<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, 1999       Commission file number: 0-22354

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

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

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

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

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

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

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

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

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

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

       Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the last 90 days.  X  Yes     No
                                          ---     ---

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

       The aggregate market value of Common Stock held by non-affiliates of
registrant is $161,449,892 (based upon a last sale price of $12.0625 per share
of the Common Stock as reported on the NASDAQ National Market System on January
14, 2000). The number of shares of Common Stock outstanding as of January 14,
2000 was 16,517,364.

                       DOCUMENTS INCORPORATED BY REFERENCE

       Certain portions of Registrant's Annual Report to Stockholders for the
fiscal year ended October 31, 1999 are incorporated by reference into Part II of
this Report. Certain portions of the Registrant's Definitive Proxy Statement for
its 2000 Annual Meeting of Stockholders (which will be filed with the Commission
within 120 days after the end of the Registrant's 1999 fiscal year) are
incorporated by reference into Part III of this Report.


<PAGE>   2


                                     PART I

ITEM I.  BUSINESS.

                                    OVERVIEW

       Martek Biosciences Corporation ("Martek" or "the Company") is a leader in
the development and commercialization of high value products derived from
microalgae. Martek's leading products are nutritional oils used as ingredients
in infant formula and foods, and as ingredients in, and encapsulated for use as,
dietary supplements. The Company's nutritional oils are comprised of fatty acid
components, primarily docosahexaenoic acid ("DHA") and arachidonic acid ("ARA"),
which many researchers believe may enhance mental and visual development in
infants and play a pivotal role in brain function throughout life. Low levels of
DHA in adults has also been linked to a variety of health risks, including
cardiovascular problems, cancer, and various neurological and visual disorders.
Martek has licensed its nutritional oils to six infant formula manufacturers,
representing over 40% of the estimated $6 billion worldwide market for infant
formula. Four of these licensees are marketing term infant formula products
containing Martek's oils in seven countries and pre-term infant formula products
containing the Company's oils in over 60 countries. Additional applications of
the Company's platform technology include currently marketed products and
technologies to assist in drug discovery and diagnostics. Martek intends to
continue to exploit the largely untapped commercial opportunities of microalgae.
To that end, the Company maintains a library of more than 3,300 live microalgal
species and a related database, which it believes are among the largest such
resources available worldwide.

       Nutritional Oils for Infant Formula, Dietary Supplementation and Other
Applications. Using its proprietary technology, Martek has developed nutritional
oils which provide two fatty acids that are naturally present in breast milk but
are not available in most infant formulas. The predominant fatty acid components
of these oils, DHA and ARA, are produced from microalgae and fungi,
respectively, using Martek's proprietary technologies. Studies published by
others have indicated that DHA may play a vital role in the development and
function of the brain and retina. Recent research has linked low levels of DHA
to a variety of health risks, including increased cardiovascular problems,
cystic fibrosis, cancer, and various neurological and visual disorders. Further
research is underway to explore the impact of DHA supplementation in these and
other areas. ARA is a major structural lipid in human tissues. Martek's blended
oils containing DHA and ARA provide the closest available match, with regard to
molecular form of these fatty acids, to the DHA and ARA in human milk when added
to infant formula. In 1994, the Company received a U.S. patent covering certain
blends of a microbial oil enriched with DHA and a microbial oil enriched in ARA,
as well as the use of such blends in infant formulas. In 1995, the Company
received a U.S. patent covering a process for making an edible oil containing
DHA and the edible oil made by such process as well as a U.S. patent covering an
infant formula comprising a specified edible oil containing DHA. In 1996 the
Company received two additional U.S. patents covering its nutritional oils
technology. The first patent protects pharmaceutical compositions and dietary
supplements comprising a single cell oil in concentrations of at least 20% DHA
in a triglyceride form made using Martek's method of producing DHA oil. The
second patent clarifies that Martek's patent coverage includes the blending, in
infant formula and nutritional supplements, of microbially derived ARA oil with
low eicosapentaenoic acid ("EPA") fish oils. Fish oil is a potential competitive
source of DHA to Martek's algal-derived DHA oil. This patent will make it more
difficult for low EPA fish oils to be combined with microbial sources of ARA
oils without violating Martek's patents. Two 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 the
Company's DHA-rich algal biomass, an inexpensive source of DHA which may
potentially be a low cost product itself. The Company also has been awarded a
number of foreign patents covering various aspects of its nutritional oils.

       Martek has entered into royalty-bearing license agreements to utilize its
oils with six infant formula manufacturers, including Mead Johnson & Company (a
subsidiary of Bristol-Myers Squibb Company), American Home Products, Royal
Numico N.V. ("Numico", formerly Nutricia), Maabarot Products Ltd. ("Maarbarot")
and Novartis Nutrition S.A. ("Novartis"). Numico, Wyeth-Ayerst (a subsidiary of
American Home Products), Maarbarot, and Novartis are currently marketing term
infant formula products containing Martek's oils in seven


                                     - 1 -
<PAGE>   3


countries and pre-term infant formula products containing the Company's oils in
over 60 countries worldwide. More than one company is marketing supplemented
term infant formulas in Spain, Australia and New Zealand. The infant formula
industry represents over $2 billion in annual wholesale sales in the United
States and approximately $6 billion worldwide. Martek is actively pursuing
licenses with other infant formula producers throughout the world to continue
penetrating these markets.

       In the latter part of 1996, Martek initiated sales of its first consumer
products, Neuromins(R), a DHA dietary supplement, and Neuromins(R) PL, a DHA
dietary supplement for pregnant and lactating women. Since then, Martek has
expanded distribution of its Neuromins(R) DHA. Martek has 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, and General Nutrition Centers (GNC), the
nation's largest natural products chain. Neuromins(R) DHA is also sold through
mail order distributors and a multi-level marketer. In 1999, American Home
Products accounted for approximately 15% of Martek's sales.

       In 1999, Martek began selling bulk DHA oil and powder for additional
applications, including inclusion in childrens chewables and nutritional drinks
and adult combination supplements which not only include Martek's DHA but other
ingredients such as Gingko and St. Johns Wort. Martek is continuing to explore
additional applications for DHA, including use in pharmaceuticals, functional
foods and animal and aquaculture feeds.

       Aquaculture. Larval fish, crustaceans (shrimp) and mollusks (oysters and
clams), like humans, require certain long chain polyunsaturated fatty acids such
as DHA and ARA for optimal growth and health. The Company has leveraged it
capabilities in these areas with joint activities at aquaculture research and
production facilities around the world to develop new high value enrichment
feeds for this industry. In 1999, the Company began beta-testing its proprietary
AquaGrow(R) line of enrichment feeds at several sites around the world.

       Products for Drug Discovery. Using its core microalgal technology, Martek
has developed and markets a range of products and technologies for use in
structure based drug discovery, molecular structure and metabolic research. The
Company markets these products worldwide to many of the world's largest
pharmaceutical companies and research institutions. These products aid
researchers in expediting new drug discovery by enabling them to determine the
3-dimensional ("3-D") structure of certain molecules in solution and to study
characteristics of the structure and its binding interaction with drugs. Martek
also markets a proprietary cell growth medium, Celtone(R)M, which the Company
believes will enable researchers, for the first time, to determine the 3-D
structure of certain human proteins. The Company has entered into a
royalty-bearing license agreement with Genetics Institute regarding the use of
Celtone(R) M. U.S. patents were issued to Martek for its Celtone(R) M technology
in 1995, 1997 and 1998. The Company is currently working on developing a
proprietary fast-track protein labeling system which would, by using advanced
nuclear magnetic resonance ("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.

       The Company has also developed and been issued a U.S. patent covering a
proprietary library of small flexible probe molecules, the Reconnaissance
Probe(TM) Library, which can be labeled with stable isotopes for use to
specifically interrogate the binding sites of receptor molecules. If successful,
such information could be critical for the screening of virtual chemical
libraries, and could also be used to quickly eliminate false positive leads from
libraries already screened.

       Diagnostics. Martek identifies, isolates, and markets powerful
fluorescent dyes (phycobiliproteins) from various algae for use in applications
that require high sensitivity detection. Martek has also developed proprietary
positions around certain polymeric forms of the phycobiliproteins (PBXL(TM)
dyes) that provide extreme sensitivity with ease of use that is unmatched by
other common dyes or detection systems. These dyes provide 100 times the
sensitivity


                                     - 2 -
<PAGE>   4


of common direct fluorescent dyes while retaining the simple detection possible
with direct fluorescence. PBXL(TM) dyes are being developed for use in western
blot detection kits for instrumented systems and have potential for southern and
northern blotting applications. In 1999, the PBXL(TM) dyes also shown potential
in DNA array formats as well as in high throughput screening systems utilizing
phage as well as time resolved fluorescence formats. The Company has exclusively
in-licensed the rights to the PBXL(TM) technology based on a US Patent issued in
1997 and several pending applications. The Company's CryptoFluor(TM) dyes have
the advantage of smaller size compared to the standard phycobiliproteins, and
provide additional wavelengths for multiplexed assays. In cooperation with
Intergen(R), the Company's marketing partner for these dyes, the CryptoFluor(TM)
dyes are finding a number of new research and diagnostic applications. In 1998,
Martek began marketing some of its fluorescent detection products through
partnerships with Intergen(R) Company and Kirkegaard and Perry Laboratories. In
1999, Martek began distributing the PBXL(TM) based products through Chemdex(R),
an internet supplier of scientific products.

       Algal Genomics. Microalgae are microplants and, as such, have many
biochemical pathways and genes in common with higher plants. They offer the
further advantage, however, of having the genetic material required for the
production of certain compounds (e.g., DHA and EPA) that are not present in
higher plants. Consequently, Martek believes 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 Martek scientists. Gene sequencing from several different and
distinct algal species is also underway and many new genes have been identified
from several different species.

       Martek has utilized its understanding of heterotrophic (without light)
and autotrophic (with light) growth of microalgae, and its proprietary
technology in microalgal transformation, to convert an otherwise
photoautotrophic species of microalgae, into one capable of growing
heterotrophically. Martek believes that this represents the first time such a
transformation has ever been made. Martek's 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 the Company 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.

                                   TECHNOLOGY

       Martek applies its microalgal expertise and culturing technology to its
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 Martek's
products:

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

<TABLE>
<S>                                                                                                 <C>
-------------------------------------------------------------------------------------------------------------
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.
Aquagrow(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.
Reconnaissance Probe(TM) is a trademark of the Company.
SureLight APC(TM) is a trademark of the Company.
</TABLE>


                                     - 3 -
<PAGE>   5


XLExpress(TM) is a trademark of the Company.

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

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

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

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

              Identification of Appropriate Microalgae. Martek selects specific
       microalgae to produce potentially marketable compounds through a
       comprehensive process involving in-house algal expertise and experience,
       searches of scientific literature and the Company's proprietary
       microalgal database, biochemical analyses, and preliminary product-yield
       experiments. The Company currently maintains an increasing in-house
       collection of over 3,300 strains of microalgae, which includes
       representatives of virtually all of the significant taxonomic microalgal
       groups. Equally important is the Company's proprietary microalgal
       database, which contains biochemical and physiological data on the
       strains in the collection. The Company believes that its microalgal
       collection and associated database are among the largest such resources
       available in the world. Coupled with the Company's extensive microalgal
       expertise, these resources are used to select organisms for initial
       testing. Further testing ultimately results in the selection of
       production strains.

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

              Culturing Microalgae. Successful exploitation of the unique
       characteristics of microalgae is in large measure dependent upon the
       availability of large-scale culturing technology. Martek has discovered
       and uniquely cultured a microalga capable of producing large amounts of
       DHA heterotrophically 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 the
       Company's nutritional oils, for which the incorporation of high-priced
       stable isotopes is not required, can be conducted in existing
       fermentation equipment, resulting in lower production costs. Aspects of
       Martek's technology for the heterotrophic growth of DHA-producing
       microalgae are the subject of


                                     - 4 -
<PAGE>   6


       several U.S. patents. Similar patent applications have issued in certain
       countries and are pending in certain other countries around the world.

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

              Martek uses a series of photobioreactors of varying sizes,
       controls and methods of operation to achieve culturing consistency. The
       different sizes are used primarily for scale-up purposes, from laboratory
       bench scale to commercial culturing and manufacturing. Certain aspects of
       these photobioreactors are the subject of U.S. patents.

                         PRODUCTS AND PRODUCT CANDIDATES

Nutritional Products

       Certain microalgae and fungi produce large quantities of oils and fats
containing long-chain, polyunsaturated fatty acids ("PUFAs") that are important
to human nutrition and health. Studies have indicated that a particular PUFA,
docosahexaenoic acid ("DHA"), may be associated with mental and visual
development in infants and play a pivotal role in normal brain function
throughout life. Recent research has linked low levels of DHA to a variety of
health risks, including increased cardiovascular problems, cystic fibrosis,
cancer, and various neurological and visual disorders. Further research is
underway to explore the impact of DHA supplementation in these and other areas.
DHA is the predominant structural fatty acid in the grey matter of the brain and
retinal tissues in humans and other mammals. Children and adults obtain DHA
primarily from their diets, since humans synthesize only small amounts of DHA
from dietary precursors. Infants acquire DHA and arachidonic acid ("ARA"), an
important structural lipid in human tissues, initially in utero during
pregnancy, and then from their diet via their mother's milk. DHA and ARA dietary
supplementation may be particularly important for premature and low birth weight
infants who may not get their full in utero allotment. These fatty acids are
naturally present in breast milk, but are not added to most infant formulas
today.

       Martek has identified a strain of microalgae which produces an oil rich
in DHA and has developed the means to grow it by fermentation, with a relatively
high oil and DHA content. To supplement its DHA for infant formula, the Company
has isolated and cultured a strain of fungus that produces large amounts of ARA.
DHA and ARA are also present in high levels in egg yolk phospholipids and
various fish oils. There have been over 30 clinical studies during the past 10
years evaluating the impact of DHA and ARA supplementation on infants. Although
certain recent studies using egg yolk phospholipids and fish oil sources of DHA
and ARA have shown minimal impact on infant cognitive development, the majority
of these studies, including a recent study using Martek's nutritional oils, have
demonstrated that these fatty acids have a significant impact on early cognitive
and visual development in infants. Martek's oils also do not possess potentially
undesirable fatty acids found in fish oil sources of DHA.


                                     - 5 -
<PAGE>   7


       Martek first realized revenues from license fees related to its
nutritional oils and sale of sample quantities of these oils in 1992. In late
1994, one of the Company's licensees launched the first pre-term infant formula
containing Martek's oils in Europe, and in 1995, Martek recognized its first
royalty revenue from sales of this product. Additional product introductions
have continued through 1999. Currently, four of the Company's infant formula
licensees are marketing term infant formula products containing Martek's oils in
seven countries and pre-term infant formula containing the Company's oils in
over 60 countries worldwide.

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

       There are numerous studies which support the importance of DHA and ARA in
the infant diet. Although there are some studies which have not supported such a
benefit, the following are examples of some of the studies which have found a
benefit:

-      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 Martek's 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 recommend the need to "develop improved infant formulas with
       properties more similar to those of human breast milk that may lead to
       improved developmental outcomes in children." The study indicated that
       breast-fed babies have a 38% greater likelihood of completing their high
       school matriculation than formula-fed babies even after allowances were
       made for confounding social, familial and perinatal factors. Although the
       study could not conclude that DHA provided to the breast-fed infants from
       their mother's milk was the sole cause of the improved achievement
       scores, the authors pointed out recent controlled intervention studies
       demonstrating similar outcomes in infants with DHA-supplemented formulas
       and concluded that:


                                     - 6 -
<PAGE>   8


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

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

       In response to increasing information on the importance of omega-3 fatty
acids and DHA in psychiatric health, the National Institutes of Health sponsored
a symposium of experts in 1998 to discuss the latest research in this field. The
focus of the conference was neurological and behavioral disorders; infant
nutrition, visual disorders and cardiovascular benefits were also discussed. The
need for intervention studies was discussed to further investigate potential
benefits in these areas.

       The Company is currently working, along with its customers, to develop
other DHA delivery methods to address these markets, including powders, an
emulsion, use as a food ingredient, and use as a pharmaceutical.

       Martek believes that its 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 can be blended in a variety of mixtures in precise ratios
              for specific applications;

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

       -      the DHA- and ARA-enriched oils are in a 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 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 regulatory scrutiny.


                                     - 7 -
<PAGE>   9


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

Products and Technologies for Drug Discovery

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

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

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

       Martek's 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., glycosylated human proteins)
       frequently do not crystallize. Celtone M, Martek's isotopically labeled
       mammalian cell growth medium, has enabled determination of the 3-D
       structures of glycosylated human proteins through NMR. The Company
       believes Celtone M is a proprietary enabling technology, and, in many
       cases, the only way of making glycosylated mammalian proteins in stable
       isotope form. By unveiling the structures of these elusive and important
       proteins, the drug design process may be expedited against new targets.
       U.S. patents were issued to the Company for the composition of matter and
       use of Celtone M in 1995, 1997 and 1998.

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

              Glucose -- Carbon-13-glucose is the most widely used reagent for
       isotopically labeling bacterial proteins. Glucose is available in
       combinations of 2H and 13C.

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


                                     - 8 -
<PAGE>   10


              Fast-Track Technology - Martek is 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.

       Martek's patented Reconnaissance Probe(TM) Technology provides an
accelerated way to obtain accurate structural information about a receptor's
binding site and the interaction between a receptor and its ligand.
Reconnaissance probes are small, flexible molecules in which the atoms are
labeled with NMR "visible" isotopes. When bound to the selected receptor it is
possible that the "docked" conformation of the probe can be determined and, in
theory, through the proper alignment of a series of superimposed, docked
structures, the geometric constraints of the receptor binding site can be
established. The detailed chemoinformatic map that would be produced could then
be used to design a focused library of new compounds (leads) designed
specifically to the molecular constraints of the receptor.

Diagnostics

       Products and Technologies for Fluorescence Detection. Martek's
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. 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. 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: 1) the detection of
receptors or small molecules at 100-fold lower concentrations; 2) detection with
the same level of sensitivity but in 100-fold smaller volumes; and 3) detection
with the same level of sensitivity but using much lower cost equipment.

       Martek's fluorescent products include the following:

       Phycobiliproteins - Classical direct fluorescent detection dyes, which
have been produced by Martek for several years and fill an existing market in
immunodetection and flow cytometry. In 1999, the Company introduced its own
versions of chemically cross-linked allophycocyain (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 permeablilized cells and are used for internal
epitope detection in flow cytometry and Fluorescence In Situ Hybridization
(FISH). Different CryptoFluor(TM) dyes have different fluorescence emission
wavelengths and, therefore, provide the possibility of multiplexing 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. The 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, Martek began beta-testing PBXL-based Western blot
detection kits and its proprietary XLExpress(TM) Rapid Labeling system


                                     - 9 -
<PAGE>   11


which allows individual researchers to label their own molecules with the PBXL
dye of their choice in a simple and convenient format.

Aquaculture Technology

       Aquaculture is a fast growing industry in Southeast Asia, Australia and
Europe. Martek's primary library of over 3,300 live microalgal species and its
large scale systems for the production of microalgae formed the basis for the
development of a new product line of high-value aquaculture feeds (AquaGrow(R)).
Just like the requirement of human infants for DHA and ARA early in development,
larval fish, mollusks (oysters and clams) and crustaceans (shrimp) also require
these important fatty acids in their early development. In the natural
developmental process, these marine species ordinarily have access to the
primary sources of these materials (i.e., microalgae), but with the development
of intensive aquaculture practices, these fatty acids need to be provided in
large quantities at high concentration for high density fish culture.

       Since 1997, Martek has been part of an Israeli/US bi-national consortium
(the Aquaculture Technology Joint Venture) to develop new high value aquaculture
feeds. New enrichment feeds based on Martek's proprietary DHA and ARA technology
were developed and tested in aquaculture facilities worldwide. As a result of
the initial successes in new product development, Martek began beta-testing the
AquaGrow(R) line of enrichment feeds for rotifers and artemia. These zooplankton
are used as direct feeds to provide larval fish (e.g. Seabream, Turbot, Halibut,
etc.) with the DHA and ARA enrichment required for rapid growth. Research
articles and papers presented in 1999 by the Center of Marine Biotechnology at
the University of Maryland and others have described significant improvements in
DHA content of artemia and rotifers when fed Martek's AquaGrow(R) products
compared to other enrichment feeds. Furthermore, they have shown that this
results in improved growth rates and fish quality as well as a reduction in
production losses due to stress and disease of the fish.

                     COLLABORATIVE AND LICENSING AGREEMENTS

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

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


                                     - 10 -
<PAGE>   12


these agreements without either the prior written consent of such licensees or
prospectively offering such royalty rate to these current licensees.

       In 1993, Martek entered into an agreement with Columbia University
pursuant to which Columbia University will try to determine the structure of the
hCG protein using Celtone(R) M. The hCG molecule affects fertility by
controlling the attachment of the egg to the uterus. Martek and Columbia
University will share any commercial proceeds resulting from their joint
efforts. Martek's share of any such proceeds will be based upon the successful
conclusion of certain events but will not be less than 75%. In May 1994, the
Company initiated commercialization of Celtone(R) M through a license agreement
with Genetics Institute under which Martek will receive royalties on sales of
products resulting from Genetics Institute's work with Celtone(R) M. In October
1994, Martek 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. Martek will provide
funding and pay royalties for certain proprietary products arising from this
research.

       In January 1997, Martek signed an agreement with DSM Food Specialties
("DSM", formerly Royal Gist-Brocades B.V.) under which DSM became Martek's
exclusive contract supplier for nutritional oils containing ARA. As part of this
agreement, Martek recognized license fee revenue in January, 1998 and will
receive guaranteed supplies of oil rich in ARA from DSM on advantageous terms.

       The Company markets certain of its 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.

       The Company has also entered into various additional collaborative
research and license agreements. Under these agreements, the Company is required
to fund research or to collaborate on the development of potential products.
Certain of these agreements also commit the Company to make payments upon the
occurrence of certain milestones and pay royalties upon the sale of certain
products resulting from such collaborations. One such collaboration, with the
U.S.-Israel Science and Technology Foundation ("USISTF"), commits Martek to
remit a royalty of 3% on all sales of aquaculture products related to the
research collaboration between the Company and USISTF.

        COMMERCIAL AND U.S. GOVERNMENT RESEARCH AND DEVELOPMENT CONTRACTS

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

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


                                     - 11 -
<PAGE>   13


substantially in the United States. In addition, the Company's licenses from
third parties may also relate to technology developed with federal funding and
therefore may also be subject to Government Rights.

       Costs under U.S. government contracts are subject to audit by the U.S.
government. The Company believes that cost disallowances, if any, arising from
such audits of costs charged to government contracts through October 31, 1999
would not be material to the Company.

                                  MANUFACTURING

       Martek manufactures oils rich in DHA and ARA in its fermentation facility
located in Winchester, Kentucky by conventional fermentation processes. The
Company acquired the Winchester facility in 1995 from a subsidiary of ACX
Technologies, Inc. Martek's oils produced in this facility have been certified
kosher by the Orthodox Union. Martek is currently in the process of optimizing
production of its nutritional oils, and believes that a continued optimization
effort will be required for at least the next two years. In 1996, the Company
constructed a "state of the art" oil processing plant at its Winchester facility
which was put into production in early 1997. Martek has also entered into an
agreement with a third party, DSM, to produce its ARA oil, and may enter into
additional production agreements with third parties if demand for its oils
requires. The commercial success of its nutritional oils will depend, in part,
on Martek's ability to manufacture these oils or have them manufactured at a
commercially acceptable cost. There can be no assurance that the Company will be
able to successfully optimize production of its nutritional oils, or continue to
comply with applicable regulatory requirements (including Good Manufacturing
Practices ("GMP") requirements) or that these facilities will be sufficient to
meet the future demand for the oils. Under the terms of several of its infant
formula licenses, Martek's licensees may elect to manufacture these oils
themselves, although the Company believes this is unlikely.

                               SALES AND MARKETING

       The Company currently markets its products both directly to end users and
through distributors. The Company markets its nutritional oils for use in infant
formula directly to infant formula manufacturers. The Company markets its
Neuromins(R) DHA dietary supplements primarily through distributors and directly
to end users through its toll free number (1-800-662-6339). Martek has 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 its 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 and General Nutrition Center (GNC) stores. 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. Martek has continued its own DHA awareness campaign in an
effort to support the marketing efforts of its infant formula licensees and
capsule distributors. This campaign will continue and could intensify in 2000.
There can be no assurance that the Company will be able to successfully market
these nutritional oils products for use in infant formula or as dietary
supplements.

                                   COMPETITION

       The health care and biological sciences industries are characterized by
rapidly evolving technology and intense competition. The Company's competitors
include major pharmaceutical, chemical and specialized biotechnology companies,
many of which have financial, technical and marketing resources significantly
greater than those of the Company. In addition, many specialized biotechnology
companies have formed collaborations with large, established companies to
support research, development and commercialization of products and technologies
that may be competitive with those of the Company. Academic institutions,
governmental agencies and other public and private research organizations are
also conducting research activities and seeking patent protection and may
commercialize products and technologies competitive with those of the Company on
their own or through joint


                                     - 12 -
<PAGE>   14


ventures. The existence of products and technologies of which the Company is not
aware, or products and technologies that may be developed in the future, may
adversely affect the marketability of products and technologies developed by the
Company.

       The development of a DHA-containing fish oil low in EPA provides an
alternative to Martek's DHA oil for infant formula applications. Though it is a
lower cost product relative to Martek's DHA, fish oil, including low-EPA fish
oil, has odor, stability and taste characteristics that may limit the usefulness
of the oil in food products. Martek is also aware of the development of
microencapsulated low-EPA fish oil products by several large companies,
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 fish oil is significantly less costly than Martek's DHA oil, fish oil
will present a substantial competitive threat to Martek's Neuromins(R) DHA.
Published reports, however, have cited a number of fish oils as containing
chemical toxins that are not present in Martek's oils. In addition, management
believes that the combination of either low-EPA fish oil or microencapsulated
fish oil with a microbial source of ARA for use in infant formula would likely
infringe claims of Martek's patents. Martek is also aware that Omegatech, Inc.,
an early stage company, is currently able to produce DHA from a strain of fungus
containing DHA. Martek believes that Omegatech has licensed human applications
of this fungal-derived DHA to a division of Monsanto Corporation. The Company is
currently unable to evaluate the degree of competitive threat that this fungal
source of DHA will present to its DHA oil in the future.

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

       Small amounts of ARA can be derived from egg yolk lipids, but are not in
the same molecular form as found in breast milk. DHA can also be found in egg
yolks of chickens fed a special diet containing, for example, fish meal. ARA and
DHA derived by this method are currently being added to infant formula by
Milupa, which was acquired by Numico in 1995. The Company believes it is more
expensive to produce DHA and ARA using this source than the Company's process of
producing DHA and ARA oils. Furthermore, the addition of DHA and ARA from egg
yolk at levels equivalent to those found in human milk will result in dietary
levels of lecithin and cholesterol in excess of that found in human milk.

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

       Sales of certain of the Company's products for drug discovery, especially
the Company's carbon-13 glucose (a non-proprietary product), have been the
subject of intense competition in the past several years. The Company has
lowered its prices of carbon-13 glucose to remain competitive. Martek's primary
competitors for carbon-13 glucose are Isotec, Inc. and Cambridge Isotope Labs,
companies that are also manufacturers of carbon-13, a primary raw material in
the production of carbon-13 glucose. In an effort to compete better with these
companies in the reagents market, Martek has focused recent efforts on producing
new, carbon-13 labeled media that has demonstrated better performance and
competitive pricing with carbon-13 labeled glucose. The Company expects that
competition in the carbon-13 glucose market will continue to remain strong in
2000, and as a result, may limit the manufacturing and selling of these products
in favor of its new, higher performance media.

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


                                     - 13 -
<PAGE>   15


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

                  PATENTS, LICENSES AND PROPRIETARY TECHNOLOGY

       The Company's success is dependent in part on its ability to obtain
patent protection for its products, maintain trade secret protection and operate
without infringing the proprietary rights of others. The Company's policy is to
protect aggressively its proprietary technology through patents, where
appropriate, and through trade secrets in other cases. Additionally, the
Company, in certain cases, relies on the licences of patents and technology of
third parties. The Company has obtained approximately 25 U.S. patents, covering
various aspects of its technology, which will expire on various dates between
2007 and 2015. The Company has filed, and intends to file, applications for
additional patents covering both products and processes as appropriate. There
can be no assurance that any patent applications filed by, assigned to, or
licensed to, the Company will be granted, that the Company will develop
additional products that are patentable or that any patents issued to or
licensed by the Company will provide the Company with any competitive advantages
or adequate protection for inventions. Moreover, no assurance can be given that
any patents issued to or licensed by the Company will not be challenged,
invalidated or circumvented by others.

       There can be no assurance that issued patents, or patents that may issue,
will provide protection against competitive products or otherwise be
commercially valuable. Furthermore, patent law relating to the scope of claims
in the fields of health care and biosciences is still evolving, and the
Company's patent rights are subject to this uncertainty. The Company's patent
rights on its products therefore might conflict with the patent rights of
others, whether existing now or in the future. Alternatively, the products of
others could infringe the patent rights of the Company. The defense and
prosecution of patent claims is both costly and time consuming, even if the
outcome were favorable to the Company. An adverse outcome could subject the
Company to significant liabilities to third parties, require disputed rights to
be licensed from third parties or require the Company to cease selling its
affected products.

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

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

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


                                     - 14 -
<PAGE>   16


                    GOVERNMENT REGULATION AND PRODUCT TESTING

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

       Martek's infant formula licensees are responsible for obtaining the
requisite regulatory clearances to market their products containing Martek's
oils. Sales of the Company's products outside the United States are subject to
foreign regulatory requirements that may vary widely from country to country.
Four of the Company's infant formula licensees have obtained the regulatory
approval, where required, to sell infant formula supplemented with Martek's oils
in over 60 countries for term or pre-term infant formula products. The Company
and its licensees are in the process of responding to certain questions raised
by the FDA in connection with evaluating Martek's oils for inclusion in U.S.
infant formula. While management believes that FDA approval should ultimately be
obtained, it is management's belief that this process will take a minimum of six
to twelve additional months. There is no assurance that the Company and its
licensees will be able to adequately respond to the FDA's questions, that the
licensees will continue to press forward, that clearances will in fact be
granted, that the process will not involve significant delays that may
materially and adversely affect the timing and extent of potential future
introductions of the Company's products, or that once and if approval is
obtained, a licensee will actually market a U.S. infant formula product
containing the Company's oils. There also can be no assurance that additional
clearances needed for new introductions of Martek's oils in foreign countries
can be obtained on a timely basis, if at all.

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

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

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

       In connection with the Company's decision to manufacture certain of its
products which it markets directly, or licenses to or collaborates with others
to market, it will be required to adhere to applicable current GMP as required


                                     - 15 -
<PAGE>   17


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

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

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

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

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

                                    EMPLOYEES

       As of October 31, 1999, the Company had 118 full-time employees, of whom
15 had Ph.D.'s. Approximately 38 employees are engaged in research and
development and contract related research and development activities, 55 are
engaged in production or production development related activities and 25 are in
administrative, business development, and sales and marketing positions. The
Company considers relations with its employees to be good. None of the Company's
employees is covered by a collective bargaining agreement.


                                     - 16 -
<PAGE>   18


               DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

       The information concerning the Company's directors contained under the
captions "Nominees for Election as a Director For Terms Expiring in 2003" and
"Directors Continuing in Office" and, with regard to Item 405 of Regulation S-K,
the information contained under the caption "Section 16(a) Beneficial Ownership
Reporting Compliance" in the Company's 2000 Proxy Statement is hereby
incorporated herein by reference.

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

<TABLE>
<CAPTION>
                              NAME                           AGE                        POSITION
              -----------------------------------            ---    ------------------------------------------------
              <S>                                            <C>    <C>
              Henry Linsert, Jr.......................        59    Chairman, Chief Executive Officer and Director
              Richard J. Radmer, Ph.D.................        57    President, Chief Scientific Officer and Director
              Thomas C. Fisher........................        53    Senior Vice President, Operations
              David J. Kyle, Ph.D.....................        46    Senior Vice President, Research and Development
              Jerome C. Keller........................        57    Senior Vice President, Sales & Marketing
              Steve Dubin.............................        46    Senior Vice President, Business Development,
                                                                    General Counsel, and Secretary
              Peter L. Buzy...........................        40    Chief Financial Officer and Treasurer
              Paul W. Behrens, Ph.D...................        43    Director of Physiology
              Jonathan Miles Brown, Ph.D..............        44    Director, Stable Isotope Group
              Paul J. Kelley..........................        46    Vice President of Manufacturing
</TABLE>

       Henry Linsert, Jr. joined Martek as Chairman of the Board in 1988 and
became Chief Executive Officer in 1989. From 1987 to 1988 he was primarily
engaged as President of American Technology Investments Corp. ("ATI"), a
consulting company specializing in the development and financing of early stage
companies in the Mid-Atlantic area. He was President and Chief Executive Officer
of Suburban Capital Corporation, a venture capital subsidiary of Sovran
Financial Corporation (now 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.


                                     - 17 -
<PAGE>   19


       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.

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

       Peter L. Buzy joined Martek in March 1998 as Chief Financial Officer.
Prior to joining Martek, Mr. Buzy spent 13 years with the accounting and
consulting 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 - 1996, and as such
has played a vital role in advising the 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.

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

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

       Paul J. Kelley joined Martek in April 1997 as Vice President of
Manufacturing at the Company's Winchester, Kentucky production plant. Prior to
joining Martek, Mr. Kelley spent four years as the Plant Manager of a
Biotechnology plant in the Pharmaceutical Division of Bayer. Prior to 1993, Mr.
Kelley held several other positions


                                     - 18 -
<PAGE>   20


at Bayer, including Production Manager of a plant in West Germany from 1989 to
1991. Prior to working for Bayer, Mr. Kelley was the Plant Manager of a facility
in the Biotechnology Division of Miles, Inc. from 1983 to 1989. Mr. Kelley
received an M.B.A. from Rutgers Graduate School of Business and a B.S.C.E. from
the New Jersey Institute of Technology.














                                     - 19 -
<PAGE>   21


ITEM 2.  PROPERTIES.

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

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

ITEM 3.  LEGAL PROCEEDINGS.

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

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

       No matters were voted upon during the fourth quarter of 1999.













                                     - 20 -
<PAGE>   22


                                     PART II

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

       The information set forth under the caption "Price Range of Common Stock"
and "Stock Description and Form 10-K" on the inside back cover of the Company's
Annual Report to Stockholders for the fiscal year ended October 31, 1999, is
included herein as Exhibit 13.01, and those portions are incorporated by
reference into Part II of this report. Martek has not declared any cash
dividends during the two-year period ending October 31, 1999.

ITEM 6.  SELECTED FINANCIAL DATA.

       The information set forth under the caption "Selected Financial Data" on
page 6 of the Company's Annual Report to Stockholders for the fiscal year ended
October 31, 1999, 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, 1999, 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 1999 Financial Statements and Report of Independent
Auditors by Ernst & Young LLP set forth on pages 11 through 19 of the Company's
Annual Report to Stockholders for the fiscal year ended October 31, 1999, 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>   23


                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

       Information relating to the Directors and Executive Officers of the
Company 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 the
Company's 2000 Proxy Statement.

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

       The information required by this item is hereby incorporated by reference
from the information to be contained under the caption "Beneficial Ownership of
Common Stock" in the Company's 2000 Proxy Statement.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

       None.









                                     - 22 -
<PAGE>   24


                                     PART IV

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

(a)(1) Financial Statements

       The following Financial Statements of the Company and Report of
Independent Auditors set forth on the pages indicated in the Company's Annual
Report to Stockholders for the year ended October 31, 1999 are included in
Exhibit 13.01 to this report and are incorporated into Item 8 of this Report:

<TABLE>
<CAPTION>
                                                                                Page(s) in Company's Annual
                                                                                   Report to Stockholders
                                                                                   ----------------------
       <S>                                                                      <C>
       Balance Sheets as of October 31, 1999 and 1998                                        11

       Statements of Operations for the Years Ended October 31, 1999,
       1998 and 1997                                                                         12

       Statements of Stockholders' Equity for the
       Years Ended October 31, 1999, 1998 and 1997                                           13

       Statements of Cash Flows for the Years Ended October 31, 1999,
       1998 and 1997                                                                         14

       Notes to Financial Statements                                                       15 - 19

       Report of Independent Auditors                                                        19
</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.

(a)(3) Exhibits

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


                                     - 23 -
<PAGE>   25


                 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 August 5, 1993.
       10.14  License Agreement, dated September 10, 1992, between the Company
                 and [*].
       10.14A Exhibits to September 10, 1992 License Agreement.[*]
       10.15  License Agreement, dated October 28, 1992, between the Company
                 and [*].
       10.15A Exhibits to October 28, 1992 License Agreement.[*]
       10.16  License Agreement, dated January 28, 1993 between the Company and
                 [*] (Domestic and International Versions).
       10.16A Exhibits to January 28, 1993 License Agreements.[*]
       10.17  Management Cash Bonus Incentive Plan, dated June 10, 1993.
       10.18  Lease Modification Agreement, dated October 14, 1993 between the
                 Company and Aetna Life Insurance Company.
       10.19  Letter of Intent, dated January 13, 1995, between the Company and
                 Golden Technologies Corporation (filed as Exhibit 10.19 to the
                 Company's 1994 Form 10-K, File No. 0-22354, and incorporated by
                 reference herein).
       10.20  Second Lease Modification Agreement, dated September 27, 1994,
                 between the Company and Aetna Life Insurance Company (filed as
                 Exhibit 10.20 to the Company's 1994 Form 10-K, File No.
                 0-22354, and incorporated by reference herein).
       10.21  Purchase and Sale Agreement, dated February 16, 1995, between the
                 Company and Zeagan, Inc. (filed as Exhibit 4.3 to the Company's
                 Registration Statement on Form S-3, File No. 33-89760, filed
                 March 15, 1995, and incorporated by reference herein).
       10.22  Directors' Stock Option Plan (filed as Exhibit 4.1(b) to the
                 Company's Registration Statement on Form S-8, File No.
                 33-79222, filed May 23, 1994, and incorporated by reference
                 herein).
       10.23  Manufacturing Agreement, dated December 31, 1996, between the
                 Company and 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).


                                     - 24 -
<PAGE>   26


       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).
       13.01  Portions of the Annual Report to Stockholders of the Company for
                 the year ended October 31, 1999.**
       23.01  Signed Consent of Ernst & Young LLP, Independent Auditors.**
       24.01  Power of Attorney of the Board of Directors (included on signature
                 page of this Report).**
       27.01  Financial Data Schedule.**
       99.1   Cautionary Statements for purposes of the "safe harbor" provisions
                 of the private securities reform act of 1995.**

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

       * 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>   27


                                   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 27, 2000.

                                           MARTEK BIOSCIENCES CORPORATION

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

                                POWER OF ATTORNEY

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

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

<TABLE>
<CAPTION>
Signatures                                              Title                         Date
----------                                              -----                         ----
<S>                                          <C>                                      <C>
/s/ Henry Linsert, Jr.                       Chief Executive Officer and              January 27, 2000
------------------------------------         Director (Principal Executive
Henry Linsert, Jr.                           Officer)


/s/Peter L. Buzy                             Principal Financial and                  January 27, 2000
------------------------------------         Accounting Officer
Peter L. Buzy


/s/ Jules Blake                              Director                                 January 27, 2000
------------------------------------
Jules Blake


/s/ Ann L. Johnson                           Director                                 January 27, 2000
------------------------------------
Ann L. Johnson
</TABLE>



                                     - 26 -
<PAGE>   28


<TABLE>
<S>                                          <C>                                      <C>
/s/ Gordon S. Macklin                        Director                                 January 27, 2000
------------------------------------
Gordon S. Macklin


/s/ Douglas J. MacMaster, Jr.                Director                                 January 27, 2000
------------------------------------
Douglas J. MacMaster, Jr.


/s/ John H. Mahar                            Director                                 January 27, 2000
------------------------------------
John H. Mahar


/s/ Sandra Panem                             Director                                 January 27, 2000
------------------------------------
Sandra Panem


/s/ Richard J. Radmer                        President and Director                   January 27, 2000
------------------------------------
Richard J. Radmer


/s/ Eugene J. Rotberg                        Director                                 January 27, 2000
------------------------------------
Eugene H. Rotberg


/s/ William D. Smart                         Director                                 January 27, 2000
------------------------------------
William D. Smart
</TABLE>



                                     - 27 -
<PAGE>   29


                                  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 August 5, 1993.
   10.14      License Agreement, dated September 10, 1992, between the Company
                 and [*].
   10.14A     Exhibits to September 10, 1992 License Agreement.[*]
   10.15      License Agreement, dated October 28, 1992, between the Company
                 and [*].
   10.15A     Exhibits to October 28, 1992 License Agreement.[*]
   10.16      License Agreement, dated January 28, 1993 between the Company and
                 [*] (Domestic and International Versions).
</TABLE>


                                     - 28 -
<PAGE>   30


<TABLE>
<S>           <C>
   10.16A     Exhibits to January 28, 1993 License Agreements.[*]
   10.17      Management Cash Bonus Incentive Plan, dated June 10, 1993.
   10.18      Lease Modification Agreement, dated October 14, 1993 between the
                 Company and Aetna Life Insurance Company.
   10.19      Letter of Intent, dated January 13, 1995, between the Company and
                 Golden Technologies Corporation (filed as Exhibit 10.19 to the
                 Company's 1994 Form 10-K, File No. 0-22354, and incorporated by
                 reference herein).
   10.20      Second Lease Modification Agreement, dated September 27, 1994,
                 between the Company and Aetna Life Insurance Company (filed as
                 Exhibit 10.20 to the Company's 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).
   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).
   13.01      Portions of the Annual Report to Stockholders of the Company for
                 the year ended October 31, 1999.**
   23.01      Signed Consent of Ernst & Young LLP, Independent Auditors.**
   24.01      Power of Attorney of the Board of Directors (included on signature
                 page of this Report).**
   27.01      Financial Data Schedule.**
   99.1       Cautionary Statements for purposes of the "safe harbor" provisions
                 of the private securities 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).


                                     - 29 -