<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, 2000
                         COMMISSION FILE NUMBER: 0-22354
                            ------------------------

                         MARTEK BIOSCIENCES CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                            ------------------------
<TABLE>
<S>                                                    <C>
               DELAWARE                                      52-1399362
   (STATE OR OTHER JURISDICTION OF                        (I.R.S. EMPLOYER
    INCORPORATION OR ORGANIZATION)                     IDENTIFICATION NUMBER)
</TABLE>

                   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:

<TABLE>
<S>                               <C>
                 NONE                                NONE
          (TITLE OF CLASS:)       (NAME OF EACH EXCHANGE ON WHICH REGISTERED:)
</TABLE>

           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. [X]

     The aggregate market value of Common Stock held by non-affiliates of the
registrant is $250,191,545 (based upon a last sale price of $17.19 per share of
the Common Stock as reported on the NASDAQ National Market System on January 12,
2001. The number of shares of Common Stock outstanding as of January 12, 2001
was 17,808,919.

                       DOCUMENTS INCORPORATED BY REFERENCE

          Certain portions of Registrant's Annual Report to Stockholders for the
fiscal year ended October 31, 2000 are incorporated by reference into Part II of
this Report. Certain portions of the Registrant's Definitive Proxy Statement for
its 2001 Annual Meeting of Stockholders (which will be filed with the commission
within 120 days after the end of the Registrant's 2000 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 ("We", "Martek" or "the Company") is a
leader in the development and commercialization of products derived from
microalgae. Our leading products are nutritional oils used as ingredients in
infant formula and foods, and as ingredients in, and encapsulated for use as,
dietary supplements. Our nutritional oils are comprised of fatty acid
components, primarily docosahexaenoic acid, commonly known as DHA, and
arachidonic acid, commonly known as ARA, which many researchers believe may
enhance mental and visual development in formula-fed infants and play a pivotal
role in brain function throughout life. Low levels of DHA in adults have also
been linked to a variety of health risks, including cardiovascular problems,
cancer, and various neurological and visual disorders, although the precise
relationship between DHA supplementation and these diseases has yet to be fully
assessed. We have licensed our nutritional oils to seven infant formula
manufacturers, representing over 60% of the estimated $6 billion worldwide
market for infant formula. Five of these licensees are marketing term infant
formula products containing our oils in over 70 countries. Additional
applications of our patented technology based upon microalgae include currently
marketed products and technologies that can be used by researchers as an aid in
drug discovery and diagnostics. We intend to continue to exploit the largely
untapped commercial opportunities of microalgae. To that end, we maintain a
library of more than 3,300 live microalgal species and a related database, which
we believe are among the largest such resources available anywhere in the world.


                   PRODUCTS AND PRODUCT CANDIDATES

     NUTRITIONAL OILS FOR INFANT FORMULA, DIETARY SUPPLEMENTATION AND OTHER
APPLICATIONS. Certain microalgae and fungi produce large quantities of oils and
fats containing long-chain, polyunsaturated fatty acids, known as PUFA's, that
are important to human nutrition and health. We have identified a strain of
microalgae which produces an oil rich in DHA and have developed the means to
grow it by fermentation, with a relatively high oil and DHA content. In
addition, we have isolated and cultured a strain of fungus that produces large
amounts of ARA.

     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. 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. For a nursing infant, it is provided via breast milk. DHA is generally
the most abundant omega-3 long-chain PUFA in human 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. Although these fatty
acids are naturally present in breast milk, they are not added to most infant
formulas today. Our blended oils containing DHA and ARA provide the closest
available match, with regard to the molecular form of these fatty acids, to the
DHA and ARA in human milk when added to infant formula.

     Independent studies have indicated 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 later in life when compared to those fed infant formula not containing
DHA. This evidence is from retrospective studies comparing intelligence in
breast-fed versus formula-fed infants and from intervention studies in infants
using DHA/ARA-supplemented infant formula.

    Although there are some studies which dispute the benefit of DHA and ARA in
the infant diet, the following are examples of some of the studies which have
found a benefit:


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     - A study reported by investigators at Baylor College of Medicine in
       November, 2000, supported the importance of DHA supplementation during
       breast-feeding by showing that breast-fed, 30 month-old children whose
       mother took a DHA supplement for four months after delivery scored a mean
       of eight points higher on a standard test of psychomotor development than
       infants whose mother received a placebo.

     - Research published from an NIH sponsored study in the March 2000 issue of
       Developmental Medicine and Child Neurology showed a significant
       improvement in mental development in term infants given a commercially
       available infant formula supplemented with our DHA and ARA compared to
       infants fed the same non-supplemented formula. In the double-blind study,
       infants fed the diet supplemented with our oils showed, at 18 months of
       age, a mean increase of 7 points on the Mental Development Index
       ("MDI")of the Bayley Scales of Infant Development II. Researchers
       reported that "these data support a long-term cognitive advantage of
       infant dietary DHA supply during the first 4 months of life. The
       significant correlations...support the hypothesis that early dietary
       supply of DHA was a significant determinant of improved performance on
       the MDI." Although there are different sources of DHA and ARA, these
       findings re-affirmed the beneficial effects of adding Martek's pure
       source of pre-formed DHA and ARA to infant formulas at the levels
       evaluated by the researchers.

     - In 1999, a meta-analysis of over 20 published reports concluded that
       infants deprived of the nutrients in breast milk are likely to have a
       lower IQ, lower educational achievement, and poorer social adjustment
       than breast-fed infants. The nutritional benefits of breast-feeding were
       associated with at least a 3.2 point difference in cognitive development
       compared to formula feeding, and the longer the baby was breast fed, the
       greater the increase in cognitive developmental benefit.

     - A National Institutes of Health (NIH) sponsored study published in the
       August 1998 edition of Pediatric Research concluded that early dietary
       intake of preformed DHA and ARA appears necessary for optimal development
       of the brain and eye. The study reported that healthy, full-term infants
       fed formula supplemented with our oils had visual development results
       consistent with breast-fed infants, but those fed a standard formula
       without DHA and ARA had a deficiency of about "one line on an eye chart".
       The study also indicated that infant formula without preformed DHA and
       ARA may put infants at risk for DHA deficiency, and suggested that the
       availability of dietary DHA during the critical developmental period may
       lead to persistent changes in the underlying neural structure and/or
       function of 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 recommended 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


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           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 United Kingdom, 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 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 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, we introduced Neuromins(R) PL, which is a DHA dietary supplement
specifically designed for pregnant and lactating women.

     Investigators at universities around the world and at other research
centers, such as the National Institutes of Health, have observed a relationship
between low levels of DHA and a variety of health risks, including increased
cardiovascular problems, cystic fibrosis, cancer, and various neurological and
visual disorders. We are currently trying to establish what contribution, if
any, supplementation with our oils will make in addressing these problems. We
have recently begun sponsoring studies to further investigate the potential
benefit of DHA supplementation on cardiovascular health and breast cancer, and
we, as well as others, are conducting research regarding the impact of DHA
supplementation on cystic fibrosis and certain visual and neurological
disorders.

     We are also, along with our customers, developing other DHA delivery
methods to address these potential new markets, including powders, an emulsion,
use as a food ingredient, and use as a pharmaceutical.

     We believe that our nutritional oils and Neuromins(R)capsules have the
following advantages over other currently available sources of DHA and ARA for
use in infant formula, as food ingredients, or as nutritional supplements:

     - the oils do not have the odor, stability, taste characteristics, or
       potential impurities that may limit the usefulness of fish oil;

     - 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., eicosapentaenoic acid ("EPA")) can
       be excluded;

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

     - the position of the DHA within the triglyceride 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 higher oxidative stability and longer shelf life


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       than fish oil and are, therefore, amenable to the spray drying process
       required for powdered formula, and

     - the oils can be produced in large quantities under controlled conditions
       satisfying strict regulatory scrutiny.

     We have received numerous patents protecting our nutritional products
technology, including the fermentation methods of producing our DHA and ARA
oils, as well as the blending of DHA and ARA oils for use in infant formula.

     In 1994, we received a U.S. patent covering certain blends of a microbial
oil enriched with DHA and a microbial oil enriched with ARA, as well as the use
of such blends in infant formulas. In 1995, we 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 we received two additional U.S.
patents covering our 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 our
method of producing DHA oil. The second patent clarifies that our patent
coverage includes the blending, in infant formula and nutritional supplements,
of microbially derived ARA oil with low 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 our patents. Two U.S. patents were granted
in 1997, one of which protects the production, use and sale of oils rich in ARA
(30% or greater concentration). In 1998 a U.S. patent was issued protecting our
DHA-rich algal biomass. DHA-rich algal biomass is the raw product of the DHA
fermentation process and represents an inexpensive source of DHA that may
potentially be a low cost product itself. We also have been awarded a number of
foreign patents covering various aspects of our nutritional oils, including
European patents covering our DHA and ARA-rich oils.

     We first realized revenues from license fees related to our nutritional
oils and sale of sample quantities of these oils in 1992. In late 1994, one of
our licensees launched the first pre-term infant formula containing our oils in
Europe, and in 1995, we recognized our first royalty revenue from sales of this
product. Additional product introductions have continued through 2000.
Currently, five of our infant formula licensees are marketing term infant
formula products containing our oils in fourteen countries and pre-term infant
formula containing the our oils in over 70 countries worldwide. In the latter
part of 1996, we initiated sales of our first consumer products, Neuromins(R), a
DHA dietary supplement, and Neuromins(R) PL, a DHA dietary supplement for
pregnant and lactating women. Since then, we have expanded distribution of our
Neuromins(R) DHA. We have entered into agreements with Natrol, Inc., 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 Safeway, Vitamin
World, Eckerd's, Lucky's, Savon and Vitamin Shoppe stores. Neuromins(R) DHA is
also sold through mail order distributors and a multi-level marketer.

     In 1999, we began selling bulk DHA oil and powder for additional
applications, including inclusion in children's chewables and nutritional drinks
and adult combination supplements which not only include our DHA but other
ingredients such as Gingko and St. Johns Wort. We are continuing to explore
additional applications for DHA, including use in pharmaceuticals, functional
foods and animal feeds. Our sales and royalties on nutritional oils for infant
formula were approximately $900,000 in 1998, $1.4 million in 1999, and $5
million in 2000. In addition, our sales of nutritional oils for adult
supplements and food additives totaled approximately $1.5 million in each of
1998 and 1999, and $2 million in 2000.

     PRODUCTS 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 identification 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

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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.

     We have developed a series of products which enable researchers to
determine the 3-D structures of certain molecules of pharmaceutical interest.
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") technology. Proteins incorporating stable isotopes such as
carbon-13 and/or nitrogen-15 have been obtained by growing micro-organisms, such
as bacteria, yeast, insect cells or mammalian cells on our 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.

     We market 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.

     Our drug discovery products and technologies include the following:

          Celtone(R) 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., human proteins with sugar
     attached) frequently do not crystallize. Celtone M, our isotopically
     labeled mammalian cell growth medium, has enabled determination of the 3-D
     structures of glycosylated human proteins through NMR. We believe that
     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. We were issued
     U.S. patents for the composition of matter and use of Celtone M in 1995,
     1997 and 1998, and currently have an ongoing royalty-bearing license
     agreement with Genetics Institute regarding the use of Celtone (R)M.

          Celtone(R) -- Our 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 deuterium, carbon-13 and nitrogen-15. In June 1994, we were
     issued a U.S. patent for the composition of matter and method for producing
     our Celtone medium.

          Glucose -- Carbon-13-glucose is the most widely used reagent for
     isotopically labeling bacterial proteins. Glucose is available in
     combinations of deuterium and carbon-13.

          Nucleic Acids -- We sell isotopically labeled nucleic acid
     derivatives. These are available labeled with any combination of deuterium,
     carbon-13 and nitrogen-15 and are used to solve the structures of DNA and
     RNA, especially when bound to proteins.

          Fast-Track Technology - We are currently working on developing a
     proprietary fast-track labeling system which would, by using advanced NMR
     technology, enable researchers to determine the structure and movement of
     pharmaceutical target binding sites in significantly reduced time. This
     technology could greatly reduce the time needed to understand a given
     target/drug candidate interaction and thereby speed up the rejection of
     unsuitable compounds and reduce the overall time needed to develop new
     pharmaceuticals. In 2000, we were issued a composition of matter patent on
     our "Fast Track" technology.



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     Our sales of isotope products for drug discovery totaled less than $2
million in each of 1998, 1999 and 2000.

     DIAGNOSTICS. Our fluorescence technology is a sensitive and direct method
for detection of a specific binding event. That event could be a receptor
mediated binding, cell based binding, antibody driven binding, or essentially
any event where one entity recognizes another. Because of environmental concerns
with the use of radioactivity as a sensitive method of detection, higher
sensitivity detection technologies are in demand. The main advantages of
fluorescence as a method of detection is that it is direct, fast, and relatively
simple in that it does not require enzymatic steps for signal amplification or
prolonged development times for signal measurement. We have identified, isolated
and now market powerful fluorescent dyes (phycobiliproteins) from various algae
for use in applications that require high sensitivity. The phycobiliproteins
fulfill that role well but cannot match the detection sensitivity of
chemiluminescent methods. The PBXL(TM) dye technology was developed to attain
those sensitivities. PBXL(TM) dyes are large, intensely fluorescent combinations
of phycobiliproteins that provide extreme sensitivity with ease of use that is
unmatched by other common dyes or detection systems. A 100-fold improvement in
sensitivity has been demonstrated with the PBXL dyes over existing direct
fluorescent dyes, and multiple new applications are now accessible by simple,
direct fluorescence. Such increased sensitivity allows:

-    the detection of receptors or small molecules at 100-fold lower
     concentrations;

-    detection with the same level of sensitivity but in 100-fold smaller
     volumes; and

-    detection with the same level of sensitivity but using much lower cost
     equipment.

     Our fluorescent products include the following:

     Phycobiliproteins -- Classical direct fluorescent detection dyes, which we
have produced for several years and fill an existing market in protein detection
and flow cytometry. In 1999, we introduced our own brand of improved fluorescent
dyes (XL-APC and SureLight-APC(TM)) to be used for time resolved fluorescence
applications in the high throughput screening market.

     CryptoFluor(TM) dyes -- A product line of small molecular weight, yet high
intensity phycobiliproteins isolated from an unusual group of microalgae. These
dyes are capable of entering permeabilized cells and are used for internal
detection of markers in cells which could be used for discovering diseases, and
in flow cytometry and Fluorescence In Situ Hybridization (FISH). Different
CryptoFluor(TM) dyes have different fluorescence emission wavelengths and,
therefore, provide the possibility of multi-colored assays. They have also been
used in fluorescence microscopy and fluorescence energy transfer applications.

     PBXL(TM) dyes -- A proprietary line of ultrasensitive dyes which provide a
very large signal per binding event. Our PBXL dyes have demonstrated an
increased sensitivity compared to other direct detection dyes in all
applications evaluated thus far. They provide sensitivity similar to
enzymatically amplified or radioactive detection systems but with fewer steps,
generating more rapid results at lower costs. These dyes have been used in
immunodiagnostic detection, DNA arrays, flow cytometry, western blotting and
other applications. In 1999, we began beta-testing PBXL-based Western blot
detection kits and our proprietary XLExpress(TM) Rapid Labeling system which
allows individual researchers to label their own molecules with the PBXL dye of
their choice in a simple and convenient format.

     In 1999, our PBXL(TM) dyes also showed potential utility in gene detection
and drug discovery formats. We have exclusively in-licensed the rights to the
PBXL(TM) technology based on a U.S. Patent issued in 1997 and several pending
applications. Our CryptoFluor(TM) dyes have the advantage of smaller size
compared to the standard phycobiliproteins, and provide additional colors for
multi-color tests. In 1998, we began marketing some of our fluorescent detection
products through partnerships with Intergen(R) Company and Kirkegaard and Perry
Laboratories. In 1999, we began distributing the PBXL(TM) based products through
Chemdex(R),an internet supplier of scientific products. Our sales of diagnostic
products was less than $200,000 in each of 1998, 1999, and 2000.



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     ALGAL GENOMICS. Microalgae are microplants and, as such, have many
biochemical pathways and genes in common with higher plants. They offer the
further advantage of having the genetic material required for the production of
certain compounds, DHA for example, that are not present in higher plants.
Consequently, we believe that microalgae represent a valuable gene pool for
modern agricultural biotechnology. Gene coding for enzymes in microalgal fatty
acid biosynthesis have been identified, isolated and characterized by our
scientists. Gene sequencing from several different and distinct algal species is
also underway and many new genes have been identified from several different
species.

     We have combined our understanding of heterotrophic (without light) and
autotrophic (with light) growth of microalgae with our proprietary technology in
microalgal transformation to convert an otherwise autotrophic species of
microalgae into one capable of growing heterotrophically. We believe that this
represents the first time such a transformation has ever been made. Our Trophic
Conversion(TM) technology is the subject of several patent applications and
opens the door to the commercial heterotrophic production (growth via
fermentation) of algal species that could only be grown previously using a
photobioreactor system. The favorable production economics associated
with fermentation compared to those of the photobioreactor will allow us to
pursue new algal products not previously believed to be economically feasible
and potentially represents a means to commercially exploit a greater portion of
the kingdom of microalgae. To date, we have received no revenues from our algal
genomics technology.

                                   TECHNOLOGY

     We apply our microalgal expertise and culturing technology to our expanding
library of over 3,300 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 our products:

     - microalgae are a genetically diverse kingdom 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 our nutritional oils,
       and highly sensitive fluorescent diagnostic products;

     - microalgae are essentially "microplants" which use simple substances such
       as carbon dioxide, water and nitrate to grow. When we substitute 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 our drug design
       products; and

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



---------------
Celtone(R) is a trademark of the Company registered with the U.S. Patent and
     Trademark Office.
Neuromins(R) is a trademark of the Company registered with the U.S. Patent and
     Trademark Office.
PBXL(TM) is a trademark of the Company.
CryptoFluor(TM) is a trademark of the Company.
Trophic Conversion(TM) is a trademark of the Company.
SureLight APC(TM) is a trademark of the Company.
XLExpress(TM) is a trademark of the Company.



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     Our 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), we have
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.

     Our product development process involves the following primary steps:

          Identification of Appropriate Microalgae. We select specific
     microalgae to produce potentially marketable compounds through a
     comprehensive process involving in-house algal expertise and experience,
     searches of scientific literature and our proprietary microalgal database,
     biochemical analyses, and preliminary product-yield experiments. We
     currently maintain an increasing in-house collection of over 3,300 strains
     of microalgae, which includes representatives of virtually all of the
     significant taxonomic microalgal groups. Equally important is our
     proprietary microalgal database, which contains biochemical and
     physiological data on the strains in the collection. We believe that our
     microalgal collection and associated database are among the largest such
     resources available in the world. Coupled with our 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. We apply standard
     industrial microbiological techniques to microalgae and manipulate
     culturing conditions (such as light intensity, temperature and growth
     medium composition) to optimize productivity. After selecting strains with
     the best yields and growth characteristics, we enhance their production
     through mutagenesis and natural selection under biochemical stress. We have
     not used genetic engineering techniques to develop any of our 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. We have discovered and
     uniquely cultured a microalga capable of producing large amounts of DHA
     heterotrophically 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 (i.e. with light) because
     larger-scale production of products such as our 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 our technology for the heterotrophic growth of
     DHA-producing microalgae are the subject of several U.S. patents. Similar
     patents have issued in certain countries and are pending in certain other
     countries around the world.

          For many other product applications, we use our 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 our photobioreactors, we are 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



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<PAGE>   10

     our drug discovery products, we are 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 our
     photobioreactors using carbon dioxide, water and/or certain
     nitrogen-containing compounds containing predominantly heavier stable
     isotopes, carbon-13, deuterium and nitrogen-15. Use of our photobioreactors
     also provides us 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. Our microalgal method of
     stable isotope incorporation is significantly less expensive than
     alternative microbial or chemical synthesis in many instances.

          We use 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 U.S. patents.

                     COLLABORATIVE AND LICENSING AGREEMENTS

     We have entered into licensing agreements with seven infant formula
manufacturers, including Mead Johnson & Company (a subsidiary of Bristol-Myers
Squibb Company), American Home Products (Wyeth-Ayerst division), Abbott
Laboratories, Numico, Maabarot and Novartis, that together comprise over 60% of
the worldwide infant formula market. We have one additional licensing agreement
with an infant formula manufacturer and and have contractually agreed not to
disclose the licensee's name. The undisclosed infant formula manufacturer has
less than 3% of the world-wide market for infant formula and has not purchased
products from us to date. Under these agreements, we received up-front licensing
fees and are entitled to royalties based on sales of infant formula containing
our nutritional oils. These licensees are not required to include our oils in
their formulas under the terms of these agreements, and there can be no
assurance that such infant formula manufacturers will include our oils in any or
all of their product lines. Each of these royalty-bearing license agreements
calls for us to provide to the licensees our nutritional oils at a transfer
price and receive a royalty from the licensee upon the final sale of infant
formula containing the oils. Licensees have the right to buy other sources of
DHA and ARA oils provided they still make royalty payments to us upon the sale
of the final infant formula product containing the oils. The license agreements
have terms exceeding 20 years, contain no future funding commitments on our part
or the part of the licensees, and may be terminated by the licensee upon proper
notification. 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 our current license agreements, our licensees generally are obligated to
indemnify us against product liability claims relating to our nutritional oils
unless they are related to manufacturing impurities in the oils. In addition to
compensation payable to us under these agreements, we expect to receive transfer
payments to the extent we supply nutritional oils to our licensees.

     The infant formula industry represents over $2 billion in annual wholesale
sales in the United States and approximately $6 billion worldwide. Our current
licensees cover over 60% of the worldwide infant formula market. To date,
however, their introductions of products containing our oils have penetrated
less than 2% into this market. We are actively pursuing licenses with other
infant formula producers throughout the world to continue penetrating these
markets. We anticipate that 100% penetration into the worldwide infant formula
market could bring us in excess of $300 million in annual revenues. Our sales
and royalties from infant formula licensees were approximately $900,000 in 1998,
$1.4 million in 1999, and $5 million in 2000. American Home Products, an infant
formula licensee, accounted for approximately 12% of our total product sales and
royalties in 1998, 18% in 1999 and 33% in 2000.

     Under the terms of several of our current license agreements, we are
prohibited from granting a license to any party for the inclusion of our


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<PAGE>   11

nutritional oils in infant formula with payment terms or royalty rates that are
more favorable to such licensee than those provided in our agreements with our
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 us 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 1993, we entered into an agreement with Columbia University pursuant to
which Columbia University will try to determine the structure of the human
chorionic gonadotropin, known as hCG, protein using Celtone(R) M. The hCG
molecule affects fertility by controlling the attachment of the egg to the
uterus. We will share any commercial proceeds resulting from this joint venture
with Columbia University. Our share of any such proceeds will be based upon the
successful conclusion of certain events but will not be less than 75%. In May
1994, we initiated commercialization of Celtone(R) M through a license agreement
with Genetics Institute under which we will receive royalties on sales of
products resulting from Genetics Institute's work with Celtone(R) M. In October
1994, we entered into a collaboration with the University of St. Andrews in
Scotland (which has now been assigned to Leeds University). 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, Leeds University will provide NMR
facilities and expertise in large protein resolution. We will provide funding
and pay royalties for certain proprietary products arising from this research.

     In January 1997, we entered into an agreement with DSM Food Specialties
("DSM", formerly Royal Gist-Brocades B.V.) under which they became our exclusive
contract supplier for nutritional oils containing ARA. DSM is a multi-billion
dollar international group of companies that is active worldwide in the fields
of life science, product performance materials and chemicals. As part of this
agreement, we recognized approximately $1.1. million in license fee revenue in
1998 and will receive guaranteed supplies of oil rich in ARA on advantageous
terms. At October 31, 2000 we had outstanding inventory purchase commitments to
DSM totaling approximately $4 million.

     We market certain of our fluorescent detection products under a
royalty-bearing license from Stanford University and certain fluorescent
detection products under an exclusive royalty-bearing license from a private
inventor.

     We have also entered into various additional collaborative research and
license agreements. Under these agreements, we are required to fund
research or to collaborate on the development of potential products. Existing
agreements have committed us to fund up to approximately $100,000 for future
development activities. Certain of these agreements also commit us 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

     Our 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, we plan to continue applying for government contracts and
soliciting commercial research and development contracts on a
selective basis when such contracts involve research that may bring us future
commercial benefit.

     As a result of us receiving Small Business Innovation Research grants, the
U.S. Government will have certain rights (the "Government Rights")in
the technology that we developed with the funding. These rights include a
non-exclusive, paid-up, worldwide license to practice or have practiced such
inventions



                                       11
<PAGE>   12

for any governmental purpose. In addition, the government has the right to
require us to grant licenses which may be exclusive under any of such inventions
to a third-party if the government determines that:

-    adequate steps have not been taken to commercialize such inventions;

-    such action is necessary to meet public health or safety needs; or

-    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
we fail to disclose the invention and elect title within specified time limits.
In addition, the government may acquire title in any country in which we fail 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, our 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. We believe that cost disallowances, if any, arising from such audits
of costs charged to government contracts through October 31, 2000 will not be
material.

                                  MANUFACTURING

     We manufacture oils rich in DHA at our fermentation facility located in
Winchester, Kentucky, by conventional fermentation processes. We acquired the
Winchester facility in 1995 from a subsidiary of ACX Technologies, Inc. The oils
that we produce in this facility have been certified kosher by the Orthodox
Union and certified Halal by the Islamic Food and Nutrition Council of America.
We are currently in the process of optimizing the production of our nutritional
oils, and believe that a continued optimization effort will be required for at
least the next two years. In 1996, we constructed a "state of the art" oil
processing plant at our Winchester facility which was put into production in
early 1997. We have also entered into an agreement with a third party, DSM, to
produce our ARA oil, and may enter into additional production agreements with
other third parties if demand for our oil requires such additional output. We
believe that, along with DSM, we can increase our production to meet
approximately 20% to 30% of the world-wide infant formula market demand for DHA
and ARA-rich oils. Our ability, however, to maintain commercial production at
these levels at our plant has not yet been successfully tested. As a precaution,
we have developed plans to expand our existing facilities to accommodate
increased production. In order to double our capacity at our current facility,
it would cost as much as $20 million, which would require us to raise
significant amounts of capital. We have also conducted DHA production trials
with third party manufacturers. However, we do not currently have a third party
manufacturing agreement in place to supply us with DHA-containing oil. The
commercial success of our nutritional oils will depend, in part, on our ability
to manufacture these oils or have them manufactured at a commercially acceptable
cost. There can be no assurance that we will be able to successfully optimize
production of our nutritional oils, or continue to comply with applicable
regulatory requirements (including Good Manufacturing Practices ("GMP")
requirements) or that we will be able to successfully obtain sufficient
facilities to meet the future demand for the oils. Under the terms of several of
our infant formula licenses, our licensees may elect to manufacture these oils
themselves. We are currently unaware of any of our licensees producing our oils
or preparing to produce our oils, and estimate that it would take a licensee at
least one year or more to develop their own process of making our oils.

                                SOURCES OF SUPPLY

     Our raw material suppliers for production of nutritional oils include major
chemical companies and food ingredient suppliers. We have identified



                                       12
<PAGE>   13

several sources for each of our major ingredients and have never had problems
obtaining adequate quantities of any of these materials. Crude ARA oil is
provided to us by DSM, a third-party processor. DSM, through a fermentation
process, produces a fungal biomass rich in ARA oil, which is then sent to a
sub-contractor for extraction of the oil. After extraction, the crude ARA oil is
sent to our Winchester, Kentucky, production facility for final processing. If
DSM fails to supply us with required amounts under the contract, we would not be
able to meet our customers' demands. In this case, we would either have to
manufacture the ARA containing oil at our plant, which would reduce our DHA
containing oil production capacity, or enter into other third party manufacturer
supply agreements. Although we feel that DSM can fill our ARA needs for at least
the next several years, there is no guarantee the DSM will be able to adequately
supply all of our ARA needs in the long-term. Additional capacity may need to be
obtained, either within DSM or at another facility.

     For us to produce many of our products for drug discovery, we require
carbon-13 gas. The market supply of carbon-13 gas is very limited, and several
of the large suppliers of this gas also compete with us in the sale of carbon-13
labeled isotope products. In an effort to alleviate these problems, we have
focused recent efforts on producing more refined products that have higher
market values and do not require as much carbon-13 gas consumption to produce.
Additionally, we have limited the manufacturing and selling of less refined
products with lower market values that utilize high levels of carbon-13 gas.

                            RESEARCH AND DEVELOPMENT

     Research and development expenses, including contract-related costs, were
$9,787,000 in 1998, $10,309,000 in 1999, and $12,517,000 in 2000.
Contract-related research and development costs included in these amounts were
$446,000 in 1998, $464,000 in 1999, and $527,000 in 2000. Consistent with our
plans, nutritional oils development costs accounted for over 75% of all research
and development costs, as a result of our continued development efforts to
refine our production process and lower our DHA production cost. Our research
and development costs may increase in the future as we evaluate new technologies
and continue efforts to optimize the efficiency of our large scale fermentation
and oil extraction processes.

                               SALES AND MARKETING

     We currently market our products both directly to end users and through
distributors. We market our nutritional oils for use in infant formula directly
to infant formula manufacturers. We market our Neuromins(R) DHA dietary
supplements primarily through distributors and directly to end users through our
toll free number (1-800-662-6339). We have entered into agreements with Natrol,
Inc., and Leiner Health Products for the packaging and distribution of
Neuromins(R) 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 our Neuromins(R) DHA capsules to the natural foods
markets. Neuromins(R) DHA is currently being marketed in over 10,000 retail
stores nationwide, including Safeway, Vitamin World, Eckerd's, Lucky's, Savon
and Vitamin Shoppe. Neuromins(R)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. We have continued our own
DHA awareness campaign in an effort to support the marketing efforts of our
infant formula licensees and capsule distributors. This campaign will continue
and could intensify in 2001. There can be no assurance that we will be able to
successfully market our nutritional oils products for use in infant formula or
as dietary supplements.

     We market our products for drug discovery directly to large pharmaceutical
companies and research institutions such as the National Institutes of Health.
We market our diagnostic products directly to large pharmaceutical and research
institutions and through distribution agreements with Intergen (R) Company and
Kirkegaard & Perry Laboratories.





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<PAGE>   14

                                   COMPETITION

     The health care and biological sciences industries are characterized by
rapidly evolving technology and intense competition. Our competitors include
major pharmaceutical, chemical and specialized biotechnology companies, many of
which have financial, technical and marketing resources significantly greater
than us. 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 our products and technologies. 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 our products on their
own or through joint ventures. The existence of products and technologies of
which we are not aware, or products and technologies that may be developed in
the future, may adversely affect the marketability of products and technologies
that we have developed.

     The development of a DHA-containing fish oil provides an alternative to our
DHA oil for infant formula applications. Though it is a lower cost product
relative to our DHA, fish oil has odor, stability and taste characteristics that
may limit the usefulness of the oil in food products. We are also aware of the
development of microencapsulated fish oil products by several large companies,
including BASF and F. Hoffman-LaRoche Ltd. 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 non-microencapsulated fish oil is significantly less costly than
our DHA oil, fish oil will present a substantial competitive threat to our
Neuromins(R) DHA. Published reports, however, have cited a number of fish oils
as containing chemical toxins that are not present in our oils. In addition, we
believe that the combination of either fish oil or microencapsulated fish oil
with a microbial source of ARA for use in infant formula would likely infringe
claims of our patents. We are also aware that OmegaTech, Inc., an early stage
company, is able to produce DHA from a strain of algae containing DHA and is
currently marketing this product as an adult nutritional supplement. We are
currently unable to evaluate the degree of competitive threat that this fungal
source of DHA will present to our DHA oil in the future.

     We are also aware of several large companies promoting ARA oil. We are
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
our ARA in the future.

     Small amounts of ARA can be derived from egg yolk lipids, but are not in
the same molecular form as found in breast milk. DHA can also be found in egg
yolks of chickens when 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 Numico in 1995. We believe that it is more
expensive to produce DHA and ARA using this source than our 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 far in excess of that found in human milk.

     There may be other competitive sources of DHA and ARA of which we are not
aware. The fact that many of the companies mentioned above are larger, more
experienced and better capitalized than us raises the significant risk that
these companies may be able to use their resources to develop cheaper sources of
DHA and ARA in the future than our current technology permits.

     Sales of certain of our isotope products for drug discovery, especially our
carbon-13 labeled glucose (a non-proprietary product), are the subject of
intense competition. Our primary competitors for



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<PAGE>   15

carbon-13 glucose in the U.S. 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. We are also aware of Silantes, a German
company, that is currently marketing isotope products in Europe. In an effort to
compete better with these companies in the reagents market, we have focused
recent efforts on producing new, carbon-13 labeled media that have demonstrated
better performance and competitive pricing then carbon-13 labeled glucose. We
expect that competition in the carbon-13 glucose market will continue to remain
strong in 2001, and as a result, may limit the manufacturing and selling of
these products in favor of higher performing media.

     In the area of diagnostics for drug discovery, our major competitors
consist of life science reagent suppliers such as Amersham Pharmacia, Molecular
Probes, Prozyme and Cyanotech.

     Our products for drug discovery compete primarily on the basis of product
efficacy, safety, patient convenience, reliability, price and proprietary
position.

     Our competitive position will also depend on our 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

     Our success is dependent in part on our ability to obtain patent protection
for our products, maintain trade secret protection and operate without
infringing the proprietary rights of others. Our policy is to aggressively
protect our proprietary technology through patents, where appropriate, and
through trade secrets in other cases. Additionally, in certain cases, we rely on
the licenses of patents and technology of third parties. We have obtained
approximately 25 U.S. patents, covering various aspects of our technology, which
will expire on various dates between 2007 and 2017. We have filed, and intend to
file, applications for additional patents covering both our products and
processes as appropriate. There can be no assurance that:

-    any patent applications filed by, assigned to, or licensed to us will be
     granted;

-    we will develop additional products that are patentable;

-    any patents issued to or licensed by us will provide us with any
     competitive advantages or adequate protection for inventions;

-    any patents issued to or licensed by us will not be challenged, invalidated
     or circumvented by others; or

-    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 claims in the fields of
health care and biosciences is still evolving, and our patent rights are subject
to this uncertainty. Our patent rights on our products therefore might conflict
with the patent rights of others, whether existing now or in the future.
Alternatively, the products of others could infringe our patent rights. The
defense and prosecution of patent claims are both costly and time consuming,
even if the outcome is ultimately in our favor. An adverse outcome could subject
us to significant liabilities to third parties, require disputed rights to be
licensed from third parties or require us to cease selling the affected
products.

     We have been issued seven U.S. patents covering certain aspects of our DHA
and/or ARA oils. We have applied for other patents in the United States covering
certain other aspects of our nutritional oils and have also filed patent
applications on a selective basis in other industrialized countries, some of
which are pending and some of which have been granted. We are unable



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<PAGE>   16

to predict, however, whether these patents will be challenged, invalidated or
circumvented by others. OmegaTech, Inc., Monsanto Corporation, Aventis S.A. and
Nagase & Co. Ltd. are challenging our European patent covering our
DHA-containing oils. At a hearing in October, 2000, a division of the European
Patent Office revoked our patent on the grounds that it is too broad. We
immediately appealed this ruling, and as a result, our patent was reinstated and
it will remain in effect during the appeal process, which may take up to two
years.

     If we fail to obtain maintain patent protection for our nutritional oils,
it would have a material adverse effect on our ability to gain a competitive
advantage for these oils and may have a material adverse effect on our results
of operations, particularly future sales of our nutritional oils, future
royalties on sales of infant formula containing these oils or license fees
related thereto. In particular, if we fail to maintain patent protection, it
would permit our competitors to produce products that would be directly
competitive with our nutritional oils using similar or identical processes, and
it is possible that our current infant formula manufacturers under license or
those 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.

     Our other patents cover our photobioreactor system for culturing microalgae
and certain aspects of our breath test technology; our Celtone(R) and Celtone(R)
M technology, and our "Fast Track" technology.

     We also rely on trade secrets and proprietary know-how, which we seek to
protect in part by confidentiality agreements with our collaborators, employees
and consultants. There can be no assurance that these agreements will not be
breached, that we will have adequate remedies for any such breach or that our
trade secrets will not otherwise become known or be independently developed by
competitors.

                    GOVERNMENT REGULATION AND PRODUCT TESTING

     Our products and our manufacturing and research activities are subject to
varying degrees of regulation by a number of state and federal regulatory
authorities in the United States, including the FDA pursuant to the Federal
Food, Drug and Cosmetic Act (the "FDC Act"). The products developed by us are
subject to potential regulation by FDA as food ingredients, dietary supplements,
drugs and/or medical devices. The regulatory status of the product is largely
determined by its intended use.

     Drugs and medical devices generally may not be marketed without first
obtaining FDA authorization to do so. New infant formulas also are subject to
premarket notification requirements. Although there are no premarket
authorization requirements for whole foods per se, there are premarket approval
requirements for food additives. Specifically exempt from the food additive
definition and, therefore, the premarket approval requirements, are generally
recognized as safe ("GRAS") food ingredients. Dietary supplements for the most
part are not subject to premarket authorization requirements, although there is
a premarket notification requirement for certain new dietary ingredients that
were not marketed as dietary supplements prior to October 1994. FDA has
established detailed good manufacturing practice (GMP), labeling and other
requirements for drugs, medical devices, infant formulas, foods and dietary
supplements. The requirements for drugs, medical devices and infant formulas
generally are much more stringent than the requirements for foods and dietary
supplements.

     Our infant formula licensees are responsible for obtaining the requisite
regulatory clearances to market their products containing our oils. Sales of our
products outside the United States are subject to foreign regulatory
requirements that may vary widely from country to country. Five of our infant
formula licensees have obtained the regulatory approval, where required, to sell
term or pre-term infant formula supplemented with our oils in over 70 countries.
No company has yet launched an infant formula containing our oils in the United
States.

     We believe that our DHA and ARA are GRAS when used as ingredients in infant
formulas and, as such, are exempt from the premarket approval requirements for
food



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<PAGE>   17

additives. In February 2000, we filed a GRAS Notification with the FDA for the
use of our DHA and ARA in infant formula. We believe that the FDA review of the
GRAS notification should ultimately have a favorable outcome, but this review
likely will not be completed for at least another three to six months. In
addition, each of our licensees must file an infant formula premarket
notification and meet the statutory and regulatory requirements established for
such notifications before launching an infant formula in the United States that
contains our oils. There can be no assurance that:

-    the FDA will take the position that DHA and ARA are GRAS ingredients and,
     therefore, exempt from the definition of food additives;

-    the FDA will complete its review of the GRAS notification in the next three
     to six months;

-    a licensee will pursue the necessary regulatory steps to market an infant
     formula containing our DHA and ARA in the U.S.;

-    a licensee's infant formula premarket notification will provide sufficient
     data to support the marketing of an infant formula containing our DHA and
     ARA; or

-    the regulatory process will not involve significantly longer delays that
     may materially and adversely affect the timing and introduction of infant
     formulas containing our products.

          The Federal Dietary Supplement Health and Education Act of 1994
("DSHEA") regulates the use and marketing of dietary supplements. We are
currently marketing a line of DHA dietary supplements, Neuromins(R) and
Neuromins(R) PL. In addition, we are researching and developing new applications
for our DHA and ARA oils. We believe that our DHA and ARA are not subject to
premarket notification requirements when marketed for use as dietary
supplements. There can be no assurance that the FDA would agree that a premarket
notification is not required or that we will be able to comply with the
requirements of DSHEA or any regulations that the FDA may promulgate thereunder.

     Our 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 Martek or our licensees or
collaborators would be able to develop the extensive safety and efficacy data
needed to support such FDA premarket authorizations 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 our products.
Additionally, there is no assurance that Martek or our 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.

     Many of our products are in research or development phases. We cannot
predict all of the regulatory requirements or issues that may apply to or arise
in connection with our products. Changes in existing laws, regulations or
policies and the adoption of new laws, regulations or policies could prevent us
or our licensees or collaborators from complying with such requirements.

     Due to the cost and time commitment associated with the FDA regulatory
process, as well as our lack of experience in obtaining FDA regulatory
clearances, we will decide on a product-by-product basis whether to handle
relevant clearance and other requirements independently or to assign such
responsibilities to our licensees or future collaborative partners. There can be


                                       17
<PAGE>   18

no assurance that Martek or our 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 our
business, financial condition and results of operations.

     In connection with our decision to manufacture certain of our products, we
will be required to adhere to applicable current GMP requirements as required by
the FDA. GMP regulations specify component and product testing standards,
control quality assurance requirements, and records and other documentation
controls. The GMP requirements for foods, infant formulas, drugs and medical
devices vary widely. As the manufacturer of DHA and ARA that are marketed as
dietary supplements and that presumably one day will be sold as ingredients in
infant formulas sold in the United States, we are subject to GMP and various
other requirements applicable to infant formulas and dietary supplements. There
can be no assurance that we will be able to continue to manufacture our
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 we are 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.

                                    EMPLOYEES

     As of October 31, 2000, we had 134 full-time employees, of whom 17 had
Ph.D.s. Approximately 49 employees are engaged in research and development and
contract related research and development activities, 56 are engaged in
production or production development related activities and 29 are in
administrative, business development, and sales and marketing positions. We
consider relations with our employees to be good. None of our employees are
covered by a collective bargaining agreement.

               DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information concerning our directors contained under the captions
"Nominees for Election as a Director for Terms Expiring in 2004" 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 our 2001 Proxy Statement is hereby incorporated herein
by reference.

     Our executive officers are as follows:


<TABLE>
<CAPTION>
           NAME              AGE                      POSITION
           ----              ---                      --------

<S>                          <C>  <C>
Henry Linsert, Jr.           60    Chairman, Chief Executive Officer and Director
Richard J. Radmer, Ph.D.     58    President, Chief Scientific Officer and
                                   Director
Thomas C. Fisher             54    Senior Vice President, Operations
David J. Kyle, Ph.D.         47    Senior Vice President, Research and Development
Jerome C. Keller             58    Senior Vice President, Sales & Marketing
George P. Barker             61    Senior Vice President,
                                   General Counsel and Secretary
Peter L. Buzy                41    Chief Financial Officer and Treasurer
</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., a



                                       18
<PAGE>   19

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 Bank of America), 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 and as 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 last 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.

     Dr. David J. Kyle, a founder of Martek, is currently Senior Vice President,
Head of Research and Development. Prior to co-founding 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.

     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 M.S. degree from the University of Pittsburgh and a
B.S. degree from Duquesne University.

     George P. Barker joined Martek in June 2000 as Senior Vice President,
General Counsel and Secretary. Prior to joining Martek, Mr. Barker was Senior
Vice President of Howard County General Hospital, Inc. - a member of Johns
Hopkins Medicine and its affiliate Howard County Health Services, Inc. In these
positions, Mr. Barker had both legal and business responsibilities. From 1982 to
1991, Mr. Barker was Senior Vice President for Development, General Counsel and
Secretary of The Enterprise Development Company, a real estate development
company located in Columbia, Maryland. Prior to 1982, Mr. Barker held positions
as a partner of a Baltimore, Maryland, law firm and Associate General Counsel
and Assistant Secretary of The Rouse Company, a real estate development company
also located in Columbia, Maryland. Mr. Barker has an A.B. degree from Princeton
University and a LL.B. degree from Columbia University.

     Peter L. Buzy joined Martek in March 1998 as Chief Financial Officer. Prior
to joining Martek, Mr. Buzy spent 13 years with the accounting firm of Ernst &
Young LLP, most recently as an audit partner in the Northern Virginia High
Technology/Life Sciences Practice. Mr. Buzy was a member of the Ernst & Young
audit team servicing Martek from 1986 to 1996, and as such has played a vital
role in advising the



                                       19
<PAGE>   20

Company on various technical accounting and finance related issues. Mr. Buzy is
a Certified Public Accountant and a member of the American Institute of
Certified Public Accountants. He received his B.S.in accounting from Salisbury
State University.


ITEM 2.  PROPERTIES.

     We lease 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. Our lease expires in 2004,
but we have an option to extend the lease through 2009 at the expiration of the
initial lease.

     We produce oils rich in DHA and ARA at our fermentation facility located in
Winchester, Kentucky, using our 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, we have an oil processing plant at the Winchester
facility which was put into production in 1997 and occupies approximately 6,000
square feet. The fermentation facility and certain equipment in the oil
processing plant are collateral for our currently outstanding term loan.

ITEM 3.  LEGAL PROCEEDINGS.

     OmegaTech, Inc., Monsanto Corporation, Aventis S.A. and Nagase & Co. Ltd.
are challenging our European patent covering our DHA-containing oils. At a
hearing in October, 2000, a division of the European Patent Office revoked our
patent on the grounds that it is too broad. We immediately appealed this
ruling, and as a result, our patent was reinstated and it will remain in effect
during the appeal process, which may take up to two years.

     We are 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 2000.



                                       20
<PAGE>   21


                                     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 our Annual
Report to Stockholders for the fiscal year ended October 31, 2000, is included
herein as Exhibit 13.01, and those portions are incorporated by reference into
Part II of this report. We have not declared any cash dividends during the
two-year period ending October 31, 2000.

ITEM 6.  SELECTED FINANCIAL DATA.

     The information set forth under the caption "Selected Financial Data" on
page 6 of our Annual Report to Stockholders for the fiscal year ended October
31, 2000, 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 10
of the Company's Annual Report to Stockholders for the fiscal year ended October
31, 2000, 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

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

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     The Company's 2000 Financial Statements and Report of Independent Auditors
by Ernst & Young LLP set forth on pages 11 through 20 of our Annual Report to
Stockholders for the fiscal year ended October 31, 2000, is included herein as
Exhibit 13.01, and those portions are incorporated by reference into Part II of
this Report.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
         AND FINANCIAL DISCLOSURE.

     None.





                                       21
<PAGE>   22

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

    Information relating to our Directors and Executive Officers is set forth in
Part I of this report under the caption Item I - Business "Directors and
Executive Officers of the Registrant".

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 our
2001 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 our 2001 Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     None.



                                       22
<PAGE>   23


                                     PART IV

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

(a)(1)   Financial Statements

     The following Financial Statements and Report of Independent Auditors set
forth on the pages indicated in our Annual Report to Stockholders for the year
ended October 31, 2000 are included in Exhibit 13.01 to this report and are
incorporated into Item 8 of this Report:


<TABLE>
                                                                    Page(s)in Company's Annual
                                                                       Report to Stockholders
                                                                       ----------------------

<S>                                                              <C>
     Balance Sheets as of October 31,  2000 and 1999                              11

     Statements of Operations for the Years Ended                                 12
     October 31, 2000, 1999 and 1998

     Statements of Stockholders' Equity for the
     Years Ended October 31, 2000, 1999 and 1998                                  13

     Statements of Cash Flows for the Years Ended
     October 31, 2000, 1999 and 1998                                              14

     Notes to Financial Statements                                              15 - 20

     Report of Independent Auditors                                               20
</TABLE>



(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 in the
financial statements.

(a)(3) Exhibits


<TABLE>
<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
</TABLE>


                                       23
<PAGE>   24

<TABLE>
<S>                    <C>
                        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).
         4.05           Form of First Amendment to Rights Agreement between the
                        Company and Registrar and Transfer Company, as Rights
                        Agent (filed as Exhibit 99.1 to the Company's Form 8-K,
                        File No. 0-22354, filed November 9, 1998 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 Bestuurcentrum Der Verenigde Bedrijven Nutricia
                        B.V.*
        10.14A          Exhibits to September 10, 1992 License Agreement between the
                        Company and Bestuurcentrum Der Verenigde Bedrijven Nutricia
                        B.V.*
        10.15           License Agreement, dated October 28, 1992, between the
                        Company and Mead Johnson & Company.*
        10.15A          Exhibits to October 28, 1992 License Agreement between the
                        Company and Mead Johnson & Company.*
        10.16           License Agreement, dated January 28, 1993 between the
                        Company and American Home Products Corporation
                        represented by the Wyeth-Ayerst Division (Domestic
                        Version) and American Home Products Corporation
                        represented by its agent Wyeth-Ayerst International
                        (International Version).*
        10.16A          Exhibits to January 28, 1993 License Agreements between
                        the Company and American Home Products Corporation
                        represented by the Wyeth-Ayerst Division (Domestic
                        Version) and American Home Products Corporation
                        represented by its agent Wyeth-Ayerst International
                        (International Version).*
        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
</TABLE>


                                       24
<PAGE>   25

<TABLE>
<S>                    <C>
                        herein).
        10.23           Manufacturing Agreement, dated December 31, 1996,
                        between the Company and DSM Food Specialties (formerly
                        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 (filed as
                        exhibit 10.25 to the Company's 1997 10-K, File No. 22354,
                        and incorporated by reference herein).
        10.26           Fourth Amendment of Lease, dated August 5, 1998 between
                        the Company and M.O.R Columbia Limited Partnership
                        (filed as exhibit 10.26 to the Company's 1998 Form 10-K,
                        File No. 22354, and incorporated by reference herein).
        10.27           Employment Agreement, dated January 16, 1998, between the
                        Company and Peter L. Buzy (filed as exhibit 10.27 to the
                        Company's 1998 Form 10-K, File No. 22354, and Incorporated
                        by reference herein).
        10.28           Common Stock and Warrant Purchase Agreement, dated April
                        27, 1998, by and among the Company and the Selling
                        Stockholders (filed as exhibit 99.2 to the Company's
                        Form 8-K, File No. 22354, dated April 27, 1998 and
                        incorporated by reference herein).
        10.29           Common Stock and Warrant Purchase Agreement, dated May
                        28, 1999, by and among the Company and the Selling
                        Stockholders (filed as exhibit 99.2 to the Company's
                        Form 8-K, File No. 22354, dated June 9, 1999 and
                        incorporated by reference herein).
        10.30           License Agreement, dated March 31, 2000 between the
                        Company and Abbott Laboratories * (filed as exhibit
                        10.30 to the Company's quarterly report on Form 10-Q for
                        the quarter ended April 30, 2000, and incorporated by
                        reference herein).
        10.31           Employment Agreement, dated June 1, 2000 between the
                        Company and George P. Barker.**
        13.01           Portions of the Annual Report to Stockholders of the Company
                        for the year ended October 31, 2000.**
        23.01           Consent of Ernst & Young LLP, Independent Auditors.**
        24.01           Power of Attorney of the Board of Directors (included
                        on the signature page of this report).**
        27.01           Financial Data Schedule.**
         99.1           Cautionary Statements for purposes of the "safe harbor"
                        provisions of the private securities litigation reform act
                        of 1995.**
</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




                                       25
<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 26, 2001.


                                             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 Peter L. Buzy, 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 attorneys-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 26, 2001
------------------------        Director (Principal Executive
Henry Linsert, Jr.               Officer)

/s/Peter L. Buzy                Principal Financial and                 January 26, 2001
------------------------        Accounting Officer
Peter L. Buzy

/s/ Jules Blake                 Director                                January 26, 2001
------------------------
Jules Blake

/s/ Ann L. Johnson              Director                                January 26, 2001
------------------------
Ann L. Johnson

/s/ Gordon S. Macklin           Director                                January 26, 2001
------------------------
Gordon S. Macklin

/s/ Douglas J. MacMaster, Jr.   Director                                January 26, 2001
-----------------------------
Douglas J. MacMaster, Jr

/s/ John H. Mahar               Director                                January 26, 2001
------------------------
John H. Mahar
</TABLE>


                                       26
<PAGE>   27


<TABLE>
<S>                             <C>                                     <C>
/s/ Sandra Panem                Director                                January 26, 2001
------------------------
Sandra Panem

/s/ Richard J. Radmer           President and Director                  January 26, 2001
------------------------
Richard J. Radmer

/s/ Eugene J. Rotberg           Director                                January 26, 2001
------------------------
Eugene H. Rotberg

/s/ William D. Smart            Director                                January 26, 2001
------------------------
William D. Smart
</TABLE>







                                       27
<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).
  4.05    Form of First Amendment to Rights Agreement between the Company and
          Registrar and Transfer Company, as Rights Agent (filed as Exhibit 99.1
          to the Company's Form 8-K, File No. 0-22354, filed November 9, 1998
          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
</TABLE>


                                       28
<PAGE>   29
<TABLE>
<S>       <C>
          August 5, 1993.
 10.14    License Agreement, dated September 10, 1992, between the
          Company and Bestuurcentrum Der Verenigde Bedrijven Nutricia
          B.V.*
 10.14A   Exhibits to September 10, 1992 License Agreement between the
          Company and Bestuurcentrum Der Verenigde Bedrijven Nutricia
          B.V.*
 10.15    License Agreement, dated October 28, 1992, between the Company and
          Mead Johnson & Company.*
 10.15A   Exhibits to October 28, 1992 License Agreement between the Company and
          Mead Johnson & Company.*
 10.16    License Agreement, dated January 28, 1993 between the Company and
          American Home Products Corporation represented by the Wyeth-Ayerst
          Division (Domestic Version) and American Home Products Corporation
          represented by its agent Wyeth-Ayerst International (International
          Version).*
 10.16A   Exhibits to January 28, 1993 License Agreements between the Company
          and American Home Products Corporation represented by the Wyeth-Ayerst
          Division (Domestic Version) and American Home Products Corporation
          represented by its agent Wyeth-Ayerst International (International
          Version).*
 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 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 DSM Food Specialties (formerly 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 (filed as exhibit 10.25 to the
          Company's 1997 10-K, File No. 000-22354, and incorporated by reference
          herein).
 10.26    Fourth Amendment of Lease, dated August 5, 1998 between the Company
          and M.O.R Columbia Limited Partnership (filed as exhibit 10.26 to the
          Company's 1998 Form 10-K, File No. 22354, and incorporated by
          reference herein).
 10.27    Employment Agreement, dated January 16, 1998, between the Company and
          Peter L. Buzy (filed as exhibit 10.27 to the Company's 1998 Form 10-K,
          File No. 22354, and Incorporated by reference herein).
 10.28    Common Stock and Warrant Purchase Agreement, dated April 27, 1998, by
          and among the Company and the Selling Stockholders (filed as exhibit
          99.2 to the Company's Form 8-K, File No. 22354, dated April 27, 1998
          and incorporated by reference herein).
</TABLE>


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<PAGE>   30

<TABLE>
<S>       <C>
 10.29    Common Stock and Warrant Purchase Agreement, dated May 28, 1999, by
          and among The Company and the Selling Stockholders (filed as exhibit
          99.2 to the Company's Form 8-K, File No. 22354, dated June 9, 1999 and
          incorporated by reference herein).
 10.30    License Agreement, dated March 31, 2000 between the Company and
          Abbott Laboratories * (filed as exhibit 10.30 to the Company's
          quarterly report on Form 10-Q for the quarter ended April 30, 2000,
          and incorporated by reference herein).
 10.31    Employment Agreement, dated June 1, 2000 between the
          Company and George P. Barker.**
 13.01    Portions of the Annual Report to Stockholders of the Company for the
          year ended October 31, 2000.**
 23.01    Consent of Ernst & Young LLP, Independent Auditors.**
 24.01    Power of Attorney of the Board of Directors (included on the signature
          page of this report).**
 27.01    Financial Data Schedule.**
 99.1     Cautionary Statements for purposes of the "safe harbor"
          provisions of the private securities litigation reform act of 1995.**
</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).




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