UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549


                                    FORM 10-Q

         [ X ]             QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the Quarterly Period Ended July 31, 1999
                                       or

         [     ]          TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                        For the Transition Period From to


                         Commission File Number 0-22354

                         MARTEK BIOSCIENCES CORPORATION
             (Exact name of registrant as specified in its charter)



               Delaware                          52-1399362
       (State of Incorporation)          (IRS Employer Identification No.)

                6480 Dobbin Road, Columbia, Maryland 21045
                 (Address of principal executive offices)

     Registrant's telephone number including area code: (410)740-0081

                                  None
 (Former name, former address and former fiscal year, if changed since last
                                 report)



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. X Yes No


Common stock,  par value $.10 per share:  16,492,229  shares  outstanding  as of
September 8, 1999

                                  Page 1 of 14
<PAGE>

                               PART I - FINANCIAL
                                 INFORMATION

Item 1. Financial Statements

MARTEK BIOSCIENCES CORPORATION
Balance Sheets
($ in thousands)

--------------------------------------------------------------------------------
                                                 July 31,        October 31,
                                                  1999              1998
--------------------------------------------------------------------------------
                                               (Unaudited)
Assets:
Current assets:
     Cash and cash equivalents                    $3,479           $4,498
     Short-term investments and
        marketable securities                     16,616           13,147
     Accounts receivable                           1,509            1,336
     Inventories  (Note 3)                         5,995            5,002
     Prepaid expenses                                250              424
     Other current assets                            126               96
                                              ----------------------------------
Total current assets                              27,975           24,503
Property, plant and equipment, net                15,498           16,233
                                              ----------------------------------
                                                 $43,473          $40,736
                                              ==================================


Liabilities and stockholders' equity:
Current liabilities:
     Accounts payable                               $888             $596
     Accrued liabilities                           1,060            1,566
     Unearned Revenue                                 19              ---
     Current portion of notes payable              1,551            1,341
                                              ----------------------------------
Total current liabilities                          3,518            3,503
Long-term portion of notes payable (Note 2)          747            1,951
Commitments and contingencies (Note 2)
Stockholders' equity:
     Preferred stock, $.01 par value,
        4,700,000 shares authorized;
        none issued or outstanding.                  ---              ---
     Series A junior participating preferred
        stock, $.01 par value, 300,000 shares
        authorized; none issued or outstanding.      ---              ---
     Common stock, $.10 par value; 30,000,000
        shares authorized;  16,492,229 and
        14,879,434 shares issued and
        outstanding  at July 31, 1999
        and October 31, 1998, respectively.        1,649            1,488
     Additional paid-in capital                  107,472           92,843
     Accumulated deficit                         (69,913)         (59,049)
                                              ----------------------------------
Total stockholders' equity                        39,208           35,282
                                              ----------------------------------

Total liabilities and stockholder's equity       $43,473          $40,736
                                              ==================================

See accompanying notes.






                             Page 2 of 14

<PAGE>





MARTEK BIOSCIENCES CORPORATION
Statements of Operations
(Unaudited - $ in thousands, except per share data)

                                          Three months           Nine months
                                          ended July 31,        ended July 31,
--------------------------------------------------------------------------------
                                          1999      1998        1999      1998
--------------------------------------------------------------------------------

Revenues:
     Product Sales:
        Nutritional product sales         $677       $619      $2,092    $1,927
        Stable isotope and other
           product sales                   485        491       1,749     1,595
                                        ------------------   -------------------
     Total Product Sales                 1,162      1,110       3,841     3,522
     License fees and other revenues         6        ---           6     1,165
     Royalties                              79         67         245       187
     Research and development contracts
        and grants                          71        140         278       326
                                        ------------------   -------------------
Total revenues                           1,318      1,317       4,370     5,200
Costs and expenses:
     Cost of product sales                 853        887       2,934     2,825
     Research and development            2,601      2,575       7,324     7,475
     Selling, general and administrative 1,586      1,551       5,202     5,705
                                        ------------------   -------------------
Total costs and expenses                 5,040      5,013      15,460    16,005
                                        ------------------   -------------------
Loss from operations                    (3,722)    (3,696)    (11,090)  (10,805)
Other income (expense):
     Miscellaneous income                   31         25         102        67
     Interest income                       212        341         569       801
     Interest expense                     (141)      (170)       (445)     (358)
                                        ------------------   -------------------
Total other income                         102        196         226       510
                                        ------------------   -------------------
Net loss                               ($3,620)   ($3,500)   ($10,864) ($10,295)
--------------------------------------------------------------------------------
Net loss per share (Note 5)             ($0.23)    ($0.24)     ($0.71)   ($0.73)
--------------------------------------------------------------------------------
Weighted average common
shares outstanding                  15,971,019 14,833,397  15,273,640 14,145,134
--------------------------------------------------------------------------------


See accompanying notes.












                              Page 3  of  14



<PAGE>




MARTEK BIOSCIENCES CORPORATION
Statements of Cash Flows
(Unaudited - $ in thousands)

                                                 Nine Months  ended July 31,
--------------------------------------------------------------------------------
                                                     1999            1998
--------------------------------------------------------------------------------

Operating activities:
  Net loss                                        ($10,864)       ($10,295)
  Adjustments to reconcile net loss to net cash
     used in operating activities:
     Depreciation and amortization                   1,087           1,001
     Other non-cash items                              348             ---
     Changes in assets and liabilities:
        Accounts receivable                           (173)            435
        Inventories                                   (993)         (1,231)
        Other current assets                           144             136
        Accounts payable                               292            (394)
        Accrued liabilities                           (506)            102
        Unearned revenue                                19             ---
                                                 -------------------------------
  Net cash used in operating activities            (10,646)        (10,246)

Investing activities:
     Change in short-term investments
        and marketable securities                   (3,469)              4
     Purchase of property, plant and equipment        (352)         (1,239)
                                                 -------------------------------
  Net cash used in investing activities             (3,821)         (1,235)

Financing activities:
     Proceeds from issuance of common stock
        in private placement                         13,770         10,010
     Proceeds from the exercise of warrants
        and options                                     672          3,998
     Borrowings on notes payable                        ---            ---
     Repayment of notes payable                        (994)          (980)
                                                 -------------------------------
  Net cash provided by financing activities          13,448         13,028
                                                 -------------------------------
  Net increase (decrease) in cash and
     cash equivalents                                (1,019)         1,547
  Cash and cash equivalents at beginning of year      4,498          1,977
                                                 -------------------------------
  Cash and cash equivalents at end of period         $3,479         $3,524
                                                 ===============================





See accompanying notes.












                            Page 4 of 14

<PAGE>



MARTEK BIOSCIENCES CORPORATION
Statement of Stockholders' Equity
(Unaudited - $ in thousands)


                                                  Additional
                                                   Paid-In  Accumulated
                                 Common Stock      Capital    Deficit     Total
                  --------------------------------------------------------------
                              Shares     Amounts

Balance at
October 31, 1998           14,879,434    $1,488    $92,843   ($59,049)  $35,282
--------------------------------------------------------------------------------

Issuance of common stock
in private placement        1,528,935       153     13,617      ---      13,770

Exercise of stock options
and other                      83,860         8      1,012      ---       1,020

Net loss                          ---       ---       ---     (10,864)  (10,864)
--------------------------------------------------------------------------------
Balance at
July 31, 1999              16,492,229    $1,649   $107,472   ($69,913)  $39,208
--------------------------------------------------------------------------------


See accompanying notes.



























                           Page 5 of 14


<PAGE>



Notes to Financial Statements (Unaudited)

1.  Basis of Presentation

The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting  principles for interim financial information
and  with the  instructions  to Form  10-Q and  Article  10 of  Regulation  S-X.
Accordingly,  they do not include all of the information and footnotes  required
by generally accepted accounting  principles for complete financial  statements.
In the opinion of management,  all adjustments  (consisting of normal  recurring
accruals)  considered  necessary  for a fair  presentation  have been  included.
Operating  results for the  quarter and nine months  ended July 31, 1999 are not
necessarily  indicative  of the results  that may be expected for the year ended
October 31, 1999. For further information, refer to the financial statements and
footnotes thereto included in Martek Biosciences  Corporation's annual report on
Form 10-K for the year ended October 31, 1998.

2.  Commitment and Contingencies

The Company had commitments at July 31, 1999 to fund up to $1.5 million of Phase
III Small Business  Innovation  Research ("SBIR")  technology  commercialization
expenses,  provided the  technology  under  existing Phase II SBIR grants yields
commercial opportunities favorable to the Company.

Costs under U.S.  Government  contracts are subject to audit by the  appropriate
U.S. Government agency.  Management  believes that cost  disallowances,  if any,
arising from such audits of costs charged to government  contracts  through July
31, 1999, would not have a material effect on the financial statements.

The Company has licensed certain technologies and recognized license fee revenue
under  various  agreements.  License fees are not recorded as revenue  until the
earnings  process is complete and amounts are not subject to refund.  In January
1998,  a  license  fee  of  $1,125,000  associated  with  a  pre-1998  licensing
arrangement was recognized.

The  Company  has  entered  into  various  collaborative  research  and  license
agreements. Under the agreements, the Company is required to fund research or to
collaborate  on  the  development  of  potential  products.   Certain  of  these
agreements  also  commit the Company to pay  royalties  upon the sale of certain
products resulting from such collaborations.

The Company is required to meet certain covenants in relation to its term loans,
which had an outstanding balance at July 31, 1999 of approximately $2.3 million.
These covenants outline minimum cash, current ratio and net worth  requirements.
The Company was in compliance with all of these covenants at July 31, 1999.

3.  Inventories

Inventories consist of the following:

                                                July 31,          October 31,
                                                  1999               1998
                                             -----------          -----------
               Finished products              $1,982,042           $1,406,053
               Work in process                 3,646,914            3,343,911
               Raw materials                     366,497              252,026
                                             -----------          -----------
                                              $5,995,453           $5,001,990
                                             ===========          ===========

                          Page 6 of 14
<PAGE>

Inventories include products and materials held for sale as well as products and
materials  that  could  alternatively  be used  in the  Company's  research  and
development activities.

4.  Income Taxes

At  July  31,  1999,  the  Company  has  net  operating  loss  carryforwards  of
approximately  $84,734,000  for income tax  purposes  that  expire in years 2000
through 2019.

Section 382 of the Internal Revenue Code limits the utilization of net operating
losses when ownership changes,  as defined by that section,  are greater than 50
percent.  The Company has had significant  ownership  changes over the past five
years, including an initial public offering of its common stock in December 1993
and a follow-on  public offering of its common stock in October 1995,  which may
have caused these limitations to apply.

Deferred  income  taxes  reflect  the net tax effects of  temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes and the amounts used for income tax purposes.  The Company's  total net
deferred tax assets,  which resulted  primarily from net operating losses,  were
$34,235,000 and $28,024,000 at July 31, 1999 and 1998, respectively.  Because of
the uncertainty with the ultimate  realization of these net deferred tax assets,
they were fully reserved for by a valuation allowance at July 31, 1999 and 1998.

5.  Capital Accounts

Private Placements of Common Stock
On April 21, 1998,  655,563 shares of the Company's common stock and warrants to
purchase  196,670  shares of common  stock  were  issued in a private  placement
resulting  in net  proceeds to the Company of  approximately  $10  million.  The
warrants are  exercisable for a period of three years from date of issuance at a
price of $18.76. The investors have also agreed to a two-year funding commitment
to provide up to an additional $10.25 million in financing in the form of common
stock and  warrants,  at the  discretion  of the  Company,  subject  to  certain
conditions,  which  include the stock price being within  twenty  percent of the
initial  issuance price of $15.63.  In consideration  for the additional  $10.25
million two-year funding commitment,  the Company issued warrants to purchase up
to 51,250  shares of  common  stock on April 27,  1999 at $7.51 per share and is
obligated  to again issue  warrants  to  purchase up to 51,250  shares of common
stock at the end of year two if the  Company  does not  utilize  the  additional
funding by such date. The cost associated with the additional  warrants has been
calculated  using the  Black-Scholes  option  pricing  model and is  included in
interest expense for the quarter ended July 31, 1999.

On June 1, 1999,  1,528,935 shares of the Company's common stock and warrants to
purchase  458,679  shares of common  stock  were  issued in a private  placement
resulting in net proceeds to the Company of  approximately  $13.8  million.  The
stock was issued at a thirty day average  trading price of $9.03 per share.  The
warrants  are  exercisable  for a period of three years from date of issuance at
$10.84 per share.












                                Page 7 of 14

<PAGE>



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

General

This Management's  Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements concerning the Company's business
and  operations,  including  among  other  things,  statements  concerning:  (1)
expectations  regarding  future  product  introductions,   distribution,  sales,
applications and potential marketing  partnerships;  (2) expectations  regarding
sales and royalties by and from formula  licensees;  (3) expectations  regarding
FDA approval of the Company's  oils for inclusion in U.S.  infant  formula;  (4)
expectations  regarding future  efficiencies in manufacturing  processes and the
cost of production of the Company's  nutritional  oils; (5) future  research and
development costs; (6) Year 2000 business risks; and (7) expectations  regarding
additional  capital  expenditures  needed in  relation to  fermentation  and oil
processing  activities.  Forward-looking  statements  include  those  statements
containing such words as "will,"  "should,"  "could,"  "anticipate,"  "believe,"
"plan,"  "estimate,"  "expect,"  "intend," and other similar  expressions.  Such
statements  involve  risks and  uncertainties  and  actual  results  may  differ
materially due to a variety of risk factors set forth in Exhibit 99.1 hereto and
from time to time in the  Company's  filings  with the  Securities  and Exchange
Commission.

Martek, founded in 1985, is a leader in the development and commercialization of
high value products derived from  microalgae,  including  nutritional  products,
pharmaceutical research and development tools and diagnostics.  Martek develops,
manufactures and sells products from microalgae. The Company's products include:
(1) specialty,  nutritional oils for infant formula, nutritional supplements and
food   ingredients   that  play  a  beneficial  role  in  promoting  mental  and
cardiovascular  health,  and in the  development of the eyes and central nervous
system in newborns;  (2) stable isotope  products and  technologies to visualize
molecular interactions for drug discovery and development; and (3) new, powerful
fluorescent markers for diagnostics,  rapid miniaturized  screening and gene and
protein  detection.  In 1989, Martek began to realize revenues from sales of its
stable isotope products.  In 1992, Martek began to realize revenues from license
fees related to its nutritional oils containing docosahexaenoic acid ("DHA") and
arachidonic acid ("ARA") and sales of sample  quantities of these oils. In 1995,
Martek  recognized  its first product and royalty  revenues from sales of infant
formula  containing  these oils, and in 1996,  Martek began to realize  revenues
from the sale of Neuromins(R),  a DHA dietary supplement.  In 1998, Martek first
realized  revenues  from the sale of its new  phycobilisome  fluorescent  marker
products.

Martek has incurred  losses in each year since its inception.  At July 31, 1999,
the  Company's  accumulated  deficit was  $69,913,000.  The  Company  expects to
continue  its  development,   production   optimization  and  product  marketing
activities  and as a result,  expects  losses to continue  for at least the next
year, or until  significant  sales of its nutritional  oils and Neuromins(R) DHA
products occur and/or until  significant  royalties from sales of infant formula
products containing its oils are recognized. In addition, the Company expects to
continue to  experience  quarter-to-quarter  and  year-to-year  fluctuations  in
revenues, expenses and losses, some of which may be significant.  The timing and
extent of such  fluctuations  will depend, in part, on the timing and receipt of
oils-related  revenues.  Because  the extent  and timing of future  oils-related
revenues are largely dependent upon the Company's  licensees and/or other future
third-party  collaborators,  the timing or likelihood of future profitability is
largely dependent on factors over which the Company has no control.

Management Outlook and Regulatory Issues

Management  believes  that while  quarterly  results  may show  fluctuations  in
product sales,  the outlook for future revenue growth remains  positive and that
fiscal 1999 sales will surpass prior year levels.

                               Page 8 of 14
<PAGE>

Specifically,  Management  believes that for fiscal 1999 as a whole:  (1) Infant
formula containing Martek's oils will be introduced in additional countries; (2)
sales and royalties from the Company's infant formula licensees will continue to
grow; (3)  distribution of the Company's  Neuromins(R) DHA products will expand;
(4) sales of new high value  products  from the Company's  stable  isotope group
will increase; and (5) distribution and sales of diagnostic products will grow.

Management believes that recent scientific evidence supports the contention that
humans  throughout  life  will  benefit  from DHA  supplementation.  This  could
represent a far larger  market for DHA than the market for  infants.  To realize
this market,  the Company is pursuing a long-term  marketing  partnership with a
large  nutritional  products and/or  pharmaceutical  company to promote Martek's
non-infant formula nutritional oil products. Because of this objective,  certain
shorter-term  marketing  arrangements  of lesser scope have been  avoided,  thus
modestly  sacrificing  short-term product sales.  Management believes that broad
introductions of infant formula  containing  Martek's  nutritional oils and/or a
strategic alliance with a large scale nutritional products and/or pharmaceutical
company will occur in the future.  However,  management  is unable to accurately
predict when, or if, such events will occur.

Four of the Company's  infant  formula  licensees  have obtained the  regulatory
approval, where required, to sell infant formula supplemented with Martek's oils
in over 60 countries for term or pre-term  infant  formula  products,  including
most recently approval by the French Scientific Committee for Foods for pre-term
and term infant  formula.  The Company and its  licensees  are in the process of
responding to certain  questions raised by the FDA in connection with evaluating
Martek's oils for inclusion in U.S. infant formula.  While  Management  believes
that FDA approval should ultimately be obtained,  it is Management's belief that
this process will take a minimum of six to twelve  additional  months.  There is
also no assurance  that the Company and its licensees will be able to adequately
respond  to the FDA's  questions,  that the  licensees  will  continue  to press
forward,  that  clearances  will in fact be granted,  that the process  will not
involve  significant  delays that may materially and adversely affect the timing
and extent of potential future introductions of the Company's products,  or that
once and if approval is obtained,  a licensee will actually market a U.S. infant
formula  product  containing  the  Company's  oils.   Nevertheless,   management
anticipates  that for  fiscal  year  1999  infant  formula  products  containing
Martek's oils will continue to be introduced in additional  countries around the
world and overall  product sales,  including  sales from infant formula  related
products, will increase over sales from the prior year.

Results of  Operations -  Comparison  of Quarters and Nine Months Ended July 31,
1999 and 1998

Revenues for the quarter ended July 31, 1999 were  $1,318,000,  consistent  with
revenues of $1,317,000 for the same period in 1998.  Revenues for the nine-month
period ended July 31, 1999 were $4,370,000,  a decrease of $830,000 or 16%, from
the same period in 1998,  due primarily to the  recognition  of a  non-recurring
$1.1MM  license fee in  January,  1998.  Total  product  sales  during the third
quarter and nine months  ending July 31, 1999  increased by $52,000 and $319,000
or 5% and 9%,  respectively  from the same periods in 1998. Sales of Nutritional
Products,  including Neuromins(R) capsules,  increased 9% for both the three and
the nine months  ended July 31, 1999 when  compared to the same periods in 1998.
Stable  isotope and other product  sales  decreased 1% for the third quarter and
increased  $154,000 or 10% for the first nine months of 1999,  when  compared to
the  same  periods  in 1998.  The  decrease  in the  third  quarter  of 1999 was
primarily due to price  competition in the reagents  market which is expected to
continue  for at least the  remainder of 1999 and could  adversely  impact total
reagent  sales.  The Company is actively  looking for ways to reduce its reagent
production  costs and increase  yields of high-end  co-products  in an effort to
offset the impact of this price  competition.  Royalty revenues increased by 18%
in the third  quarter of 1999 compared to the third quarter of 1998 and over 32%
for the first nine  months of 1999  compared  to the first nine  months of 1998.
Revenues from research and development  contracts and grants decreased by 49% in
the  third  quarter  of 1999 when  compared  to the  third  quarter  of 1998 and
decreased  15% for the nine  months  ended July 31, 1999 from the same period in
1998, due to the timing of activity under the Company's outstanding grants.


                               Page 9 of 14
<PAGE>

Cost of product  sales  decreased to 73% of revenues  from product sales for the
third quarter of 1999 from 80% for the third quarter of 1998. For the nine month
period  ended July 31, 1999 cost of product  sales  decreased to 76% of revenues
from  product  sales,  down from 80% for the same period in 1998.  Cost of sales
will  continue  to  fluctuate  based on the mix of  sales,  with  lower  margins
experienced  when the mix  includes  higher  volumes of sales to infant  formula
manufacturers. There is an approximate six to nine month delay after the initial
sale of oil until  royalties are received and recognized as revenue,  creating a
significantly  higher cost of goods sold as a percentage  of revenues than would
be the case if royalties were incorporated into the product price and recognized
as revenue at the time of the product sale. In addition,  oil  production  costs
remain  high due to the  current  low  volume  of  production  and  because  the
production process requires further optimization. As sales volumes increase, and
manufacturing efficiencies and optimization occurs, Management believes that the
cost of production of the nutritional oils products will decrease.

Research and development costs in the third quarter of 1999 were consistent with
the third  quarter of 1998.  For the nine  month  period  ended  July 31,  1999,
research and  development  costs  decreased  $151,000 or 2% when compared to the
same period in 1998.  Consistent  with the  Company's  plans,  nutritional  oils
development  costs accounted for over 75% of all research and development  costs
as a result  of the  Company's  continued  development  efforts  to  refine  its
production process. Research and development costs may increase in the future as
the Company  evaluates new  technologies  and continues  efforts to optimize the
efficiency of its large-scale fermentation and oil extraction processes.

Selling, general and administrative expenses increased by $35,000, or 2%, during
the third  quarter of 1999 and  decreased  by $503,000 or 9%, in the nine months
ended July 31, 1999 compared to the third quarter and nine months ended July 31,
1998,  respectively.  The fiscal  year-to-date  cost  decrease was primarily the
result  of lower  advertising  expenses  due to the  timing  of print  and other
advertising  campaigns.  Other income was $94,000 lower during the third quarter
of 1999 than in the third  quarter of 1998 and $284,000  lower in the first nine
months of 1999 than in the first nine months of 1998.  Decreases in other income
are due primarily to a decrease in the amount of interest  earned on investments
as funds received in the Company's  various fund raising  efforts are being used
to support operations.

As a  result  of the  foregoing,  net  loss for the  third  quarter  of 1999 was
$3,620,000, or $.23 per share, compared to a net loss of $3,500,000, or $.24 per
share for the third quarter of 1998. Net loss for the nine months ended July 31,
1999, was  $10,864,000 or $.71 per share,  compared to a net loss of $10,295,000
or $.73 per share for the same period in 1998.

Recent Accounting Pronouncements

In June 1997, the FASB issued SFAS No. 130,  "Reporting  Comprehensive  Income,"
which requires  companies to report by major components and in total, the change
in its net assets during the period from  non-owner  sources.  This Statement is
effective  for the annual  reporting  of companies  with fiscal years  beginning
after December 15, 1997.  Adoption of SFAS No. 130 will not impact the reporting
of the Company.

The FASB also recently  issued SFAS No. 131,  "Disclosures  about Segments of an
Enterprise  and  Related  Information,"  which  establishes  annual and  interim
reporting  standards for a company's  operating segments and related disclosures
about  its  products,  services,  geographic  areas and  major  customers.  This
Statement  must be adopted in the annual  reporting  for  companies  with fiscal
years  beginning  after  December  15,  1997.  Adoption of this  standard is not
expected  to have a  significant  impact on the  Company's  financial  position,
results of operations, cash flows, or the presentation of its disclosures.





                             Page 10 of 14
<PAGE>

Impact of Year 2000

The Company uses a number of computer software programs and operating systems in
its internal  operations,  including  applications  used in  financial  business
systems and  various  administrative  functions.  Management  believes  that the
business risk associated with these internal  information systems is minimal and
has completed more than 95% of its Year 2000 compliance  implementation  work on
them. The Company is also  evaluating its  non-information  technology  systems,
including the various equipment in operation at the oil production facilities in
Winchester,  Kentucky. Management has completed more than 95% of this evaluation
and subsequent  implementation,  and believes that the business risk  associated
with this equipment is minimal.  Management believes that its compliance work on
the  Company's  information  and  non-information  technology  systems  will  be
completed  by  the  end  of  fiscal  year  1999.  However,  if  significant  new
non-compliance  issues  are  identified,  the  process  may be  delayed  and the
Company's  operations  and  financial  condition  may  be  materially  adversely
affected.

Additionally,  Martek's third party  relationships  are being reviewed to assess
their Year 2000  status and  potential  impact on the  Company.  The Company has
completed  approximately  95% of this review and, where potential  business risk
has been  identified,  is requesting  additional  information from certain third
parties to obtain  assurance  that they are year 2000  compliant.  To date,  the
Company's  third  party  suppliers  have  represented  that  they are Year  2000
compliant  or are in the process of becoming  compliant  by December  31,  1999.
Although  Management has identified multiple suppliers for most of the goods and
services purchased from third parties, there can be no guaranty that the failure
of any  individual  supplier to  adequately  address the Year 2000 issue for the
products or services  that they  provide to the Company will not have a material
adverse impact on the Company's  operations and financial  results.  Contingency
plans will be developed if it appears that the Company or its suppliers will not
be Year 2000 compliant,  and such  non-compliance is expected to have a material
adverse impact on the Company's  operations.

The major risks to Martek  resulting from the failure of third parties to attain
Year 2000  readiness  could  include:  (1)  interruptions  or disruptions to the
manufacturing  process and facilities;  (2) an interruption in the flow of goods
or services from suppliers;  or (3) interruptions or disruptions of business and
transaction processing such as customer billing,  payroll,  accounts payable and
other operating and information processes. If such disruptions would occur, they
could have a material adverse effect on the Company's operations.

Based on currently available  information,  Management believes that total costs
associated with Year 2000 issues will be less than $200,000, and that it will be
able to manage the Year 2000 transition  without any material  adverse effect on
the Company's operations,  liquidity or capital resources. However, there can be
no assurance that Year 2000 issues will not require a significant  commitment of
resources to resolve potential problems.

Liquidity and Capital Resources

Martek has  financed  its  operations  primarily  from the  issuance and sale of
equity  securities,  debt  financing,   revenues  received  under  research  and
development  contracts  and grants,  product  sales and receipt of license fees.
Since its  inception,  the Company  has raised  approximately  $97 million  from
public and private sales of its equity securities,  including  approximately $10
million  from a  private  placement  in 1998 and  $13.8  million  from a private
placement in June 1999.  The 1998 private  placement  investors also agreed to a
two-year  funding  commitment to provide up to an additional  $10.25  million in
financing  in the form of common  stock and  warrants at the  discretion  of the
Company,  subject to certain  conditions,  which  include  the stock price being
within twenty percent of the 1998 initial issuance price of $15.63.

Through July 31, 1999 Martek has incurred an accumulated deficit of $69,913,000.
The Company's  balance of cash,  cash  equivalents,  short-term  investments and
marketable  securities at July 31, 1999 was  $20,095,000.  The  investments  and
securities consist of U.S.  government  securities and are available to meet the
future cash needs of the Company. Cash, cash equivalents, short-term investments
and marketable securities increased $2,450,000 in the first nine months of 1999,
primarily the result of the additional funds raised in the private  placement of
common stock which closed in June 1999 (see Note 5).

                              Page 11 of 14
<PAGE>

Martek may require  substantial  additional  funds in the future to continue its
research and development  programs,  to conduct preclinical and clinical studies
and to commercialize its nutritional oils, Neuromins(R),  and its other products
under  development.  The ultimate levels of these  expenditures  will depend, in
part, on whether the Company seeks independently,  or with other parties through
collaborative agreements,  to develop,  manufacture and market its products. The
capital  requirements of Martek will depend,  among other things, on one or more
of the following factors: growth in the Company's infant formula and nutritional
product sales; the extent and progress of its research and development programs;
the  progress  of  preclinical  and  clinical  studies;  the time  and  costs of
obtaining  regulatory  clearances for those products subject to such clearances;
the costs involved in filing,  protecting and enforcing patent claims; competing
technological and market  developments;  the cost of capital expenditures at the
Company's  manufacturing  facilities;  the cost of acquiring  additional  and/or
operating  existing  manufacturing  facilities  for  its  various  products  and
potential  products   (depending  on  which  products  the  Company  decides  to
manufacture and continues to manufacture itself); and the costs of marketing and
commercializing   the  Company's   products.   The  continued   development  and
optimization of the Company's  production facility has had, and will continue to
have,  a  material  effect  upon  Martek's   liquidity  and  capital  resources.
Additional  plant  modifications  costing at least  $250,000 are expected in the
fourth  quarter of fiscal 1999.  Expenditures  beyond fiscal 1999 will depend in
part  on  production   capacity  needs,   and  the  extent  of  development  and
implementation of process improvements.

Management believes that its existing capital resources, consisting primarily of
cash, short-term  investments and marketable  securities,  will provide adequate
capital  for at least the next 18  months.  However,  Management  believes  that
additional  funds will be needed in the longer  term to continue  the  Company's
research  and  development,  manufacturing  and  marketing  efforts.  Management
intends to seek additional  funding through  commercial and government  research
and   development   contracts   and  grants,   product  sales  and  license  fee
arrangements,   asset-based  borrowing,   equity  issuances,   additional  lease
financing and/or  collaborative  arrangements  with partners if such methods are
available to the Company and on favorable terms.  There can be no assurance that
such funds will be available to the Company on acceptable terms, if at all.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not Applicable






                               Page 12 of 14



<PAGE>


                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings.

None

Item 2.  Changes in Securities and Use of Proceeds.

See Item 2, Part II of Form 10-Q for the quarter ended April 30, 1999

Item 3.  Defaults Upon Senior Securities.

Not Applicable.

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

None.

Item 5.  Other Information.

None.

Item 6.  Exhibits and Reports on Form 8-K

(a)  Exhibits: 27.01 Financial Data Schedule

                      99.1    Cautionary  Statements  for  Purposes of the "Safe
                              Harbor"   Provisions  of  the  Private  Securities
                              Litigation Reform Act of 1995

 (b) Reports on Form 8-K: Form 8-K filed on June 9, 1999.



















                                  Page 13 of 14


<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.



                  MARTEK BIOSCIENCES CORPORATION
                           (Registrant)







Date:  September 14, 1999                   /s/ Peter L. Buzy
      -------------------                   ------------------------------
                                            Peter L. Buzy, Principal Financial
                                            and Chief Accounting Officer






























                                  Page 14 of 14