible notes due June 1997............................................                 -        3,620,003
Other current liabilities..................................................         1,326,008          826,952

Long-term liabilities......................................................         1,196,321          215,407
Accrued losses.............................................................         1,200,000                -
                                                                                   ----------       ----------
Net assets of discontinued operations......................................       $ 3,562,726      $ 1,007,607
</TABLE>

THE  SUMMARIZED  STATEMENTS OF OPERATIONS  FOR AGRITOPE AND  SUBSIDIARIES  IS AS
FOLLOWS:
<TABLE>
SEPTEMBER 30                                                                    1997                 1996                1995

<S>                                                                        <C>                   <C>                <C>
Revenues..............................................................     $  1,551,190          $   585,485        $  2,109,688
Operating costs and expenses..........................................        6,088,883            2,821,397           9,920,166
Other income (expense), net...........................................       (4,427,275)            (265,356)           (234,740)
Minority interest in subsidiary net loss..............................          274,369                    -                   -
                 -
Net loss from operations..............................................       (8,690,599)          (2,501,268)         (8,045,218)
</TABLE>


                                     - 32 -
<PAGE>


Bank Line of Credit.  A&W maintains a $6,500,000  revolving bank line of credit.
The line is secured  by A&W's  accounts  receivable,  inventory  and  equipment.
Epitope has agreed to guarantee  the line of credit and any  succeeding  line of
credit  through  November 1, 1998. In addition,  the principals of A&W have each
personally  guaranteed  the  loan.  The  Company's  guarantee  contains  various
financial  covenants  including  minimum tangible net worth levels.  The balance
outstanding under the line was $250,000 at September 30, 1997.

Long Term Debt. In November 1996, Epitope exchanged  $3,380,000 principal amount
of Agritope convertible notes for 250,367 shares of common stock of Epitope at a
reduced  exchange  price of $13.50 per share.  The exchange price had previously
been fixed at $19.53 per share.  Accordingly,  Agritope  recognized  a charge to
results  of  operations  of  $1,216,654  in the first  quarter  of  fiscal  1997
representing  the  conversion   expense.   In  conjunction  with  the  exchange,
unamortized debt issuance costs of $86,134 related to such notes were recognized
as equity  issuance  costs during  1997.  Concurrent  with the note  conversion,
Epitope made a $4,529,009  capital  contribution to Agritope.  On June 30, 1997,
Agritope paid in full the remaining $240,000 principal amount outstanding.

NOTE 4         PROPERTY AND EQUIPMENT

Property and equipment are summarized as follows:

<TABLE>
SEPTEMBER 30                                                                        1997                   1996
<S>                                                                              <C>                   <C>
Research and development laboratory equipment..........................          $  1,096,425          $  1,056,883
Manufacturing equipment................................................             1,389,304             1,291,546
Office furniture and equipment.........................................             1,772,698             1,899,948
Leasehold improvements.................................................             1,102,895             1,084,660
Construction in progress...............................................               109,380               134,557
                                                                                  -----------           -----------
                                                                                    5,470,702             5,467,594
Less accumulated depreciation and amortization.........................            (4,269,714)           (3,924,837)
                                                                                  -----------           -----------
                                                                                 $  1,200,988          $  1,542,757
</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.

Common  Stock  Reserved for Future  Issuance.  As of  September  30,  1997,  the
following  shares  of the  Company's  common  stock  were  reserved  for  future
issuance, as more fully described below:

<TABLE>
PURPOSE                                                                                   SHARES
<S>                                                                                     <C>
Outstanding warrants............................................................        2,000,640
Outstanding stock options.......................................................        3,499,865
Employee Stock Purchase Plan subscriptions......................................           76,460
                                                                                        ---------
                                                                                        5,576,965
</TABLE>


                                     - 33 -
<PAGE>


<TABLE>
Common Stock  Warrants.  As of September 30, 1997, the following  warrants to purchase  shares of common stock were
outstanding:
DATE OF ISSUANCE                                               SHARES        PRICE *       EXPIRATION DATE
<S>                                                           <C>            <C>        <C>
September 26, 1991........................................      159,150      $16.00     September 30, 2000
December 23, 1992.........................................      988,390       18.50     September 30, 2000
July 20, 1993.............................................      375,000       20.00     September 30, 2000
August 1, 1993............................................      200,000       18.50     September 30, 2000
October 17, 1994..........................................       50,000       18.50     September 30, 2000
November 22, 1994.........................................      228,100       18.50     September 30, 2000
                                                              ---------
                                                              2,000,640
</TABLE>

* Beginning ten days after the Agritope spin-off, Epitope will allow exercise of
the  warrants at a price equal to 110  percent of the average  closing  price of
Epitope  common stock during the five trading days  beginning on the date of the
spin-off.

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.

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 option may be exercised is
ten years  from the date of grant.  To date,  options  have  been  granted  with
four-year vesting schedules.

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.  The
options are exercisable after one year from the date of grant at the rate of 25%
per year cumulatively and expire ten years from the date of grant.

The 1991 Plan also provides that nonqualified  options may be granted at a price
not less than 75% 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.  As of September  30, 1997,  1,145,874  shares of Epitope  common
stock remain available for grant under the Company's stock award plans.

In October 1995, the Financial  Accounting  Standards Board issued  Statement of
Financial   Accounting   Standards   No.  123,   "Accounting   for   Stock-Based
Compensation"  ("SFAS 123").  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  existing  accounting  rules  under,  but with  additional  financial
statement  disclosure.  The Company  has  continued  to account for  stock-based
compensation  under  APB 25,  and  therefore,  SFAS 123 did not have a  material
impact on its financial position or results of operations.

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

<TABLE>
                                        1997                        1996                           1995
                                 SHARES       PRICE          SHARES       PRICE            SHARES         PRICE
Outstanding at
<S>                            <C>        <C>              <C>        <C>                <C>          <C>
 beginning of period ......    3,365,726  $3.50 - 24.00    3,636,103  $1.09 - 24.00      3,483,432    $1.09 - 24.94
Granted....................    2,801,403   3.50 - 14.81      901,379   9.81 - 18.13        802,050    14.94 - 18.88
Exercised..................      (16,124)  7.25 - 14.81     (386,550)  1.09 - 17.13       (183,525)    1.84 - 22.50
Canceled...................   (2,651,140)  3.50 - 24.00     (785,206) 14.38 - 24.00       (465,854)    7.38 - 24.94
                               ---------   ------------    ---------  -------------      ---------   --------------
Outstanding at end of period   3,499,865  $3.50 - 20.38    3,365,726  $3.50 - 24.00      3,636,103    $1.09 - 24.00

Exercisable................    2,474,623  $3.50 - 20.38    2,302,212  $3.50 - 24.00      2,002,925    $1.09 - 24.00
</TABLE>


                                     - 34 -
<PAGE>


<TABLE>
                                    Number of        Weighted          Average Remaining
Exercise Price Range                Shares           Average Price              Contractual Life
--------------------                ------           -------------              ----------------
<S>            <C>                    <C>                 <C>                            <C>
$3.50     -    $5.75                     55,950           $4.9172                        5.69
$6.38     -    $6.38                    825,000           $6.375                         8.27
$6.69     -    $7.06                     65,150           $6.968                         9.53
$7.25     -    $7.25                  2,175,503           $7.25                          7.57
$8.02     -    $20.38                   296,832           $13.72                         8.46
                                     ----------           ------                         ----
                                      3,418,435            $7.56                         7.83
</TABLE>

Options exercisable at September 30, 1997 totaled 2,474,623 shares at a weighted
average  exercise price of $7.65.  Options  available for grant at September 30,
1997 totaled 1,145,874.

Pursuant  to the 1991  Plan,  973 and 3,680  shares of  common  stock  were also
awarded  to  consultants  and  members  of  the  Company's  scientific  advisory
committees during 1996 and 1995, respectively.

Employee Stock Purchase Plans. In 1991, the shareholders  approved the Company's
adoption of the 1991  Employee  Stock  Purchase  Plan ("1991  ESPP")  covering a
maximum of 100,000  shares of common  stock for  subscription  over two offering
periods.  The purchase price for stock purchased under the 1991 ESPP for each of
the two 24-month  subscription  periods was the lesser of 85% 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 each  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%.

The 1993 Employee  Stock  Purchase Plan ("1993  ESPP"),  as amended and restated
effective  February 1, 1993,  covers a maximum of 500,000 shares of common stock
for  subscription  over  established  offering  periods.  The Company's Board of
Directors was granted authority to determine the number of offering 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.  Other
provisions  of the 1993 ESPP are similar to the 1991 ESPP.  As of September  30,
1997,  76,460  shares of common stock were  subscribed  for during two offerings
under the 1993 ESPP.  Shares  subscribed for under these 1993 ESPP offerings may
be purchased over 24 months and have initial subscription prices of $ 8.77 and $
6.00 per share for the various  offerings.  During the year ended  September 30,
1997,  2,472 shares were issued at prices ranging from $8.77 to $12.33 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% 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. 5,569 Special Offering  Subscription
shares were issued to  employees  during 1995 at an average  price of $15.26 per
share.

The Company has elected to account for its  stock-based  compensation  under the
provisions of APB 25, however, as required by SFAS 123, the Company has computed
for pro forma  disclosure  purposes the value of options granted during 1997 and
1996  using  the  Black-Scholes  option  pricing  model.  The  weighted  average
assumptions  used for  stock  option  grants  for 1997 and 1996 were a risk free
interest rate of 5.9 percent and 5.6 percent, respectively, an expected dividend
yield of 0 percent and 0 percent,  respectively, an expected life of 4.3 and 4.4
years,  respectively,  and an expected  volatility of 53 percent and 48 percent,
respectively. The weighted average assumptions used for ESPP rights for 1997 and
1996  were  a  risk  free   interest  rate  of  6.1  percent  and  5.4  percent,
respectively,   an  expected   dividend  yield  of  0  percent  and  0  percent,
respectively,  an  expected  life of 2 years and 2 years,  respectively,  and an
expected   volatility   of  63  percent  and  48  percent,   respectively.   The
weighted-average  fair value of ESPP  rights  granted in 1997 was  $248,700  and
$57,600 for ESPP rights granted in 1996.


                                     - 35 -
<PAGE>


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, 1997 and 1996, the total value of the options granted
was  computed to be  $9,096,600  and  $6,638,200,  respectively,  which would be
amortized on a straight-line basis over the vesting period of the options.

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

<TABLE>
YEAR ENDED SEPTEMBER 30                                            1997                      1996

                                                   NET LOSS          NET LOSS           NET LOSS          NET LOSS
                                                                    PER SHARE                             PER SHARE
<S>                                            <C>                    <C>           <C>                    <C>
As reported.................................   $ (22,440,271)         $ (1.67)      $ (1,399,900)          $ (.11)
Pro forma...................................     (26,958,371)           (2.01)        (3,579,800)            (.28)
</TABLE>

The effects of applying SFAS 123 in providing pro forma  disclosure for 1997 and
1996 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.

NOTE 6            INCOME TAXES

As of September 30, 1997,  the Company had net operating loss  carryforwards  of
approximately $45.0 million and $42.0 million,  respectively,  to offset federal
and state  taxable  income.  Approximately  $6.9  million of the  Company's  net
operating loss carryforwards were generated as a result of deductions related to
the  exercise  of stock  options.  When  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.

As of  September  30, 1997,  the Company had total gross  deferred tax assets of
approximately $21.3 million, consisting primarily of $17.0 million net operating
loss  carryforwards,  $1.7 million of deferred  compensation  and a $0.9 million
research and  development tax credit  carryforward.  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 $21.3 million, representing a $4.6 million increase since
the prior fiscal year end, has been recorded.

The  expected  tax  benefit of  approximately  $4.4  million  for the year ended
September 30, 1997 is increased by approximately  $0.5 million for the effect of
state and local taxes (net of federal  impact)  and is reduced by  approximately
$4.6  million for the effect of the  increase in  valuation  allowance  and $0.3
million  for  other  permanent  differences  consisting  primarily  of  the  A&W
valuation difference write off.

The federal  and state net  operating  loss  carryforwards  available  to offset
future taxable income will expire as follows:

<TABLE>
                                                                                        LOSS CARRYFORWARDS
YEAR OF EXPIRATION                                                                 FEDERAL              OREGON
<S>                                                                            <C>                  <C>
1998...................................................................        $    22,000          $      ---
1999...................................................................            252,000              25,000
2000...................................................................            100,000             200,000
2001...................................................................            300,000              31,000
2002...................................................................            666,000                 ---
2003...................................................................          2,278,000           2,106,000
2004...................................................................          2,360,000           2,206,000
2005...................................................................          1,993,000           1,914,000
2006...................................................................          6,100,000           5,643,000
2007...................................................................          6,378,000           5,788,000


                                     - 36 -
<PAGE>


2008...................................................................          5,370,000           4,671,000
2009...................................................................          3,459,000           4,430,000
2010...................................................................          7,053,000           6,275,000
2011...................................................................            796,000             796,000
2012...................................................................          7,731,000           7,731,000
                                                                              ------------        ------------
                                                                               $44,858,000         $41,816,000

Significant components of Epitope's deferred tax asset were as follows:

SEPTEMBER 30
1997                               1996
Net operating loss carryforwards.......................................        $17,030,000         $13,627,000
Deferred compensation..................................................          1,707,000           1,504,000
Research and experimentation credit carryforwards......................            888,000             812,000
Accrued expenses.......................................................            868,000             302,000
Other..................................................................            850,000             436,000
                                                                              ------------        ------------

Gross deferred tax assets..............................................         21,343,000          16,681,000
Valuation allowance....................................................        (21,343,000)        (16,681,000)
                                                                              ------------        ------------
Net deferred tax asset.................................................        $      ----         $      ----
</TABLE>

NOTE 7   RESEARCH AND DEVELOPMENT ARRANGEMENTS

In February  1995, the Company  entered into a  development,  license and supply
agreement  with  SmithKline  Beecham,  plc ("SB")  pursuant to which the Company
conducted  research  and  development  projects  funded by SB. In July 1997,  SB
terminated the agreement.  Revenues from research and  development  arrangements
are included in the accompanying consolidated statements of operations under the
caption "Grants and Contracts."

NOTE 8   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  continues  to maintain  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 EPIblot HIV confirmatory tests ("EPIblot") on a worldwide basis. As of
April  1,  1994,  the  Company  renewed  the  agreements  which  had an  initial
termination  date of March 31, 1997 (with  successive  one-year  renewal periods
thereafter) and include pricing incentives based on volumes purchased by Organon
Teknika  and  penalties  for  failure to purchase  specified  minimum  quarterly
volumes.  In 1997, the agreement was extended for another one-year  period.  For
the years  ended  September  30,  1997,  1996 and 1995,  respectively,  revenues
generated from sales of EPIblot to Organon Teknika were  $1,791,290,  $1,539,164
and $1,808,431, including export sales of $15,750, $62,539 and $72,369.

LabOne, Inc. (previously Home Office Reference Laboratory,  Inc.) 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, 2000, with an automatic  five-year renewal,
unless either party  notifies the other of intent not to renew at least 180 days
prior to the initial  expiration  date. For the years ended  September 30, 1997,
1996 and 1995,  respectively,  revenues  generated from product sales to LabOne,
Inc.  were  $3,194,698,  $1,327,544  and  $525,628  including  export  sales  of
$597,000, $394,747 and $58,500.

SB had an exclusive  agreement to market the Company's oral specimen  collection
device  worldwide,  except in several  foreign  countries  and to the  insurance
industry  in the U.S.,  Canada  and  Japan.  In July  1997,  SB  terminated  its
development, license and supply agreement with Epitope. As a result, the Company
acquired  marketing rights for OraSure from SB. During the transition  period in
August and September of 1997, SB continued to market the OraSure  testing system
to the medical  community.  Beginning in October  1997,  the product is marketed
through Epitope's direct sales force.


                                     - 37 -
<PAGE>


In 1995, SB made an initial license fee payment of $1 million to the Company and
committed an  additional  license fee of $4 million to be paid upon FDA approval
of a pending  request  to amend the  labeling  of the  Company's  oral  specimen
collection  device to  indicate a two-year  shelf life.  In April 1996,  the FDA
granted the  Company's  request for extended  dating and SB disbursed $4 million
plus  interest from escrow.  Accordingly,  the Company  recognized  income of $5
million in 1996 operating results.


NOTE 9    COMMITMENTS

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

YEAR ENDING SEPTEMBER 30
<TABLE>
<S>                                                                                                     <C>
1998..............................................................................................      $ 345,576
1999..............................................................................................        346,356
2000..............................................................................................        109,992
                                                                                                        ---------
                                                                                                        $ 801,924
</TABLE>

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 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  $409,970,  $538,665 and $547,930 for the
years ended September 30, 1997, 1996 and 1995, respectively.

NOTE 10  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%  of  an  employee's   basic
contribution,  not to exceed 2.5% of an  employee's  compensation.  The Board of
Directors  has the  authority to increase or decrease the 50% match at any time.
During  1997,  1996 and 1995,  respectively,  the Company  contributed  $101,737
(11,459  shares,  totaling  $101,721 and the remainder in cash),  $73,315 (4,653
shares  totaling  $73,279 and the  remainder in cash) and $97,631  (5,562 shares
totaling  $97,607 and the remainder in cash).  As of September 30, 1997,  27,832
shares of Epitope common stock are held by the plan.


                                     - 38 -
<PAGE>


NOTE 11   GEOGRAPHIC AREA INFORMATION

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 and Europe. Operating
loss represents revenues less operating  expenses.  In computing operating loss,
allocated corporate  administration expenses have been included;  however, other
income and expense items such as interest  expense,  miscellaneous  income,  and
other charges have not been added or deducted.

IN THOUSANDS
<TABLE>
GEOGRAPHIC                   REVENUES                     OPERATING LOSS                   IDENTIFIABLE ASSETS
AREAS             1997         1996      1995      1997         1996         1995       1997       1996      1995
United
<S>              <C>         <C>        <C>     <C>          <C>         <C>         <C>        <C>       <C>
States........   $ 8,569     $ 4,903    $ 2,630 $ (4,964)    $ (5,287)   $ (11,608)  $ 17,012   $ 29,784  $ 26,142
Canada........       608         404         78                     -            -                     -         -
Latin
America.......         4         100          -                     -            -                     -         -
Europe........        49          65         72                     -            -                     -         -
Other.........       130         122         76                     -                       -          -         -
                  ------      ------     ------   ------      -------     --------    -------    -------   -------
                 $ 9,360     $ 5,594    $ 2,856 $ (4,964)    $ (5,287)   $ (11,608)  $ 17,012    $29,784  $ 26,142
</TABLE>



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 pages of this report.

(b)      Reports on Form 8-K.  

Current  report on Form 8-K dated  July 28,  1997,  reporting  under  Item 5 the
Company's  intention  to  spin-off  Agritope  and  the  termination  of  the  SB
Agreement.

Current report on Form 8-K dated September 12, 1997,  reporting under Item 5 the
extension and repricing of outstanding warrants.



                                     - 39 -

<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 24, 1997.

                            EPITOPE, INC.

                            By /s/ Gilbert N. Miller
                            Gilbert N. Miller
                            Executive Vice President and Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed on December 24, 1997, by the following  persons on behalf of the
Registrant and in the capacities indicated.

                  SIGNATURE                          TITLE

         *JOHN W. MORGAN            President and Chief Executive Officer
         John W. Morgan             (Principal Executive Officer)

         /S/ GILBERT N. MILLER      Executive Vice President and
         Gilbert N. Miller          Chief Financial Officer
                                    (Principal Financial Officer and Principal
                                    Accounting Officer)

         *W. CHARLES ARMSTRONG      Director
         W. Charles Armstrong

         *RICHARD K. DONAHUE        Director
         Richard K. Donahue

         *ADOLPH J. FERRO           Director
         Adolph J. Ferro

         *R. DOUGLAS NORBY          Director
         R. Douglas Norby

         *MICHAEL J. PAXTON         Director
         Michael J. Paxton

         *ROGER L. PRINGLE          Director
         Roger L. Pringle

         *G. PATRICK SHEAFFER       Director
         G. Patrick Sheaffer

         * /S/ GILBERT N. MILLER
         Gilbert N. Miller
         (Attorney-in-Fact)


                                     - 40 -
<PAGE>


                                INDEX TO EXHIBITS
Exhibit
Number            Exhibit
------            -------
2.1               Acquisition and Merger Agreement among  Registrant,  Thamscoe,
                  Inc.,  Andrew and Williamson  Sales, Co., and the shareholders
                  of Andrew and Williamson  Sales,  Co., dated November 6, 1996.
                  Incorporated  by  reference  to Exhibit 2 to the  Registrant's
                  Current Report on Form 8-K dated November 6, 1996.

2.2               Settlement Agreement and Release among Epitope, Inc., Keith R.
                  Andrew and Kevin S.  Andrew as  co-trustees  under the Fred W.
                  and Virginia S. Andrew 1990 Revocable  Living Trust,  Keith R.
                  Andrew,  individually,  Fred L. Williamson, Fred M. Williamson
                  and  Andrew  and  Williamson  Sales,  Co.,  dated May 4, 1997.
                  Incorporated by reference to Exhibit 10.1 of the  Registrant's
                  Quarterly  Report on Form 10-Q for the fiscal quarterly period
                  ended March 31, 1996 ("March 1996 10-Q").

2.3               Separation Agreement between Epitope, Inc. and Agritope,  Inc,
                  dated December 1, 1997

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
                  (File No. 000-15337).

3.2               Restated Bylaws of Registrant.

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               Note Purchase  Agreement dated June 10, 1992,  among Agritope,
                  Inc.,  Registrant,  and  certain  investors.   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 4.2 to the  Registrant's
                  Quarterly  Report on Form 10-Q for the fiscal quarterly period
                  ended June 30, 1992.

4.4               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").

4.5               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").

4.6               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.

4.7               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.


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<PAGE>


4.8               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.

4.11              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.

4.12              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.

4.13              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.*

10.3              Agritope,   Inc.,  1992  Stock  Award  Plan.  Incorporated  by
                  reference to Exhibit 10.3 to the 1992 10-K.*

10.4              Form of  Nonqualified  Stock Option  Agreement to be issued to
                  certain  officers  and  directors  of  Registrant  pursuant to
                  Agritope, Inc., 1992 Stock Award Plan.*

10.5              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.

10.6              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").

10.7              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.

10.8              Business  Park Lease  dated as of  December  16,  1994,  among
                  Registrant,  Petula Associates Ltd., an Iowa corporation,  and
                  Koll Portland  Associates,  a California general  partnership.
                  Incorporated by reference to Exhibit 10.1 to the  Registrant's
                  Quarterly  Report on Form 10-Q for the fiscal quarterly period
                  ended December 31, 1994.

10.9              Agreement  dated  December  9, 1987,  between  Registrant  and
                  Adolph Ferro,  Ph.D.  Incorporated by reference to Exhibit 4.3
                  to the 1988 S-1.*

10.10             Amendment to Agreement of December 9, 1987, dated November 11,
                  1996,   between   Registrant   and  Adolph  J.  Ferro,   Ph.D.
                  Incorporated by reference to Exhibit 10.13 to the Registrant's
                  Annual  Report on Form 10-K for the year ended  September  30,
                  1996.

10.11             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.


                                     - 42 -
<PAGE>


10.12             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.

10.13             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).*

10.14             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 (the
                  "1991 10-K").*

10.15             Amended and Restated  Employment  Agreement  dated  January 9,
                  1991,   between  Adolph  J.  Ferro,   Ph.D.,  and  Registrant.
                  Incorporated by reference to Exhibit 10.29 to the 1991 10-K.*

10.16             Amendment  to Amended and  Restated  Employment  Agreement  of
                  January 9, 1991, dated August 19, 1997, between Registrant and
                  Adolph J. Ferro, Ph.D.*

10.17             Employment  Agreement dated January 28, 1990,  between Gilbert
                  N. Miller and Registrant. Incorporated by reference to Exhibit
                  10.19 to the 1994 10-K.*

10.18             Employment  Agreement  dated  July 1,  1990,  between  John H.
                  Fitchen,  M.D. and  Registrant.  Incorporated  by reference to
                  Exhibit 10.20 to the 1994 10-K.*

10.19             Employment  Agreement  dated October 6, 1997,  between John W.
                  Morgan and Registrant.*

10.20             Option Agreement dated October 6, 1997, between John W. Morgan
                  and Registrant.*

10.21             Form of Employment  Agreement  between Charles E. Bergeron and
                  Registrant.*

10.22             Form of Employment  Agreement between J. Richard George, Ph.D.
                  and Registrant.*

10.23             Continuing  Guaranty  by  Epitope,  Inc.  of credit  agreement
                  between Andrew & Williamson  Sales Co. ("A&W") and Wells Fargo
                  Bank, N.A. ("Wells Fargo") and  Subordination  Agreement among
                  Registrant,  A&W and Wells Fargo each dated as of December 17,
                  1996.  Incorporated  by reference to Exhibit 10.2 to the March
                  1996 10-Q.

10.24             Amended  and  Restated  Employee  Benefits  Agreement  between
                  Epitope, Inc. and Agritope, Inc., dated December 19, 1997.*

10.25             Transition Services and Facilities  Agreement between Epitope,
                  Inc. and Agritope, Inc., dated December 1, 1997.

10.26             Tax Allocation  Agreement between Epitope,  Inc. and Agritope,
                  Inc., dated December 1, 1997.

21.               The Registrant's  subsidiaries  are Agritope,  Inc., an Oregon
                  corporation,   Vinifera,  Inc.,  an  Oregon  corporation,  and
                  Agrimax Floral Products,  Inc., a Minnesota  corporation.  The
                  Registrant also owns a 67 percent  interest in Superior Tomato
                  Associates,  L.L.C., a Delaware limited liability company, and
                  a 60  percent  interest  in  Epitope  KK, a  Japanese  limited
                  liability  company.  The  Registrant  will  no  longer  own an
                  interest in Agritope,  Inc.,  Vinifera,  Inc.,  Agrimax Floral
                  Products,   Inc.  or  Superior  Tomato   Associates,   L.L.C.,
                  following the spin-off of Agritope, Inc.

23.               Consent of Price Waterhouse LLP.

24.               Powers of Attorney.

27.               Financial Data Schedule.

*        Management contract or compensatory plan or arrangement


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