<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-K  

                                  -----------

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

For the fiscal year ended October 31, 1997       Commission file number: 0-22354

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

                                  -----------

            DELAWARE                                            52-1399362
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                           Identification Number)

                   6480 DOBBIN ROAD, COLUMBIA, MARYLAND 21045
                    (Address of principal executive offices)

     REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE:  (410) 740-0081   

                                  -----------

          SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

       None                                              None
(Title of class:)                   (Name of each exchange on which registered:)

          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                          Common Stock, $.10 par value
                                (Title of Class)

    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 last 90 days.  X  Yes     No
                                          ---     ---

    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [  ]

    The aggregate market value of Common Stock held by non-affiliates of
registrant is $97,564,468 (based upon a last sale price of $9.50 per share of
the Common Stock as reported on the NASDAQ National Market System on January
14, 1998).  The number of shares of Common Stock outstanding as of January 14,
1998 was 13,790,759.

                      DOCUMENTS INCORPORATED BY REFERENCE

    Certain portions of Registrant's Annual Report to Stockholders for the
fiscal year ended October 31, 1997 are incorporated by reference into Part II
of this Report.  Certain portions of the Registrant's Definitive Proxy
Statement for its 1998 Annual Meeting of Stockholders (which will be filed with
the Commission within 120 days after the end of the Registrant's 1997 fiscal
year) are incorporated by reference into Part III of this Report.
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                                     PART I

ITEM I.  BUSINESS.
                                    OVERVIEW

    Martek Biosciences Corporation ("Martek") is a leader in the development
and commercialization of high value products derived from microalgae.  Martek's
leading products are nutritional oils used as ingredients in infant formula and
encapsulated for use as dietary supplements.  The Company's nutritional oils
are comprised of fatty acid components which many researchers believe may
enhance mental and visual development in infants and play a pivotal role in
brain function throughout life.  Martek has licensed these oils to six infant
formula manufacturers, representing over 40% of the estimated $5 billion
worldwide market for infant formula.  Two of these licensees are marketing term
infant formula products containing the Company's oils in Israel and Spain. Four
of these licensees are marketing pre-term infant formula products containing
the Company's oils. In total, infant formula products containing the Company's
oils are being marketed in 24 countries with populations totalling 900 million.
Additional applications of the Company's platform technology include currently
marketed products and technologies to assist in drug discovery and diagnostics.
Martek intends to continue to exploit the largely untapped commercial
opportunities of microalgae.  To that end, the Company maintains a library of
more than 2,900 live microalgal species and a related database, which it
believes are among the largest such resources available worldwide.

    Nutritional Oils for Infant Formula, Dietary Supplementation and Other
Applications.  Using its proprietary technology, Martek has developed
nutritional oils, which provide two essential fatty acids that are naturally
present in breast milk but are not available in most infant formulas.  The
predominant fatty acid components of these oils, docosahexaenoic acid ("DHA")
and arachidonic acid ("ARA"), are produced from microalgae and fungi,
respectively, using Martek's proprietary technologies.  Studies published by
others have indicated that DHA may be linked to the development and function of
the brain and retina. ARA is a major structural lipid in human tissues. With
respect to DHA and ARA, Martek's blended oils provide the closest match to
human milk when added to infant formula. In 1994, the Company received a U.S.
patent covering certain blends of a microbial oil enriched with DHA and a
microbial oil enriched in ARA, as well as the use of such blends in infant
formulas.  In 1995, the Company received a U.S.  patent covering a process for
making an edible oil containing DHA and the edible oil made by such process as
well as a U.S. patent covering an infant formula comprising a specified edible
oil containing DHA.  In 1996 the Company received two additional US patents
covering its nutritional oils technology.  The first patent protects
pharmaceutical compositions and dietary supplements comprising a single cell
oil in concentrations of at least 20% DHA in a triglyceride form made using
Martek's method of producing DHA oil.  The second patent clarifies that
Martek's patent coverage includes the blending, in infant formula and
nutritional supplements, of microbially derived ARA oil with low
eicosapentaenoic acid ("EPA") fish oils.  Fish oil is a potential competitive
source of DHA to Martek's algal-derived DHA oil.  This patent will make it more
difficult for low EPA fish oils to be combined with microbial sources of ARA
oils without violating Martek's patents. Two more patents were granted in 1997.
One of these protects the production, use and sale of oils rich in ARA (30% or
greater concentration). The Company also has been awarded a number of foreign
patents covering aspects of its nutritional oils.

    Martek has entered into royalty-bearing license agreements to utilize its
oils with six infant formula manufacturers, including Mead Johnson & Company (a
subsidiary of Bristol-Myers Squibb Company), American Home Products, Nutricia,
Maabarot Products Ltd.  ("Maarbarot") and Novartis Nutrition S.A. ("Novartis").
Nutricia, Wyeth-Ayerst, a subsidiary of American Home Products, Maarbarot, and
Novartis are currently marketing pre-term infant formula products containing
Martek's oils in 24 countries worldwide. In addition, Maarbarot and Novartis
are currently marketing term infant formula products containing Martek's oils
in Israel and Spain, respectively.   The infant formula industry represents
over $2 billion in annual wholesale sales in the United States and
approximately $5 billion worldwide.  Martek is actively pursuing additional
licenses with other infant formula producers throughout the world.





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    In the latter part of 1996, Martek initiated sales of its first consumer
products, Neuromins(TM), a DHA dietary supplement, and Neuromins(TM) PL, a DHA
dietary supplement for pregnant and lactating women. In 1997, Martek expanded
distribution of Neuromins(TM).  Martek has entered into agreements with Source
Naturals, Inc., Solgar Vitamin and Herb Company, Leiner Health Products,
Nature's Way and Neutraceutical Corporation for the packaging and distribution
of these products in retail outlets nationwide, including General Nutrition
Centers (GNC), the nation's largest natural products chain. Neuromins(TM) DHA
is also sold through mail order distributors.

    Martek is exploring additional applications for DHA, including use in 
specialty food products.

    Products for Drug Discovery.  Using its core microalgal technology, Martek
has developed and markets a range of products and technologies for use in
molecular structure research and structure-based drug discovery.  The Company
markets these products worldwide to many of the largest pharmaceutical
companies and research institutions.  These products aid researchers in
expediting new drug discovery by enabling them to determine the 3-dimensional
("3-D") structure of certain proteins in solution and to study characteristics
of the structure and its binding interaction with drugs.  Martek also markets a
proprietary cell growth medium, Celtone M, which the Company believes will
enable researchers, for the first time, to determine the 3-D structure of
certain human proteins.  The Company has entered into a royalty-bearing license
agreement with Genetics Institute regarding the use of Celtone M.  U.S. patents
were issued to Martek for its Celtone M technology in 1995 and 1997.

    The Company has also developed novel labelled combinatorial libraries of
small molecules. The Company was issued a patent for this technology in 1997.
These libraries can be produced in a form which is labeled with stable isotopes
for rapid elucidation of bound conformations of these small molecules to their
receptor binding sites. The chemoinformatics associated with the receptor
binding site may be useful for accelerating the design of new drug leads.

    Diagnostics.  Martek has recently developed a series of proprietary
fluorescent markers that are 100 times brighter than existing fluors and could
provide a sensitivity to diagnostics never before achieved with conventional
fluorescent markers. Martek's new markers provide rapid (taking minutes instead
of hours), sensitive Western and Southern blot tests (protein and gene
determination respectively), and open new possibilities for high sensitivity
viral detection, rapid high throughput screening, and detection of substrates
in the parts per trillion range. The Company recently began to supply these
high sensitivity markers for Western blot tests (protein determination).  The
Company has exclusive rights to use of this technology for diagnostic
applications based on a U.S. patent issued in 1997 and pending patent
applications.

TECHNOLOGY

    Martek applies its microalgal expertise and culturing technology to its
expanding library of over 2,900 live microalgal species and related database to
achieve technical and commercial advantages.  Certain fundamental and unique
attributes of microalgae allow for the development and production of Martek's
products:


    -    microalgae are a genetically diverse group of organisms that have a
         wide range of physiological and biochemical characteristics; thus,
         they naturally produce many different and unusual fats, sugars,
         proteins and bioactive compounds that may have commercial
         applications, such as the fatty acids that are the principal
         ingredients in the Company's nutritional oils, and highly sensitive
         fluorescent diagnostic products;

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

Celtone(R) is a trademark of the Company registered with the U.S. Patent and
Trademark Office.

Neuromins(TM) is a trademark of the Company.





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    -    microalgae are essentially "microplants," which use simple substances
         such as carbon dioxide, water and nitrate to grow.  When Martek
         substitutes the heavy stable isotope forms of these nutrients,
         microalgae will cost-effectively incorporate certain stable isotopes
         (carbon-13, deuterium and nitrogen-15) into the various compounds that
         the microalgae produce.  This characteristic provides the basis for
         Martek's drug design products; and

    -    microalgae comprise a large, substantially unexplored group of
         organisms, and thus provide a virtually untapped source that can be
         screened for a variety of new products, including pharmaceuticals.

    Martek's scientists have developed and patented novel microalgal culturing
systems which allow for the routine scale-up of microalgae of commercial
interest.  Proprietary closed-system, light-driven photobioreactors and
numerous techniques for maintaining and manipulating microalgal monocultures
form the basis of this culturing technology.  Where possible, and for
applications that require large quantities of product (e.g., nutritional
products), the Company has selected and developed microalgae capable of growing
without light by using nutrient feeds in a manner similar to bacteria, yeast or
fungi.  These microalgae can be grown in existing commercial fermenters using
current technology, resulting in economies of scale and substantially lower
production costs than microalgae grown in photobioreactors.

    Martek's product development process involves the following primary steps:

         Identification of Appropriate Microalgae.  Martek selects specific
    microalgae to produce potentially marketable compounds through a
    comprehensive process involving in-house algal expertise and experience,
    searches of scientific literature and the Company's proprietary microalgal
    database, biochemical analyses, and preliminary product-yield experiments.
    The Company currently maintains an increasing in-house collection of over
    2,900 strains of microalgae, which includes representatives of virtually
    all of the significant taxonomic microalgal groups.  Equally important is
    the Company's proprietary microalgal database, which contains biochemical
    and physiological data on the strains in the collection.  The Company
    believes that its microalgal collection and associated database are among
    the largest such resources available in the world.  Coupled with the
    Company's extensive microalgal expertise, these resources are used to
    select organisms for initial testing.  Further testing ultimately results
    in the selection of production strains.

         Modification of Microalgae and Growth Conditions.  Martek applies
    standard industrial microbiological techniques to microalgae and
    manipulates culturing conditions (such as light intensity, temperature and
    growth medium composition) to optimize productivity.  After selecting
    strains with the best yields and growth characteristics, the Company
    enhances their production through mutagenesis and natural selection under
    biochemical stress.  Martek has not used genetic engineering techniques to
    develop any of its existing products, but may use these methods for certain
    products currently in development.

         Culturing Microalgae.  Successful exploitation of the unique
    characteristics of microalgae is in large measure dependent upon the
    availability of large-scale culturing technology.  Martek has discovered
    and uniquely cultured a microalga capable of producing large amounts of DHA
    heterotrophically (i.e., without light) by using organic nutrients.
    Heterotrophic culturing of this DHA-producing microalga was previously not
    believed to be possible at commercially viable levels.  Heterotrophic
    microalgae have the advantage of being able to be cultured in conventional
    fermenters employed by the food, pharmaceutical and biotechnology
    industries.  Microalgal fermentation has an advantage over photobioreactor
    production because larger-scale production of products such as the
    Company's nutritional oils, for which the incorporation of high-priced
    stable isotopes is not required, can be conducted in existing fermentation
    equipment, resulting in lower production costs.  Aspects of Martek's
    technology for the heterotrophic growth of DHA-producing microalgae are the
    subject of a U.S. patent.  Similar patent applications have issued in
    certain countries and are pending in certain other countries around the
    world.





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         For many other product applications, the Company uses its proprietary,
    light-driven, closed-culture system photobioreactors for microalgal
    production.  Photobioreactors are closed to the atmosphere and designed to
    make the most efficient use of light while keeping contaminating microbes
    out of the culture.  Using its photobioreactors, Martek is able to culture
    isolated microalgal strains without contamination and to manipulate such
    strains to influence growth and biochemical makeup, thus efficiently
    generating products of interest.  For example, for the production of
    Martek's drug discovery products, the Company is able to culture certain
    microalgae to produce compounds containing predominantly heavier stable
    isotopes rather than the more common forms of atoms by growing microalgae
    in its photobioreactors using carbon dioxide, water and/or certain
    nitrogen-containing compounds containing predominantly heavier stable
    isotopes, carbon-13, deuterium and nitrogen-15.  Use of its
    photobioreactors also provides Martek a means to conserve and recycle
    liquid and gaseous components of the culture, a feature critical for those
    applications that involve the use of expensive stable isotopes.  Martek's
    microalgal method of stable isotope incorporation is significantly less
    expensive than alternative microbial or chemical synthesis in many
    instances.

         Martek uses a series of photobioreactors of varying sizes, controls
    and methods of operation to achieve culturing consistency.  The different
    sizes are used primarily for scale-up purposes, from laboratory bench scale
    to commercial culturing and manufacturing.  Certain aspects of these
    photobioreactors are the subject of the Company's patents and patent
    applications filed in the United States.

                                    PRODUCTS
                             AND PRODUCT CANDIDATES

Nutritional Products

    Certain microalgae and fungi produce large quantities of oils and fats
containing long-chain, polyunsaturated fatty acids ("PUFAs") that are essential
to human nutrition and health.  Studies have indicated that a particular PUFA,
docosahexaenoic acid ("DHA"), may be associated with mental and visual
development in infants, and plays a pivotal role in normal brain function
throughout life.  DHA is the predominant structural fatty acid in the grey
matter of the brain and retinal tissues in humans and other mammals.  Children
and adults obtain DHA primarily from their diets, since humans synthesize only
small amounts of DHA from dietary precursors.  Infants acquire DHA and
arachidonic acid ("ARA"), an important structural lipid in human tissues,
initially in utero during pregnancy, and then from their diet via their
mother's milk.  DHA and ARA dietary supplementation may be particularly
important for premature and low birth weight infants who may not get their full
in utero allotment.

    Martek has identified a strain of microalgae which produces an oil rich in
DHA and has developed the means to grow it by fermentation, with a relatively
high oil and DHA content.  To supplement its DHA for infant formula, the
Company has isolated and cultured a strain of fungus that produces large
amounts of ARA.  DHA and ARA are naturally present in breast milk but are not
added to most infant formulas today.  When the Company's nutritional oils are
added to infant formula at proper levels, they provide DHA and ARA in
concentrations that closely match those in breast milk without the potential
undesirable characteristics presented by other sources of DHA, such as certain
fish oils.

    Martek first realized revenues from license fees related to its nutritional
oils and sale of sample quantities of these oils in 1992.  In late 1994, one of
the Company's licensees launched the first pre-term infant formula containing
Martek's oils in Europe, and in 1995, Martek recognized its first royalty
revenue from sales of this product.  Additional product introductions have
continued through 1997.  As of early 1998, four of the Company's infant formula
licensees were marketing pre-term infant formula containing Martek's oils in 24
countries worldwide and two licensees were marketing term infant formula in
Israel and Spain.

    Independent studies indicate that the mental development and visual acuity
of infants are positively affected by breast feeding and that breast-fed
infants have higher levels of DHA in their brain tissue and enhanced mental
acuity





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later in life when compared to those fed infant formula not containing DHA.
Brain development in humans takes place primarily in the last trimester in
utero and in the first 12 months of postnatal life.  For a fetus, DHA is
provided through its mother's bloodstream via the placenta and for a nursing
infant, it is provided via breast milk.  DHA is generally the most abundant
omega-3 very long-chain PUFA in human milk.  Breast-fed infants have been found
to have higher levels of DHA in their brain tissue than those fed infant
formula.  There is evidence indicating that for infants who are breast-fed,
mental development and visual acuity are positively affected.  This evidence is
from retrospective studies comparing intelligence in breast-fed versus
formula-fed infants and from intervention studies in infants using
DHA-supplemented infant formula.

    Compelling data on the healthful attributes of breast milk has prompted a
trend among infant formula manufactures to reformulate their products so that
they more closely approximate breast milk. Recent studies have added to the
expanding body of evidence supporting the importance of DHA and ARA. The
following studies are examples:

    -    New research was presented in 1997 suggesting that infants deprived of
         DHA may be at higher risk of developing schizophrenia later in life.
         According to this study, which was published in the British Journal of
         Psychiatry, schizophrenics that were not breast-fed during childhood
         "had more schizoid and schizotypal traits, and were more poorly
         adjusted" than their siblings (who were more likely to have been
         breast-fed). In addition, the results showed that patients who were
         not breast-fed had a lower mean IQ than breast-fed patients.

    -    A study sponsored by Mead-Johnson & Company and reported in 1997 found
         that pre-term infants fed formulas containing Martek's oils had a 12%
         better growth rate than the control group. Another study reported in
         1997 and sponsored by Wyeth-Ayerst found that infant formula
         supplemented with Martek's oils resulted in a reduction of fungal skin
         infections, milk intolerance, nervousness and irritability in pre-term
         infants.

    -    The January 1998 issue of PEDIATRICS (Vol. 101 No. 1 January 1998) in
         an article entitled "Breastfeeding and Later Cognitive and Academic
         Outcomes" by Horwood and Fergusson (New Zealand), reported that in an
         18-year longitudinal study of over 1,000 children, those who were
         breast-fed as infants had both better intelligence and greater
         academic achievement than those who were infant-formula fed children.
         The authors cited the importance of DHA in the neurological
         development of children and recommend the need to "develop improved
         infant formulas with properties more similar to those of human breast
         milk that may lead to improved developmental outcomes in children."
         The study indicated that breast-fed babies have a 38% greater
         likelihood of completing their high school matriculation than
         formula-fed babies even after allowances were made for confounding
         social, familial and perinatal factors. Although the study could not
         conclude that DHA provided to the breast-fed infants from their
         mother's milk was the sole cause of the improved achievement scores,
         the authors pointed out recent controlled intervention studies
         demonstrating similar outcomes in infants with DHA-supplemented
         formulas and concluded that:

                   "... the weight  of evidence clearly favors
                   the view that exposure to breast-feeding is
                   associated with small but detectable
                   increases in childhood cognitive ability and
                   educational achievement, with it being likely
                   that these increases reflect the effects of
                   long chain polyunsaturated fatty acid levels
                   and, particularly, DHA levels on early
                   neurodevelopment."

    In the November 12, 1994 edition of The Lancet, a scientific journal
published in the UK, scientists concluded that "some components of breast-milk
may have a beneficial effect on brain development. . . arachidonic acid [ARA]
and docosahexaenoic acid [DHA] should be considered as essential nutrients for
infants because they are present in structural lipids in brain and nervous
tissue." Preliminary data submitted to The Society of Pediatric





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Research in May 1994 and a separate study, presented in July 1995 at the Second
International Congress of the International Society for the Study of Fatty
Acids and Lipids, showed that low birth weight infants fed formula supplemented
with Martek's nutritional oils have blood lipid levels of DHA and ARA
comparable to those of breast-fed, low birth weight infants.  In addition, the
British Nutrition Foundation ("BNF"), the European Society for Pediatric
Gastroenterology and the Expert Committee on Human Nutrition of the United
Nations Food and Agriculture Organization ("FAO") and World Health Organization
("WHO"), have recommended that these essential fatty acids be included in
pre-term infant formulas at levels found in human milk.  The BNF and the
FAO/WHO Committee have gone further to recommend that DHA and ARA also be
included in formulas for term infants as well. Also, in addition to
recommending the inclusion of DHA and ARA in infant formula, the BNF and
FAO/WHO Committees have recognized their importance in pregnancy and lactation.
To address these markets, Martek introduced Neuromins(TM) PL DHA dietary
supplements for pregnant and lactating women.

    Low levels of DHA have been correlated with changes in disposition, memory
loss, visual and other neurological conditions. A link between low levels of
DHA and Alzheimer's, depression, memory loss and Attention-Deficit/Hyperactivity
Disorder (ADHD) was the subject of a 1997 conference on nutrition and the brain
at The New York Hospital-Cornell Medical Center's Nutrition Information Center.
Experts at the conference, "Keeping Your Brain in Shape: New Insights Into
DHA," discussed their research into the relationship between low levels of DHA
and a number of behavioral and neurological conditions that until now have been
thought to be unrelated. In addition to conditions such as Alzheimer's,
depression, memory loss and ADHD, the researchers also noted studies showing a
link between deficient DHA levels and hostility and aggression.

    The Company is currently working to develop other DHA delivery methods to
address these markets, including powders, an emulsion and food ingredients.
The Company is also selling DHA for incorporation into enteral products.

    Martek believes that its nutritional oils have the following advantages
over other currently available sources of DHA and ARA for use in infant
formula:

    -    the oils can be blended in a variety of mixtures in precise ratios for
         specific applications;

    -    each of the oils is comprised of a fatty acid blend that has no other
         bioactive PUFAs in significant quantities so that desirable PUFAs can
         be included and undesirable ones (e.g., EPA) can be excluded;

    -    the DHA- and ARA-enriched oils are in a triacylglycerol (or
         triglyceride) form similar to that found in breast milk and are
         therefore easily digested;

    -    the position of the DHA within the triacylglycerol in Martek's
         DHA-containing oil is similar to that in breast milk, but different
         from that in fish oils or fish eye-socket oils;

    -    Martek's oils have a much higher oxidative stability and longer shelf
         life than fish oil and are, therefore, amenable to the spray drying
         process required for powdered formula;

    -    the oils can be produced in large quantities under controlled
         conditions satisfying regulatory scrutiny; and,

    -    the Company has received patents protecting the blend of its DHA and
         ARA oils, as well as the blend of certain other microbial oils and the
         blend of microbial derived ARA oils and low EPA fish oils, that may
         compete with Martek's nutritional oils for use in infant formula.





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Products and Technologies for Drug Discovery

    Structure-based drug discovery has recently emerged to improve the
efficiency of new pharmaceutical development.  Many drugs work by mimicking the
interaction between two molecules, a ligand and a receptor.  Rather than rely
solely on the chance synthesis of an active chemical compound, practitioners of
structure-based drug discovery seek to study the interaction between the ligand
and receptor, and to design a specific drug prototype on the basis of that
interaction.  The ability to determine the structures of the ligand, the
receptor, and ideally, the complex between the two, is key to structure-based
drug discovery.

    Martek has developed a series of products which enable 3-D structures of
certain proteins of pharmaceutical interest to be determined in solution.  Some
of these products are used as growth media which allow for the generation of
proteins incorporating stable isotopes.  Others can be used to make
isotopically labeled DNA and RNA.  The presence of stable isotopes allows for
the determination of the 3-D structure of these molecules using nuclear
magnetic resonance ("NMR").  Proteins incorporating stable isotopes such as
carbon-13 and/or nitrogen-15 have been obtained by growing micro-organisms,
such as bacteria and yeast, on Martek's media, and the 3-D structures
subsequently deduced from information provided by NMR.  In addition,
incorporating deuterium, an NMR "invisible" isotope of hydrogen, into the
protein allows for the structure of either the ligand or the receptor to be
determined while bound to its NMR invisible partner.

    The Company has developed a series of novel combinatorial libraries. These
libraries are available for screening by pharmaceutical and drug discovery
companies. Martek has also developed a new method for providing detailed
structural information on molecular interactions through the use of an array of
small, flexible molecules which are labelled with stable isotopes such as
Carbon-13 and Nitrogen-15. In conjunction with NMR analysis, these probes are
being developed to elucidate the bound conformation of these small molecules to
their receptor binding sites. The chemoinformatics associated with the receptor
binding site may be useful for accelerating the design of new drug leads.

    The Company markets these products and technologies to pharmaceutical and
structure-based drug discovery companies, universities and research institutes.
Future growth in sales of these products and technologies may depend in large
measure on the future growth of structure-based drug discovery and use of NMR
techniques.

    In particular, Martek markets the following products for drug discovery:

         Celtone M -- The classical technique for determining the 3-D
    structures of proteins, X-ray crystallography, is limited in that certain
    of the most important protein targets (i.e., glycosylated human proteins)
    frequently do not crystallize.  Celtone M, Martek's isotopically labeled
    mammalian cell growth medium, has enabled determination of the 3-D
    structures of glycosylated human proteins through NMR.  The Company
    believes Celtone M is a proprietary enabling technology, and, in many
    cases, the only way of making glycosylated mammalian proteins in stable
    isotope form.  By unveiling the structures of these elusive and important
    proteins, the drug design process may be expedited against new targets.
    U.S. patents were issued to the Company for the composition of matter and
    use of Celtone M in 1995 and 1997.

         Celtone -- Martek's cell growth medium for bacteria and yeast,
    Celtone, has been on the market since 1990 and has been instrumental in
    determining the structure of a number of proteins.  Celtone is available in
    any combination of 2H, 13C and 15N.  In June 1994, a U.S. patent was issued
    to the Company for the composition of matter and method for producing its
    Celtone medium.

         Glucose -- Carbon-13-glucose is the most widely used reagent for
    isotopically labeling bacterial proteins and is Martek's leading product
    for drug discovery as measured by annual sales.  Glucose is available in
    combinations of 2H and 13C.





                                     - 7 -
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         Nucleic Acids -- Martek has recently developed and sells isotopically
    labeled nucleic acids.  These are available labeled with any combination of
    2H, 13C and 15N and are used to solve the structures of DNA and RNA,
    especially when bound to proteins.

Diagnostics

    Fluorescent Marker Technology. In 1997, Martek developed a series of
proprietary fluorescent markers ("PBXLs") that are 100 times brighter than
existing fluors and could provide a sensitivity to diagnostics never before
achieved with conventional fluorescent markers. Martek's PBXLs provide rapid
(taking minutes instead of hours), sensitive, Western and Southern blot tests
(protein and gene determination respectively) and the Company recently began to
market these high sensitivity markers for commercially available laser scanning
systems. As a consequence of their high level of sensitivity, Martek's PBXLs
are being tested as a platform technology for new methods of viral detection,
novel high throughput screening approaches, and new diagnostic tests which were
heretofore not practical because of a lack of sensitivity. The Company has
exclusive rights to use of this technology for diagnostic applications based on
a U.S. patent issued in 1997 and pending patent applications.

    Martek also markets, under a royalty-bearing license from Stanford
University, a series of phycobiliproteins and conjugated phycobiliproteins
directly to university researchers as well as to pharmaceutical and diagnostics
companies.

                     COLLABORATIVE AND LICENSING AGREEMENTS

    Martek has entered into licensing agreements with six infant formula
manufacturers, including Mead Johnson & Company (a subsidiary of Bristol-Myers
Squibb Company), American Home Products, Nutricia, Maabarot and Novartis, that
together comprise over 40% of the worldwide infant formula market.  Under these
agreements, Martek received up-front licensing fees and is entitled to
royalties based on sales of infant formula containing its nutritional oils.
These licensees are not required to include these oils in their formulas under
the terms of these agreements, and there can be no assurance that such infant
formula manufacturers will include the oils in any or all of their product
lines.  In addition, Martek's licensees are free to include DHA and ARA
acquired from other sources.  Under the terms of these licensing agreements,
the licensees are responsible for obtaining Food and Drug Administration
("FDA") and all other necessary regulatory approvals with respect to these
nutritional oils.  Under each of its current license agreements, Martek's
licensees generally are obligated to indemnify Martek against product liability
claims relating to its nutritional oils unless they are related to
manufacturing impurities in the oils.  In addition to compensation payable to
the Company under these agreements, the Company expects to receive transfer
payments for supplies of its nutritional oils.

    Under the terms of several of its current license agreements, Martek is
prohibited from granting a license to any party for the inclusion of its
nutritional oils in infant formula with payment terms that are more favorable
to such licensee than those provided in its agreements with its current
licensees without either the prior written consent of the current licensees or
prospectively offering such new favorable terms to these licensees.  This
restriction does not apply to any lump sum payments to Martek pursuant to a
territorially restricted license under which the reduced payment is reasonably
related to the reduced marketing opportunities available under such a
restricted license.  In addition, under the terms of several of the agreements,
Martek is prohibited from granting a license to any party for the inclusion of
its nutritional oils with a royalty rate that is more favorable to other
licensees than that provided in these agreements without either the prior
written consent of such licensees or prospectively offering such royalty rate
to these current licensees.

    In 1993, Martek entered into an agreement with Columbia University pursuant
to which Columbia University will try to determine the structure of the hCG
protein using Celtone M.  The hCG molecule affects fertility by controlling the
attachment of the egg to the uterus.  Martek and Columbia University will share
any commercial proceeds resulting from their joint efforts.  Martek's share of
any such proceeds will be based upon the successful





                                     - 8 -
<PAGE>   10
conclusion of certain events but will not be less than 75%.  In May 1994, the
Company initiated commercialization of Celtone M through a license agreement
with Genetics Institute under which Martek will receive royalties on sales of
products resulting from Genetics Institute's work with Celtone M.  In October
1994, Martek entered into a collaboration with the University of St. Andrews in
Scotland.  This collaboration is dedicated to the development of NMR techniques
for the study of large proteins and determining the 3-D structures of certain
human proteins of pharmaceutical interest.  Under this agreement, St. Andrews
will provide NMR facilities and expertise in large protein resolution.  Martek
will provide funding and pay royalties for certain proprietary products arising
from this research.

    In January 1997, Martek signed an agreement with Royal Gist-Brocades B.V.
("Gist-Brocades") under which Gist-Brocades became Martek's exclusive contract
supplier for nutritional oils containing ARA. As part of this agreement, Martek
will receive guaranteed supplies on advantageous terms and license fees from
Gist-Brocades pending certain patent issuances.

    The Company has also entered into various additional collaborative research
and license agreements.  Under these 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 pay royalties upon the sale of certain
products resulting from such collaborations.

       COMMERCIAL AND U.S. GOVERNMENT RESEARCH AND DEVELOPMENT CONTRACTS

    Martek's technology development has been funded in part by commercial and
federal government contracts.  While not expected to be a primary source of
revenue in the future, Martek plans to continue applying for government
contracts and soliciting commercial research and development contracts on a
selective basis when such contracts involve research of future commercial
benefit to the Company.

    As a result of Martek's receiving Small Business Innovation Research
grants, the U.S. Government will have certain rights (the "Government Rights")
in the technology developed with the funding.  These rights include a
non-exclusive, paid-up, worldwide license to practice or have practiced such
inventions for any governmental purpose.  In addition, the government has the
right to require the Company to grant licenses which may be exclusive under any
of such inventions to a third-party if the government determines that (i)
adequate steps have not been taken to commercialize such inventions, (ii) such
action is necessary to meet public health or safety needs, or (iii) such action
is necessary to meet requirements for public use under federal regulations.
The government also has the right to take title to a subject invention if the
Company fails to disclose the invention and elect title within specified time
limits.  In addition, the government may acquire title in any country in which
the Company fails to file a patent application within specified time limits.
Federal law requires any licensor of an invention that was partially funded by
federal grants to obtain a covenant from any exclusive licensee to manufacture
products using the invention substantially in the United States.  In addition,
the Company's licenses from third parties may also relate to technology
developed with federal funding and therefore may also be subject to Government
Rights.

    Costs under U.S. government contracts are subject to audit by the U.S.
government.  The Company believes that cost disallowances, if any, arising from
such audits of costs charged to government contracts through October 31, 1997
would not be material to the Company.

                                 MANUFACTURING

    Martek manufactures oils rich in DHA and ARA in its fermentation facility
located in Winchester, Kentucky by conventional fermentation processes.  The
Company acquired the Winchester facility in 1995 from a subsidiary of ACX
Technologies, Inc.  Martek's oils produced in this facility have been certified
kosher by the Orthodox Union. Martek is currently in the process of optimizing
production of its nutritional oils, and believes that a continued optimization
effort will be required for at least the next two years.  In 1996, the Company
constructed a "state of the





                                    - 9 -
<PAGE>   11
art" oil processing plant at its Winchester facility which was put into
production in early 1997.  Martek has also entered into an agreement with a
third party, Gist-Brocades, to produce its ARA oil, and may enter into
additional production agreements with third parties if demand for its oils
requires.  The commercial success of its nutritional oils will depend, in part,
on Martek's ability to manufacture these oils or have them manufactured at a
commercially acceptable cost.  There can be no assurance that the Company will
be able to successfully optimize production of its nutritional oils, or
continue to comply with applicable regulatory requirements (including Good
Manufacturing Practices ("GMP") requirements) or that these facilities will be
sufficient to meet the future demand for the oils.  Under the terms of several
of its infant formula licenses, Martek's licensees may elect to manufacture
these oils themselves, although the Company believes this is unlikely.

                              SALES AND MARKETING

    The Company currently markets its nutritional oils products and its
products for drug discovery both directly to end users and through
distributors.  The Company markets its nutritional oils for use in infant
formula directly to infant formula manufacturers.  The Company markets its
Neuromins(TM) DHA dietary supplements directly to end users through its toll
free number (1-800-662-6339) and through distributors.  Martek has entered into
agreements with  Leiner Health Products for the packaging and distribution of
Neuromins(TM) to mass market retail outlets, and with Nutraceuticals
Corporation, Solgar Vitamin and Herb Company, Source Naturals, and Nature's Way
for the packaging and distribution of its Neuromins(TM) DHA capsules to the
natural foods markets. Neuromins(TM) DHA is currently being marketed in over
5,000 retail stores nationwide, including General Nutrition Center (GNC)
stores.  Neuromins(TM) DHA is also marketed through several mail order
distributors.  In the aggregate, these distributors have access to
approximately 58,000 health food and mass retail outlets nationwide. Martek has
continued its own DHA awareness campaign in an effort to support the marketing
efforts of its infant formula licensees and capsule distributors. This campaign
will continue and most likely intensify in 1998. There can be no assurance that
the Company will be able to successfully market these nutritional oils products
for use in infant formula or as dietary supplements.

                                  COMPETITION

    The health care and biological sciences industries are characterized by
rapidly evolving technology and intense competition.  The Company's competitors
include major pharmaceutical, chemical and specialized biotechnology companies,
many of which have financial, technical and marketing resources significantly
greater than those of the Company.  In addition, many specialized biotechnology
companies have formed collaborations with large, established companies to
support research, development and commercialization of products and
technologies that may be competitive with those of the Company.  Academic
institutions, governmental agencies and other public and private research
organizations are also conducting research activities and seeking patent
protection and may commercialize products and technologies competitive with
those of the Company on their own or through joint ventures.  The existence of
products and technologies of which the Company is not aware, or products and
technologies that may be developed in the future, may adversely affect the
marketability of products and technologies developed by the Company.

    The development of a DHA-containing oil low in EPA may provide an
alternative to Martek's DHA oil.  Though it is a lower cost product relative to
Martek's DHA, fish oil, including low-EPA fish oil, has odor, stability and
taste characteristics that may limit the usefulness of the oil in food
products.  Martek is also aware of the development of microencapsulated low-EPA
fish oil products by several large companies.  Though microencapsulation of the
oil resolves much of the odor, stability and taste issues found with fish oil,
a microencapsulated product is significantly more costly than regular fish oil.
Because fish oil is significantly less costly than Martek's DHA oil, fish oil
will present a substantial competitive threat to Martek's Neuromins(TM) DHA.
Published reports, however, have cited a number of fish oils as containing
chemical toxins that are not present in Martek's oils. In addition, management
believes that the combination of either low-EPA fish oil or microencapsulated
fish oil with a microbial source of ARA for use in infant formula would likely
infringe claims of





                                     - 10 -
<PAGE>   12
Martek's patents.  Martek is also aware of an early stage company that
currently is able to produce DHA from a strain of fungus containing DHA.
Martek believes that this company has licensed human applications of this
fungal-derived DHA to a division of Monsanto Corporation.  The Company is
currently unable to evaluate the degree of competitive threat that this fungal
source of DHA will present to its DHA oil in the future.

    Martek is also aware of several large companies promoting ARA oil.  Martek
is currently unable to evaluate whether any of these companies has the ability
to produce ARA oil or whether these companies will present a competitive threat
to Martek's ARA in the future.

    Small amounts of ARA can be derived from egg yolk lipids.  DHA can also be
found in egg yolks of chickens fed a special diet containing, for example, fish
meal.  ARA and DHA derived by this method are currently being added to infant
formula by Milupa, which was acquired by Nutricia in 1995.  The Company
believes it is more expensive to produce DHA and ARA using this source than the
Company's process of producing DHA and ARA oils.  Furthermore, the addition of
DHA and ARA from egg yolk at levels equivalent to those found in human milk
will result in dietary levels of lecithin and cholesterol in excess of that
found in human milk.

    There may be other competitive sources of DHA and ARA of which Martek is
not aware.

    Sales of certain of the Company's products for drug discovery, especially
the Company's carbon-13 glucose (a non-proprietary product), have been the
subject of intense competition the past several years.  The Company has lowered
its prices of carbon-13 glucose to remain competitive.  Martek's primary
competitors for carbon-13 glucose are Isotec, Inc. and Cambridge Isotope Labs,
companies that are also manufacturers of carbon-13, a primary raw material in
the production of carbon-13 glucose.  The Company expects that competition in
the carbon-13 glucose market will continue to remain strong.

    The Company's products for drug discovery compete primarily on the basis of
product performance, proprietary position and price, and Martek expects those
nutritional, diagnostic and pharmaceutical products approved for sale to
compete primarily on the basis of product efficacy, safety, patient
convenience, reliability, price and proprietary position.

    The Company's competitive position will also depend on its ability to
attract and retain qualified scientific and other personnel, develop effective
proprietary products, implement production and marketing plans, obtain patent
protection and secure adequate capital resources.

                  PATENTS, LICENSES AND PROPRIETARY TECHNOLOGY

    The Company's success is dependent in part on its ability to obtain patent
protection for its products, maintain trade secret protection and operate
without infringing the proprietary rights of others.  The Company's policy is
to protect aggressively its proprietary technology through patents, where
appropriate, and through trade secrets in other cases.  Additionally, the
Company, in certain cases, relies on the licences of patents and technology of
third parties.  The Company has obtained over 18 U.S. patents, covering various
aspects of its technology, which will expire on various dates between 2007 and
2015.  The Company has filed, and intends to file, applications for additional
patents covering both products and processes as appropriate.  There can be no
assurance that any patent applications filed by, assigned to, or licensed to,
the Company will be granted, that the Company will develop additional products
that are patentable or that any patents issued to or licensed by the Company
will provide the Company with any competitive advantages or adequate protection
for inventions.  Moreover, no assurance can be given that any patents issued to
or licensed by the Company will not be challenged, invalidated or circumvented
by others.

    There can be no assurance that issued patents, or patents that may issue,
will provide protection against competitive products or otherwise be
commercially valuable.  Furthermore, patent law relating to the scope of





                                     - 11 -
<PAGE>   13
claims in the fields of health care and biosciences is still evolving, and the
Company's patent rights are subject to this uncertainty.  The Company's patent
rights on its products therefore might conflict with the patent rights of
others, whether existing now or in the future.  Alternatively, the products of
others could infringe the patent rights of the Company.  The defense and
prosecution of patent claims is both costly and time consuming, even if the
outcome were favorable to the Company.  An adverse outcome could subject the
Company to significant liabilities to third parties, require disputed rights to
be licensed from third parties or require the Company to cease selling its
products.

    The Company has been issued seven U.S. patents covering certain aspects of
its DHA and/or ARA oils.  The Company has applied for other patents in the
United States covering certain other aspects of its nutritional oils and has
also filed patent applications on a selective basis in other industrialized
countries, some of which are pending and some of which have been granted.  The
Company is unable to predict, however, whether these patents will be
challenged, invalidated or circumvented by others.  Failure by the Company to
obtain adequate patent protection for its nutritional oils would have a
material adverse effect on the Company's ability to gain a competitive
advantage for these oils and may have a material adverse effect on the
Company's results of operations, particularly future sales of its nutritional
oils, future royalties on sales of infant formula containing these oils or
license fees related thereto.  In particular, failure to maintain patent
protection would permit competitors of the Company to produce products which
would be directly competitive with its nutritional oils using similar or
identical processes, and it is possible that the infant formula manufacturers
currently under license by the Company or which may be under license in the
future may choose formula ingredients from these competitors if they choose to
include the ingredients in their formulas at all.

    The Company's other patents cover its photobioreactor system for culturing
microalgae and certain aspects of Martek's breath test technology; its Celtone
and Celtone M technology; and its combinatorial library technology.

    The Company also relies on trade secrets and proprietary know-how, which it
seeks to protect in part by confidentiality agreements with its collaborators,
employees and consultants.  There can be no assurance that these agreements
will not be breached, that the Company will have adequate remedies for any such
breach or that the Company's trade secrets will not otherwise become known or
be independently developed by competitors.

                   GOVERNMENT REGULATION AND PRODUCT TESTING

    The Company's products and its manufacturing and research activities are
subject to varying degrees of regulation by a number of government authorities
in the United States and other countries, including the FDA pursuant to the
Federal Food, Drug and Cosmetic Act (the "FDC Act").  The FDA regulates, to
varying degrees and sometimes in very different ways, infant formulas, dietary
supplements, medical foods, enteral and parenteral nutritional products and
diagnostic and pharmaceutical products, including their manufacture and
labeling.  Generally, prescription pharmaceuticals and certain types of
diagnostic products are regulated more rigorously than foods, such as dietary
supplements.  Infant formulas are special types of food that are regulated more
rigorously than most other types of foods.  Federal and state laws, regulations
and policies are always subject to change and depend heavily on administrative
policies and interpretations.  There can be no assurance that any changes with
respect to federal and state laws, regulations and policies, and, particularly,
with respect to the FDA or other such regulatory bodies, with possible
retroactive effect, will not have a material adverse effect on the Company.

    Martek's infant formula licensees are responsible for obtaining the
requisite regulatory clearances to market their products containing Martek's
oils.  To date, none of the Company's infant formula licensees have obtained
the requisite marketing clearances for any of the Company's products that
require such clearances in the United States.  Sales of the Company's products
outside the United States are subject to foreign regulatory requirements that
may vary widely from country to country.  Infant formula products containing
the Company's nutritional oils are currently being marketed outside the U.S. in
24 countries worldwide, and Martek understands that its licensees have received
appropriate regulatory clearances to the extent they are required to market
such products in those countries.





                                     - 12 -
<PAGE>   14
The time required to obtain clearances from additional foreign countries and
for term infant formulas containing Martek's oils in foreign countries may be
longer or shorter than that required by the FDA or other such agencies, and
clearance or other product requirements may differ.  There can be no assurance
that such foreign clearances or other requirements can be obtained or met on a
timely basis, if at all.

    There can be no assurance that DHA and ARA used in medical foods, infant
formulas or enteral nutritional products will not be subject to food additive
regulation under the FDC Act.  Additional data also may be needed to support
the use of DHA and ARA in medical foods.

    The process of obtaining FDA clearances can be time-consuming and
expensive, and there is no assurance that such clearances will be granted or
that the FDA review process will not involve delays that materially and
adversely affect the testing, marketing and sale of the Company's products.
Moreover, regulatory clearances for products such as medical devices, new
drugs, or new food additives, even if granted, may include significant
limitations on the uses for which such products may be marketed.  Additionally,
product clearances could be withdrawn for failure to comply with regulatory
standards.  There can be no assurance that any clearances that are required,
once obtained, will not be withdrawn or that compliance with other regulatory
requirements can be maintained.

    Many of the Company's products are in research or development phases.  The
Company cannot predict all regulatory requirements or issues that may apply to
or arise in connection with the Company's products.  Changes in existing laws,
regulations or policies and the adoption of new laws, regulations or policies
could prevent the Company or its licensees or collaborators from, or could
affect the timing of, achieving compliance with regulatory requirements,
including obtaining current and future regulatory clearances, where necessary.

    Due to the cost and time commitment associated with the FDA regulatory
process, as well as the Company's lack of experience in obtaining FDA
regulatory clearances, the Company will decide on a product-by-product basis
whether to handle relevant clearance and other requirements independently or to
assign such responsibilities to its licensees or future collaborative partners.
There can be no assurance that the Company, its licensees or collaborators will
be able to obtain such regulatory clearances, if required, on a timely basis or
at all.  Delays in receipt of, or failure to receive, such clearances, the loss
of previously received approvals or clearances, or failure to comply with
existing or future regulatory requirements would have a material adverse effect
on the Company's business, financial condition and results of operations.

    In connection with the Company's decision to manufacture certain of its
products which it markets directly, or licenses to or collaborates with others
to market, it will be required to adhere to applicable current GMP as required
by the FDA.  GMP regulations specify component and product testing standards,
control quality assurance requirements, and records and other documentation
controls.  In general, drug GMP requirements are more stringent than food GMP
requirements although significant quality control procedures exist for infant
formulas.  Depending upon the type of FDA application that is submitted,
compliance with relevant GMP requirements can be onerous and time consuming,
and there can be no assurance that the Company can meet relevant FDA
manufacturing requirements, particularly for scale-up operations involving
product marketing applications.  Because the Company is manufacturing its DHA
and ARA oils, it will be subject to GMP and various other requirements
applicable to infant formulas and dietary supplements as well as periodic
inspections by the FDA.  Further, the Company has had only limited experience
in the area of regulatory compliance with respect to its products.  There can
be no assurance that the Company will be able to continue to manufacture its
nutritional oils in accordance with relevant infant formula and dietary
supplement requirements for commercial use.  Ongoing compliance with GMP and
other applicable regulatory requirements are monitored through periodic
inspections by state and federal agencies, including the FDA and comparable
agencies in other countries.  A determination that the Company is in violation
of such GMP and other regulations could lead to the imposition of civil
penalties, including fines, product recalls or product seizures, and, in the
most egregious cases, criminal sanctions.





                                     - 13 -
<PAGE>   15
    Each line of products that is or may be marketed by the Company or its
licensees or collaborators can present unique regulatory problems and risks,
depending on the product type, uses and method of manufacture.

    The Federal Dietary Supplement Health and Education Act of 1994 ("DSHEA")
regulates the use and marketing of dietary supplements.  The DSHEA sets forth
standards for adulteration of dietary supplements or ingredients thereof,
prescribes detailed requirements for labeling dietary supplements and
establishes GMP requirements for dietary supplements.  Martek is currently
marketing a line of DHA dietary supplements, Neuromins(TM) and Neuromins(TM)
PL.  In addition, it is researching and developing new applications for its DHA
and ARA oils.  There can be no assurance that the Company will be able to
comply with the requirements of the DSHEA or any regulations that the FDA may
promulgate thereunder with regards to ARA as a dietary supplement or that the
Company will be able to continue to meet such requirements with regard to DHA
as a dietary supplement.

    The fluorescent pigment and other products derived from microalgae are
subject to potential regulation by FDA as either medical devices or as a
combination medical device/drug product to the extent that they are used in the
diagnosis, mitigation, treatment, cure or prevention of diseases. Such
classification would subject the products to premarket clearances and/or
regulatory approvals.  There can be no assurances that the Company or its
licensees or collaborators would be able to develop the extensive safety and
efficacy data needed to support such FDA premarket clearances and/or regulatory
approvals or that FDA ultimately would authorize the marketing of such products
on a timely basis, if at all.

    For pharmaceutical uses of products derived from microalgae, there can be
no assurance that required clinical testing will be completed successfully
within any specified time period, if at all, with respect to the Company's
products.  Additionally, there is no assurance that the Company or its
licensees or collaborators will be able to develop the extensive data needed to
establish the safety and efficacy of these products for approval for drug uses,
or that such drug products will not be subject to regulation as biological
products or as controlled substances, which would affect marketing and other
requirements.

                                   EMPLOYEES

    As of October 31, 1997, the Company had 121 full-time employees, of whom 12
had Ph.D.'s.  Approximately 46 employees are engaged in research and
development and contract related research and development activities, 52 are
engaged in production or production development related activities and 23 are
in administrative, business development, and sales and marketing positions.
The Company considers relations with its employees to be good.  None of the
Company's employees is covered by a collective bargaining agreement.





                                     - 14 -
<PAGE>   16
ITEM 2.  PROPERTIES.

    The Company leases an aggregate of approximately 40,000 square feet of
laboratory, manufacturing, technical and administrative space in Columbia,
Maryland, 6,000 square feet of which is currently being subleased.  The
Company's lease expires in 2004, but the Company has an option to extend the
lease through 2009 at the expiration of the initial lease.

    The Company produces oils rich in DHA and ARA at its fermentation facility
located in Winchester, Kentucky, using its proprietary technology.  The
facility is located on eight acres and occupies approximately 30,000 square
feet holding two 140,000 liter and one 90,000 liter production fermentation
vessels and supporting equipment.  In addition, the Company has an oil
processing plant at the Winchester facility which was put into production in
1997.  The oil processing plant occupies approximately 6,000 square feet.

ITEM 3.  LEGAL PROCEEDINGS.

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

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

    No matters were voted upon during the fourth quarter of 1997.





                                     - 15 -
<PAGE>   17
                                    PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

    The information set forth under the caption "Price Range of Common Stock"
and "Stock Description and Form 10-K" on the inside back cover of the Company's
Annual Report to Stockholders for the fiscal year ended October 31, 1997, is
included herein as Exhibit 13.01, and those portions are incorporated by
reference into Part II of this report.  Martek has not declared any cash
dividends during the two-year period ending October 31, 1997.

    During fiscal 1997, 67,500 shares of common stock were issued by Martek
upon exercise of options held by American Technology Investments, Inc.  The
date of these stock option exercises and the respective option exercise prices
are set forth below.

<TABLE>
<CAPTION>
         Date                 # of Shares           Per Share Exercise Price
         -----                -----------           ------------------------
         <S>                     <C>                           <C>
          1/8/97                 11,250                        $2.00
          1/9/97                 11,250                        $2.00
         1/10/97                 18,750                        $2.00
         1/11/97                 10,000                        $2.00
         1/13/97                  9,375                        $2.00
         1/14/97                  6,875                        $2.00
</TABLE>

    These shares were issued by Martek in reliance on the exemption
contained in rule 701 under the Securities Act of 1933, as amended.

ITEM 6.  SELECTED FINANCIAL DATA.

    The information set forth under the caption "Selected Financial Data" on
page 6 of the Company's Annual Report to Stockholders for the fiscal year ended
October 31, 1997, is included herein as Exhibit 13.01, and that portion of the
annual report is incorporated by reference into Part II of this Report.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

    The information set forth under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" on pages 7 through 9
of the Company's Annual Report to Stockholders for the fiscal year ended
October 31, 1997, is included herein as Exhibit 13.01, and that portion is
incorporated by reference into Part II of this Report.

ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    Not applicable.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

    The Company's 1997 Financial Statements and Report of Independent Auditors
by Ernst & Young LLP set forth on pages 12 through 20 of the Company's Annual
Report to Stockholders for the fiscal year ended October 31, 1997, is included
herein as Exhibit 13.01, and those portions are incorporated by reference into
Part II of this Report.





                                     - 16 -
<PAGE>   18
ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

    None.





                                     - 17 -
<PAGE>   19
                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

    The information concerning the Company's directors contained under the
captions "Nominees for Election as a Director For Terms Expiring in 2001" and
"Directors Continuing in Office" and, with regard to Item 405 of Regulation
S-K, the information contained under the caption "Section 16(a) Beneficial
Ownership Reporting Compliance" in the Company's 1998 Proxy Statement is hereby
incorporated herein by reference.

    The executive officers and key employees of the Company are as follows:

<TABLE>
<CAPTION>
                          NAME                       AGE                   POSITION           
         -----------------------------------------   ---   -----------------------------------------
         <S>                                         <C>   <C>
         Henry Linsert, Jr . . . . . . . . . . . .   57    Chairman, Chief Executive Officer and
                                                           Director
         Richard J. Radmer, Ph.D . . . . . . . . .   55    President, Chief Scientific Officer and
                                                           Director
         Thomas C. Fisher  . . . . . . . . . . . .   51    Senior Vice President, Operations
         David J. Kyle, Ph.D . . . . . . . . . . .   44    Senior Vice President, Research and
                                                           Development
         Jerome C. Keller  . . . . . . . . . . . .   55    Senior Vice President, Sales & Marketing
         Steve Dubin . . . . . . . . . . . . . . .   44    Chief Financial Officer, General Counsel,
                                                           Secretary and Treasurer
         Paul W. Behrens, Ph.D . . . . . . . . . .   41    Director of Physiology
         Jonathan Miles Brown, Ph.D  . . . . . . .   42    Director, Stable Isotope Group
         Paul J. Kelley  . . . . . . . . . . . . .   44    Vice President of Manufacturing
         Ivan Rubin  . . . . . . . . . . . . . . .   58    Director Of Business Development and
                                                           Strategic Planning
</TABLE>

----------

    Henry Linsert, Jr. joined Martek as Chairman of the Board in 1988 and
became Chief Executive Officer in 1989.  From 1987 to 1988 he was primarily
engaged as President of American Technology Investments Corp. ("ATI"), a
consulting company specializing in the development and financing of early stage
companies in the Mid-Atlantic area.  He was President and Chief Executive
Officer of Suburban Capital Corporation, a venture capital subsidiary of Sovran
Financial Corporation (now NationsBank), from 1983 to 1987.  Prior to 1983, Mr.
Linsert was Vice President of Inverness Capital Corporation, a small business
investment company, and Vice President of First Virginia Bank.  He also served
as a Captain in the U.S. Marine Corps and as an artillery officer in Vietnam.
He received an M.A. in economics from George Washington University and a B.A.
from Duke University.

    Dr. Richard J. Radmer, a founder of Martek, has served since 1985 as a
director, President and Chief Scientific Officer of the Company.  Prior to
1985, he worked for 17 years at Martin Marietta Corp. where he headed the
Biosciences Department which performed research to develop new products from
microalgae, among other activities.  He has served as an Adjunct Associate
Professor and Associate Member of the Graduate Faculty at the University of
Maryland.  Dr. Radmer received a Ph.D. in biology, an M.S. in botany and a B.S.
in biochemistry from the University of Chicago.  He completed his Ph.D. studies
while in residence at Harvard University.

    Thomas C. Fisher joined Martek in 1991 and was named Senior Vice President
of Operations in 1992 after 18 years with Merck & Co., Inc. ("Merck") and
Dupont-Merck.  Mr. Fisher's latest position was Vice President for Technical
Operations at Dupont-Merck, and in that capacity he was responsible for
world-wide pharmaceutical production, quality control and engineering.  During
his tenure at Merck, Mr. Fisher was Director of Biological Manufacturing and
held management positions in sterile operations, development and quality
control.  Mr. Fisher received an M.S. in genetics from West Virginia University
and a B.S. in biology from Waynesburg College.





                                     - 18 -
<PAGE>   20
    Jerome C. Keller joined Martek in September 1997 as Senior Vice President
of Sales and Marketing. Prior to joining Martek, Mr. Keller had been
consulting after spending a 25-year career at Merck, most recently as Vice
President of Sales from 1986 to 1993. In this position, he was responsible for
all U.S. sales operations, including the direction of a support staff of 4,500
personnel and a sales volume of $4.2 billion. Some of the products introduced
under Mr. Keller included Pepcid, Mefoxin, Primaxin, Vasotec, Mevocor, Zocor,
Proscor and Prilosec. Mr. Keller has a B.S. degree from Duquesne University and
an M.S. degree from the University of Pittsburgh.

    Steve Dubin joined Martek in 1992 as Chief Financial Officer, Secretary and
Treasurer, and from 1988 to the time he joined Martek on a full-time basis, Mr.
Dubin consulted with Martek on financial and accounting matters.  In 1993, Mr.
Dubin also assumed the duties of General Counsel of the Company.  Prior to
joining Martek, Mr. Dubin was Chief Financial Officer of the J.L. Wickham Co.,
Inc., a machine tool company, from 1987 to 1992.  From 1986 to 1991, Mr. Dubin
was active as Vice President of ATI, a consulting company of which Mr. Dubin is
a co-founder, specializing in the development and financing of early stage
companies in the Mid-Atlantic area.  Prior to 1986, he served as Vice President
of Suburban Capital Corporation, a venture capital subsidiary of Sovran
Financial Corporation (now NationsBank), where he participated in the original
financing of the Company.  Mr. Dubin also held a variety of financial
management positions with Suburban Bank.  Mr. Dubin is a Certified Public
Accountant and an attorney.  He received his J.D. from the National Law Center,
George Washington University and his B.S. in accounting from the University of
Maryland.

    Dr. David J. Kyle, a founder of Martek, is currently Senior Vice President,
Head of Research and Development.  Prior to joining Martek in 1985, Dr. Kyle
was a research scientist in the Biosciences Department at Martin Marietta Corp.
from 1984 to 1985.  He has been a post-doctoral fellow at Michigan State
University and a visiting scientist at the Centre d'Etudes Nucleaires of
Saclay, France, and the Institute of Physical and Chemical Research, Tokyo,
Japan.  Dr. Kyle received a Ph.D. in physiology and biochemistry from the
University of Alberta, and a B.S. degree in biology from the University of
Victoria.

    Dr. Paul W. Behrens, a founder of Martek, has served as Director of
Physiology since 1985 and is responsible for the Company's microalgal-screening
activity and microalgal-physiology expertise.  Prior to joining Martek, Dr.
Behrens was a research scientist in the Biosciences Department at Martin
Marietta Laboratories from 1983 to 1985.  He received a Ph.D. in physiology and
biochemistry and an M.S. in biology from the University of Maryland.  He also
received a B.A. in biology from The Johns Hopkins University.

    Dr. Jonathan Miles Brown, who is overseeing the development of Martek's
Stable Isotope products, joined Martek in September 1991 following a period as
a consultant with British Biotechnology Ltd.  Prior thereto, he was Research
and Development Manager for Oxford Virology plc from 1987 to 1990 where his
responsibilities included market research, preparation of all marketing
documents and protection of intellectual property.  Dr. Brown received his
Ph.D. from the University of London where he developed the first synthetic
process for the unambiguous synthesis of long chain oligoribonucleotides.  He
is a Chartered Chemist and Member of the Royal Society of Chemistry.

    Paul J. Kelley joined Martek in April 1997 as Vice President of
Manufacturing at the Company's Winchester, Kentucky production plant. Prior to
joining Martek, Mr. Kelley spent four years as the Plant Manager of a
Biotechnology plant in the Pharmaceutical Division of Bayer. Prior to 1993, Mr.
Kelley held several other positions at Bayer, including Production Manager of a
plant in West Germany from 1989 to 1991. Prior to working for Bayer, Mr. Kelley
was the Plant Manager of a facility in the Biotechnology Division of Miles,
Inc. from 1983 to 1989. Mr. Kelley received an M.B.A. from Rutgers Graduate
School of Business and a B.S.C.E. from the New Jersey Institute of Technology.





                                     - 19 -
<PAGE>   21
    Ivan Rubin, former Vice President of Business Planning, Development, and
Research for Merck, joined Martek in October 1997 as Director of Business
Development and Strategic Planning. Prior to joining Martek, Mr. Rubin spent 25
years at Merck developing the strategies to position them as the leader in the
pharmaceutical industry. Since leaving Merck in 1993, Mr. Rubin has been the
President of Beta Associates, a consulting firm specializing in strategic
planning and business development in the health care industry. Mr. Rubin is
also on the Board of Directors of Covalent Group, a clinical research company
for the Pharmaceutical and Biotechnology industries. Mr. Rubin received a B.A.
from the University of Buffalo and an M.B.A. from Hofstra University.





                                     - 20 -
<PAGE>   22
ITEM 11.  EXECUTIVE COMPENSATION.

    The information required by this item is hereby incorporated by reference
from the information to be contained under the caption "Compensation" in the
Company's 1998 Proxy Statement.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

    The information required by this item is hereby incorporated by reference
from the information to be contained under the caption "Beneficial Ownership of
Common Stock" in the Company's 1998 Proxy Statement.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

    None.





                                     - 21 -
<PAGE>   23
                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a)(1)  Financial Statements

    The following Financial Statements of the Company and Report of Independent
Accountants set forth on the pages indicated in the Company's Annual Report to
Stockholders for the year ended October 31, 1997 are included in Exhibit 13.01
to this report and are incorporated into Item 8 of this Report:


    Balance Sheets as of October 31, 1997 and 1996

    Statements of Operations for the Years Ended October 31, 1997,
    1996 and 1995

    Statements of Stockholders' Equity for the
    Years Ended October 31, 1997, 1996 and 1995

    Statements of Cash Flows for the Years Ended October 31, 1997,
    1996 and 1995

    Notes to Financial Statements

    Report of Independent Auditors


(a)(2)  Financial Statement Schedules

    Financial statement schedules have been omitted since they are either not
required, not applicable, or the information is otherwise included.

(a)(3)  Exhibits

    3.01     Revised Restated Certificate of Incorporation of Registrant.
    3.02     Amendment to the Restated Certificate of Incorporation, effective
                 March 14, 1995 (filed as Exhibit 3.1 to the Company's
                 Registration Statement on Form S-3, File No. 33-89760, filed
                 March 15, 1995, and incorporated by reference herein).
    3.03     Certificate of Designation, Preferences and Rights of Series A
                 Junior Participating Preferred Stock (filed as Exhibit 4 to
                 the Company's Form 8-K, File No. 0-22354, filed January 29,
                 1996, and incorporated by reference herein).
    3.04     Amended By-Laws of Registrant.
    3.05     Amendment to By-Laws, effective March 14, 1995 (filed as Exhibit
                 3.2 to the Company's Registration Statement on Form S-3, File
                 No. 33-89760, filed March 15, 1995, and incorporated by
                 reference herein).
    4.01     Specimen Stock Certificate for Common Stock.
    4.02     Common Stock and Warrant Purchase Agreements, dated May 19, June
                 1, June 6, and June 8, 1995, by and among the Company and the
                 Selling Stockholders (filed as Exhibit 4.2 to the Company's
                 Registration Statement on Form S-3, File No. 33-93580, filed
                 June 16, 1995, and incorporated by reference herein).





                                     - 22 -
<PAGE>   24

<TABLE>
<S>          <C>
    4.03     Warrant No. 1 issued pursuant to Common Stock and Warrant Purchase
                 Agreements and Schedule of Warrants (filed as Exhibit 4.3 to
                 the Company's Registration Statement on Form S-3, File No.
                 33-93580, filed June 16, 1995, and incorporated by reference
                 herein).
    4.04     Form of Rights Agreement dated as of January 24, 1996 between the
                 Company and Registrar and Transfer Company, as Rights Agent
                 (filed as Exhibit 1 to the Company's Form 8-K, File No.
                 0-22354, filed January 29, 1996, and incorporated by reference
                 herein).
    10.01    Form Indemnification Agreement for directors.
    10.02    1986 Stock Option Plan, as amended.
    10.03    1992 Registration Rights Agreement between the Company and
                 Preferred Stockholders.
    10.04    Employment Agreement, dated May 4, 1990, between the Company and
                 Henry Linsert, Jr.
    10.05    Employment Agreement, dated May 7, 1990, between the Company and
                 Richard J. Radmer.
    10.06    Employment Agreement, dated May 7, 1990, between the Company and
                 David J. Kyle.
    10.07    Employment Agreement, dated May 7, 1990, between the Company and
                 Paul W. Behrens.
    10.08    Form of Proprietary Information, Inventions and Non-Solicitation
                 Agreement.
    10.12    Collaborative Research and License Agreement, dated April 30,
                 1993, as amended June 11, 1993, between the Company and the
                 Trustees of Columbia University.
    10.13    Lease, commencement date October 15, 1992, between the Company and
                 Aetna Life Insurance Company, as modified on August 5, 1993.
    10.14    License Agreement, dated September 10, 1992, between the Company
                 and [*].
    10.14A   Exhibits to September 10, 1992 License Agreement.[*]
    10.15    License Agreement, dated October 28, 1992, between the Company and
                 [*].
    10.15A   Exhibits to October 28, 1992 License Agreement.[*]
    10.16    License Agreement, dated January 28, 1993 between the Company and
                 [*] (Domestic and International Versions).
    10.16A   Exhibits to January 28, 1993 License Agreements.[*]
    10.17    Management Cash Bonus Incentive Plan, dated June 10, 1993.
    10.18    Lease Modification Agreement, dated October 14, 1993 between the
                 Company and Aetna Life Insurance Company.
    10.19    Letter of Intent, dated January 13, 1995, between the Company and
                 Golden Technologies Corporation (filed as Exhibit 10.19 to the
                 Company's 1994 Form 10-K, File No. 0-22354, and incorporated
                 by reference herein).
    10.20    Second Lease Modification Agreement, dated September 27, 1994,
                 between the Company and Aetna Life Insurance Company (filed as
                 Exhibit 10.20 to the Company's 1994 Form 10-K, File No.
                 0-22354, and incorporated by reference herein).
    10.21    Purchase and Sale Agreement, dated February 16, 1995, between the
                 Company and Zeagan, Inc. (filed as Exhibit 4.3 to the
                 Company's Registration Statement on Form S-3, File No.
                 33-89760, filed March 15, 1995, and incorporated by reference
                 herein).
    10.22    Directors' Stock Option Plan (filed as Exhibit 4.1(b) to the
                 Company's Registration Statement on Form S-8, File No.
                 33-79222, filed May 23, 1994, and incorporated by reference
                 herein).
    10.23    Manufacturing Agreement, dated December 31, 1996, between the
                 Company and Royal Gist-Brocades B.V.[*] (filed as Exhibit
                 10.23 to the Company's Annual Report on Form 10-K for the
                 fiscal year ended October 31, 1996).
    10.24    Martek Biosciences Corporation 1997 Stock Option Plan (filed as
                 Exhibit 4.1(e) to the Company's Registration Statement on 
                 Form S-8, File No. 333-27671, filed May 22, 1997, and 
                 incorporated by reference herein).
    10.25    Third Amendment of Lease, dated August 1, 1997 between the Company
                 and M.O.R Columbia Limited Partnership. **
</TABLE>





                                     - 23 -
<PAGE>   25

<TABLE>
<S>          <C>
    13.01    Portions of the Annual Report to Stockholders of the Company for
                 the year ended October 31, 1997.**
    23.01    Signed Consent of Ernst & Young LLP, Independent Auditors.**
    24.01    Power of Attorney of the Board of Directors (included on signature
                 page of this Report).**
    27.01    Financial Data Schedule.**
</TABLE>

-------------------------
         * Confidential treatment was granted by the Securities and Exchange
Commission for certain portions of these agreements.  The confidential portions
were filed separately with the Commission.

         ** Filed herewith.  Unless otherwise noted, all other Exhibits are
incorporated by reference as an Exhibit to the Registrant's Registration
Statement on Form S-1 (No. 33-68522).



(b)  Reports on Form 8-K

     None





                                     - 24 -
<PAGE>   26
                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this Report to be signed on its behalf
by the undersigned, thereunto duly authorized on January 29, 1998.


                                       MARTEK BIOSCIENCES CORPORATION
                                       
                                       
                                       
                                       By /s/ Henry Linsert, Jr.
                                          -------------------------------------
                                              Henry Linsert, Jr.
                                              Chief Executive Officer
                                              and Director

                               POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Henry Linsert, Jr. and Steve Dubin, and each of them
individually, as his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and his name, place and stead
in any and all capacities, to sign the report and any and all amendments to
this report, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney's-in-fact and agents, full power and authority to
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or their substitutes, may lawfully do or cause to be done by virtue
thereof.

Pursuant to the requirement of the Securities Exchange Act of 1934, this Report
has been signed by the following persons in the capacities and on the date
indicated.

<TABLE>
<CAPTION>
Signatures                                   Title                           Date
----------                                   -----                           ----
<S>                             <C>                                          <C>
/s/ Henry Linsert, Jr.          Chief Executive Officer and                  January 29, 1998
----------------------------    Director (Principal Executive                                
Henry Linsert, Jr.              Officer)                     
                                                             

/s/ Steve Dubin                 Secretary and Treasurer                      January 29, 1998
----------------------------    (Principal Financial and                                     
Steve Dubin                     Accounting Officer)     
                                                        

/s/ Jules Blake                 Director                                     January 29, 1998
----------------------------                                                                 
Jules Blake


/s/ Ann L. Johnson              Director                                     January 29, 1998
----------------------------                                                                 
Ann L. Johnson
</TABLE>





                                     - 25 -
<PAGE>   27
<TABLE>
<S>                             <C>                                          <C>
/s/ Douglas J. MacMaster, Jr.   Director                                     January 29, 1998
-----------------------------                                                                
Douglas J. MacMaster, Jr.


/s/ John H. Mahar               Director                                     January 29, 1998
----------------------------                                                                 
John H. Mahar


/s/ Sandra Panem                Director                                     January 29, 1998
----------------------------                                                                 
Sandra Panem


/s/ Richard J. Radmer           President and Director                       January 29, 1998
----------------------------                                                                 
Richard J. Radmer


                                Director                                     January 29, 1998
----------------------------                                                                 
Eugene H. Rotberg


/s/ William D. Smart            Director                                     January 29, 1998
----------------------------                                                                 
William D. Smart


/s/ Bruce E. Elmblad            Director                                     January 29, 1998
----------------------------                                                                 
Bruce E. Elmblad
</TABLE>





                                     - 26 -
<PAGE>   28
                                 EXHIBIT INDEX


<TABLE>
<CAPTION>
   Exhibit
   Number                    Description
   -----                     -----------

<S>          <C>
    3.01     Revised Restated Certificate of Incorporation of Registrant.
    3.02     Amendment to the Restated Certificate of Incorporation, effective
                 March 14, 1995 (filed as Exhibit 3.1 to the Company's
                 Registration Statement on Form S-3, File No. 33-89760, filed
                 March 15, 1995, and incorporated by reference herein ).
    3.03     Certificate of Designation, Preferences and Rights of Series A
                 Junior Participating Preferred Stock (filed as Exhibit 4 to
                 the Company's Form 8-K, File No. 0-22354, filed January 29,
                 1996, and incorporated by reference herein ).
    3.04     Amended By-Laws of Registrant.
    3.05     Amendment to By-Laws, effective March 14, 1995 (filed as Exhibit
                 3.2 to the Company's Registration Statement on Form S-3, File
                 No. 33-89760, filed March 15, 1995, and incorporated by
                 reference herein ).
    4.01     Specimen Stock Certificate for Common Stock.
    4.02     Common Stock and Warrant Purchase Agreements, dated May 19, June
                 1, June 6, and June 8, 1995, by and among the Company and the
                 Selling Stockholders (filed as Exhibit 4.2 to the Company's
                 Registration Statement on Form S-3, File No. 33-93580, filed
                 June 16, 1995, and incorporated by reference herein ).
    4.03     Warrant No. 1 issued pursuant to Common Stock and Warrant Purchase
                 Agreements and Schedule of Warrants (filed as Exhibit 4.3 to
                 the Company's Registration Statement on Form S-3, File No.
                 33-93580, filed June 16, 1995, and incorporated by reference
                 herein).
    4.04     Form of Rights Agreement dated as of January 24, 1996 between the
                 Company and Registrar and Transfer Company, as Rights Agent
                 (filed as Exhibit 1 to the Company's Form 8-K, File No.
                 0-22354, filed January 29, 1996, and incorporated by reference
                 herein).
    10.01    Form Indemnification Agreement for directors.
    10.02    1986 Stock Option Plan, as amended.
    10.03    1992 Registration Rights Agreement between the Company and
                 Preferred Stockholders.
    10.04    Employment Agreement, dated May 4, 1990, between the Company and
                 Henry Linsert, Jr.
    10.05    Employment Agreement, dated May 7, 1990, between the Company and
                 Richard J. Radmer.
    10.06    Employment Agreement, dated May 7, 1990, between the Company and
                 David J. Kyle.
    10.07    Employment Agreement, dated May 7, 1990, between the Company and
                 Paul W. Behrens.
    10.08    Form of Proprietary Information, Inventions and Non-Solicitation
                 Agreement.
    10.12    Collaborative Research and License Agreement, dated April 30,
                 1993, as amended June 11, 1993, between the Company and the
                 Trustees of Columbia University.
    10.13    Lease, commencement date October 15, 1992, between the Company and
                 Aetna Life Insurance Company, as modified on August 5, 1993.
    10.14    License Agreement, dated September 10, 1992, between the Company
                 and [*].
    10.14A   Exhibits to September 10, 1992 License Agreement.[*]
    10.15    License Agreement, dated October 28, 1992, between the Company and
                 [*].
    10.15A   Exhibits to October 28, 1992 License Agreement.[*]
    10.16    License Agreement, dated January 28, 1993 between the Company and
                 [*] (Domestic and International Versions).
    10.16A   Exhibits to January 28, 1993 License Agreements.[*]
    10.17    Management Cash Bonus Incentive Plan, dated June 10, 1993.
</TABLE>




                                     - 27 -
<PAGE>   29

<TABLE>
<S>          <C>
    10.18    Lease Modification Agreement, dated October 14, 1993 between the
                 Company and Aetna Life Insurance Company.
    10.19    Letter of Intent, dated January 13, 1995, between the Company and
                 Golden Technologies Corporation (filed as Exhibit 10.19 to the
                 Company's 1994 Form 10-K, File No. 0-22354, and incorporated
                 by reference herein).
    10.20    Second Lease Modification Agreement, dated September 27, 1994,
                 between the Company and Aetna Life Insurance Company (filed as
                 Exhibit 10.20 to the Company's 1995 Form 10-K, File No.
                 0-22354, and incorporated by reference herein).
    10.21    Purchase and Sale Agreement, dated February 16, 1995, between the
                 Company and Zeagan, Inc. (filed as Exhibit 4.3 to the
                 Company's Registration Statement on Form S-3, File No.
                 33-89760, filed March 15, 1995, and incorporated by reference
                 herein).
    10.22    Directors' Stock Option Plan (filed as Exhibit 4.1(b) to the
                 Company's Registration Statement on Form S-8, File No.
                 33-79222, filed May 23, 1994, and incorporated by reference
                 herein).
    10.23    Manufacturing Agreement, dated December 31, 1996, between the
                 Company and Royal Gist-Brocades B.V.[*] (filed as exhibit
                 10.23 to the Company's Annual Report on Form 10-K for the
                 fiscal year ended October 31, 1996).
    10.24    Martek Biosciences Corporation 1997 Stock Option Plan (filed as
                 Exhibit 4.1(e) to the Company's Registration Statement on Form
                 S-8, File No. 333-27671, filed May 22, 1997, and incorporated
                 by reference herein).
    10.25   Third Amendment of Lease, dated August 1, 1997 between the Company
                 and M.O.R Columbia Limited Partnership.  **
    13.01    Portions of the Annual Report to Stockholders of the Company for
                 the year ended October 31, 1997.**
    23.01    Signed Consent of Ernst & Young LLP, Independent Auditors.**
    24.01    Power of Attorney of the Board of Directors (included on signature
                 page of this Report).**
    27.01    Financial Data Schedule.**
</TABLE>


-------------------------
         * Confidential treatment was granted by the Securities and Exchange
Commission for certain portions of these agreements.  The confidential portions
were filed separately with the Commission.

         ** Filed herewith.  Unless otherwise noted, all other Exhibits are
incorporated by reference as an Exhibit to the Registrant's Registration
Statement on Form S-1 (No. 33-68522).





                                     - 28 -