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 April 30, 2001

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
(State of Incorporation) | 52-1399362
(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.XYes No

Common stock, par value $.10 per share: 19,316,701 shares outstanding
                                                          as of June 8, 2001

Page 1 of 16

## PART I -
FINANCIAL INFORMATION

## Item 1.
Financial Statements

## MARTEK
BIOSCIENCES CORPORATION

`---------------------------------------------------------------------------------------------
                                                                      April 30,   October 31,
                                                                        2001          2000
---------------------------------------------------------------------------------------------
                                                                    (Unaudited)
Assets:
Current assets
     Cash and cash equivalents                                           $9,784       $2,682
     Short-term investments and marketable securities                    20,340       16,582
     Accounts receivable                                                  4,257        2,520
     Inventories  (Note 3)                                                5,984        5,126
     Other current assets                                                   796        1,883
                                                                -----------------------------
Total current assets                                                     41,161       28,793
Property, plant and equipment, net                                       16,047       16,146
Other assets                                                                726          503
                                                                -----------------------------

Total assets                                                            $57,934      $45,442
                                                                =============================


Liabilities and stockholders' equity:
Current liabilities
     Accounts payable                                                      $822         $948
     Accrued liabilities                                                  4,544        3,979
     Current portion of notes payable                                       ---          472
     Current portion of unearned revenue                                  2,107        2,128
                                                                -----------------------------
Total current liabilities                                                 7,473        7,527
Long-term portion of unearned revenue                                     2,407        2,460
Commitments (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; 19,137,889 and 17,806,079 shares issued
        and outstanding at April 30, 2001 and October 31, 2000,
        respectively                                                      1,914        1,781
     Additional paid-in capital                                         142,776      123,474
     Deferred compensation                                                (200)        (173)
     Accumulated other comprehensive income/(loss)                            5          (2)
     Accumulated deficit                                               (96,441)     (89,625)
                                                                -----------------------------
Total stockholders' equity                                               48,054       35,455
                                                                -----------------------------

Total liabilities and stockholders' equity                              $57,934      $45,442
                                                                =============================`

Page 2 of 16

## MARTEK
BIOSCIENCES CORPORATION

`Three months ended April 30,   Six months ended April 30,
---------------------------------------------------------------------------------------------------------
                                                       2001          2000             2001          2000
---------------------------------------------------------------------------------------------------------

Revenues
    Product sales
       Nutritional product sales                     $3,136        $1,151           $5,651        $2,063
       Stable isotope and other product sales           404           481              876         1,157
       Royalties                                        439           107              911           198
                                               ---------------------------   ----------------------------
    Total product sales and royalties                 3,979         1,739            7,438         3,418
    Research and development contracts and grants         8           618               17           730
    Licensing fees and other revenue                     26            11               53            11
                                               ---------------------------   ----------------------------
Total revenues                                        4,013         2,368            7,508         4,159
Costs and expenses
    Cost of product sales                             2,388         1,274            4,728         2,502
    Research and development                          3,058         3,575            6,065         6,412
    Selling, general and administrative               2,121         1,941            3,881         3,554
    Other operating expenses                             52           ---              297           ---
                                               ---------------------------   ----------------------------
Total costs and expenses                              7,619         6,790           14,971        12,468
                                               ---------------------------   ----------------------------
Loss from operations                                 (3,606)       (4,422)          (7,463)       (8,309)
Other income (expense)
    Miscellaneous income                                 40            34               74            65
    Interest income                                     328           318              582           517
    Interest expense                                     (2)          (31)              (9)         (157)
                                               ---------------------------   ----------------------------
Total other income                                      366           321              647           425
                                               ---------------------------   ----------------------------

Net loss                                            $(3,240)      $(4,101)         $(6,816)      $(7,884)
                                               ---------------------------   ----------------------------

Net loss per share, basic and diluted                $(0.17)       $(0.24)          $(0.37)       $(0.47)
---------------------------------------------------------------------------------------------------------

Weighted average common shares outstanding       18,743,645    17,397,572       18,269,881    16,945,862
---------------------------------------------------------------------------------------------------------`

Page 3 of 16

## MARTEK BIOSCIENCES
CORPORATION

`Six Months ended April 30,
------------------------------------------------------------------------------------------------------

                                                                              2001             2000
------------------------------------------------------------------------------------------------------

Operating activities:
  Net loss                                                                  $(6,816)         $(7,884)
  Adjustments to reconcile net loss to net cash
     used in operating activities:
     Depreciation and amortization                                              872              755
     Other non-cash items                                                       150              ---
     Changes in assets and liabilities:
        Accounts receivable                                                  (1,737)          (1,197)
        Inventories                                                            (858)           1,242
        Other assets                                                            845             (235)
        Accounts payable                                                       (126)            (175)
        Accrued liabilities                                                     565              (83)
        Unearned revenue                                                        (74)           4,489
                                                                        ------------------------------
  Net cash used in operating activities                                      (7,179)          (3,088)

Investing activities:
     Purchase of short-term investments and marketable securities           (27,027)         (15,583)
     Proceeds from sale of short-term investments and
          marketable securities                                              23,276            9,250
     Purchase of property, plant and equipment                                 (754)            (392)
                                                                        ------------------------------
  Net cash used in investing activities                                      (4,505)          (6,725)

Financing activities:
     Proceeds from the issuance of common stock in private placement         18,710           10,249
     Proceeds from the exercise of warrants and options                         548            2,494
     Repayment of notes payable                                                (472)            (715)
                                                                        ------------------------------
  Net cash provided by financing activities                                  18,786           12,028
                                                                        ------------------------------

  Net increase in cash and cash equivalents                                   7,102            2,215
  Cash and cash equivalents at beginning of year                              2,682            1,180
                                                                        ------------------------------

  Cash and cash equivalents at end of period                                 $9,784           $3,395
------------------------------------------------------------------------------------------------------`

Page 4 of 16

## MARTEK
BIOSCIENCES CORPORATION

`Accumulated
                               Common Stock     Additional                    Other
                               ------------      Paid-in     Deferred     Comprehensive  Accumulated
                              Shares    Amount   Capital   Compensation   Income (Loss)    Deficit     Total
---------------------------------------------------------------------------------------------------------------
Balance at
October 31, 2000             17,806,079  $1,781   $123,474         ($173)           ($2)   ($89,625)  $35,455
---------------------------------------------------------------------------------------------------------------

 Issuance of common stock
   in private placement, net  1,279,237     128     18,582           ---             ---        ---    18,710
 Exercise of stock options
   and warrants                  52,573       5        543           ---             ---        ---       548
 Deferred compensation
   on stock options                 ---     ---        177          (177)            ---        ---       ---
 Amortization of
   deferred compensation            ---     ---        ---           150             ---        ---       150
 Net loss                           ---     ---        ---           ---             ---     (6,816)   (6,816)
 Other comprehensive
   income:
  Unrealized gain
   on investments                   ---     ---        ---           ---              7         ---         7
                                                                                                     ----------
    Comprehensive loss                                                                                 (6,809)
---------------------------------------------------------------------------------------------------------------
Balance at
April 30, 2001               19,137,889  $1,914   $142,776         ($200)             $5   ($96,441)  $48,054
---------------------------------------------------------------------------------------------------------------`

Page 5 of 16

Basis of
Presentation. The accompanying unaudited financial statements of Martek
Biosciences Corporation (the Company) 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 ended April 30, 2001 are not
necessarily indicative of the results that may be expected for the year ended
October 31, 2001. 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, 2000.

Revenue Recognition.
Revenues on cost reimbursement and fixed price contracts are generally
recognized on the percentage of completion method of accounting as costs are
incurred. Revenue is recognized on product sales when goods are shipped. Revenue
from licensing agreements is recognized in general over the term of the
agreement, or in certain circumstances, when milestones are met. Revenue
recognized in the accompanying Statements of Operations is not subject to
repayment. Revenue received that is related to future performance under such
contracts is deferred and recognized as revenue when earned.

Foreign Currency Transactions.    Foreign currency transactions are translated into U.S. dollars at prevailing rates. Gains or losses
resulting from foreign currency transactions are included in current period income or loss as incurred. Currently, all material
transactions of the Company are denominated in U.S. dollars, and the Company has not entered into any material transactions that are
denominated in foreign currencies.

Inventories.Inventories are stated at the lower of cost or market including appropriate
elements of material, labor and indirect costs and are valued using the weighted
average approach that approximates the first-in, first-out method. Inventories
include products and materials held for sale as well as products and materials
that can alternatively be used in the Companys research and development
activities. Inventories identified for development activities are expensed in
the period in which such inventories are designated for such use.

Impairment of Long Lived
Assets and Long Lived Assets to be Disposed Of. The Company reviews
long-lived assets and certain identifiable intangibles for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Recoverability of assets to be held and used is measured
by a comparison of the carrying amount of an asset to future undiscounted net
cash flows expected to be generated by the asset. For purposes of estimating
undiscounted cash flows, the Company does not group cash flows on different
levels as only one significant line of business is identified. If such assets
are considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of assets exceeds the fair value of the
assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell. In the past, the Company has not
incurred any impairment expense.

Segment Information.The Company currently operates in one business segment, that being the
development and commercialization of novel products from microalgae. The Company
is managed and operated as one business. The entire business is comprehensively
managed by a single management team that reports to the Chief Executive Officer.
The Company does not operate separate lines of business or separate business
entities with respect to its products or product candidates. Accordingly, the
Company does not accumulate discrete financial information with respect to
separate product areas and does not have separately reportable segments as
defined by SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information."

Page 6 of 16

Short-term Investments
and Marketable Securities.The Company has classified all debt securities as
available-for-sale. Available-for-sale securities are carried at specific
identification cost and consist of U.S. government obligations with average
maturities of less than six months. Unrealized gains and losses on these
securities are reported as accumulated other comprehensive income (loss), which
is a separate component of stockholders equity. Realized gains and losses
and declines in value judged to be other than temporary are included in other
income, based on the specific identification method.

Comprehensive Income
(Loss). Comprehensive income (loss) is comprised of net loss and other
comprehensive income. Other comprehensive income includes certain changes in
equity that are excluded from net income, such as translation adjustments, and
unrealized holding gains and losses on available-for-sale marketable securities.
Comprehensive loss for the three months ended April 30, 2001 was $3,242,000
versus $4,111,000 for the comparable period in 2000. Comprehensive loss for the
six months ended April 30, 2001 and 2000 was $6,809,000 and $7,878,000,
respectively.

Reclassifications.   Certain amounts in the prior period's financial statements have been reclassified to conform to the current
period presentation.

The Company had commitments
at April 30, 2001 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 April 30, 2001, would not have a
material effect on the financial statements.

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 currently
contracts with a third party supplier to produce its arachidonic acid oil. At
April 30, 2001, the Company had outstanding inventory purchase commitments to
this supplier totaling approximately $5.0 million.

Inventories consist of the following:

`April 30,         October 31,
                                                              2001               2000
                                                       -----------------    ---------------

                          Finished products                  $4,967,000         $3,850,000
                          Work in process                       996,000          1,035,000
                          Raw materials                         215,000            521,000
                                                       -----------------    ---------------
                                                              6,178,000          5,406,000
                          Less inventory reserve               (194,000)          (280,000)
                                                       -----------------    ---------------
                                                             $5,984,000         $5,126,000
                                                       =================    ===============`

Page 7 of 16

At April 30, 2001, the Company had net operating loss carryforwards of approximately $112,415,000 for income tax purposes that expire
in years 2001 through 2020.

Deferred income taxes
reflected 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 $44,966,000 and
$38,462,000 at April 30, 2001 and 2000, respectively. Because it is more likely
than not that some portion or all of these deferred tax assets will not be
realized, they were fully reserved for by a valuation allowance at April 30,
2001 and 2000.

On March 31, 2000, the
Company entered into a worldwide non-exclusive license agreement relating to the
use of the Companys proprietary long-chain polyunsaturated fatty acids in
infant formulas. The total consideration received by the Company of $4.5
million, which represents license fees and royalty prepayments, was recorded as
unearned revenue. The license fees are non-refundable and are being recognized
as revenue on a straight-line basis over the twenty-five year term of the
agreement. Of this amount, $500,000 may be credited against on-going royalties
or Abbott Laboratories purchase from the Company of its products. The
non-refundable royalty prepayment, as well as potential ongoing royalties, will
be recognized as revenue as products are introduced by the licensee in
accordance with the terms of the agreement. The license agreement may be
terminated by the licensee upon proper notification subsequent to the first
anniversary of the date upon which the licensee has made all payments to the
Company in accordance with the agreement. The Company recognized approximately
$25,000 and $50,000 in license fee revenues and no royalty revenues from this
agreement during the three and six-month periods ended April 30, 2001,
respectively.

On March 2, 2001, 1,279,237
shares of the Companys common stock and warrants to purchase 319,811
shares of common stock were issued in a private placement resulting in net
proceeds to the Company of approximately $18.7 million. The stock was issued at
the closing market price as of February 27, 2001 of $15.875 per share. The
warrants are exercisable for a period of five years from the date of issuance at
$19.05 per share.

Page 8 of 16

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

## Cautionary Note

This Managements
Discussion and Analysis of Financial Condition and Results of Operations
contains forward-looking statements concerning our business and operations,
including, among other things, statements concerning our:

- expectations regarding future revenue growth, product introductions,
distribution, sales, applications and potential marketing partnerships;
- expectations regarding sales and royalties by and from our formula licensees;
- expectations regarding potential marketing of our oils by our U.S. infant formula licensees;
- expectations regarding future efficiencies in manufacturing processes and the cost of production of our
  nutritional oils;
- expectations regarding future research and development costs; and
- expectations regarding additional capital expenditures needed in relation to our
fermentation and oil processing activities.

Forward-looking statements include those statements containing words such as:

- "will,"
- "should,"
- "could,"
- "anticipate,"
- "believe,"
- "plan,"
- "estimate,"
- "expect,"
- "intend," and other similar expressions.

All of these
forward-looking statements involve risks and uncertainties. They are all made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. We wish to caution you that our actual results may differ
significantly from the results we discuss in our forward-looking statements. We
discuss the risks that could cause such differences in this Managements
Discussion and Analysis, in Exhibit 99.1 to this Form 10-Q, and in various other
filings with the Securities and Exchange Commission (SEC).

## General

Martek Biosciences
Corporation (We, Martek or the Company) was
founded in 1985. We are a leader in the development and commercialization of
products derived from microalgae. Our leading products are nutritional oils used
as ingredients in infant formula and foods, and as ingredients in, and
encapsulated for use as, dietary supplements. Our nutritional oils are comprised
of fatty acid components, primarily docosahexaenoic acid, commonly known as DHA,
and arachidonic acid, commonly known as ARA. Many researchers believe that these
fatty acids may enhance mental and visual development in infants, and play a
pivotal role in brain function throughout life. Low levels of DHA in adults have
also been linked with a variety of health risks, including cardiovascular
problems, cancer, and various neurological and visual disorders. Additional
applications of our patented technology based upon microalgae include our algal
genomics technology and our currently marketed stable isotope and fluorescent
detection products and technologies that can be used by researchers as an aid in
drug discovery and diagnostics. In 1989, we began to realize revenues from sales
of our stable isotope products. In 1992, we realized our first revenues from
license fees related to our nutritional oils containing DHA and ARA and sales of
sample quantities of these oils. In 1995, we recognized our first product and
royalty revenues from sales of infant formula containing these oils, and in
1996, we began to realize revenues from the sale of Neuromins®, a DHA
dietary

Page 9 of 16

supplement. In 1998, we
first realized revenues from the sale of our new phycobilisome fluorescent
detection products. We currently have license agreements with seven infant
formula manufacturers representing over 60% of the estimated $6 - $8 billion
worldwide market for infant formula. Five of these licensees are now marketing
term infant formula products containing our oils in twenty countries and
pre-term infant formula products containing our oils in over 60 countries around
the world.

We have incurred losses in
each year since our inception. At April 30, 2001, our accumulated deficit was
$96,441,000. We expect to continue our development, production optimization and
product marketing activities and as a result, expect our losses to continue for
at least the remainder of 2001, or until significant sales of our nutritional
oils and Neuromins® DHA products occur and/or until significant royalties
from sales of infant formula products containing our oils are recognized. In
addition, we expect 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. The extent and timing of future
oils-related revenues are largely dependent upon:

- FDA and other regulatory approvals for products containing our oils;
- market introductions of products by our licensees; and/or
- agreements with other future third-party collaborators.

Because of this, the timing
or likelihood of future profitability is largely dependent on factors over which
we have no control.

## Management
Outlook and Regulatory Issues

We believe that the outlook
for future revenue growth remains positive and that, for the remainder of fiscal
2001, term infant formulas containing our oils will be introduced in additional
countries and sales and royalties from our nutritional oils will continue to
grow. To date, five of our infant formula licensees have obtained the regulatory
approval, where required, to sell infant formula supplemented with our oils in
over 60 countries for term or pre-term infant formula products. No company has
yet launched an infant formula containing our oils in the United States.

On May 17, 2001, we
received notice from the Food and Drug Administration (FDA) that
after completing its review of our generally recognized as safe
(GRAS) notification, the agency had no further questions regarding
our conclusion that our DHASCO® and ARASCO® oil blend is GRAS when
used in specified ratios in infant formulas. Our licensees must now meet the
statutory and regulatory requirements established for infant formula, including
the premarket notification requirements, before launching an infant formula in
the United States that contains our oils. While we believe that infant formula
supplemented with our oils will be available in the U.S. by the end of 2001,
there can be no assurance that:

-a licensee will pursue the necessary regulatory steps to market an infant
formula containing our DHA and ARA in the U.S.;
-a licensees infant formula pre-market notification will provide sufficient
data to support the marketing of an infant formula containing our DHA and ARA;
or
-the regulatory process will not involve significant delays that may materially
and adversely affect the timing of the introduction of infant formulas
containing our products in the U.S.

Nevertheless, we anticipate
that new infant formula products containing our oils will continue to be
introduced in various countries around the world and we will continue to see
accelerated growth in sales from infant formula related products.

Page 10 of 16

## Results Of
Operations

Revenues for the quarter
ended April 30, 2001 were $4,013,000, a 69% increase from revenues of $2,368,000
for the quarter ended April 30, 2000. Revenues for the six-month period ended
April 30, 2001 were $7,508,000, an increase of $3,349,000 or 81%, from the same
period in 2000. These increases were primarily due to increased nutritional
product sales. Total product sales and royalties during the quarter ended April
30, 2001 increased by $2,240,000 or 129% from the quarter ended April 30, 2000
and increased by $4,020,000 or 118% for the six-month period ended April 30,
2001 from the same period in 2000. Sales of nutritional products increased by
$1,985,000 or 172% for the quarter ended April 30, 2001 over the quarter ended
April 30, 2000 and increased $3,588,000 or 174% for the first six months of
fiscal year 2001 when compared to the same period in 2000. Royalties on sales of
infant formula products increased $332,000 or 310% for quarter ended April 30,
2001 over the quarter ended April 30, 2000 and increased $713,000 or 360% for
the six months ended April 30, 2001 over the same period in 2000. The increase
in nutritional product sales is primarily due to increased sales of oil to
infant formula licensees. The increase in royalties is primarily due to the
increased volume of oil sales to licensees under royalty-bearing arrangements in
the fourth quarter of fiscal 2000 for which trailing royalties were not earned
until the quarter ended April 30, 2001. Since December 2000, over 95% of all
sales to infant formula licensees have been made under all-inclusive pricing
arrangements, which incorporate a slightly discounted royalty up-front into the
sales price of the Companys oils. Management anticipates that royalty
revenues will decline in the future as the Company increases sales of bulk oil
to infant formula licensees under all-inclusive pricing arrangements.

Sales of stable isotopes
and other products decreased 16% for the quarter ended April 30, 2001 and
decreased by 24% for the first six months of fiscal year 2001, when compared to
the same periods in 2000. These decreases are primarily due to a shift in focus
to higher margin isotope sales and a decreased emphasis on the sales of lower
margin reagent products. The decrease in sales of stable isotopes was offset
somewhat by increased sales of fluorescent marker products. Fluorescent marker
sales increased by over $100,000 in the quarter ended April 30, 2001 compared to
the quarter ended April 30, 2000, primarily the result of increased sales from a
new distribution agreement with PerkinElmer Life Sciences, Inc., which was
completed in the first quarter of fiscal 2001. Revenues from research and
development work decreased by $610,000 in the quarter ended April 30, 2001 when
compared to the quarter ended April 30, 2000, and decreased $713,000 for the six
months ended April 30, 2001 from the same period in 2000, mainly due to a
third-party development project completed during the quarter ended April 30,
2000 at the Companys Winchester, Kentucky plant that did not repeat in
fiscal year 2001.

Cost of product sales and
royalties decreased to 60% of revenues from product sales and royalties for the
quarter ended April 30, 2001, down from 73% for the quarter ended April 30,
2000. For the six-month period ended April 30, 2001, cost of product sales and
royalties decreased to 64% of revenues from product sales and royalties, down
from 73% for the six-month period ended April 30, 2000. After excluding the
impact of trailing royalties, cost of product sales was 67% of product sales for
the quarter ended April 30, 2001 and 72% of product sales for the six-month
period ended April 30, 2001. Since December 2000, over 95% of all sales to
infant formula licensees have been made under all-inclusive pricing, and
management anticipates that this trend will continue for future sales to infant
formula licensees. The change to all-inclusive pricing will not have a material
impact on the Companys overall financial results as the economics of
flat-rate pricing are similar to the economics of existing royalty-bearing
arrangements, with the current transfer price and royalty combined into one
initial price with a slight discount. All-inclusive pricing does, however,
eliminate the time lag in recognizing trailing royalty revenues, which has
generally been 3 to 6 months after the initial sale of oil.

In general, the cost of
sales of 67% (excluding trailing royalties) incurred during the quarter ended
April 30, 2001 reflects the cost of inventory manufactured over approximately
the last 12 months when certain production efficiencies had not yet been
realized due to the low volume of production and because the production process
had not been optimized. Management believes that, as sales volumes increase,
manufacturing efficiencies from recent development efforts are realized, and
new, more cost-effective

Page 11 of 16

strains of algae are
developed and introduced into full-scale production, the cost of production of
Marteks nutritional oils products will decrease, resulting in a positive
impact on the Companys sales margins.

Research and development
costs decreased by $517,000 or 14%, in the quarter ended April 30, 2001 as
compared to the quarter ended April 30, 2000. For the six-month period ended
April 30, 2001, research and development costs decreased by $347,000 or 5% when
compared to the same period in 2000. The majority of the decrease in fiscal year
2001 relates to approximately $420,000 in expenses that were incurred relating
to a third-party development project at the Companys Winchester plant
during the quarter ended April 30, 2000 that did not repeat in 2001. Management
believes that research and development expenditures may remain high and
potentially increase in the future as new, more cost-effective strains of algae
are developed and introduced into full-scale production and the oil extraction
and refining processes are optimized.

Selling, general and
administrative expenses increased by $180,000, or 9%, during the quarter ended
April 30, 2001 and increased by $327,000 or 9%, in the six months ended April
30, 2001 over the second quarter and six months ended April 30, 2000,
respectively. These increases are primarily the result of increased corporate
administrative expenditures and the timing of print and other DHA marketing
campaigns, including promotional support for European launches of supplemented
formula by our infant formula licensees.

Other operating expenses of
$52,000 were incurred in the quarter ended April 30, 2001. These expenses relate
primarily to start-up and other costs associated with obtaining additional
capacity for the production of our DHA and ARA oils. We anticipate that these
costs may increase in the future as demand for our oils rises and start-up costs
from existing and potential new third-party manufacturers are incurred.

Other income, net,
increased $45,000 or 14%, during the quarter ended April 30, 2001 over the
quarter ended April 30, 2000, and increased $222,000, or 52% during the six
months ended April 30, 2001 over the six months ended April 30, 2000. This
increase is primarily due to increased interest earned on investments as a
result of fundraising activities in fiscal year 2001 as well as a decrease in
interest expense on outstanding debt, which was extinguished during the quarter
ended April 30, 2001.

As a result of the
foregoing, our net loss for the quarter ended April 30, 2001 was $3,240,000, or
$.17 per share, compared to a net loss of $4,101,000, or $.24 per share for the
quarter ended April 30, 2000. Our net loss for the six months ended April 30,
2001, was $6,816,000 or $.37 per share, compared to a net loss of $7,884,000 or
$.47 per share for the same period in 2000.

## Liquidity and
Capital Resources

We have financed our operations primarily from:

- the issuance and sale of equity securities;
- product sales and receipt of license fees;
- the exercise of stock options and warrants;
- debt financing; and
- revenues received under research and development contracts and grants.

Since our inception, we
have raised approximately $146 million from public and private sales of our
equity securities, as well as option and warrant exercises. We recently raised
approximately $10.25 million in February 2000 and approximately $18.7 million in
March 2001 from private placements of our common stock.

Through April 30, 2001, we have incurred an accumulated deficit of $96,441,000. Our balance of cash and cash equivalents at April
30, 2001 was $9,784,000. In addition, at April 30, 2001, we had $20,340,000 in

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short-term investments and marketable securities. These investments and
securities, which consist of U.S. Government securities with average maturities
of less than six months, are available to meet our future cash needs. Our cash,
cash equivalents, short-term investments and marketable securities increased
$10,860,000 during the first six months of fiscal 2001, primarily due to the
funds received from the private placement of common stock and warrants in March
of 2001, offset by cash used to fund operations.

In the future we may require substantial additional funds to:

- increase production capacity for our nutritional oils;
- continue our research and development programs;
- conduct pre-clinical and clinical studies; and
- commercialize our nutritional oils, Neuromins®DHA, and our other products under development.

The ultimate amount of
funding that we will require will depend, in part, on whether we seek
independently, or with other parties through collaborative agreements, to
develop, manufacture and market our products. Our future capital requirements will
depend, among other things, on one or more of the following factors:

- growth in our infant formula and nutritional product sales;
- the extent and progress of our research and development programs;
- the progress of pre-clinical and clinical studies;
- the time and costs of obtaining regulatory clearances for our products that are 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 our manufacturing facilities;
- the cost of acquiring additional and/or operating existing manufacturing facilities for our various products
  and potential products (depending on which products we decide to manufacture and continue to
  manufacture ourselves); and
- the costs of marketing and commercializing our products.

The continuing development
and optimization of our production facility have had, and will continue to have,
a material effect upon our liquidity and capital resources. During the first six
months of fiscal 2001 we spent approximately $700,000 on capital equipment at
our production plant, and we expect additional expenditures at our production
plant of at least $1.0 million during the remainder of fiscal 2001. Capital
expenditures beyond 2001 will depend in part on our production capacity needs,
and the extent of development and implementation of process improvements.

We believe that, with the approximately $18.7 million raised on March 2, 2001, our existing capital resources will provide us
adequate capital for at least the next 18 months.  However, as demand for our nutritional oils increases, we may require substantial
additional funds to increase our production capacity for our oils.  The amount of capital needed for this scale-up will depend on
whether we decide to expand our production capabilities on our own or contract with a third party manufacturer to produce our oils.
We estimate that, to double the capacity of our DHA production capabilities at our Winchester, KY plant, it could cost between $10 - $20
million.   We intend to seek additional funding through:

- equity issuances;
- asset-based borrowing;
- product sales and license fee arrangements;
- additional lease financing;
- collaborative arrangements with partners; and/or
- commercial and government research and development contracts and grants.

We can offer no assurance that such financing alternatives will be available to us on terms that would be acceptable, if at all.

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## Item 3.
Quantitative and Qualitative Disclosure About Market Risk

Quantitative and
qualitative disclosures about market risk are not required because the
underlying risk items are not material.

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# PART II -
OTHER INFORMATION

## Item 1. Legal
Proceedings.

## Item 2.
Changes in Securities.

## Item 3. Defaults
Upon Senior Securities.

## Item 4.  Submission of Matters to a vote of Security Holders.

Martek's Annual Meeting of Stockholders was held on March 16, 2001.
The following members were elected to Martek's Board of Directors to hold office for
 the periods indicated below:

`Elected Until
                                         Annual Meeting
           Nominee                         To Be Held                  In Favor                Withheld

           Douglas J. MacMaster, Jr.           2004                    13,286,545                13,841
           John H. Mahar                       2004                    13,286,545                13,841
           Eugene H. Rotberg                   2004                    13,286,545                13,841`

## Directors
Continuing in Office:

`Gordon S. Macklin
           Richard J. Radmer, Ph.D.
           William D. Smart
           Jules Blake, Ph.D.
           Henry Linsert, Jr.
           Ann L. Johnson, M.D.
           Sandra Panem, Ph.D.`

## Item 5.  Other Information.

## Item 6.  Exhibits and Reports on Form 8-K

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# 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:    June 14, 2001 | /s/ Peter L. Buzy
Peter L. Buzy, Chief Financial and Accounting Officer
|---------------------- | -----------------------------------------------------------------------

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