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, 1997

                                       or

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

                      For the Transition Period From to


                         Commission File 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: 13,629,219 shares outstanding
                           as of September 5, 1997



                                Page 1 of 13

   
<PAGE>




                       PART I - FINANCIAL INFORMATION
                                 

Item 1. Financial Statements

MARTEK BIOSCIENCES CORPORATION

Balance Sheets
($ in thousands)
--------------------------------------------------------------------------------
                                                  July 31,        October 31,
                                                    1997             1996
--------------------------------------------------------------------------------
                                               (Unaudited)
Assets:
Current assets:
     Cash and cash equivalents                    $3,336            $8,633
     Short-term investments and                   
        marketable securities                     22,180            30,759      
     Accounts receivable                             543               322
     Inventories  (Note 4)                         2,685             1,841
     Prepaid expenses                                247               134
     Other current assets                            158               125
                                              ----------------------------------
Total current assets                              29,149            41,814
Property, plant and equipment, net                15,859            15,309
                                              ----------------------------------
                                                 $45,008           $57,123
                                              ==================================


Liabilities and stockholders' equity:
Current liabilities:
     Accounts payable                               $617              $642
     Accrued liabilities                           1,216             1,495
     Current portion of notes payable              1,293             4,371
                                              ----------------------------------
Total current liabilities                          3,126             6,508

Long-term portion of notes payable                 3,625             1,199
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  at July 31, 1997 
        and at October  31,  1996;  13,619,394 
        and 13,392,250 shares issued at July 31, 
        1997 and October 31, 1996, respectively.   1,362             1,339
     Additional paid-in capital                   78,759            78,268
     Accumulated deficit                         (41,864)          (30,191)
                                              ----------------------------------
Total stockholders' equity                        38,257            49,416
                                              ----------------------------------

                                                 $45,008           $57,123
                                              ==================================

See accompanying notes.





                              Page 2 of 13




<PAGE>







MARTEK BIOSCIENCES CORPORATION

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

                                     Three months              Nine months
                                    ended July 31,            ended July 31,
--------------------------------------------------------------------------------
                                                       
                                    1997        1996          1997        1996
--------------------------------------------------------------------------------
Revenues:
  Product Sales:
   Nutritional product sales        $539         $38        $1,192         $74
   Other product sales               436         159         1,229         589
                                   -------------------     ---------------------
   Total Product Sales               975         197         2,421         663
   License fees and related 
    revenues                         ---          12           293       2,244
   Royalties                           7           1            16           7
   Research and development 
    contracts and grants             101         212           375         596
                                   -------------------     ---------------------
Total revenues                     1,083         422         3,105       3,510
Costs and expenses:
   Cost of product sales             773         134         1,925         390
   Research and development        2,716       2,496         8,397       7,564
   Selling, general and
    administrative                 1,730       1,159         5,532       3,191
                                   -------------------      --------------------
Total costs and expenses           5,219       3,789        15,854      11,145
                                  --------------------     ---------------------
Loss from operations              (4,136)     (3,367)      (12,749)     (7,635)
Other income (expense):
   Miscellaneous income               18          13            45          42
   Interest income                   400         600         1,354       1,911 
   Interest expense                 (111)       (105)         (323)       (251) 
                                 --------------------      ---------------------
Total other income                   307         508         1,076       1,702
                                 --------------------      ---------------------

Net loss                         ($3,829)    ($2,859)     ($11,673)    ($5,933)
--------------------------------------------------------------------------------

Net loss per share (Note 5)       ($0.28)     ($0.22)       ($0.86)     ($0.45)
--------------------------------------------------------------------------------

Weighted average common 
shares outstanding            13,609,781  13,369,968    13,530,766  13,246,324
--------------------------------------------------------------------------------


See accompanying notes.












                               Page 3 of 13



<PAGE>


MARTEK BIOSCIENCES CORPORATION

Statements of Cash Flows
(Unaudited - $ in thousands)

                                                    Nine Months ended July 31,
--------------------------------------------------------------------------------
                                                       1997            1996
--------------------------------------------------------------------------------

Operating activities:
  Net loss                                         ($11,673)        ($5,933)
  Adjustments to reconcile net loss to net cash
     used in operating activities:
     Depreciation and amortization                      861             666
     Changes in assets and liabilities:
        Accounts receivable                            (221)            146
        Inventories                                    (844)           (499)
        Prepaid expenses                               (113)            (68)
        Other current assets                            (33)              2
        Accounts payable                                (25)           (199)
        Accrued liabilities                            (279)            228
        Unearned revenue                                ---          (2,075)
                                                 -------------------------------
  Net cash used in operating activities             (12,327)         (7,732)

Investing activities:
     Change in short-term investments
       and marketable securities                      8,579         (20,837)
     Purchase of property, plant and equipment       (1,411)         (3,765)
                                                 -------------------------------
  Net cash provided by (used in)
     investing activities                             7,168         (24,602)

Financing activities:
     Proceeds from the exercise of warrants 
      and options, and other                            514             885
     Borrowings on notes payable                      4,000           1,540
     Repayment of notes payable                      (4,652)           (120)
                                                 -------------------------------
  Net cash provided by (used in) 
     financing activities                              (138)          2,305
                                                 -------------------------------

  Net decrease in cash and cash equivalents          (5,297)        (30,029)
  Cash and cash equivalents at beginning of year      8,633          41,039
                                                 -------------------------------

  Cash and cash equivalents at end of period         $3,336         $11,010
--------------------------------------------------------------------------------


See accompanying notes.








                           Page 4 of 13

<PAGE>


MARTEK BIOSCIENCES CORPORATION
Statement of Stockholders' Equity
(Unaudited - $ in thousands, except per share data)


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

Balance at
October 31, 1996           13,392,250    $1,339    $78,268   ($30,191)  $49,416
--------------------------------------------------------------------------------

Exercise of stock options     227,144        23        491       ---        514
                                                                                
Net loss                        ---         ---       ---    (11,673)   (11,673)
--------------------------------------------------------------------------------
Balance at
July 31, 1997              13,619,394    $1,362   $78,759   ($41,864)   $38,257
--------------------------------------------------------------------------------


See accompanying notes.
































                                  Page 5 of 13

<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, 1997 are not
necessarily  indicative  of the results  that may be expected for the year ended
October 31, 1997. 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, 1996.

2.  Commitment and Contingencies

The Company had commitments at July 31, 1997 to fund up to $1.7 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, 1997, would not have a material effect on the financial statements.

The Company has licensed certain technologies and recognized license fee revenue
under various  agreements.  Potentially  refundable license fees are recorded as
unearned revenue and are not recognized as revenue until the earnings process is
complete  and amounts  are not subject to refund.  Under the terms of one of the
Company's license  agreements,  $2,075,000  previously  recorded as unearned was
recognized  during the first quarter of 1996. See  "Management's  Discussion and
Analysis of Financial Condition and Results of Operations."

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 make  payments  upon the  occurrence  of
certain  milestones,  and royalties upon the sale of certain products  resulting
from such collaborations.

On June 20, 1996,  the Company  entered into an equipment  line of credit in the
amount  of  $2,000,000  to  finance  a portion  of the  construction  of the oil
processing  facility in  Winchester,  KY. Draws on the line of credit as of June
20, 1996 converted to a four year term loan bearing interest at a rate of 9.02%.
As of July 31, 1997,  $460,000 of the line was available  for future  borrowings
and  $1,185,000  was  outstanding.  This  loan is  collateralized  solely by the
equipment purchased with the proceeds.

On March 24, 1997, the Company  entered into a four year term loan in the amount
of $4,000,000 to refinance the notes payable for the purchase of the Winchester,
Kentucky  fermentation  facility that were due in March and September  1997. The
loan bears  interest at a rate of 8.61% and as of July 31, 1997 the  outstanding
balance was  $3,627,000.  The Company uses this facility to produce oils rich in
DHA and ARA using its proprietary technology.  The loan is collateralized solely
by the fermentation plant.






                                  Page 6 of 13

<PAGE>
3.  Income Taxes

At  July  31,  1997,  the  Company  had  net  operating  loss  carryforwards  of
approximately  $53,563,000  for income tax  purposes  that  expire in years 2000
through 2011.

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 several
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. Significant components of
the Company's deferred tax assets as of July 31, 1997 are as follows:


         Deferred tax assets:
            Write-off of patent                            $    404,000
            Net operating loss carryforwards                 21,425,000
                                                            ------------
            Total deferred tax assets                       $21,829,000
                                                            ============
            Valuation allowance for net
              deferred tax assets                          ($21,829,000)
                                                            ============
            Net deferred tax assets                         $    ---
                                                            ============

4.  Inventories

Inventories consist of the following:

                                              July 31,       October 31,
                                               1997             1996     
                                            -----------      -----------
        Finished products                   $1,422,244         $875,645
        Work in process                        930,321          545,168
        Raw materials                          332,430          420,315
                                           -----------      -----------  
                                            $2,684,995       $1,841,128
                                           ===========      ===========

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.

5.  Net loss per share

Net loss per share is computed  using the weighted  average  number of shares of
common stock outstanding during the period.  Common equivalent shares from stock
options and warrants are excluded as their effect is antidilutive.









                                  Page 7 of 13

<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  statements about future production  efficiencies for
its nutritional oil products.  Such statements  involve risks and  uncertainties
that could cause  actual  results to differ due to a variety of risk factors set
forth herein and from time to time in the Company's  filings with the Securities
and Exchange  Commission,  including but not limited to its last filed report on
Form 10-K and its S-3 declared effective on September 26, 1995.

Since its inception in 1985,  Martek has been engaged  primarily in the research
and development, manufacturing and sales of products derived from microalgae. In
1989, the Company began the  commercial  production and sale of its products for
drug  discovery.  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 began to recognize  revenues from the
sale of Neuromins(TM),  a DHA dietary supplement.  Martek has incurred losses in
each year since its  inception.  At July 31,  1997,  the  Company's  accumulated
deficit was $41,864,000.  The Company expects to continue to expand its research
and  development  effort,  optimize  oils  production  and  increase its product
marketing  activities.  As a result,  Martek  expects its losses to continue and
possibly  increase  for at  least  the  next six  months,  or until  significant
royalties from sales of infant  formula  products  containing  its oils,  and/or
sales revenues from Neuromins(TM)  and/or its nutritional oils to infant formula
companies  are  realized.  In  addition,   the  Company  expects  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, if any.

Two of the Company's  licensees have  introduced  term infant  formula  products
containing  Martek's DHA and ARA in Spain and Israel, and three of the Company's
licensees have introduced  preterm infant formula products  containing  Martek's
DHA and ARA in ten countries.  The Company is not able to predict  however when,
or if, any of these licensees will expand or introduce new offerings of products
containing  Martek's  oils.  The  Company  does not believe  that broad  product
introductions  of term infant formulas  containing  these oils will occur before
early 1998, at the earliest,  and cannot predict the timing or extent of further
introductions  or  expansions  of preterm  infant  formula  products  containing
Martek's  oils.  Revenues  from preterm uses of Martek's  oils will not,  alone,
significantly  reduce Martek's losses.  Future  oils-related  revenues,  and the
timing or likelihood of future  profitability,  are largely dependent on factors
over which the Company has no control.

Results of  Operations -  Comparison  of Quarters and Nine Months Ended July 31,
1997 and 1996

Revenues for the quarter ended July 31, 1997, were  $1,083,000,  a 157% increase
from revenues of $422,000 for the same period in 1996, due to increased sales of
nutritional  and drug design  products.  As the result of  $2,075,000 in license
fees recognized during the first quarter of 1996 (and not repeated in 1997) that
were  initially  recorded  as  unearned  in  1992  and  1993,  revenues  for the
nine-month  period  ended July 31, 1997 of  $3,105,000  were down by $405,000 or
12%,  from the same  period in 1996  despite a  significant  increase in product
sales during the first nine months of 1997. Total product sales during the third
quarter  and  nine-months  ending  July 31,  1997,  increased  by  $778,000  and
$1,758,000 or 395% and 265%, respectively,  from the same periods in 1996. Sales
of  nutritional  products  including  Neuromins(TM)  capsules,   increased  over
fourteen  times for the third  quarter and over sixteen times for the first nine
months of 1997, when compared to the same periods in 1996. Sales of products for
drug discovery increased 174% for the third quarter and 109% for  the first nine

                              Page 8 of 13
<PAGE>
months  of 1997, when  compared  to  the  same  periods  in 1996. Revenues  from
research  and  development  contracts and grants  decreased by 52% in  the third
quarter of 1997 when  compared  to the third  quarter of 1996 and  decreased 37%
for the nine months ended July 31, 1997 from the same period in 1996.

Cost of product  sales  increased to 79% of revenues  from product sales for the
third quarter of 1997 from 68% for the third quarter of 1996, but improved by 6%
from the second quarter of 1997.  For the nine-month  period ended July 31, 1997
cost of product  sales  increased to 80% of revenues from product sales from 59%
for the same period in 1996. This increase  resulted  primarily from the cost of
sales of Martek's  nutritional oils which represented a higher percentage of the
product mix than in 1996. A portion of the  revenues  from the sales of Martek's
oils for infant  formula uses are royalty  based and are received by the Company
and recognized as revenue  approximately 9 months after the initial sale of oil.
Accordingly,  royalty  revenues  are not  included  in  product  sales,  thereby
creating a higher cost of goods sold as a percentage  of revenues  than would be
the case if total revenues were  recognized as product sales.  In addition,  oil
production cost was high due to the current low volume of production and because
the production process requires further optimization. As sales volume increases,
and  manufacturing  efficiencies and optimization  occurs,  the Company believes
that the cost of production of the nutritional oils products will decrease.  The
Company  believes  that a  significant  continued  optimization  effort  will be
required  for at least the next two years.  There can be no  assurance  that the
Company will be able to successfully optimize production of its nutritional oils
in order to manufacture  commercial quantities at a reasonable cost, or continue
to comply with applicable  regulatory  requirements,  including GMP, or that its
facilities  will be sufficient  to meet the demand for the oils.  The balance of
the increase in cost of sales  resulted  from price  reductions in the Company's
drug discovery  products  brought about by competition for these  products.  The
Company  is working  to  decrease  the  production  costs of its drug  discovery
products and has  developed  new,  co-products  and  proprietary  products in an
effort to improve profit margins.  The Company's ability to successfully  market
these new products and the  ultimate  impact of these  efforts on cost of sales,
however, cannot be predicted.

Research  and  development  costs  increased  by  $220,000,  or 9%, in the third
quarter  of 1997 as  compared  to the same  period in 1996.  For the  nine-month
period ended July 31, 1997, research and development costs increased $833,000 or
11% when  compared to the same  period in 1996.  Consistent  with the  Company's
plans, nutritional oils development costs accounted for a significant portion of
all research and  development  costs as a result of intensified  efforts to meet
production and product introduction objectives.  To support the introductions of
infant formula products  containing  Martek's oils, the Company  intensified its
commercial scale up, process  development and  optimization  efforts for its oil
products  beginning during the latter half of 1994. These efforts have continued
through the third quarter of 1997. Production development and other oils-related
development  costs comprised over 75% of research and  development  expenses for
the first nine months of 1997.  Research and  development  costs may increase in
the future as the  Company  continues  its  research  and  development  efforts,
including   optimization   of  oil   production   and  in-house  oil  processing
capabilities.

Selling,  general and  administrative  expenses  increased by $571,000,  or 49%,
during the third quarter of 1997 and $2,341,000 or 73%, in the nine months ended
July 31,  1997 over the third  quarter  and nine-  months  ended July 31,  1996,
respectively.  These costs increased primarily due to marketing, advertising and
public  awareness  costs resulting from the  commercialization  of the Company's
Neuromins(TM)  products,  reflecting the Company's efforts to build a market for
these new products.  Increased insurance and other corporate overhead costs also
contributed  to the increase.  Other income was $201,000  lower during the third
quarter  of 1997 than in the third  quarter  of 1996 and  $626,000  lower in the
first nine months of 1997 than in the first nine months of 1996. These decreases
are due  primarily  to a  decrease  in the  amount  of  interest  earned  on the
investment of funds received in the Company's 1995 public  offering as funds are
being used to support Company operations.




                               Page 9 of 13
<PAGE>
Net loss  for the  third  quarter  of 1997 was  $3,829,000,  or $.28 per  share,
compared  to a net loss of $2,859,000, or $.22 per share for  the same period in
1996. A  net loss of  $11,673,000 or $.86 per share  for the nine  months  ended
July 31, 1997, was an  increase from a net loss of  $5,933,000 or $.45 per share
for the same period in 1996.  The increase in net loss  for 1997's third quarter
was  primarily  due  to  an  increase in  marketing  expenses and  research  and
development  expenses and  a  decrease in other income (both  described  above),
which more than offset the effect of increased  product  sales.  The increase in
net  loss  for the  first nine  months of 1997  resulted  from the  increase  in
expenses  for  research and development and marketing  expenses and  decrease in
other income (both described above) plus the one-time recognition  of $2,075,000
in license fees during the first quarter of 1996 as discussed above.

Recent Accounting Pronouncements

In October 1995, the  Financial Accounting Standards Board  issued SFAS No. 123,
"Accounting  for  Stock-Based  Compensation."  SFAS  No.  123  allows  companies
to either  account  for  stock-based  compensation  under the new  provisions of
SFAS  No. 123 or  under the provisions  of APB No.  25,  "Accounting  for  Stock
Issued to Employees". If companies elect to account for stock-based compensation
under the provisions of APB No. 25, pro forma  disclosure is required for fiscal
years  beginning  after December  31, 1995  in the footnotes  to  the  financial
statements  as if  the measurement  provisions of SFAS 123 had been adopted. The
Company intends  to continue  accounting for  its stock-based  compensations  in
accordance  with  the  provisions of  APB No. 25. As such,  the adoption of SFAS
No. 123 will not impact the financial position of the Company.

Liquidity and Capital Resources

Cash,  cash  equivalents,   short-term  investments  and  marketable  securities
decreased by  $13,876,000  in the first nine months of 1997  resulting in a cash
balance of $3,336,000 and a balance of $22,180,000 in short-term investments and
marketable  securities at July 31, 1997.  Capital  expenditures  of $350,000 and
$1,411,000  were made in the third  quarter  of 1997 and the nine  month  period
ending July 31, 1997,  respectively,  a significant  portion of which represents
upgrades to the  Company's  fermentation  facility in  Winchester,  Kentucky and
modifications  to the newly  constructed  oil processing  plant at the site. The
Company expects additional capital expenditures of approximately $500,000 during
the  balance  of  1997 as a  result  of  escalating  fermentation  activity  and
optimization of oil processing capabilities at the facility.

Martek may require  substantial  additional  funds to continue  its research and
development  programs,  to  conduct  preclinical  and  clinical  studies  and to
commercialize its nutritional oils, Neuromins(TM),  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:  the speed at which Martek's infant formula licensees
incorporate Martek's oils into their term infant formula products;  the progress
of preclinical and clinical studies;  the time and costs of obtaining regulatory
clearance for those products subject to regulatory clearance; the costs involved
in filing,  protecting  and enforcing  patents and other  intellectual  property
rights;   competing   technological  and  market  developments;   the  costs  of
manufacturing  facilities for those products the Company  chooses to manufacture
itself;  the  costs of  optimizing  manufacturing  processes  for the  Company's
nutritional oil products;  the costs of  commercializing  its products;  and the
extent  of future  facilities  expansion  and  collaborative  partnerships.  The
Company's 1995 purchase of a fermentation facility has had, and will continue to
have,  a material  effect upon  Martek's  liquidity  and capital  resources.  In
addition  to the  $1.0  million  in cash  used to  close  the  transaction,  the
investment  in  subsequent  improvements  and  the  addition  of oil  processing
capabilities, additional capital expenditures will be needed to modify the plant
to meet Martek's future production  requirements as the demand for the Company's
nutritional oils grows to fill plant capacity.  Plant modifications,  costing at
least  $500,000,  are  expected  to  occur  throughout  the  remainder  of 1997.
Expenditures  beyond 1997 will depend in part on production  capacity needs, the
extent of development and implementation of process improvements and the success
of previously implemented improvements. In March 1997 the Company refinanced the


                              Page 10 of 13
<PAGE>
the promissory notes, associated with the plant purchase,  in the  aggregate  of
$4,000,000  with a four year term loan bearing interest at 8.61% (See Notes to 
Financial Statements, Note 2).

The Company believes its existing  capital  resources,  consisting  primarily of
cash,  short-term  investments and marketable  securities will provide  adequate
capital  for at  least  the  next  12  months.  However,  due  to the  Company's
expectations  of growth and the rapidly  changing nature of the markets in which
it competes,  no prediction can be made with certainty of the Company's need for
additional  capital or its liquidity  position  over the long term.  The Company
intends to seek additional  funding through  commercial and government  research
and   development   contracts   and  grants,   product  sales  and  license  fee
arrangements.  The Company may pursue other methods of financing its activities,
including asset-based  borrowing,  equity issuances,  additional lease financing
and collaborative  arrangements with partners,  if such methods are available to
the Company and on favorable terms.  Should the Company need to raise additional
funds,  there can be no  assurance  that such  funds  will be  available  to the
Company on acceptable terms, if at all.






































                               Page 11 of 13


<PAGE>




                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings.

As  previously  reported in the  Company's  annual  reports on Form 10-K for its
fiscal years ended October 31, 1995 and 1996,  and in the  Company's  reports on
Form 10-Q since the first  quarter of fiscal  1996,  on November 29, 1995 Martek
received a letter from the United States Environmental Protection Agency ("EPA")
notifying Martek of potential  liability under the  Comprehensive  Environmental
Response,  Compensation  and Liability Act in connection with the cleanup of the
RAMP  Industries  Site in Denver,  Colorado.  EPA has stated that to date it has
incurred $2.1 million in costs in connection  with the cleanup of the site,  but
that  at this  time it is  unable  to  estimate  total  cleanup  costs.  EPA has
informally  indicated that based on its initial review,  it believes that Martek
is  responsible  for less than .02% of the waste at the RAMP Site.  Martek's own
review  indicates  that its  contribution  to the site,  if any,  may be a lower
percentage.  EPA has  stated  that  it  intends  to  enter  into a "de  minimis"
settlement  with smaller  contributors  based on a waste-in list it is currently
compiling.  Martek believes that the impact of any settlement will be immaterial
to its financial condition and results of operations.

The Company is not a party to any other legal proceedings.


Item 2.  Changes in Securities.

None

Item 3.  Defaults Upon Senior Securities.

Not Applicable

Item 4.  Submission of Matter to a vote of Security Holders.

None

Item 5.  Other Information.

None

Item 6.  Exhibits and Reports on Form 8-K

(a)  Exhibits: None

(b) Reports on Form 8-K: None







                              Page 12 of 13

<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 12, 1997                   /s/ Steve Dubin
       ------------------                   ------------------------
                                            Steve Dubin, Chief Financial 
                                            and Accounting Officer































                                  Page 13 of 13