**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,DC 20549**

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**FORM10-Q**

**x**                              QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

**For theQuarterly Period Ended March 31, 2007**

**o**                                 TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

**For the Transition Period From          to          **

**Commission File Number 000-22400**

**STRATEGIC DIAGNOSTICS INC.**

(Exact name of Registrantas specified in its charter)

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| **Delaware**                              |   | **56-1581761**       |
|-------------------------------------------|--------|----------------------|
| (State or other  jurisdiction of          |   | (I.R.S. employer     |
| incorporation or  organization)           |   | identification  no.) |
|                                      |   |                 |
| **111  Pencader Drive  Newark, Delaware** |   | **19702**            |
| (Address of  principal executive offices) |   | (Zip Code)           |

 

Registrant’s telephonenumber, including area code: **(302) 456-6789**

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Indicate by check mark whether the Registrant: (1) hasfiled all reports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the Registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days.

Yes: x                              No: o

Indicate by checkmark whether the Registrant is a large accelerated filer, an accelerated fileror a non-accelerated filer. See definition of “large accelerated filer andaccelerated filer” in Rule 12b-2 of the Exchange Act.
| Large Accelerated Filer o |   | Accelerated  Filer o |   | Non-Accelerated  Filer x |
|---------------------------|--------|---------------------------|--------|--------------------------|

 

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).

Yes: o                                No:x

As of March 31, 2007 there were 20,289,779 outstandingshares of the Registrant’s common stock, par value $.01 per share.

 

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**STRATEGIC DIAGNOSTICS INC.**

 

**INDEX**

 
| **Item**                                                                                             | ** ** | ** ** |
|------------------------------------------------------------------------------------------------------|------------|------------|
| PART  I FINANCIAL INFORMATION                                                                        |       |       |
| ITEM 1. Financial Statements                                                                         |       |       |
| Consolidated Balance Sheets – March  31, 2007 and December 31, 2006                             |       |       |
| Consolidated Statements of  Operations – Three months ended March 31, 2007 and 2006             |       |       |
| Consolidated Statements of  Cash Flows – Three months ended March 31, 2007 and 2006             |       |       |
| Notes to  Consolidated Interim Financial Statements                                                  |       |       |
| ITEM 2.  Management’s Discussion and Analysis of Financial Condition and Results of  Operations |       |       |
| ITEM 3.  Quantitative and Qualitative Disclosures About Market Risk                                  |       |       |
| ITEM 4. Controls  and Procedures                                                                     |       |       |
| PART II OTHER  INFORMATION                                                                           |       |       |
| ITEM 6. Exhibits                                                                                     |       |       |
| SIGNATURES                                                                                           |       |       |

1

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**PART I. –FINANCIAL INFORMATION**

**ITEM 1. FINANCIALSTATEMENTS**

**STRATEGC DIAGNOSTICS INC. AND SUBSIDIARIES**

**CONSOLIDATED BALANCE SHEETS(in thousands, except share and per share data)(unaudited)**
| ** **                                                                                                                                                           | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                                                                                                                                                           | ** ** | **2007**           | ** ** | **2006**              | ** ** |
| ASSETS                                                                                                                                                               | ** ** | ** **         |       |                  |       |
| Current Assets :                                                                                                                                                     | ** ** | ** **         |       |                  |       |
| Cash and cash equivalents                                                                                                                                            | ** ** | **$**              | **10,299** |                  | $          | 10,892 |   |
| Receivables, net                                                                                                                                                     | ** ** | **3,836**          |       | 3,678                 |       |
| Inventories                                                                                                                                                          | ** ** | **3,728**          |       | 3,178                 |       |
| Deferred tax asset                                                                                                                                                   | ** ** | **993**            |       | 831                   |       |
| Other current assets                                                                                                                                                 | ** ** | **1,128**          |       | 492                   |       |
| Total current assets                                                                                                                                                 | ** ** | **19,984**         |       | 19,071                |       |
|                                                                                                                                                                 | ** ** | ** **         |       |                  |       |
| Property and equipment, net                                                                                                                                          | ** ** | **4,186**          |       | 4,058                 |       |
| Other assets                                                                                                                                                         | ** ** | **28**             |       | 3                     |       |
| Deferred tax asset                                                                                                                                                   | ** ** | **8,048**          |       | 8,484                 |       |
| Intangible assets, net                                                                                                                                               | ** ** | **6,276**          |       | 6,337                 |       |
| Total assets                                                                                                                                                         | ** ** | **$**              | **38,522** |                  | $          | 37,953 |   |
|                                                                                                                                                                 | ** ** | ** **         |       |                  |       |
| LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                                                            | ** ** | ** **         |       |                  |       |
| Current Liabilities :                                                                                                                                                | ** ** | ** **         |       |                  |       |
| Accounts payable                                                                                                                                                     | ** ** | **$**              | **563**    |                  | $          | 541 |   |
| Accrued expenses                                                                                                                                                     | ** ** | **1,126**          |       | 1,455                 |       |
| Deferred revenue                                                                                                                                                     | ** ** | **154**            |       | 133                   |       |
| Current portion of long term debt                                                                                                                                    | ** ** | **211**            |       | 211                   |       |
| Total current liabilities                                                                                                                                            | ** ** | **2,054**          |       | 2,340                 |       |
|                                                                                                                                                                 | ** ** | ** **         |       |                  |       |
| Long-term debt                                                                                                                                                       | ** ** | **298**            |       | 351                   |       |
| Non-current taxes payable                                                                                                                                            | ** ** | **82**             |       | —                |       |
| Total non-current liabilities                                                                                                                                        | ** ** | **380**            |       | 351                   |       |
|                                                                                                                                                                 | ** ** | ** **         |       |                  |       |
| Stockholders’ Equity:                                                                                                                                           | ** ** | ** **         |       |                  |       |
| Preferred stock, $.01 par value,  20,920,648 shares authorized, no shares issued or outstanding                                                                      | ** ** | **—**         |       | —                |       |
| Common stock, $.01 par value, 35,000,000  shares authorized, 20,289,779 and 20,192,402 issued and outstanding at March  31, 2007 and December 31, 2006, respectively | ** ** | **203**            |       | 202                   |       |
| Additional paid-in capital                                                                                                                                           | ** ** | **38,991**         |       | 38,605                |       |
| Accumulated deficit                                                                                                                                                  | ** ** | **(3,200**         | **)**      | (3,690                | )          |
| Cumulative translation adjustments                                                                                                                                   | ** ** | **94**             |       | 145                   |       |
| Total stockholders’ equity                                                                                                                                      | ** ** | **36,088**         |       | 35,262                |       |
| Total liabilities and stockholders’  equity                                                                                                                     | ** ** | **$**              | **38,522** |                  | $          | 37,953 |   |

 

The accompanying notesare an integral part of these statements.

2

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STRATEGIC DIAGNOSTICSINC. AND SUBSIDIARIES

 

CONSOLIDATEDSTATEMENTS OF OPERATIONS(in thousands, except share and per share data)(unaudited)

 
| ** **                                             | ** ** | **Three Months**         | ** ** |
|--------------------------------------------------------|------------|-------------------------------|------------|
| ** **                                             | ** ** | **Ended March 31,** | ** ** |
| ** **                                             | ** ** | **2007**                      | ** ** | **2006** | ** ** |
|                                                   |       |                          |       |   |   |
| Revenues                                               | ** ** | **$**                         | **6,647**  |   | $ | 6,268 |   |
|                                                   |       |                          |       |   |   |
| Operating Expenses:                                    |       |                          |       |   |   |
| Manufacturing                                          | ** ** | **2,577**                     |       | 2,940 |   |
| Research and development                               | ** ** | **697**                       |       | 697 |   |
| Selling, general and administrative                    | ** ** | **2,662**                     |       | 2,563 |   |
| Total operating expenses                               | ** ** | **5,936**                     |       | 6,200 |   |
|                                                   |       |                          |       |   |   |
| Operating income                                       | ** ** | **711**                       |       | 68 |   |
|                                                   |       |                          |       |   |   |
| Interest income, net                                   | ** ** | **110**                       |       | 83 |   |
|                                                   |       |                          |       |   |   |
| Income before taxes                                    | ** ** | **821**                       |       | 151 |   |
|                                                   |       |                          |       |   |   |
| Income tax expense                                     | ** ** | **331**                       |       | 59 |   |
|                                                   |       |                          |       |   |   |
| Net income                                             | ** ** | **490**                       |       | 92 |   |
|                                                   |       |                          |       |   |   |
| Basic net income per share                             | ** ** | **$**                         | **0.02**   |   | $ | 0.005 |   |
|                                                   |       |                          |       |   |   |
| Shares used in computing basic net  income per share   |       | **20,209,000**                |       | 19,960,000 |   |
|                                                   |       |                          |       |   |   |
| Diluted net income per share                           | ** ** | **$**                         | **0.02**   |   | $ | 0.005 |   |
|                                                   |       |                          |       |   |   |
| Shares used in computing diluted net  income per share |       | **20,319,000**                |       | 20,113,000 |   |

 

The accompanying notesare an integral part of these statements.

3

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STRATEGIC DIAGNOSTICSINC. AND SUBSIDIARIES

 

CONSOLIDATEDSTATEMENTS OF CASH FLOWS(in thousands)(unaudited)

 
| ** **                                                                      | ** ** | **Three Months**         | ** ** |
|---------------------------------------------------------------------------------|------------|-------------------------------|------------|
| ** **                                                                      | ** ** | **Ended March 31,** | ** ** |
| ** **                                                                      | ** ** | **2007**                      | ** ** | **2006** | ** ** |
|                                                                            |       |                          |       |   |   |
| Cash Flows from Operating Activities :                                          |       |                          |       |   |   |
| Net income                                                                      | ** ** | **$**                         | **490**    |   | $ | 92 |   |
| Adjustments to reconcile net income to net cash used in operating  activities : |       |                          |       |   |   |
| Depreciation and amortization                                                   | ** ** | **297**                       |       | 248 |   |
| Share-based compensation                                                        | ** ** | **82**                        |       | 66 |   |
| Deferred income tax provision                                                   | ** ** | **273**                       |       | 59 |   |
| (Increase) decrease in :                                                        |       |                          |       |   |   |
| Receivables                                                                     | ** ** | **(158**                      | **)**      | (222 | ) |
| Inventories                                                                     | ** ** | **(550**                      | **)**      | 257 |   |
| Other current assets                                                            | ** ** | **(636**                      | **)**      | (600 | ) |
| Other assets                                                                    | ** ** | **(25**                       | **)**      | — |   |
| Increase (decrease) in :                                                        |       |                          |       |   |   |
| Accounts payable                                                                | ** ** | **22**                        |       | (9 | ) |
| Accrued expenses                                                                | ** ** | **(329**                      | **)**      | (386 | ) |
| Deferred Revenue                                                                | ** ** | **21**                        |       | (21 | ) |
| Non-current taxes payable                                                       | ** ** | **82**                        |       | — |   |
| Net cash used in operating activities                                           | ** ** | **(431**                      | **)**      | (516 | ) |
|                                                                            |       |                          |       |   |   |
| Cash Flows from Investing Activities :                                          |       |                          |       |   |   |
| Purchase of property and equipment                                              | ** ** | **(366**                      | **)**      | (80 | ) |
|                                                                            |       |                          |       |   |   |
| Net cash used in investing activities                                           | ** ** | **(366**                      | **)**      | (80 | ) |
|                                                                            |       |                          |       |   |   |
| Cash Flows from Financing Activities :                                          |       |                          |       |   |   |
| Proceeds from exercise of incentive stock options                               | ** ** | **302**                       |       | 12 |   |
| Proceeds from employee stock purchase plan                                      | ** ** | **6**                         |       | 7 |   |
| Repayments on financing obligations                                             | ** ** | **(53**                       | **)**      | (53 | ) |
|                                                                            |       |                          |       |   |   |
| Net cash provided by (used in) financing  activities                            | ** ** | **255**                       |       | (34 | ) |
|                                                                            |       |                          |       |   |   |
| Effect of exchange rate changes on cash                                         | ** ** | **(51**                       | **)**      | 10 |   |
|                                                                            |       |                          |       |   |   |
| Net decrease in Cash and Cash  Equivalents                                      | ** ** | **(593**                      | **)**      | (620 | ) |
|                                                                            |       |                          |       |   |   |
| Cash and Cash Equivalents, Beginning of  Period                                 | ** ** | **10,892**                    |       | 10,009 |   |
|                                                                            |       |                          |       |   |   |
| Cash and Cash Equivalents, End of Period                                        | ** ** | **$**                         | **10,299** |   | $ | 9,389 |   |
|                                                                            |       |                          |       |   |   |
| Supplemental Cash Flow Disclosure :                                             |       |                          |       |   |   |
|                                                                            |       |                          |       |   |   |
| Cash paid for taxes                                                             | ** ** | **53**                        |       | 7 |   |
|                                                                            |       |                          |       |   |   |
| Cash paid for interest                                                          | ** ** | **10**                        |       | 12 |   |

 

The accompanying notesare an integral part of these statements

4

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**STRATEGIC DIAGNOSTICSINC. AND SUBSIDIARIES**

**NOTES TOCONSOLIDATED INTERIM FINANCIAL STATEMENTS(in thousands, except share and per share data)(unaudited)**

**1.****                                      DESCRIPTIONOF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

**Business**

Strategic Diagnostics Inc. and its subsidiaries (the “Company”)develops, manufactures and markets antibody products and analytical test kitsto a diverse customer base, across multiple industrial and human healthmarkets. By applying its core competency of creating custom antibodies toassay development, the Company produces unique, sophisticated diagnostictesting and reagent systems that are responsive to customer diagnostic andinformation needs. Customers benefit with quantifiable “return on investment”by reducing time, labor, and/or material costs. All this is accomplished whileincreasing accuracy, reliability and actionability of essential test results.The Company is focused on sustaining this competitive advantage by leveragingits expertise in immunology, proteomics, bio-luminescence and otherbio-reactive technologies to continue its successful customer-focused researchand development efforts.

**Basis of Presentation and InterimFinancial Statements**

The accompanying unaudited consolidated interimfinancial statements of the Company have been prepared by the Company pursuantto the rules and regulations of the Securities and Exchange Commissionregarding interim financial reporting. Accordingly, they do not include all theinformation and footnotes required by generally accepted accounting principlesin the United States for complete financial statements and should be read inconjunction with the Company’s Annual Report on Form 10-K for the fiscalyear ended December 31, 2006. In the opinion of management, the accompanyingconsolidated financial statements include all adjustments (all of which are ofa normal recurring nature) necessary for a fair presentation of the results ofoperations.

**Revenue Recognition**

Revenues composed of sales of immunoassay-based testkits and certain antibodies and immunochemical reagents are recognized upon theshipment of the product and transfer of title, or when related services areprovided. Revenues associated with such products or services are recognizedwhen persuasive evidence of an order exists, shipment of product has occurredor services have been provided, the price is fixed and determinable andcollectibility is probable. Management is required to make judgments based onactual experience about whether or not collectibility is reasonably assured.

The Company enters into contracts related to theproduction of custom antibodies, which provide for the performance of definedtasks for a fixed price, with delivery of the product upon completion ofproduction. The standard time to complete a project is typically longer than 30days but less than 12 months, and effort is expended over the life of theproject. Revenues related to sales of custom antibody projects are recognizedwhen a project’s specifications have been met and the related materials havebeen shipped.

Fees associated with products and services added on toa custom antibody project subsequent to delivery of the initial project arebilled monthly and recognized as revenue as the services and other deliverablesare provided.

**Use of Estimates**

The preparation of the consolidated interim financialstatements requires management of the Company to make a number of estimates andassumptions relating to the reported amount of assets and liabilities,disclosure of contingent assets and liabilities at the date of the consolidatedinterim financial statements, and the reported amounts of revenues and expensesduring the period. These estimates include those made in connection withassessing the valuation of accounts receivable, inventories and deferred taxassets. Actual results could differ from these estimates.

5

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**New Accounting Pronouncements**

In September 2006, the FASB issued SFAS No.{157} “FairValue Measurements” (“SFAS No. 157”). SFAS No. 157 provides guidance for using fair value to measure assetsand liabilities and is intended to respond to investors’ requests for expandedinformation about the extent to which a company measures assets and liabilitiesat fair value, the information used to measure fair value and the effect offair value measurements on income. SFAS No. 157 applies whenever otherstandards require (or permit) assets or liabilities to be measured at fairvalue, but does not expand the use of fair value to any new circumstances. SFASNo. 157 also requires expanded disclosure of the effect on income for itemsmeasured using unobservable data, establishes a fair value hierarchy thatprioritizes the information used to develop those assumptions and requiresseparate disclosure by level within the fair value hierarchy. The provisions ofSFAS No. 157 are effective for interim financial statements issued for fiscalyears beginning after November 15, 2007, in the case of the Company, fiscal2008. The Company is currently evaluating the impact of adopting SFAS No. 157on the Consolidated Financial Statements.

In June 2006, the FASB issued Interpretation No. 48, “Accountingfor Uncertainty in Income Taxes, an Interpretation of FASB Statement 109” (“FIN48”).  This statement clarifies thecriteria an individual tax position must satisfy for some or all of thebenefits of that position to be recognized in a company’s financialstatements.  FIN 48 prescribes arecognition threshold of more-likely-than-not, and a measurement attribute forall tax positions taken or expected to be taken on a tax return, in order forthose tax positions to be recognized in the financial statements.  Effective January 1, 2007, the Company hasadopted the provisions of FIN 48 and there was no material effect on the financialstatements.  As a result, there was nocumulative effect related to adopting FIN 48.

As of January 1,2007, the Company has provided a liability for approximately $362,000 ofunrecognized tax benefits, of which $326,000 would impact the Company’seffective tax rate, if recognized.  Therewere no material adjustments for the unrecognized income tax benefits in thefirst quarter of 2007, and the Company does not expect that the amounts ofunrecognized tax benefits will change significantly within the next twelvemonths.

The Company issubject to U.S. Federal and United Kingdom income tax, as well as income taxesof multiple state jurisdictions.  TheCompany has been informed by the Internal Revenue Service that its 2005 incometax return will be examined.  An estimateof possible change to the unrecognized tax benefit as a result of thisexamination cannot be made at this time.

The Companyrecognizes interest and penalties related to uncertain tax positions in incometax expense.  Upon adoption of FIN 48,the Company had no interest or penalties accrued related to uncertain taxpositions, due to available net operating loss carryforwards.

For federalpurposes, post 1992 tax years remain open to examination as a result of earliernet operating losses being utilized in recent years.  For state purposes, the statute oflimitations remains open in a similar manner for states that have generated netoperating losses.

6

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**Comprehensive Income**

Comprehensive income consists of the following foreach period:
|                                 | ** ** | **Three Months Ended** | ** ** |
|---------------------------------|------------|----------------------------------|------------|
| ** **                      | ** ** | **March 31,**               | ** ** |
| ** **                      | ** ** | **2007**                         | ** ** | **2006** | ** ** |
|                            |       |                             |       |   |   |
| Net income                      |       | $                                | 490        |   | $ | 92 |   |
|                            |       |                             |       |   |   |
| Currency translation adjustment |       | (51                              | )          | 10 |   |
|                            |       |                             |       |   |   |
| Total comprehensive income      |       | $                                | 439        |   | $ | 102 |   |

 

**2.****                                      BASICAND DILUTED INCOME PER SHARE**

Basic earnings per share (EPS) is computed by dividingnet income available for common stockholders by the weighted-average number ofcommon shares outstanding during the period. Diluted EPS is similar to basicEPS, except that the dilutive effect of converting or exercising allpotentially dilutive securities is also included in the denominator. TheCompany’s calculation of diluted EPS includes the dilutive effect of exercisingstock options into common shares.
|                                                            | ** ** | **Three Months Ended** | ** ** |
|------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                 | ** ** | **March 31,**               | ** ** |
| ** **                                                 | ** ** | **2007**                         | ** ** | **2006** | ** ** |
|                                                       |       |                             |       |   |   |
| Weighted avg. common shares outstanding                    |       | 20,208,666                       |       | 19,960,431 |   |
|                                                       |       |                             |       |   |   |
| **Shares used in computing  basic net income per share**   |       | **20,208,666**                   |       | **19,960,431** |   |
|                                                       |       |                             |       |   |   |
| Stock options                                              |       | 110,426                          |       | 153,005 |   |
|                                                       |       |                             |       |   |   |
| **Shares used in computing diluted net income per  share** |       | **20,319,092**                   |       | **20,113,436** |   |

 

**3.****                                      SHARE-BASEDCOMPENSATION**

The Company has a stock incentive plan (the “2000 Plan”),which authorizes the granting of incentive and nonqualified stock options andrestricted stock. Under the 2000 Plan, executives, key employees and outsidedirectors receive awards of options to purchase common stock or restrictedstock. Incentive stock options are granted at not less than 100% of fair marketvalue at the date of grant (110% for stockholders owning more than 10% of theCompany’s common stock). Nonqualified stock options are granted at not lessthan 85% of fair market value at the date of grant. A maximum of 4,000,000shares of common stock are issuable under the 2000 Plan. Stock options grantedunder the 2000 Plan have a maximum contractual term of 10 years. The 2000 Planprovides for accelerated vesting if there is a change of control (as defined inthe 2000 Plan).

The Company also has an Employee Stock Purchase Plan(the “ESPP”). The ESPP allows eligible full-time employees to purchase sharesof common stock at 90 percent of the lower of the fair market value of a shareof common stock on the first or last day of the quarter. Eligible employees areprovided the opportunity to acquire Company common stock during each quarter.No more than 661,157 shares of common stock may be issued under

7

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the ESPP. Such stock may be unissued shares or treasury shares of theCompany or may be outstanding shares purchased in the open market or otherwiseon behalf of the ESPP. Under SFAS 123R, the Company’s ESPP is compensatory.Therefore, the Company is required to recognize compensation expense related tothe discount from market value of shares sold under the ESPP.

Certain additional options have been granted outsidethe 2000 Plan. These options generally follow the provisions of the 2000Plan.  The Company issues new shares tosatisfy option exercises, the vesting of restricted stock units and sharespurchased under the ESPP.

Share-based compensation expense recorded in the threemonth period ended March 31, 2007 and 2006 is summarized as follows:
|                                        | ** ** | **Three Months Ended** | ** ** |
|----------------------------------------|------------|----------------------------------|------------|
| ** **                             | ** ** | **March 31,**               | ** ** |
| ** **                             | ** ** | **2007**                         | ** ** | **2006** | ** ** |
|                                   |       |                             |       |   |   |
| Stock options                          |       | $                                | 36         |   | $ | — |   |
| Employee stock purchase plan           |       | 3                                |       | 1 |   |
| Restricted stock units                 |       | 43                               |       | 65 |   |
|                                   |       |                             |       |   |   |
| Total share-based compensation expense |       | $                                | 82         |   | $ | 66 |   |

 

The deferred income tax benefit related to share-basedcompensation expense for the quarters ended March 31, 2007 and 2006 was $18 and$26 respectively.  Share-basedcompensation expense is a component of selling, general and administrativeexpense, and is recorded as a non-cash expense in the operating activitiessection of the Company’s Consolidated Statement of Cash Flows.

The intrinsic value of options exercised during thethree month period ended March 31, 2007 and 2006 was $179 and $9,respectively.  Proceeds received from theexercise of stock options and from employee payments into the ESPP totaled $302and $6, respectively, in the three month period ended March 31, 2007 and $12and $7, respectively, in three month period ended March 31, 2006. These amountsare recorded in the cash flows from financing activities section of the Company’sConsolidated Statement of Cash Flows.

8

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Information with respect to the activity ofoutstanding stock options granted under the 2000 Plan and options grantedseparately from the 2000 Plan for the three months ended March 31, 2007 issummarized as follows:
|                                            | ** ** | ** **         | ** ** | ** **           | ** ** | **Weighted**               | ** ** | **Aggregate**  | ** ** |
|--------------------------------------------|------------|--------------------|------------|----------------------|------------|----------------------------|------------|----------------|------------|
| ** **                                 | ** ** | **Number**         | ** ** | ** **           | ** ** | **Average Remaining** | ** ** | **Instrinsic** | ** ** |
| ** **                                 | ** ** | **of Shares** | ** ** | **Price Range** | ** ** | **Contractual term**  | ** ** | **Value**      | ** ** |
|                                       |       |               |       |                 |       |                       |       |           |       |
| Balance, December 31, 2006                 |       | 1,469,729          |       | $1.88 - $6.94        |       |                       |       |           |       |
|                                       |       |               |       |                 |       |                       |       |           |       |
| Granted                                    |       | 125,000            |       | $3.46 - $4.36        |       |                       |       |           |       |
| Cancelled / Forfeited                      |       | (189,200           | )          | $3.05 - $6.94        |       |                       |       |           |       |
| Exercised                                  |       | (110,000           | )          | $1.88 - $3.35        |       |                       |       |           |       |
|                                       |       |               |       |                 |       |                       |       |           |       |
| Balance, March 31, 2007                    |       | 1,295,529          |       | $2.50 - $6.94        |       | 6.3 years                  |       | $              | 1,787      |   |
|                                       |       |               |       |                 |       |                       |       |           |       |
| Vested and excercisable at March 31,  2007 |       | 1,088,268          |       | $2.50 - $6.94        |       | 5.7 years                  |       | $              | 1,538      |   |
|                                       |       |               |       |                 |       |                       |       |           |       |
| Expected to vest as of March 31, 2007      |       | 1,283,029          |       | $2.50 - $6.94        |       | 6.3 years                  |       | $              | 1,772      |   |

 

During the three month period ended March 31, 2007there were 125,000 options granted with a weighted average grant date fairvalue of $2.81 per share.

The following table provides additional informationabout the Company’s stock options outstanding and exercisable at March 31,2007:
| ** **               | ** ** | **Options Outstanding** | ** ** | **Options Exercisable** | ** ** |
|--------------------------|------------|------------------------------|------------|------------------------------|------------|
| ** **               | ** ** | ** **                   | ** ** | **Weighted Average**    | ** ** | ** ** | ** ** | **Wtd. Average** | ** ** |
| **Range of**        | ** ** | **Number of**           | ** ** | **Remaining**                | ** ** | **Exercise** | ** ** | **Number of** | ** ** | **Exercise** | ** ** |
| **Exercise Prices** | ** ** | **Shares**                   | ** ** | **Contractual Life**    | ** ** | **Price** | ** ** | **Shares** | ** ** | **Price** | ** ** |
| ** **               | ** ** | ** **                   | ** ** | ** **                   | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| $2.50 - $2.88            |       |                         | 167,334    |                         | 4.1 Years  |   | $ | 2.73 |   | 167,334 |   | $ | 2.73 |   |
| $3.05 - $4.69            |       |                         | 1,111,945  |                         | 6.7 Years  |   | $ | 3.87 |   | 904,684 |   | $ | 3.85 |   |
| $5.17 - $6.94            |       |                         | 16,250     |                         | 4.4 Years  |   | $ | 5.49 |   | 16,250 |   | $ | 5.49 |   |
| $2.50 - $6.94            |       |                         | 1,295,529  |                         | 6.3 Years  |   | $ | 3.74 |   | 1,088,268 |   | $ | 3.71 |   |

 

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A summary of the status of the Company’s unvestedrestricted stock as of December 31, 2006 and changes during the three monthperiod ended March 31, 2007 is presented below.
|                                               | ** ** | ** ** | ** ** | **Weighted Average** | ** ** | ** **               | ** ** |
|-----------------------------------------------|------------|------------|------------|---------------------------|------------|--------------------------|------------|
| ** **                                    | ** ** | ** ** | ** ** | **Grant Date**       | ** ** | **Aggregate**            | ** ** |
| ** **                                    | ** ** | **Shares** | ** ** | **Fair Value**       | ** ** | **Intrinsic Value** | ** ** |
|                                          |       |       |       |                      |       |                     |       |
| Non-vested RSU’s at December 31, 2006    |       | 85,222     |       | $                         | 3.71       |                     |       |   |
|                                          |       |       |       |                      |       |                     |       |
| Granted                                       |       | 27,000     |       | $                         | 3.46       |                     |       |   |
| Vested                                        |       | (6,000     | )          | $                         | 3.05       |                     |       |   |
|                                          |       |       |       |                      |       |                     |       |
| Non-vested RSU’s at March 31, 2007       |       | 106,222    |       | $                         | 3.68       |                     | $          | 391 |   |
|                                          |       |       |       |                      |       |                     |       |
| RSU’s expected to vest at March 31, 2007 |       | 103,522    |       | $                         | 3.69       |                     | $          | 382 |   |

 

During the three month period ended March 31, 2007,there were 27,000 shares of restricted stock granted at a fair value of $3.46.At March 31, 2007, there were 106,222 shares of restricted stock outstandingwith a fair value (based on the market price for the stock at the date ofgrant) totaling $391 and a weighted average remaining term of 1.9 years.Restricted stock granted is generally scheduled to vest over periods of two tofour years. The cost of the grant is charged to operations over the vestingperiod. The total unamortized fair value of unvested restricted stock, at March31, 2007 was $294.

**4.****                                      INVENTORIES**

The Company’s inventories are valued at the lower ofcost or market. For inventories that consist primarily of test kit components,bulk serum and antibody products, cost is determined using the first in, firstout method. For inventories that consist of costs associated with theproduction of custom antibodies, cost is determined using the specific identificationmethod. At March 31, 2007 and December 31, 2006, inventories consisted of thefollowing:
|                  | ** ** | **March 31, 2007** | ** ** | **December 31, 2006** | ** ** |
|------------------|------------|------------------------------|------------|---------------------------------|------------|
|             |       |                         |       |                            |       |
| Raw materials    |       | $                            | 1,279      |                            | $          | 1,221 |   |
| Work in progress |       | 829                          |       | 653                             |       |
| Finished goods   |       | 1,620                        |       | 1,304                           |       |
|             |       |                         |       |                            |       |
|             |       | $                            | 3,728      |                            | $          | 3,178 |   |

 

**5.****                                      INTANGIBLEASSETS**

At March 31, 2007 and December 31, 2006, intangibleassets consisted of the following:
|                                      | ** ** | **March 31, 2007** | ** ** | **December 31, 2006** | ** ** | **Lives** | ** ** |
|--------------------------------------|------------|------------------------------|------------|---------------------------------|------------|-----------|------------|
|                                 |       |                         |       |                            |       |      |       |
| Goodwill                             |       | $                            | 4,822      |                            | $          | 4,822     |       | N/A |   |
| Other                                |       | 3,134                        |       | 3,134                           |       | 2-20      |       |
| Less – accumulated amortization |       | (1,680                       | )          | (1,619                          | )          |      |       |
|                                 |       |                         |       |                            |       |      |       |
| Net intangible assets                |       | $                            | 6,276      |                            | $          | 6,337     |       |   |   |

 

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**6.****                                      DEBT**

On May 5, 2000, the Company entered into a financingagreement with a commercial bank. This agreement provides for up to a $5,000revolving line of credit, none of which was outstanding and approximately$3,044 of which was available at March 31, 2007, based on eligible assets. Therevolving line of credit bears a variable interest rate of between 1.75% and2.75% over LIBOR depending upon the ratio of the Company’s funded debt toEBITDA, and is subject to a borrowing base determined by the Company’s eligibleaccounts receivable. The Company’s annual effective rate of interest on thisline of credit, taking into account the variable interest rate and LIBOR, wasapproximately 7.07% at March 31, 2007.

On December 13, 2001, the Company entered into an agreementwith a commercial bank to finance the construction of new facilities at itsWindham, Maine location. This agreement provided for up to $1,500 in financing,$509 of which was outstanding at March 31, 2007, and is repayable over sevenyears, with principal payments that began on October 1, 2002. The loan bears avariable interest rate of between 2% and 3% over LIBOR depending upon the ratioof the Company’s funded debt to EBITDA, as defined. Payments are due monthly,with equal amortization of principal payments plus interest. The Company’sannual effective rate of interest on this loan at March 31, 2007 wasapproximately 7.32%.

Under the terms of the above financing, the Company isrequired to meet certain quarterly financial covenants that include a ratio ofEBITDA to current maturities of debt plus interest and cash paid for taxesgreater than 1.50 and a ratio of funded debt to EBITDA not to exceed 3.25. TheCompany met all of its financial covenants with respect to this indebtedness atMarch 31, 2007 and expects that it will be able to meet all of its financialcovenants with respect to this indebtedness for 2007.

At of March 31, 2007 and December 31, 2006, theoutstanding balance on all of the Company’s commercial bank debt was $509 and$562, respectively. This indebtedness is secured by substantially all of theCompany’s assets.

**Item 2. Management’s Discussion andAnalysis of Financial Condition and Results of Operations**

**Forward-Looking Statements**

This Form 10-Q contains certain forward-lookingstatements reflecting the current expectations of Strategic Diagnostics Inc.and its subsidiaries (the “Company” or “SDI”). These statements include, amongothers, statements regarding: the Company’s intentions with respect to futurespending on research and development; the development, market acceptance andsales of tests for food-borne pathogens and related growth media; the size andnature of demand in the markets for the Company’s products and related effectson operating results; the need for water quality and toxicity tests; approvaland validation by third parties of the Company’s food pathogen tests; theperformance of the Company’s testing products; sales of the Company’santibodies; timing of new product introductions and other information that maybe predictive of future operating results; the Company’s ability to reduceoperating expenses; and the Company’s ability to improve operating results thusenabling it to meet future loan covenants. In addition, when used in this Form10-Q, the words “anticipate,” “enable,” “estimate,” “intend,” “expect,” “believe,”“potential,” “may,” “will,” “should,” “project” and similar expressions as theyrelate to the Company are intended to identify said forward-looking statements.Investors are cautioned that all forward-looking statements involve risks anduncertainties, which may cause actual results to differ from those anticipatedat this time. Such risks and uncertainties include, without limitation, changesin demand for products, delays in product development, delays in marketacceptance of new products, retention of customers, attraction and retention ofmanagement and key employees, adequate supply of raw materials, inability toobtain or delays in obtaining third party approvals, or required governmentapprovals, the ability to meet increased market demand, competition, protectionof intellectual property, non-infringement of intellectual property,seasonality, the ability to obtain financing and other factors more fullydescribed in the Company’s public filings with the U.S. Securities and ExchangeCommission, including without limitation its Annual Report on Form 10-K for theyear ended December 31, 2006.

**Background**

We provide bio-services and industrial bio-detectionservices. Bio-services include providing custom antibody production servicesand antibody reagents to the diagnostic, pharmaceutical, bio-medical andacademic

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research and development markets. Industrial bio-detection servicesinclude providing test kits for assessing the health, safety and quality offood, water and the environment.

Our primary core competency is the development andmanufacture of antibodies. These antibodies are used by medical diagnostic andpharmaceutical companies, research institutions and incorporated into test kitsmanufactured by us for the detection of a wide variety of substances related tofood safety and water quality.

Our food safety product group markets tests to detectspecific traits in genetically engineered plants, tests to detect GeneticallyModified (GM) traits in food ingredients and food fractions, tests to detectnaturally occurring fungi in grains (mycotoxins) and tests for food pathogens.

Our water quality product group includes tests todetect toxicity in drinking water, industrial process water and wastewater, andtests to detect specific traits in soil and other waste matter for use atenvironmental remediation projects, hazardous waste operations and otherapplications.

Our antibody product group provides a wide array ofantibodies and antibody services, including hybridoma development, genomicantibody development, calibrators, antigens and reagents and the production ofmonoclonal and polyclonal antibodies. These antibodies are incorporated intotest kits we manufacture as described above and diagnostic and therapeuticproducts, and used in clinical research.

We sell products and services in the food safety,water quality and antibody market categories through our U.S. direct salesforce, a network of over 50 distributors in Canada, Mexico, Latin America,Europe and Asia and our corporate partners. These products and services aresold to a wide range of customers including water utilities, food processors,pharmaceutical, biotechnology and diagnostic companies and major biomedical researchcenters.

**Results of Operations**

*Three Months Ended March 31, 2007versus Three Months Ended March 31, 2006*

Revenues for the first quarter of 2007 increased 6.0%to $6.6 million, compared to $6.3 million for the same period in 2006. Theincrease in revenues in the first quarter of 2007 was primarily the result of a32% increase in sales of antibody products. Sales of food pathogen products grew 16% domestically and 8% globallywhen comparing the first quarter of 2007 to the first quarter of 2006.

Operating expenses for the first quarter of 2007decreased 4.2% to $5.9 million compared to $6.2 million for the firstquarter of 2006. This decrease is primarily attributable to a 12% reduction inmanufacturing costs. The decrease in manufacturing costs was partially offsetby a 4% increase in selling, general and administrative expenses, all asdescribed below.

Gross profits (defined as total revenues lessmanufacturing costs) for the first quarter of 2007 were $4.1 millioncompared to $3.3** **million in the year agoperiod. Gross margins were 61.2% and 53.1% for the first quarters of 2007 and2006, respectively. The increase in margins and related reduction inmanufacturing costs was primarily attributable to increased levels ofproduction (generating a lower cost per unit) and a more favorable mix ofproducts sold.

Research and development spending was $697,000, or 10.5%of net revenues, in the first quarter of 2007, compared to $697,000, or 11.1%of net revenues, in the first quarter 2006.

Selling, general and administrative expenses were $2.7million for the first quarter of 2007, compared to $2.6 million for the samequarter in 2006. The overall increase in expenses was associated with anoverall increase in business activity in the quarter ended March 31, 2007versus the quarter ended March 31, 2006.

The Company recorded net interest income of $110,000in the first quarter of 2007 compared to $83,000 in the prior year firstquarter. The increase was primarily due to higher levels of invested cash andincreased interest rates received on invested cash during the 2007 period.

Pre-tax income totaled $821,000 for the three monthsended March 31, 2007 compared to pre-tax income of $151,000 for the same periodin 2006.

The Company’s effective tax rate was approximately 40%for the three month period ended March 31, 2007 and approximately 39% for thethree month period ended March 31, 2006.

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Net income in the first quarter of 2007 was $490,000,or $0.02 per diluted share, compared to $92,000, or $0.005 per diluted share,for the same period in 2006. Diluted shares utilized in these computations were20.3 million and 20.1 million for the first quarters of 2007 and 2006,respectively.

**Antibody Products**

Antibody revenues increased 32% to $3.3 million forthe first quarter of 2007, compared to $2.5 million for the same quarter in2006.  Bulk antibody revenues accountedfor approximately 24% of total antibody revenue, and the Company has seen asteady increase for its proprietary bulk antibodies, including its antibodiesfor Strep A and Troponin I.  Bulkantibodies can be subject to inconsistent order patterns and higher rates of salesvariance.  The Company also saw solidincreases in demand for its custom antibody services, driven by its new GenomicAntibodies (TM) technology.  For thefirst quarter of 2007 antibody revenues were 50% of total Company revenuescompared to 40% in the first quarter of 2006.

**Food Safety Products**

Food safety revenues were $2.2 million for the firstquarter of 2007 compared to $2.6 million for the same period in 2006, adecrease of 14.4%. Food pathogen sales increased 16.0% in the United States inthe current quarter as compared to the first quarter of 2006, as the Companycontinues to gain traction with its new RapidChek® SELECTTM for Salmonella. Food pathogen salesgrew 8% as compared to the first quarter of 2006 on a global basis, and theCompany began active recruitment and training of new foreign distributorsduring the quarter.

Ag-GMOproducts (which are a subset of Food safety revenues) were down $447,000, or26%, for the first quarter of 2007 as compared to last year’s first quarter,consistent with the Company’s expectations. The Company expects sales in theagricultural market to decrease $700,000 in 2007 compared to the full year 2006results. As in previous years, regulations and policy changes governing thetesting of GMOs could positively or negatively impact this estimate as the yearprogresses.

**Water and Environmental Products**

Waterand environmental products revenue decreased 4.7% to $1.1 million for thequarter ended March 31, 2007, compared to $1.2 million for the same period in2006. Sales of Microtox® instruments in the first quarter of 2007 weredown slightly as were sales of RapidAssay® kits forpesticides and other environmental pollutants. Microtox® reagents as well as test kits for thedetermination of water treatment polymers strengthened during the quarter.

**Liquidity and Capital Resources**

The net cash used in operating activities of $431,000for the first quarter of 2007 was primarily the result of increases ininventories, other current assets and decreases in accrued expense levels. Theincrease in inventories is primarily attributable to production of WaterQuality and Food Safety products in anticipation of increased levels of salesin the second quarter of 2007.  Theincrease in other current assets was primarily the result of the purchase ofinsurance for 2007, while the decrease in accrued expenses is primarilyattributable to reductions in commissions and payroll accrued.

Net cash used in investing activities of $366,000 forthe first quarter of 2007 was primarily related to the capital expenditures forthe period. This compares to net cash used in investing activities of $80,000for the first quarter of 2006. The capital expenditures for 2007 and 2006 areprimarily related to purchases of laboratory and manufacturing equipment.

Net cash provided by financing activities of $255,000for the first quarter of 2007 and net cash used by financing activities for thefirst quarter of 2006 of $34,000 were primarily driven by proceeds from theexercise of stock options, which was partially offset by net repayments ofoutstanding debt.

The Company’s working capital, current assets lesscurrent liabilities, increased $1.2 million to $17.9 million at March 31,2007 from $16.7 million at December 31, 2006, primarily due to the increase ininventories and other current assets and reduction in accrued expense asdescribed above. Outstanding debt decreased $53,000 from $562,000 at December31, 2006 to $509,000 on March 31, 2007, due to scheduled repayments.

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The Company has a financing agreement with acommercial bank that provides for up to a $5.0 million revolving line ofcredit, none of which was outstanding and approximately $3.0 million of whichwas available at March 31, 2007, based on eligible assets.

The revolving line of credit bears a variable interestrate of between 1.75% and 2.75% over LIBOR depending upon the ratio of theCompany’s funded debt to EBITDA, and is subject to a borrowing base determinedby the Company’s eligible accounts receivable. The Company’s annual effectiverate of interest on this line of credit, taking into account the variableinterest rate and LIBOR, was approximately 7.07% at March 31, 2007.

On December 13, 2001, the Company entered into anagreement with a commercial bank to finance the construction of new facilitiesat its Windham, Maine location. This agreement provided for up to $1.5 millionin financing, $509,000 of which was outstanding at March 31, 2007, and isrepayable over seven years, with principal payments that began on October 1,2002. The loan bears a variable interest rate of between 2% and 3% over LIBORdepending upon the ratio of the Company’s funded debt to EBITDA. Payments aredue monthly, with equal amortization of principal payments plus interest. TheCompany’s annual effective rate of interest on this loan at March 31, 2007, wasapproximately 7.32%.

Under the terms of the above financing, the Company isrequired to meet certain quarterly financial covenants that include a ratio ofEBITDA to current maturities of debt plus interest and cash paid for taxesgreater than 1.50 and a ratio of funded debt to EBITDA not to exceed 3.25. TheCompany met all of its financial covenants with respect to this indebtedness atMarch 31, 2007.

For the quarter ended March 31, 2007, the Companysatisfied all of its cash requirements from cash provided by operatingactivities, cash available and on-hand and from the financing agreementsdescribed above. At March 31, 2007, the Company had $298,000 in long-term debtand stockholders’ equity of $36.1 million. In April 2007, the Company committed to construction of an approximately$1.4 million addition to its animal facility in Windham, Maine.  In addition, the Company anticipates that it may spend approximately $1.1 million in2007 to upgrade or expand certain manufacturing, research and development andoffice equipment and systems that will drive productivity or generate costsavings, and also to introduce automation into certain manufacturing processesthat are currently labor intensive.

Based upon its cash on hand, credit facilities,current product sales and the anticipated sales of new products, the Companybelieves it has, or has access to, sufficient resources to meet its operatingrequirements through the next twelve months. The Company’s ability to meet itslong-term capital needs will depend on a number of factors, includingcompliance with existing and new loan covenants, the success of its current andfuture products, the focus and direction of its research and developmentprograms, competitive and technological advances, future relationships withcorporate partners, government regulation, the Company’s marketing anddistribution strategy, its successful sale of additional common stock and/orthe Company successfully locating and obtaining other financing, and thesuccess of the Company’s plan to make future acquisitions. Accordingly, noassurance can be given that the Company will be able to meet the futureliquidity requirements that may arise from these inherent and similar uncertainties.

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*Non-GAAP Financial Measures*

The Company presents an EBITDA measure as the Companybelieves this provides investors and the Company’s management with additionalinformation to measure the Company’s liquidity. EBITDA measures are not ameasure of performance under GAAP, and therefore should not be considered inisolation or as a substitute for net income or cash flows from operations.Additionally, the Company’s EBITDA calculations may differ from the EBITDAcalculations for other companies.

The calculation of the Company’s EBITDA measure (asdiscussed above), and the reconciliation of the Company’s EBITDA measure to netcash provided by operating activities for the three months ended March 31, 2007and 2006, respectively, is as follows (amounts in thousands):
|                                                      | ** ** | **Three Months Ended March 31,** | ** ** |
|------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                           | ** ** | **2007**                                             | ** ** | **2006** | ** ** |
| Net cash (used in) provided by operating  activities |       | $                                                    | (431       | ) | $ | (516 | ) |
| Changes in assets and liabilities:                   |       |                                                 |       |   |   |
| Receivables                                          |       | 158                                                  |       | 222 |   |
| Inventories                                          |       | 550                                                  |       | (257 | ) |
| Other current assets                                 |       | 636                                                  |       | 600 |   |
| Other assets                                         |       | 25                                                   |       | — |   |
| Accounts payable                                     |       | (22                                                  | )          | 9 |   |
| Accrued expenses                                     |       | 329                                                  |       | 386 |   |
| Deferred revenue                                     |       | (21                                                  | )          | 21 |   |
| Non-current taxes payable                            |       | (82                                                  | )          | — |   |
| Net change in deferred income tax                    |       | 58                                                   |       | — |   |
| Share-based compensation expense                     |       | (82                                                  | )          | (66 | ) |
| Interest income, net                                 |       | (110                                                 | )          | (83 | ) |
| EBITDA                                               |       | $                                                    | 1,008      |   | $ | 316 |   |

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**Item 3. Quantitative and QualitativeDisclosures About Market Risk**

The Company has exposure to changing interest rates,and is currently not engaged in hedging activities. Interest on approximately$509,000 of outstanding indebtedness is at a variable rate of between 2% to 3%over the published London Interbank Offered Rate (LIBOR), based upon theCompany’s ratio of funded debt to EBITDA, and was 2% over LIBOR on average forthe year. At the Company’s current level of indebtedness, each 1% change in thevariable interest rate will have an effect of $5,000 on the Company’s annualinterest expense charges.

The Company conducts operations in United Kingdom. Theconsolidated financial statements of the Company are denominated in U.S.dollars and changes in exchange rates between foreign countries and the U.S.dollar will affect the translation of financial results of foreign subsidiariesinto U.S. dollars for purposes of recording the Company’s consolidatedfinancial results. Historically, the effects of translation have not beenmaterial to the consolidated financial results.

**Item 4. Controls and Procedures**

(a)                                  Evaluationof Disclosure Controls and Procedures

Our management, with the participation of our ChiefExecutive Officer and Chief Financial Officer, evaluated the effectiveness ofour disclosure controls and procedures, as defined in Rule 13a-15(e) under theSecurities Act of 1934, as amended, as of the end of the period covered by thisreport. Based upon that evaluation, the Chief Executive Officer and ChiefFinancial Officer concluded that, as of March 31, 2007, our disclosure controlsand procedures were effective to provide reasonable assurance that theinformation required to be disclosed by us in reports filed under theSecurities Exchange Act of 1934, as amended, is recorded, processed, summarizedand reported within the time periods specified in the SEC’s rules and forms,and that information required to be disclosed by us in the reports we file orsubmit under the Securities Exchange Act of 1934, as amended, is accumulatedand communicated to our management, including our principal executive andfinancial officers, or persons performing similar functions, as appropriate toallow timely decisions regarding required disclosure.

(b)                                 Changein Internal Control over Financial Reporting

No change in the Company’s internal control overfinancial reporting occurred during the most recent fiscal quarter that hasmaterially affected, or is reasonably likely to materially affect, the internalcontrol over financial reporting.

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**PART II – OTHER INFORMATION**

**Item 6.Exhibits**
| 31.1   |   | Certifications of the Chief Executive Officer of  Strategic Diagnostics Inc. required by Rule 13a-14(a) under the Securities  Exchange Act of 1934                                |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                              |
| 31.2   |   | Certifications of the Chief Financial Officer of  Strategic Diagnostics Inc. required by Rule 13a-14(a) under the Securities  Exchange Act of 1934                                |
|   |   |                                                                                                                                                                              |
| 32.1   |   | Certification of the Chief Executive Officer of Strategic  Diagnostics Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to  Section 906 of Sarbanes-Oxley Act of 2002 |
|   |   |                                                                                                                                                                              |
| 32.2   |   | Certification of the Chief Financial Officer of  Strategic Diagnostics Inc. pursuant to 18 U.S.C. Section 1350, as adopted  pursuant to Section 906 of Sarbanes-Oxley Act of 2002 |

 

**SIGNATURES**

Pursuant to the requirements of the SecuritiesExchange Act of 1934, the registrant has duly caused this report to be signedon its behalf by the undersigned thereunto duly authorized.
|                          |   | STRATEGIC DIAGNOSTICS INC.                                                                                                       |
|--------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------|
|                     |   |                                                                                                                             |
|  Date: May 14, 2007 |   | /s/ Matthew H. Knight                                                                                                            |
|                     |   | Matthew H. Knight  President, Chief Executive Officer  (Principal Executive Officer)                                             |
|                     |   |                                                                                                                             |
|                     |   |                                                                                                                             |
|  Date: May 14, 2007 |   | /s/ Stanley A. Fronczkowski                                                                                                      |
|                     |   | Stanley A. Fronczkowski  Vice President – Finance and Chief Financial Officer  (Principal Financial and Accounting Officer) |

 

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