<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                               -------------------
                                    FORM 10-Q

(Mark One)
[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934
                  For the Quarterly Period Ended June 30, 2001

[  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934
                        For the Transition Period From to



                         Commission File Number 0-68440



                           STRATEGIC DIAGNOSTICS INC.
             (Exact name of Registrant as specified in its charter)

                          ----------------------------


                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 telephone number, including area code: (302) 456-6789

                              --------------------


               Former Name, Former Address and Former Fiscal Year,
                       if Changed Since Last Report: None


         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 __

         As of June 30, 2001 there were 16,796,734 outstanding shares of the
Registrant's common stock, par value $.01 per share.

<PAGE>


                           STRATEGIC DIAGNOSTICS INC.

                                      INDEX

<TABLE>
<CAPTION>
Item                                                                               Page
----                                                                               ----

<S>                                                                                <C>
PART I

      ITEM 1.  Financial Statements (Unaudited)

             Consolidated Balance Sheets - June 30, 2001 and December 31, 2000        2

             Consolidated Statements of Operations - Three months and six months
                      ended June 30, 2001 and 2000                                    3

             Consolidated Statement of Stockholders' Equity and
                      Comprehensive Income for the six months ended
                      June 30, 2001                                                   4

             Consolidated Statements of Cash Flows - Six months ended
                      June 30, 2001 and 2000                                          5

             Notes to Consolidated Interim Financial Statements                       6

      ITEM 2.  Management's Discussion and Analysis of Financial Condition
               and Results    of Operations                                          13

      ITEM 3.  Quantitative and Qualitative Disclosures About Market Risk            19

PART II                                                                              20

       ITEM 4. Submission of Matters to a Vote of Security Holders                   20

       ITEM 6. Exhibits and Reports on Form 8-K                                      20

SIGNATURES                                                                           21
</TABLE>



                                       1
<PAGE>




                                     PART I

Item 1. Financial Statements

                   STRATEGIC DIAGNOSTICS INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                 (in thousands, except share and per share data)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                June 30,        December 31,
------------------------------------------------------------------------------------------------------------
                                                                                  2001              2000
------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>               <C>
 ASSETS
------------------------------------------------------------------------------------------------------------
 Current Assets:
      Cash and cash equivalents                                                $ 1,969           $ 1,288
      Receivables, net                                                           4,507             4,298
      Inventories                                                                6,956             6,844
      Deferred tax asset                                                         1,070             1,070
      Other current assets                                                         386               216
------------------------------------------------------------------------------------------------------------
         Total current assets                                                   14,888            13,716
------------------------------------------------------------------------------------------------------------
 Property and equipment, net                                                     2,672             2,919
 Other assets                                                                      527               438
 Deferred tax asset                                                              4,892             5,416
 Intangible assets, net                                                          3,891             4,019
------------------------------------------------------------------------------------------------------------
         Total assets                                                          $26,870          $ 26,508
------------------------------------------------------------------------------------------------------------
 LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------------------------------------------------------------------------------
 Current Liabilities:
      Accounts payable                                                           $ 977             $ 655
      Accrued expenses                                                           1,022             1,129
      Deferred revenue                                                             162               162
      Current portion of long term debt                                          1,333             1,339
------------------------------------------------------------------------------------------------------------
         Total current liabilities                                               3,494             3,285
------------------------------------------------------------------------------------------------------------
 Long-term debt                                                                    892             1,889
------------------------------------------------------------------------------------------------------------
 Stockholders' Equity
      Preferred stock, $.01 par value, 17,500,000 shares authorized,
         no shares issued or outstanding                                             -                 -
      Series A preferred stock, $.01 par value, 2,164,362 shares
         authorized, no shares issued or outstanding                                 -                 -
      Series B preferred stock,  $.01 par value, 556,286 shares
         authorized, no shares issued or outstanding                                 -                 -
      Common stock, $.01 par value, 35,000,000 shares authorized,
         16,796,734 and 16,699,052 issued and outstanding
         at June 30, 2001 and December 31, 2000, respectively                      168               167
      Additional paid-in capital                                                26,969            26,814
      Accumulated deficit                                                       (4,628)           (5,622)
      Cumulative translation adjustments                                           (25)              (25)
------------------------------------------------------------------------------------------------------------
         Total stockholders' equity                                             22,484            21,334
------------------------------------------------------------------------------------------------------------
         Total liabilities and stockholders' equity                            $26,870          $ 26,508
------------------------------------------------------------------------------------------------------------
</TABLE>


        The accompanying notes are an integral part of these statements.

                                       2

<PAGE>



                   STRATEGIC DIAGNOSTICS INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 (in thousands, except share and per share data)
                                   (unaudited)
<TABLE>
<CAPTION>
                                                                   Three Months                           Six Months
                                                                   Ended June 30,                         Ended June 30,
--------------------------------------------------------------------------------------------   ---------------------------------
                                                               2001              2000                 2001               2000
--------------------------------------------------------------------------------------------   ---------------------------------
<S>                                                           <C>               <C>                 <C>                <C>
 NET REVENUES:
--------------------------------------------------------------------------------------------   ---------------------------------
      Product related                                     $     6,999       $      5,478         $     13,890       $    10,810
      Contract and other                                          202               310                  385                754
--------------------------------------------------------------------------------------------   ---------------------------------
         Total net revenues                                     7,201             5,788               14,275             11,564
--------------------------------------------------------------------------------------------   ---------------------------------
 OPERATING EXPENSES:
      Manufacturing                                             3,258             2,319                6,581              4,819
      Research and development                                    705               706                1,424              1,435
      Selling, general and administrative                       2,463             2,231                4,649              4,443
--------------------------------------------------------------------------------------------   ---------------------------------
         Total operating expenses                               6,426             5,256               12,654             10,697
--------------------------------------------------------------------------------------------   ---------------------------------

         Operating income                                         775               532                1,621                867

 Interest expense, net                                            (15)              (87)                 (48)              (214)

 Gain on sale of assets                                            76                 -                   76                283
--------------------------------------------------------------------------------------------   ---------------------------------
 Income before taxes                                              836               445                1,649                936
--------------------------------------------------------------------------------------------   ---------------------------------
         Income tax expense                                       321               180                  655                367
--------------------------------------------------------------------------------------------   ---------------------------------
 Net income                                                       515               265                  994                569
--------------------------------------------------------------------------------------------   ---------------------------------
 Basic net income per share                               $      0.03       $      0.02          $      0.06        $      0.03
--------------------------------------------------------------------------------------------   ---------------------------------
 Shares used in computing basic net income
      per share                                            16,752,000        16,561,000           16,748,000         16,511,000
--------------------------------------------------------------------------------------------   ---------------------------------
 Diluted net income per share                             $      0.03       $      0.02          $      0.06        $     0.03
--------------------------------------------------------------------------------------------   ---------------------------------
 Shares used in computing diluted net income
      per share                                            17,352,000        17,560,000           17,303,000         17,590,000
--------------------------------------------------------------------------------------------   ---------------------------------
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       3
<PAGE>
                   STRATEGIC DIAGNOSTICS INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                            AND COMPREHENSIVE INCOME
                                 (in thousands)
                                   (unaudited)
<TABLE>
<CAPTION>
                                       Series A    Series B                 Additional                     Cumulative
                                       Preferred   Preferred      Common     Paid-In      Accumulated     Translation
                                        Stock        Stock        Stock      Capital        Deficit       Adjustments      Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                                      <C>                       <C>        <C>           <C>               <C>          <C>
Balance,
December 31, 2000                        $ -          -            167        26,814        (5,622)           (25)         $ 21,334
------------------------------------------------------------------------------------------------------------------------------------
Exercises of stock options, warrants
     and other                             -          -              1           155             -              -               156
Net and comprehensive income               -          -              -             -           994              -               994
------------------------------------------------------------------------------------------------------------------------------------
Balance,
June 30, 2001                            $ -          -            168        26,969        (4,628)           (25)         $ 22,484
====================================================================================================================================
</TABLE>

        The accompanying notes are an integral part of these statements.










                                       4
<PAGE>

                   STRATEGIC DIAGNOSTICS INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                   (unaudited)
<TABLE>
<CAPTION>
                                                                                   Six Months
                                                                                  Ended June 30,
------------------------------------------------------------------------------------------------------
                                                                              2001             2000
------------------------------------------------------------------------------------------------------
<S>                                                                        <C>               <C>
 Cash Flows from Operating Activities:
 Net income                                                                $   994           $   569
      Adjustments to reconcile net income to net
      cash provided by (used in) operating activities:
         Depreciation and amortization                                         443               421
         Deferred income tax provision                                         524               367
         Gain on sale of assets                                                (76)             (283)
 (Increase) decrease in:
      Receivables                                                             (209)              538
      Inventories                                                             (112)           (1,447)
      Other current assets                                                    (170)             (223)
      Other assets                                                             (89)               56
 Increase (decrease) in:
      Accounts payable                                                         322              (575)
      Accrued expenses and taxes payable                                      (107)             (178)
------------------------------------------------------------------------------------------------------
 Net cash provided by (used in) operating activities                         1,520              (755)

 Cash Flows from Investing Activities:
      Purchase of property and equipment                                      (322)             (120)
      Proceeds from sale of land                                               330                 -
      Proceeds from sale of intangible assets                                    -               663
      Cash used in acquisition of Envirol assets                                 -               (35)
------------------------------------------------------------------------------------------------------
 Net cash provided by investing activities                                       8               508

 Cash Flows from Financing Activities:
      Proceeds from exercise of incentive stock options                        156               208
      Proceeds from  issuance of debt                                            -             6,356
      Repayments on financing obligations                                   (1,003)           (8,369)
------------------------------------------------------------------------------------------------------
 Net cash used in financing activities                                        (847)           (1,805)

 Net increase (decrease) in Cash and Cash Equivalents                          681            (2,052)

 Cash and Cash Equivalents, Beginning of Period                              1,288             2,491
------------------------------------------------------------------------------------------------------
 Cash and Cash Equivalents, End of Period                                  $ 1,969           $   439
------------------------------------------------------------------------------------------------------
 Supplemental Cash Flow Disclosure:

      Cash paid for taxes                                                      132                82

      Cash paid for interest                                                    97               281
------------------------------------------------------------------------------------------------------

 Non-cash investing and financing activity:

      Common stock issued for the purchase of Envirol products                   -                43
------------------------------------------------------------------------------------------------------
</TABLE>

         The accompanying notes are an integral part of these statements

                                       5
<PAGE>

                   STRATEGIC DIAGNOSTICS INC. AND SUBSIDIARIES

               NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

                                   (unaudited)

1. BACKGROUND:

Business
--------

Strategic Diagnostics Inc. (the "Company") develops, manufactures and markets
immunoassay-based test kits for rapid and inexpensive detection of a wide
variety of substances in the food safety and water quality markets through its
test kit division. Through its Strategic BioSolutions division, the Company also
provides antibody and immunoreagent research and development production
services.

Business Risks
--------------

The Company is subject to certain risks of entities in similar stages of
development. These risks include, among others, the Company's ability to
successfully develop, produce and market its products and its dependence on its
key collaborative partners and management personnel.

Basis of Presentation and Interim Financial Statements
------------------------------------------------------

The accompanying balance sheets at December 31, 2000 and June 30, 2001, and the
statements of operations for the three months and six months ended June 30, 2000
and 2001, and cash flows for the six months ended June 30, 2000 and 2001 include
the consolidated financial statements of the Company. All intercompany balances
and transactions have been eliminated in consolidation.

The accompanying unaudited consolidated interim financial statements of the
Company have been prepared by the Company pursuant to the rules and regulations
of the Securities and Exchange Commission regarding financial reporting.
Accordingly, they do not include all the information and footnotes required by
generally accepted accounting principles for complete financial statements and
should be read in conjunction with the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2000. In the opinion of management, the
accompanying financial statements include all adjustments (all of which are of a
normal recurring nature) necessary for a fair presentation. The results of
operations for the three months and six months ended June 30, 2001 are not
necessarily indicative of the results expected for the full year.

Revenue Recognition
-------------------

Product related sales are composed of the sale of immunoassay-based test kits
and the sale of certain antibodies and immunochemical reagents. For the six
months ended June 30, 2001 and 2000 these sales represented 89% and 81% of total
Company revenues respectively. The sale of immunoassay-based test kits and
certain antibodies and immunochemical reagents are recognized upon the shipment
of the product and transfer of title or when related services are provided.

                                       6
<PAGE>

Sales of certain antibodies and immunochemical reagents are recognized under the
percentage of completion method and are recorded based on the percentage of
costs or time incurred through the reporting date versus the estimate for the
complete contract or project. For the six months ended June 30, 2001 and 2000
these sales represented 8% and 13% of total Company revenues respectively.

Contract revenues are recognized upon the completion of contractual milestones.
For the six months ended June 30, 2001 and 2000 these sales represented 3% and
6% of total Company revenues respectively.

New Accounting Pronouncements
-----------------------------

The Company adopted the provisions of Statement of Financial Accounting
Standards No. 133, Accounting for Derivative Instruments and Hedging Activities
(Statement 133) on January 1, 2001. Statement 133 standardizes the accounting
for derivative instruments, including certain derivative instruments embedded in
other contracts. Under the standard, entities are required to carry all
derivative instruments in the statement of financial position at fair value. The
adoption of Statement 133 had no impact on the Company's financial position or
results of operations as it does not currently hold any derivative instruments
or engage in hedging activities.

In July 2001, the FASB issued Statement No. 141, Business Combinations, and
Statement No. 142, Goodwill and Other Intangible Assets. Statement 141 requires
that the purchase method of accounting be used for all business combinations
initiated after June 30, 2001 as well as all purchase method business
combinations completed after June 30, 2001. Statement 142 will require that
goodwill and intangible assets with indefinite useful lives no longer be
amortized, but instead tested for impairment at least annually in accordance
with the provisions of Statement 142. Statement 142 will also require that
intangible assets with definite useful lives be amortized over their respective
estimated useful lives to their estimated residual values, and reviewed for
impairment in accordance with SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.

The Company is required to adopt the provisions of Statement 141 immediately,
except with regard to certain business combinations initiated prior to July 1,
2001, and Statement 142 effective January 1, 2002. Furthermore, any goodwill and
any intangible asset determined to have an indefinite useful life that are
acquired in a purchase business combination completed after June 30, 2001 will
not be amortized, but will continue to be evaluated for impairment in accordance
with the appropriate pre-Statement 142 accounting literature. Goodwill and
intangible assets acquired in business combinations completed before July 1,
2001 will continue to be amortized prior to the adoption of Statement 142.
Statement 141 will require upon adoption of Statement 142, that the Company
evaluate its existing intangible assets and goodwill that were acquired in a
prior purchase business combination, and to make any necessary reclassifications
in order to conform with the new criteria in Statement 141 for recognition apart
from goodwill. Upon adoption of Statement 142, the Company will be required to
reassess the useful lives and residual values of all intangible assets acquired
in purchase business combinations, and make any necessary amortization period
adjustments by the end of the first interim period after adoption. In addition,
to the extent an intangible asset is identified as having an indefinite useful
life, the Company will be required to test the intangible asset for impairment
in accordance with the provisions of Statement 142 within the first interim
period. Any impairment loss will be measured as of the date of adoption and
recognized as the cumulative effect of a change in accounting principle in the
first interim period.

The Company anticipates the adoption of Statements 141 and 142 will result in a
reduction of goodwill amortization of approximately $123 thousand per year and
add approximately $.01 per share all after applicable taxes.


Use of Estimates
----------------

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


                                       7
<PAGE>

2. BASIC AND DILUTED INCOME PER SHARE:

Basic EPS is computed by dividing net income or loss by the weighted-average
number of common shares outstanding during the period. Diluted EPS is similar to
basic EPS except that the effect of converting or exercising all potentially
dilutive securities is also included in the denominator. The Company's
calculation of diluted EPS includes the effect of converting or exercising stock
options and warrants into common shares.

<TABLE>
<CAPTION>

                                                            Three Months Ended                         Six Months Ended
                                                                June 30,                                    June 30,
                                                        2001                2000                   2001                2000
                                                     ==========          ==========             ==========          ==========


<S>                                                  <C>                 <C>                    <C>                 <C>
Average common shares outstanding                    16,751,632          16,560,523             16,747,893          16,511,363

Shares used in computing basic net income
per share                                            16,751,632          16,560,523             16,747,893          16,511,363
                                                     ==========          ==========             ==========          ==========

Stock options                                           555,974             936,877                513,743           1,010,691

Warrants                                                 43,976              62,765                 40,885              67,518
                                                     ----------          ----------             ----------          ----------

Shares used in computing diluted net income
per share                                            17,351,582          17,560,165             17,302,521          17,589,572
                                                     ==========          ==========             ==========          ==========
</TABLE>

On April 24, 2001, at the Company's annual stockholder's meeting, an amendment
to the Company's 2000 Stock Incentive Plan was approved increasing the number of
authorized shares to 3.2 million from the previously authorized amount of 2.5
million.

3. SALE OF TECHNOLOGY:

In July 1998, the Company entered into an exclusive agreement to sell its
analytical test to detect concentrations of lipoprotein (a) and related assets
to a biotechnology company. The purchaser has an extensive portfolio of
diagnostic assays and an established sales and distribution network targeted to
physicians and clinical laboratories and was already marketing and selling this
test pursuant to a distribution, manufacturing and license agreement with the
Company.

The purchase price for these assets was to be based on a multiple of end-user
sales volumes achieved during the second half of 1999. Transfer of the assets
occurred in March 2000.

The Company recorded proceeds of $663,000 from the sale of the assets during the
first quarter of 2000, after the sales price was determined on a preliminary
basis, and reported a net gain of $283,000.

4. ACQUISITIONS:

On February 26, 1999, the Company completed the acquisition of HTI Bio-Products
Inc. (HTI), a privately held manufacturer of custom and proprietary antibody
products and services located near San Diego, California. The acquisition was
accounted for using the purchase method of accounting. Under the terms of the
agreement to acquire HTI, the Company paid approximately $8.4 million in cash
and issued 556,286 shares of Series B preferred stock, with a fair market value

                                       8
<PAGE>

of approximately $1.1 million, as determined by an independent valuation firm,
Howard Lawson & Co. Under the terms of the agreement, on June 16, 1999, such
shares were converted into the Company's common stock on a 1 to 1 basis. The
Company is also obligated to pay a percentage of net sales of certain products
over the next three years, not to exceed $3 million. These amounts will be
recorded as additional goodwill, when and if paid. Approximately $6 million of
acquisition financing was provided by a commercial bank under a term loan, with
the balance coming from existing cash on hand.

The Series B preferred stock was valued by an independent third party, Howard
Lawson & Co. In valuing the Series B preferred stock, Howard Lawson & Co.
assumed that as convertible securities, they represented both a nonconvertible
fixed income security and a call option on the common stock of the Company.
Accordingly, the Series B preferred stock was valued as straight preferred stock
with an embedded option on the stock of the Company. Howard Lawson & Co.
performed an analysis of comparable publicly traded securities to determine the
straight preferred stock value taking into account the fixed charge and
liquidation coverage ratios for the Company and for companies issuing comparable
publicly traded straight preferred stock. The embedded option was valued using
the Black-Scholes options pricing model. The combined values resulted in a
valuation of $1.92 per share, or approximately $1.1 million in the aggregate for
the Series B preferred stock.

The acquisition financing consisted of a five-year term loan (the "Term Loan")
with monthly amortization of equal principal payments plus interest. Interest on
$3 million of original principal amount was at a fixed rate of interest of 8.96%
per annum, and the remaining principal bore interest at a variable rate of 3%
over the published London Interbank Offered Rate ("LIBOR"). Also under the terms
of the financing, the Company was required to meet certain financial covenants
including debt to net worth, minimum cash flows and no dividends or
distributions were to be paid on account of the Company's common stock. On May
5, 2000, the Company refinanced substantially all of its existing debt, and as
of June 30, 2001, the Company was in compliance with all debt covenants under
its new financing agreement (see Note 7, Debt).

The Company recorded expenses of $3.5 million of in-process research and
development in the quarter ended March 31, 1999. This amount represented an
allocation of the purchase price of HTI to two primary projects (Troponin I and
Human Red Blood Cell) and nine others that were under development but were not
launched commercially because the development was not complete. Because
technological feasibility had not been established and there was no assurance
that the customers who assisted in the development would succeed in the marker
being diagnostically significant, and no alternative use has been determined,
the entire amount of in-process research and development has been expensed. The
identified research and development consisted of in process projects for the
development of eleven antibodies, as listed below:

Troponin I              Fatty Acid Binding Protein    Cystatin C
Human Red Blood Cell    cAMP                          Brain Natriuretic Peptide
Serum Amyloid A         cGMP                          Phosphorylated Amino Acids
Phosphorylated Tau      APE

                                       9
<PAGE>

At this time, each of the eleven are commercially available. There can be no
assurance that all of these markers will be commercially successful. While each
of these markers are now commercially available, the market development has been
slower than anticipated.

The Company commissioned an appraisal of these in-process research and
development projects by an independent firm, Howard Lawson & Co., familiar with
such appraisals. This independent appraisal valued the in-process research and
development projects at $3.5 million by considering the nature and history of
HTI's business, a description of the in-process research and development assets,
the general economic outlook, the outlook for the antibody production industry,
the expected future cash flows of the products and usage of a discounted cash
flow analysis. The average completion stage of the products was estimated at 93%
and a 20% discount rate was used in computing the present value of the future
cash flows of the products.

On May 11, 1999, the Company completed the acquisition of the operating assets
of the OEM business of Atlantic Antibodies of Windham, Maine, one of the first
suppliers of custom and high-volume, bulk polyclonal antibodies for use in
diagnostic test kits and research. The acquisition was accounted for using the
purchase method of accounting. This unit serves a wide range of customers
including pharmaceutical, biotechnology, diagnostic companies and major research
centers in the United States and the Pacific Rim. Under the terms of the
agreement to acquire the operating assets of the OEM business of Atlantic
Antibodies, the Company paid $3.2 million in cash, and made a deferred payment
of $150 thousand on December 7, 2000. A commercial bank provided $3 million of
long-term acquisition financing under the Term Loan (see Note 7, Debt).

The purchase price of HTI Bio-Products and the operating assets of the OEM
business of Atlantic Antibodies Inc. was allocated as follows (in thousands):


HTI                                                  ATAB
-----------------------------------------------      ---------------------------

Cash                                   $   249       Land               $   360
Other Assets                             1,562       Fixed Assets         1,215
Fixed Assets                             1,004       Inventory            1,575
                                                     ---------------------------
Liabilities                               (863)
In-process research & development        3,500       Cash Paid          $ 3,150
                                                     ---------------------------
Goodwill                                 4,044
-----------------------------------------------

Total fair value                       $ 9,496
-----------------------------------------------

Cash Paid                              $ 8,429

Series B Preferred Stock Issued        $ 1,067


Goodwill is being amortized over its estimated useful life of 20 years.

The Company completed an asset purchase agreement with Envirol, Inc., a private
company located in Logan, Utah on April 26, 2000. Pursuant to the terms of the
agreement, the Company acquired Envirol's TCE and PCP test kit product lines for
consideration consisting of (i) a cash payment of $35 thousand (ii) the issuance
of 10,000 shares of common stock with a fair value of $43 thousand based on the
last reported sales price of the common stock on the closing date of the
transaction, May 12, 2000, and (iii) the payment of a continuing royalty to
Envirol for ten years, at a rate of 10% of purchased product sales for the first
$125 thousand, and a rate of 4% of purchased product sales for the remainder of
the royalty term. The continuing royalty payments are being expensed as
incurred.

                                       10
<PAGE>

On May 4, 2001, the Company signed a merger agreement to acquire AZUR
Environmental (AZUR), a privately held manufacturer of proprietary rapid test
systems to measure toxicity in environmental and process waters located in
Carlsbad, California. In the six month period ended December 31, 2000, AZUR
recorded sales of approximately $1.1 million. Under the terms of the merger
agreement, the Company will issue 700,000 shares of Series C preferred stock.
Each preferred share will be convertible into common shares at any time at the
option of the holder, and automatically when the closing price of the Company's
common stock is $6.00 or more for a period of 20 consecutive trading days,
according to a conversion ratio which is to be determined at the closing of the
merger and based upon the average closing price of the Company's common stock
during the consecutive 20 trading day period immediately before the closing. The
minimum number of common shares issuable upon conversion will be 700,000 and the
maximum number will be 890,000. If the average closing price during the
consecutive 20 trading day period immediately before the closing is $3.50 or
greater, the number of shares issuable will be 700,000. The preferred shares
also carry a cumulative, annual cash dividend of $0.30 per share and a
liquidation value of $6.00 per share or $4.2 million in the aggregate. The
closing of the merger is subject to the satisfaction of certain conditions,
including the issuance of a permit from the California Department of
Corporations to enable the Company to rely upon the exemption provided by
Section 3(a)(10) of the Securities Act of 1933, as amended. On July 30, 2001,
the Company received this permit. Conditions to the closing of the merger
include, among others, that at least 66 2/3% of the issued and outstanding
shares of AZUR must have voted in favor of the merger and that the parties must
obtain all requisite governmental consents to the merger. A special meeting of
the AZUR shareholders is scheduled to be held on August 20, 2001 for the purpose
of voting on the merger. The parties are in the process of obtaining the
governmental consents and approvals necessary to consummate the merger. The
closing of the merger is expected to occur within 2 business days after the
satisfaction or waiver of all of the conditions to closing. Upon the closing of
the merger, this transaction will be accounted for under the purchase method of
accounting. Although the Company anticipates the closing will occur in the third
quarter of 2001, there is no assurance that the merger will close when
anticipated or at all.

5. SEGMENT INFORMATION:

The Test Kit segment develops, manufactures and markets immunoassay-based test
kits for rapid, cost-effective detection of a wide variety of different analytes
in two primary market categories: food safety and water quality testing.

The Antibody Segment, Strategic BioSolutions (SBS), includes the former TSD
BioServices, HTI and the acquired operating assets of the OEM business of
Atlantic Antibodies. These companies provide fully integrated polyclonal and
monoclonal antibody development and large scale manufacturing services to
pharmaceutical and medical diagnostic companies.

For reporting purposes a "pro-rata" share of common costs is charged to the
Antibody segment. Segment assets are those assets associated with the respective
segment's operating activities. Segment profit is based on income before income
taxes.

                                       11
<PAGE>

Segment Information:

<TABLE>
<CAPTION>
For the three months ended June 30,                  Test Kits       Antibody             Total

<S>            <C>                                     <C>            <C>               <C>
2001           Revenues                                $ 4,644        $ 2,557           $ 7,201
               Segment profit                              783             53               836
               Segment assets                           14,105         12,765            26,870
               Depreciation and amortization                97            129               226
               Capital expenditures                         17            218               235

2000           Revenues                                $ 3,006        $ 2,782           $ 5,788
               Segment profit                               30            415               445
               Segment assets                           15,056         12,715            27,771
               Depreciation and amortization                90            118               208
               Capital expenditures                         63            -                  63

For the six months ended June 30,

2001           Revenues                                $ 9,182        $ 5,093          $ 14,275
               Segment profit                            1,416            233             1,649
               Segment assets                           14,105         12,765            26,870
               Depreciation and amortization               190            253               443
               Capital expenditures                         64            258               322

2000           Revenues                                $ 6,119        $ 5,445          $ 11,564
               Segment profit                              300            636               936
               Segment assets                           15,056         12,715            27,771
               Depreciation and amortization               185            236               421
               Capital expenditures                        120            -                 120
</TABLE>

6. INVENTORIES:

At June 30, 2001 and December 31, 2000, inventories consisted of the following
(in thousands):

                                  June 30, 2001              December 31, 2000
                                  -------------              -----------------

Raw Materials                       $  3,040                    $   2,945
Work in progress                       1,367                        1,620
Finished goods                         2,549                        2,279
------------------------------------------------------------------------------
                                    $  6,956                    $   6,844
------------------------------------------------------------------------------


7. DEBT:

On May 5, 2000, the Company entered into a financing agreement with a commercial
bank. This agreement provides for a $4 million term loan, of which approximately
$2.2 million is outstanding at June 30, 2001, repayable over three years, and
for up to a $5 million revolving line of credit, based on eligible assets as
described below. Proceeds from this financing retired substantially all of the
Company's previous indebtedness, incurred in connection with the acquisitions
described above (see Note 4, Acquisitions).

                                       12
<PAGE>

The term loan bears a variable interest rate of between 2% and 3% over the
London Interbank Offered Rate ("LIBOR"), depending upon the ratio of the
Company's funded debt to EBITDA (earnings before interest expense, income taxes,
depreciation and amortization). Payments are due monthly, with equal
amortization of principal payments plus interest.

The revolving line of credit bears a variable interest rate of between 1.75% and
2.75% over LIBOR, depending upon the ratio of the Company's funded debt to
EBITDA, and is subject to a borrowing base determined by the Company's eligible
accounts receivable.

Under the terms of the financing, the Company is required to meet certain
financial covenants including funded debt to EBITDA and EBITDA to current
maturities of debt plus interest and taxes. At June 30, 2001, the Company is in
compliance with all such covenants, with additional borrowing capabilities of
approximately $3.1 million available under the revolving line of credit. The
financing is secured by substantially all of the Company's assets.

8. SEVERANCE ACCRUAL:

In June 2001, the Company recorded $253 thousand in expense for severance costs
in connection with the announced consolidation and expansion of its Strategic
BioSolutions division which is included in selling, general and administrative
expense in the accompanying statement of operations. The severance costs relate
to 40 employees in the Company's San Diego, California facility, the majority of
which will be terminated over the next twelve months as production is
transferred to the Company's Maine facility. As of June 30, 2001, no employees
had been terminated and no amounts had been charged against the $253 thousand
severance accrual.

Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations

Forward-Looking Statements

The information included in this report on Form 10-Q contains certain
forward-looking statements reflecting the current expectations of Strategic
Diagnostics Inc. and its subsidiaries (the "Company"). When used in this report,
the words "anticipate," "enable," "expect," "intend," "believe," "estimate,"
"potential," "promising," "should," "plan," "will" and similar expressions as
they relate to the Company are intended to identify such forward-looking
statements. Investors are cautioned that all forward-looking statements involve
risks and uncertainties, which may cause actual results to differ from those
anticipated at this time. Such risks and uncertainties include, without
limitation, changes in demand for products, delays in product development,
delays in market acceptance of new products, ability of manufacturers of non-GMO
food products to charge premiums to consumers, successful integration of the
AZUR business if and when the acquisition is completed, retention of customers
and employees, adequate supply of raw materials, inability to obtain required
domestic and foreign government regulatory approvals, modifications to
regulatory requirements, modifications to development and sales relationships,
dependence on the sale of certain products, the ability to achieve anticipated
growth, competition, seasonality, and other factors more fully described in the
Company's filings with the U.S. Securities and Exchange Commission.

                                       13
<PAGE>

Background

The Company is the entity resulting from the combination of EnSys Environmental
Products, Inc. ("EnSys"), Ohmicron Corporation ("Ohmicron"), TSD BioServices
("TSD"), HTI Bio-Products Inc. ("HTI"), Atlantic Antibodies Inc. ("ATAB") and
Strategic Diagnostics Inc. ("SDI").

The Company develops, manufactures and markets immunoassay-based test kits for
rapid and inexpensive detection of a wide variety of substances in the food
safety and water quality markets. Through its Strategic BioSolutions division,
the Company also provides antibody and immunoreagent research and development
production services.

Since its inception, the Company and its predecessors have, in addition to
conducting internal research and development of new products, entered into
research and development agreements with multiple corporate partners that have
led to the introduction of various products to the food safety, water quality
and other markets. The Company expects that internal research and development
projects, primarily in the food safety area, will continue to represent a larger
percentage of its research and development expenditures. The Company believes
that its competitiveness has been enhanced through the combinations of talents,
technology and resources resulting from the relationships and the acquisitions
it concluded during the past four years. These relationships and acquisitions
have enabled the Company to achieve meaningful economies of scale for the unique
products it offers through the utilization of its consolidated facilities in
Newark, Delaware, for the manufacture of test kits, antibodies and biochemicals,
its facility located outside of San Diego, California (to be relocated to
Windham, Maine, see Note 8) for the manufacture of antibodies and biochemicals
and its facility located in Windham, Maine for the manufacture of custom,
high-volume bulk polyclonal antibodies. These economies of scale, in turn,
enable the Company to offer its customers the most appropriate test for each
specific customer application.

On May 4, 2001, the Company signed a merger agreement to acquire AZUR
Environmental (AZUR), a privately held manufacturer of proprietary rapid test
systems to measure toxicity in environmental and process waters located in
Carlsbad, California. In the six month period ended December 31, 2000, AZUR
recorded sales of approximately $1.1 million. Under the terms of the merger
agreement, the Company will issue 700,000 shares of Series C preferred stock.
Each preferred share will be convertible into common shares at any time at the
option of the holder, and automatically when the closing price of the Company's
common stock is $6.00 or more for a period of 20 consecutive trading days,
according to a conversion ratio which is to be determined at the closing of the
merger and based upon the average closing price of the Company's common stock
during the consecutive 20 trading day period immediately before the closing. The
minimum number of common shares issuable upon conversion will be 700,000 and the
maximum number will be 890,000. If the average closing price during the
consecutive 20 trading day period immediately before the closing is $3.50 or
greater, the number of shares issuable will be 700,000. The preferred shares
also carry a cumulative, annual cash dividend of $0.30 per share and a
liquidation value of $6.00 per share or $4.2 million in the aggregate. The

                                       14
<PAGE>

closing of the merger is subject to the satisfaction of certain conditions,
including the issuance of a permit from the California Department of
Corporations to enable the Company to rely upon the exemption provided by
Section 3(a)(10) of the Securities Act of 1933, as amended. On July 30, 2001,
the Company received this permit. Conditions to the closing of the merger
include among others that at least 66 2/3% of the issued and outstanding shares
of AZUR must have voted in favor of the merger and that the parties must obtain
all requisite governmental consents to the merger. A special meeting of the AZUR
shareholders is scheduled to be held on August 20, 2001 for the purpose of
voting on the merger. The parties are in the process of obtaining the
governmental consents and approvals necessary to consummate the merger. The
closing of the merger is expected to occur within 2 business days after the
satisfaction or waiver of all of the conditions to closing. Upon the closing of
the merger, this transaction will be accounted for under the purchase method of
accounting. Although the Company anticipates the closing will occur in the third
quarter of 2001, there is no assurance that the merger will close when
anticipated or at all.


Results of Operations

Three Months Ended June 30, 2001 vs. June 30, 2000

Net revenues for the second quarter of 2001 were $7.2 million versus $5.8
million in the second quarter of 2000 or an increase of 24%. Product related
revenues increased by $1.5 million or 28%, compared to the second quarter of
2000. The increase in product related revenues was primarily attributable to
increases in sales of the Company's food safety and water quality test kit
products. Revenue growth in the food safety category continues to benefit from
the increased demand for GMO (genetically modified organism) testing that has
occurred since the recall of certain foods containing StarLink (TM) corn last
fall. As the controversy surrounding StarLink and other genetically modified
foods continues, the Company believes the pressure on food suppliers to verify
the presence of genetically modified traits is growing. As a result an
increasing number of production, distribution and food companies are evaluating
their procedures to include routine GMO testing. This trend is expected to
continue to drive growth in the Company's food safety products. The Company
offers a comprehensive set of GMO test kits, with associated testing protocols
and procedures, for a variety of crops, including soybeans, corn and sugar
beets. These increases more than offset the decrease in sales of the Company's
products in the antibody market segment. Antibody revenues in the second quarter
of 2000 included revenues from the reduction in the backlog of orders that arose
during the second half of 1999, when the Company experienced delays in
manufacturing newly transferred products, there were no comparable amounts in
2001. Contract and other revenues decreased $108 thousand or 35% in the second
quarter of 2001 versus the same period in 2000. This decrease reflects the
Company's continued emphasis on internal research and development projects.

Manufacturing expenses increased $939 thousand or 40% in the second quarter of
2001 versus the second quarter of 2000. This increase reflects the higher level
of product shipments made in the second quarter of 2001 versus the comparable
period of 2000. Gross profits increased 14% to $3.9 million in the second
quarter of 2001 due to the higher volume of test kit product revenues. Gross
margins in the second quarter of 2001 decreased to 55% from 60% in the second
quarter of 2000 due to volume discounts given in the second quarter of 2001 on
the higher volume of test kit product related sales.

Research and development costs were approximately the same in the second quarter
of 2001 and the second quarter of 2000.

                                       15
<PAGE>

Selling, general and administrative expenses increased $232 thousand or 10% in
the second quarter of 2001 versus the second quarter of 2000. This increase is
due to the inclusion of a $253 thousand one-time charge, related to severance in
connection with the recently announced consolidation and expansion of the
Company's Strategic BioSolutions division, which is expected to result in
anticipated savings of $750 thousand to $1 million annually.

Interest expense decreased $72 thousand or 83% in second quarter of 2001 versus
the second quarter of 2000. This decrease is due to a lower level of outstanding
indebtedness and increased interest bearing cash balances.

Income before income taxes increased to $836 thousand from $445 thousand or 88%
in the second quarter of 2001 versus the second quarter of 2000. Pre-tax income
in the second quarter of 2001 included $76 thousand in other income attributable
to a gain on sale of assets the Company recorded in connection with the
Company's sale of land in California, and a $253 thousand charge for future
severance payments related to the business consolidation and expansion of it's
Strategic BioSolutions division.

Excluding the $76 thousand gain on sale of assets and $253 thousand one-time
charge recorded in the second quarter of 2001, income before taxes grew 128% to
$1.0 million from the $445 thousand earned in the year earlier period. Segment
profit for the test kit segment increased $753 thousand to $783 thousand due
primarily to the increase in sales of the segments' food safety and water
quality products. Segment profit for the antibody segment exclusive of the
one-time charge, decreased by $109 thousand to $306 thousand or 26% due
primarily to a decrease in antibody segment sales and slightly higher
manufacturing expenses.

Net income increased $250 thousand or 94% in the second quarter of 2001 versus
the second quarter of 2000, for reasons all as described above. Exclusive of the
gain on sales of assets after related taxes and charge for business
consolidation and expansion, the Company recorded a $358 thousand or 135%
increase in net income for the second quarter of 2001 when compared to the
second quarter net income recorded in 2000.

Six Months Ended June 30, 2001 vs. June 30, 2000

Net revenues for the first six months of 2001 were $14.3 million versus $11.6
million in the first six months of 2000 or an increase of 23%. Product related
revenues increased by $3.1 million or 28% compared to the first six months of
2000. The increase in product related revenues was primarily attributable to
increases in sales of the Company's food safety products. These increases more
than offset the decreases in water quality and antibody sales. Contract and
other revenues decreased $369 thousand or 49% in the first six months of 2001
versus the same period in 2000. This decrease reflects the Company's continued
emphasis on internal research and development projects.

Manufacturing expenses increased $1.8 million or 37% in the first six months of
2001 versus the first six months of 2000. This increase reflects the higher
level of test kit product shipments made in the first six months of 2001 versus
the comparable period of 2000. Gross profits increased 14% to $7.7 million in
the first six months of 2001 due to the higher volume of test kit product
revenues. Gross margins in the first six months of 2001 decreased to 54% from
58% in the first six months of 2000 due to volume discounts given in 2001 on the
higher volume of test kit product related sales.

                                       16
<PAGE>

Research and development costs decreased $11 thousand in the first six months of
2001 when compared to the first six months of 2000.

Selling, general and administrative expenses increased $206 thousand or 5% in
the first six months of 2001 versus the first six months of 2000. This increase
is due to the inclusion of a $253 thousand one-time charge, related to severance
in connection with the recently announced consolidation and expansion of the
Company's Strategic BioSolutions division in the second quarter of 2001, which
is expected to result in anticipated savings of $750 thousand to $1 million
annually.

Interest expense decreased $166 thousand or 78% in the first six months of 2001
versus the first six months of 2000. This decrease is due to a lower level of
outstanding indebtedness and increased interest bearing cash balances.

Income before income taxes increased to $1.6 million from $936 thousand or 76%
in the first six months of 2001 versus the first six months of 2000. Pre-tax
income in the first six months of 2001 included $76 thousand in other income
attributable to a gain on sale of assets the Company recorded in connection with
the sale of land in California, and a $253 thousand charge for future severance
payments in relation to the business consolidation and expansion of it's
Strategic BioSolutions division. Net income in the first six months of 2000
included $283 thousand in other income attributable to the sale of the Company's
Macra Lp(a) product line. Excluding the $76 thousand gain on sale of assets and
$253 thousand one-time charge related recorded in the first six months of 2001,
and the $283 thousand gain on sale of assets in the first six months of 2000,
income before taxes grew 180% to $1.8 million from the $653 thousand recorded in
the year earlier period. Segment profit for the test kit segment increased $1.1
million to $1.4 million or 372% due primarily to the increase in sales of the
segments' food safety and water quality products. Segment profit excluding the
one-time charge for the antibody segment decreased by $150 thousand to $486
thousand or 24% due primarily to a decrease in antibody segment sales and a
slightly higher manufacturing expenses.

Net income increased $425 thousand or 75% in the first six months of 2001 versus
the first six months of 2000, for reasons all as described above. Exclusive of
the gain on sales of assets and the charge for business consolidation all after
applicable taxes, all as described above, the Company recorded a $701 thousand
or 176% increase in net income for the first six months of 2001 when compared to
the comparable period net income recorded in 2000.

Liquidity and Capital Resources

The Company's working capital, which consists principally of cash, accounts
receivable and inventory, increased $963 thousand in the first six months of
2001 to $11.4 million at June 30, 2001 from $10.4 million at December 31, 2000.
This increase was primarily attributable to cash provided by the operating
activities of the Company. Outstanding debt decreased $1 million from $3.2
million at December 31, 2000 to $2.2 million on June 30, 2001.

                                       17
<PAGE>

For the six months ended June 30, 2001, the Company's operating activities
provided more than $1.5 million in cash, a significant increase from the $755
thousand used in the first six months of 2000. This cash, along with available
cash balances allowed the Company to satisfy all of its operating cash
requirements and reduce total debt outstanding by approximately $1 million in
the first six months of 2001. At June 30, 2001, the Company had $892 thousand in
long-term debt and stockholders' equity in excess of $22.4 million.

The Company believes it has, or has access to sufficient assets to meet its
operating requirements for the forseeable future. The Company's ability to meet
its long-term capital requirements will depend on a number of factors, including
the success of its current and future products, the focus and direction of its
research and development program, competitive and technological advances, future
relationships with corporate partners, government regulation, the Company's
marketing and distribution strategy, consummation of the AZUR acquisition, which
is not expected to require a significant cash investment, and the success of the
Company's plan to make future acquisitions. Accordingly, no assurance can be
given that the Company will be able to meet the future liquidity requirements
that may arise from these inherent and similar uncertainties.


                                       18
<PAGE>

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company has exposure to changing interest rates, and is currently not
engaged in hedging activities. Interest on approximately $2.2 million of
outstanding indebtedness is at a variable rate of between 1.75% to 3% over the
published London Interbank Offered Rate.

The Company conducts operations in Great Britain. The consolidated 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 subsidiaries into U.S. dollars for
purposes of recording the Company's consolidated financial results.
Historically, the effects of translation have not been material to the
consolidated financial results, however this may change in the future  as the
Company increases its foreign operations upon consummation of the AZUR merger.





                                       19
<PAGE>

                           PART II - OTHER INFORMATION


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

The Company held its annual meeting of stockholders on April 24, 2001. At the
meeting, the following Class I Directors were elected:

Directors                      Shares Voted For           Shares Withheld
---------                      ----------------           ---------------

Richard C. Birkmeyer              6,865,522                    532,600

Morton Collins                   15,155,207                    563,017

Kathleen E. Lamb                 15,155,207                    563,017

Grover C. Wrenn                  15,155,207                    563,017


Richard J. Defieux, Robert E. Finnigan and Stephen O. Jaeger constitute the
Class II directors whose terms continued after the annual meeting.

At the meeting, an amendment to increase the number of shares authorized for
issuance under the Company's 2000 Stock Incentive Plan was approved:

Proposal                Shares Voted For        Shares Withheld        Abstain
--------                ----------------        ---------------        -------

Amendment to Stock        14,501,422                1,088,915           127,887
Incentive Plan


Item 6. Exhibits and Reports on Form 8-K

        (a) Exhibits

            None

        (b) Reports on Form 8-K

            On April 4, 2001, the Company filed a report on Form 8-K pursuant to
            Item 9 announcing test evaluation by the U.S.D.A. as well as
            preliminary results for the first quarter of 2001.

            On June 26, 2001, the Company filed a report on Form 8-K pursuant to
            Item 9 announcing expansion plans and the signing of a sales and
            marketing agreement with AZUR Environmental.

                                       20
<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.



                           STRATEGIC DIAGNOSTICS INC.
                           --------------------------
                                  (Registrant)


<TABLE>
<CAPTION>
Signature                                    Title                                   Date
---------                                    -----                                   ----
<S>                           <C>                                               <C>
/s/ RICHARD C. BIRKMEYER      President and Chief Executive Officer             August 14, 2001
------------------------
    Richard C. Birkmeyer      (Principal Executive Officer)

/s/ ARTHUR A. KOCH, JR.       Vice President and Chief Operating Officer        August 14, 2001
-----------------------
    Arthur A. Koch, Jr.       (Principal Financial Officer)
</TABLE>











                                       21